Denver's Teton Drills Entrepreneurial Profits In Russia's Smaller Oilfields

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). When looking at world oil business prospects, it is worth checking the smaller independent companies who are finding entrepreneurial niches in oil exploration and development and in the supply of technical and engineering skills and product in the development of new resources. If the true entrepreneur is someone who has established and developed a business form the smell of an oil rag then Teton Petroleum Company (AMEX:TPE, FRANKFURT:TP9) (Denver, Colorado) could be a good example. The majors talk of the entrepreneurial spirit that urges them onto bigger and better bucks, but it is the new independent that can often point the way to leading edge success and new business models.

Teton has focused on new oilfields in Russia since 1997 and is currently looking into ten new fields. Since 1997, it has been working in three Siberian fields in western Siberia; Yeguryakh, South Yegurakh and Golevoye which have an estimated 19.8 million barrels of proven oil reserves and a further 13.2 million barrels in probable reserves. The adjacent TNK-BP Samotlor field has a resource of eight billion barrels.

The company's chairman, H.Howard Cooper told The Russian Energy, "When we started operations in Western Siberia, the local unemployment stood at 50-60% and we had plenty of experienced oilmen to choose from. It was our key to success. In addition, Halliburton, Schlumberger and other international service providers were already engaged at large projects nearby and we obtained a guaranteed access to Western technologies."

Cooper went on to say that local geologists have found enough oil to last for another 25 years including hundreds of small, but commercially attractive fields throughout Russia. In the Soviet era, many fields were discovered and tested and then plugged for later use that gives an almost zero risk to drilling outcomes. He claims that the few alternative locations for oil exploration and development investors such as Venezuela, Columbia, Nigeria and Indonesia are all politically unstable compared to Russia. Although Canada as an investment option is stable Russian reserves are much cheaper, he said.

Teton's new partner in the Russian venture, Goloil JV, is Russneft with which the company signed a binding and broad MOU (memorandum of understanding) early this month. The agreement covers all aspects of the joint operations in Goloil operations in western Siberia and provides a framework for future development of additional oil projects in, and outside, Russia. The agreement recognizes the requirements of privately held, independent Russneft, operating in the Russian market and Teton, a public US company grading on AMEX. Russneft is a family business with political and business connections through Ingush ethnic clan connections (oil is at least as thick as blood). The company was established in 2002 by the former president of Slavneft, Mikhail Gutseriyev, who this year became president of Russia's association of small and mid-sized oil and gas producing companies, Assoneft. Teton has taken on an 'interesting' if not 'volatile' type of partner. This species are not rare birds in Russia.

Teton is looking for new opportunities, as the estimated price pr barrel should be under one dollar with a market return of $4 to $5 dollars pbb. The company sees process rising sharply when new pipelines facilitate access to the Pacific coast and to Western Europe and the US. This will allow exporters more than the usual 35% quota of production and as domestic Russian fuel consumption is expected to remain more or less at current levels through 2020 all additional production will be exported through the new pipelines. (Energy Strategy Through 2020 is the official, published Russian energy policy statement).

With a production target of 100,000 bpd is in the mood for acquisitions and capital. In the last week of October Teton announced that a private placement of preferred stock to institutional and accredited private investors was 51% oversubscribed closing out at $7.548 million. The company, which bought its stake (currently 35.295%) in Gogoil for around $500,000 in 1996 has run debt free through capital raised through share issues. In 2002, it saw an income growth of 326% and the year on year comparison for January-July 2003 to 2002 the income increase from $2.1 million to $6.4 million was 204%.

The rag smells good when the oil is in the black. (possibly a new Ingush proverb)