The mantra goes along the lines of, “To do something once is chance, twice is coincidence, three times and it’s a pattern.” When it comes to the energy sector, legendary oil and gas executive Marc Bruner epitomizes this axiom with his pattern of success in founding not one, not two, but three valuable energy companies. A tireless entrepreneur and businessman, Bruner is at it again with Fortem Resources Inc (TSX-V: FTM)(OTCQB: FTMR), a young energy company that has already assembled a seasoned team and amassed a massive land package in prolific energy areas in Utah and Alberta, Canada.
Household Names in Energy
Bruner has built companies from scratch into names everyone knows on Wall Street. He started as the founding Chairman of Ultra Petroleum (NASDAQ: UPL) in 1996 with the goal of developing unconventional oil and gas projects in Wyoming known as Pinedale and Jonah Fields. Discovered in the early 1990’s, these fields are heralded as some of the most productive gas fields in the continental U.S., with enough reserves to serve the entire country’s gas demand for years all on their own.
During his time at Ultra, Bruner was integral in growing the company’s market capitalization in excess of US$7 billion.
Bruner was the founder of Pennaco Energy Inc., a company focused on exploring and developing coal bed methane projects in the Powder River Basin in Wyoming and Montana. Carrying a market capitalization under $1 million dollars in 1997, Bruner orchestrated adding 350,000 acres of property to the portfolio, culminating in Pennaco Energy being sold to Marathon Oil (NYSE: MRO) in March 2000 for US$550 million.
In 2005, Bruner started Falcon Oil & Gas, a global energy company now with interests in more than 12 million gross acres across projects in Australia, South Africa and Hungary. During his time as chief executive and president at Falcon, the company’s market cap rose to over US$3.7 billion.
In building asset portfolios of this scale, Bruner has negotiated dozens of contracts with the likes of Halliburton (NYSE: HAL), Questar Energy (acquired by Dominion Energy (NYSE: D) in 2016 for $4.4 billion) and Northern Burlington, to name just a few.
Bruner is tapping this extensive experience, industry network and value-building playbook as he looks to notch his next success with Fortem Resources Inc.
The Canadian Portfolio
Fortem Resources is developing its properties through five wholly owned subsidiaries: Rolling Rock Resources, Black Dragon Energy, Colony Energy and Big Lake Energy (covering its energy operations) and City of Gold (Fortem’s mining unit focused in Myanmar). For this exercise, we’ll focus on energy, but encourage interested parties to conduct their due diligence on the Myanmar assets as an emerging mining region that hosts the world’s largest zinc/VMS deposits and tin/tungsten mine. In the same way that Bruner sniffs out prime locations for oil and gas, he apparently has the same keen senses for mineral assets.
At the Compeer Alberta project in Western Alberta, Fortem has an undivided 100% working interest in the petroleum and natural gas rights to eight contiguous sections of crown land. In industry nomenclature, Compeer is a Viking oil horizontal play. In laymen’s terms, its relatively shallow, oil-rich rock that can be accessed through non-conventional methods (horizontal drilling) that Bruner has been so successful with in the past.
Consider Viking as being mentioned in the same breath with the famous Eagle Ford shale play in Texas when it comes to opportunity. This underscores why the region is a hotbed of activity, with Fortem’s property surrounded by companies such as Apache (NYSE: APA), Baytex Energy (TSX: BTE)(NYSE: BTE) and Obsidian Energy (NYSE: OBE). Interestingly, Raging River bolstered its position in the Viking with the acquisition of Anegada Energy for $126 million (paying $45,645 per flowing barrel of oil equivalent of production) and then was subsequently acquired by Baytex in June 2018 in a deal worth C$2.8 billion (US$2.13 billion), in the latest big bet on Canada’s vast shale reserves.
As Raging River produces from its East Duvernay Shale, it was developing its Viking assets at the time of the Baytex merger, with its first horizontal well drilled at Compeer about 5 miles from Fortem’s acreage in 2014.
Fortem has been producing from its 05-29 well at Compeer for several years and is encouraged that it has demonstrated Viking oil production potential as it evaluates the next steps in development. Estimated reserves at Compeer are 2.7 million barrels, assuming a conservative 5% recovery factor on potential of 55.5 million barrels of original oil in place.
With more than 2,600 horizontal wells drilled in the Viking since 2007, geologists are well aware of the potential for the formation.
In Northern Alberta, Fortem’s Colony Energy subsidiary holds a 100% interest in and to certain petroleum, natural gas and general rights, including Alberta Crown Petroleum and Oil leases covering more than 62,000 acres, 48,000 of which is contiguous oil-rich land situated in the Godin area. Bruner’s savvy was on full display at the start of October when he worked a deal with an unnamed “major Canadian oil and gas company” recently to acquire a 100% working interest in three oil leases totaling 20,719 hectares (51,200 acres), which increased the total land package to where it is today.
Unlike Compeer’s light oil, the Godin project is heavy oil in the famed Athabasca region with the main producing horizon being the Wabiskaw formation and the McMurray formation as a secondary horizon. Being in the region of world-class heavy oil concentration, there is no shortage of infrastructure, including a spider web of operating pipelines (and not far from the proposed TransCanada pipeline that will transport heavy oil into the Southern U.S.).
The Godin leases consist of the Wabiskaw formation, from which a well on the western edge of Fortem’s property has tested oil and showed moveable oil in the shakers during the drilling process. The potential for Fortem’s land is further validated by Canadian Natural Resources’ (TSX: CNQ)(NYSE: CNQ) highly successful Brintnell Project being located just 26 kilometers to the east. Currently, Canadian Natural is producing about 50,000 barrels of oil per day from the Wabiskaw formation.
Given the similarities in the Godin project and Brintnell, Fortem leadership has devised a plan to develop Godin in three phases, starting with a four-well vertical, then a four-section pad development (10 wells per pad/section) and finally full development of the acreage.
The U.S. Portfolio
In Central Utah, Fortem’s Black Dragon Energy subsidiary has the right to acquire a 75% working interest in and to certain leases, hydrocarbons, wells, agreements, equipment, surface rights agreements and assignable permits totaling approximately 165,000 acres at an 80% net revenue interest located in the Moenkopi formation of Carbon and Emery Counties.
The property in play for Fortem abuts Grassy Trails field, which has produced an aggregate of 731,000 barrels of oil from the Moenkopi formation with 543 holes drilled to better define the resource. Black Dragon’s assets also include a new production facility, a well currently producing high gravity oil that is expected to see increased production with a cleanout, 16 square miles of 3D seismic survey data from the producing fairway, work advancing permits for 12 new wells and three other potential formation targets, including the Kaibab and Manning Canyon (“Mississippian Doughnut” formation) resources.
Also in Utah, Fortem’s Rolling Rock Resources subsidiary has the right to acquire a 50% working interest in and to certain leases, hydrocarbons, wells, agreements, equipment, surface rights agreements and assignable permits totaling approximately 101,888 acres at an 80% net revenue interest located in the Mancos formation in the Southern Uinta Basin, Utah. Again, the Mancos formation may not be the household word novice energy investors know, but when it is understood that the Mancos shale is stratigraphically equivalent to the vaunted Eagle Ford formation in South Texas, the potential for the resource becomes more apparent.
Like Moenkopi and Compeer, Mancos is a shallow oil shale resource play in a proven region. In fact, Manco is located in the peak oil maturity window of the Southern Uinta Basin (situated to the north of the famed Paradox Basin). Vertical drilling has delivered about 120,000 barrels of oil, confirming a commercial resource presence.
Furthermore, there is the potential to go deeper than the Mancos formation, including the Granite Wash formation, which adds some intriguing speculation to the known oil in the ground.
One More Time
Marc Bruner has found success in three energy companies in the last two decades, a truly amazing accomplishment. He’s done so by following a similar playbook each time. The game plan includes the acquisition of a large portfolio of assets (~over 335,000 acres so far for Fortem) in regions that are known to be prolific in reserves, but still have room for expansion and establish the company as an early mover. There is a fine line between establishing a footprint in a speculative area too soon that it takes decades to build value and getting there too late so it is impossible to amass large land positions. Bruner is nearly uncanny with his penchant for clear vision and succinct timing.
With Fortem, the risk has been diversified (across heavy and light oil in different regions of North America, not to mention the mining unit) and mitigated (targeting projects with known resources). These are all parts of the equation that has proven so successful for Bruner in the past. Yogi Berra is famously credited for saying, “It’s like déjà vu all over again,” a sensation that investors that have followed Bruner may soon experience yet again as he accumulates land, advances Fortem and further cements his legacy in the energy sector.
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