Full size / One of G2 Energy´s producing oil wells in the Permian Basin, Texas.
Over and over again, you hear the same story: “The energy transition is underway and renewables are going to replace fossil fuels!“ In the next breath, you wonder why the IEA, and others, are projecting record oil demand for this year – and that oil demand will peak before 2030. According to Irina Slav from Oilprice.com, we are witnessing a paradoxical messaging as a symptom of a cognitive dissonance emerging among backers of an accelerated transition from fossil fuels to renewables: “The reason for the dissonance is that the world still runs overwhelmingly on fossil fuels. Yes, investments in alternatives, chiefly wind and solar electricity generation, are on a strong rise, and so is deployment, which hit a record last year. So did wind and solar output as a percentage of total electricity generation in the EU last year. Yet this did not dent the demand for oil.“
Indisputably, the energy transition is happening. Yet this will take (a lot of) time. Until then, oil is far from death but in high demand as mining “green“ metals and building out wind, solar and electric vehicles require (a lot of) fossil fuels. For much of the past, and well into the foreseeable future, the global supply chain – including the agricultural industry – is run on petrol.
The paradoxical messaging across media and politics has resulted in an unprecedented opportunity for companies to acquire idle and operating oil wells in the United States. Some of those sellers may feel it‘s a good time to sell now at apparently high oil prices and before the energy transition kicks in to take down pricing. Some others simply want to get out and retire.
Backed by a management team highly experienced in the oil and gas sector, G2 Energy Corp. is taking advantage of this market opportunity by deploying a low-risk strategy of acquiring, optimizing and operating oil wells in Texas with the goal of increasing production significantly to realize high profit margins for the benefit of its shareholders. The discrepancy between G2 Energy‘s current market capitalization ($2 million), the acquisition price ($4 million USD) of its flagship oil asset and the independent reserve valuation ($12 million USD) is a staggering opportunity for investors.
Full size / “MYTH: The end of oil is near. Fact: In no scenario, does @EIAgov project we will use less oil in 2050 than we are using now. In fact, oil consumption could reach 64% above 2020 levels with high economic growth.“ (Source)
Full size / According to Sanford Bernstein (April 2023): Even if EVs account for 25% of total global car sales by 2025 and 50% in 2030, the world will still consume the same amount of oil as we do today in 15 years (2038). Where exactly is the required oil production going to come from? (Source)
Full size / “The end of oil is a myth“, according to SRSrocco Report, suggesting that the estimated global oil production decline at the end of this decade is mainly due to unconventional oil well‘s natural decline rate and not due to a decline in demand.
According to “Four Scenarios That Could Send Oil Prices To $200“ (April 23, 2023):
“OPEC+ has suggested with its latest moves that its sweet price spot is around $80-90 per barrel, so it is trying to keep prices around that level... Yet there is one more scenario that is a realistic one. It’s not as bombastic as a war, but that makes it all the more dangerous. It is the scenario where consistent underinvestment shrinks supply so much, that prices have nowhere to go but up. Saudi Arabia has been warning about it. U.S. shale producers have been warning about it. And the G7 just declared they would fight “unabated fossil fuels,” which essentially means discouraging more oil and gas production. Of course, that declaration is worth little more than the paper it was written on, and that is the world’s greatest hope that oil will not hit $200 anytime soon, if ever. If those governments get serious about what they call unabated fossil fuels, the world’s oil supply will be at risk. Analysts love to say that the cure for high oil prices is high prices, and they are correct. A very efficient way to control the price of a commodity is to let it rise so much it kills demand. But what happens if that commodity is as essential as oil? Not using oil takes people back through the ages to a simpler but a lot less abundant, wealthy time.“
Full size / The “monster population growth“ we are witnessing (from about 2 billion people in 1900 to 8 billion today) was only possible thanks to oil. Raising living standards and life expectancy for so many people, including feeding them, requires a lot of energy, that is to say scalable, cheap, reliable and on-demand fossil fuels, first and foremost oil. (Source)
According to “The Permian Is Set For A Wave Of Massive Deals“ (April 21, 2023):
“The Permian basin is set for a wide-ranging wave of consolidation as the prospect of oil prices remaining higher for longer and unprecedented profits boost the appetite for M&A. With technically recoverable reserves of 50 billion barrels and some 300 TCf of natural gas, the Permian basin wields all the necessary infrastructure and well productivity for quick returns... Ryan Lance, the CEO of ConocoPhillips, poured more oil on the fire by saying that consolidation needs to happen among Permian Basin producers, with ExxonMobil and Chevron signaling the same.“
“The Permian Basin is one of the nation‘s oldest oil and gas producing regions. New technologies have transformed the region in the last decade, breathing new life into old wells and tapping new ones.“ (Source)
“Permian Basin, also called West Texas Basin, large sedimentary basin in western Texas and southeastern New Mexico, U.S., noted for its rich petroleum, natural gas, and potassium deposits. Owing to its economic importance, it is one of the most well-studied geologic regions of the world.“ (Source)
According to “Texas Oil and Gas Industry Adds 1,500 Jobs in March“ (April 26, 2023):
“Job growth in Texas’ oil and natural gas industry even amid turbulent economic times is a continued testament to the demand for the irreplaceable products that help power our modern lives.. Industry remains committed to enhancing national and energy security for our nation and our allies around the world. At 198,700 upstream jobs, compared to the same month in the prior year, January 2023 jobs were up by 20,000 – or 11.2 percent – over March 2022... these jobs pay among the highest wages in Texas, with employers in oil and natural gas paying an average salary of approximately $115,000 in 2022... the Texas comptroller’s office showed strong levels of tax contributions paid by the Texas oil and natural gas industry. In March, Texas energy producers paid $427 million in oil production taxes and $267 million in natural gas production taxes.“
“I believe firmly this year‘s oil market balance comes down to just one variable – demand. I‘ve said this for a long time now, but the supply side is known. There are no surprises lurking in the dark corners of the market that we don‘t know about... Putting all of this together, the end result is a gradually increasing deficit starting in May... Now if we tie all of this back together, it‘s not the supply side we have to worry about. It‘s just demand, and for market participants, the incoming recession is one that has many of them guessing what demand will do... And with the latest US oil demand data, I can‘t help but feel that this is the exact opposite setup versus last year. US oil demand was materially disappointing to the downside by this time last year, but oil prices kept going upwards nonetheless. But this year, demand is starting to improve, the OPEC+ production cut is coming, and yet, everyone is afraid that recession will meaningfully drop demand. I believe it‘s moments like this when readers have to really clear their heads of preconceived notions and focus on what‘s important. And what‘s important is that US oil demand is improving, and global oil market balances still show a draw despite very tepid demand assumptions. Oil data looks far better than meets the eye. Focus on what‘s important.“ (Source: “Oil Data Looks Far Better Than Meets The Eye“, April 26, 2023)
“The parallels between last April vs this April are quite telling. I think people are materially underestimating many of the hidden bullish variables we are seeing. While there are still concerns surrounding the macro environment, one must focus on the data and the data is screaming something completely different than the narrative... In essence, what I am trying to say is that the oil market is never what it seems. On the surface, something can be perceived bullishly like the Russia/Ukraine invasion, but it turned out to be bearish for the market. Similarly, the possibility of a recession on the horizon, which materially lowered oil prices, could be bullish as it stimulates demand once again. In addition, the perception also prompted OPEC+ to cut supplies... So what if the recession isn‘t as bad as we think it is? But supplies have been reduced regardless, and just like last year [...] on the expectation that Russia would lose production, what happens if demand isn‘t all that bad? The oil market is a funny beast, and I feel like we live in a parallel universe. What happened last year is playing out in its exact opposite form this year. If my analysis on this is correct, I think there‘s a much higher chance oil prices surprise to the upside this year.“ (Source: “It‘s Funny, Oil Market Has The Exact Opposite Setup Vs Last Year“, April 12, 2023)
Full size / One of G2 Energy‘s producing oil wells in the Permian Basin, Texas.
G2 Energy: Gearing Up
In an oil market with elevated prices and strong demand, companies able to acquire oil wells with production upside are well-positioned to benefit handsomely. In order to make meaningful oil asset acquisitions, management must be well-connected and have appropriate expertise in finding assets with the potential to substantially increase production by performing cost-effective well workovers. G2 Energy has assembled a top-notch management team with a compelling strategy to immediate near-term upside and long-term growth outlook.
David Whitby serves as G2 Energy‘s President and Chief Operating Officer. He is well-known in the oil and gas industry as he is considered the pioneer of the Indonesian gas industry, where he had tremendous success developing greenfield gas projects as Vice President Corporate Development at Gulf Indonesia Resources Ltd. (72% owned by Gulf Canada Resources Ltd.). In 2001, Conoco Inc. (now ConocoPhillips) acquired Gulf Canada for $6.7 billion in cash. After the takeover, David worked as Project Director of the West Java Gas Project for ConocoPhillips. Prior to his work in Indonesia, he was the Managing Director at Gulf Australia Resources Ltd., where he grew production from 5,400 boe/d to 18,500 boe/d in 3 years. As Vice President, he restructured Husky Energy Inc.‘s heavy oil operations, returning it to profitability by increasing production from 28,000 boep/d to 33,000 boep/d while reducing production costs (OPEX) from $7.26/bbl to $4.86/bbl in under 2 years. He is also the former President and CEO of ASX-listed Nido Petroleum Ltd., which saw its share price increase from 1.6 cents in 2004 to 62 cents in 2008, resulting in a market capitalization of $600 million AUD under his tenure. As a senior executive with 40 years of industry experience, he gained his reputation for building companies, creating value and driving performance improvements in the oil and gas industry, consistently delivering breakthrough change in performance. He has been relied upon to successfully manage challenging situations and turning companies around.
Click here to watch the latest interview with G2 Energy‘s President David Whitby and CEO Slawek Smulewicz.
CEO Slawek Smulewicz is an astute businessman with over 25 years experience in the oil and gas sector, having demonstrated its leadership, collaboration and negotiation skills. He is well-connected in Texas‘ oil industry, having established valuable relationships including operators, asset sellers and professionals. He has a strategic vision and talent for building complex and geographically dispersed businesses and has a proven track record for delivering results. Slawek was the founder of Be Solutions Corp., for which European company he oversees business operations and management of a wood-waste biomass facility in Poland. Previously, he was the founder, and largest shareholder, of MicroCoal Technologies Corp. where he was responsible for the transformation of the company from a “carbon credits” business to a technology company by developing a method that dries coal using microwaves.
John Costigan serves as Vice President Corporate Development, bringing decades of leadership experience in financial communications, raising capital and corporate restructuring. He was part of the team raising $140 million for Western Potash Corp., where he was the head of Corporate Development. John is adept at building relationships with stakeholders, clients and partners, and is an accomplished investor relations expert.
Notes from a recent conversation with CEO Slawek Smulewicz and VP Corporate Development John Costigan:
• Last year, the first acquisition was completed: The Masten Unit is G2‘s flagship, located in the Permian Basin.
• This producing oil field alone represents a major opportunity for shareholders due to disconnect between market capitalization, acquisition price and value in the ground:
• The Masten Unit oil field was purchased for $4 million USD ($400,000 in cash and $3.6 million in debt) plus $300,000 in shares and $400,000 in performance shares.
• Independent Reserve Report (2022) estimates total reserves at 752.8 million barrels of oil equivalent valued at $12 million USD (NPV10).
• The idle and producing oil wells have excellent engineering done by Chevron (“over-engineered“) with an estimated production cost of about $12-15 USD/barrel. The cost of production in the Permian Basin is typically below $20 USD/barrel.
• Neighboring assets are targeted for acquisition as the owners are typically ~80 years of age and want to retire now. The younger generation is usually not keen on spending time on the field, is already wealthy and/or prefers to invest in something less “dirty“. This was also the case with the previous owner of the Masten Unit, who was 76 years and wanted to retire.
• The benefit of acquiring additional wells near-by is to use the Masten Unit‘s excellent infrastructure (access to oil and gas pipelines as well as water injection wells).
• The infrastructure in place at the Masten Unit can handle up to 3,000 barrels/day (currently producing 85 barrels/day). With well workovers and additional (vertical) drilling, production can be increased up to 1,500 barrels/day, so there is ample capacity left to add wells from the close neighborhood which do not have such infrastructure in place.
• Following the closing of the current private placement financing, management plans to spend ~$250,000 USD on several well workovers at the Masten Unit to reach ~150 barrels/day within 1-3 months, targeting ~$300,000 USD per month in revenue.
• The idle wells at the Masten Unit have not been out of production for long time. For example, K1 is the longest idle well since about 3 years, which is nothing unusual or problematic to bring back production for such well-engineered wells subject to workovers.
• At the Masten Unit, there is potential to significantly increase production (up to 350 barrels/day per well) with the drilling of up to 4 horizontal wells. Other near-by fields have successfully completed horizontal wells so it‘s a relatively simple task to do the same at the Masten Unit.
• The Permian Basin will be G2‘s focus going forward. Management has very attractive assets on the radar with a long history of production to keep flowing for many years to come. Management is also constantly evaluating joint ventures and other agreements with operators, owners and/or investors.
• Targeted assets must have low risk and a steady production with a minimum of 10-15 years remaining life.
• The goal is to continue the acquisition of wells with a 50% upside (i.e., to increase production with workovers and additional drilling).
Full size / One of G2 Energy‘s operating oil wells at the Masten Unit in Texas.
“Energy producers raked in record profits after Russia’s invasion of Ukraine sent crude prices soaring, helping them rebound from their crash during the pandemic. Now that they are back on solid financial footing, companies are seeking to bulk up and consolidate, particularly in the Permian Basin of Texas and New Mexico, the largest and most productive oil field in the US, industry experts say. Tie ups bring several benefits, including expanding their supply of well locations and scale that can strengthen their bargaining power with suppliers.“ (Source: “Oil Patch Is Poised for Buyout Wave as US Drillers Seek New Land“, April 26, 2023)
Full size / One of G2 Energy‘s operating oil wells at the Masten Unit in Texas.
“The world needs more US oil, and the Permian has several thousand locations remaining that are viewed as high quality,” said Pete Bowden, global head of industrial, energy and infrastructure banking at Jefferies Financial Group Inc. “If you’re a major oil company, you have to think about getting that supply while it’s available.” [...] The Permian Basin is set to grow 40% before hitting its peak of 7.86 million barrels in 2030, according to a Bloomberg survey of major forecasters. The growth alone would be like adding another Iran, the fifth-biggest member of the Organization of Petroleum Exporting Countries, to global oil markets. The basin is still relatively fragmented, which makes consolidation somewhat inevitable... OPEC+’s recent surprise cut and continued expectation of demand outpacing supply is setting a floor for crude prices, which makes it easier to ink oil deals, said Muhammad Laghari, senior managing director at Guggenheim Securities. (Source: “Oil Patch Is Poised for Buyout Wave as US Drillers Seek New Land“, April 26, 2023)
Full size / Excellent infrastructure in place, including cheap electricity from wind power, at the Masten Unit in Texas.
Management & Directors
Slawek brings over 25 years of experience in the oil and gas sector, along with demonstrated leadership, collaboration, and negotiation skills. Over the past decade, Slawek has established relationships in the oil and gas industry in Texas, including asset sellers, investors, and professionals. He has a strategic vision and talent for building complex and geographically dispersed businesses and has a proven track record for delivering results. Slawek lives in Vancouver, BC, and in his free time enjoys spending time with his family. Over the past decade, Slawek has established relationships with key market players in Europe including equipment producers, traders and end-buyers for both residential and commercial products. Also, as the Founder of BE Solutions Corp., Slawek has a mission to become a leading innovator in the renewable energy market. He oversees business operations and management of a wood-waste biomass facility in Poland. Slawek was the key leader in securing the permissions to process up to 220,000 tons of biomass per year and achieved the ENplus certification for A1 for wood pellet production, the highest standard in the field. Previously, Slawek founded and was the largest shareholder of MicroCoal Technologies Corp. He was responsible for the transformation of the company from a “carbon credits” business to a technology company by developing a method that dries coal using microwaves. Slawek was instrumental in the technology development and lead MicroCoal to complete its first agreement to build a commercial plant in Indonesia. Slawek‘s successes also include real estate projects in Poland totalling over $25 million USD and creating a construction company that employed over 450 people and focussed on developing Class A office space as well as 4- and 5-star hotels. Slawek holds a Master degree in Business Administration, Agriculture from the University of Warsaw and is fluent in English and Polish. He has served in various executive capacities and is on the board of several international companies in both the information technology and industrial sectors.
Full size / G2 Energy‘s CEO, Slawek Smulewicz, in front of an operating oil well at the Masten Unit in Texas.
COO, President, Director
A senior executive with 40 years of industry experience spanning from the sand face through to the board room. David has a reputation for building companies, creating value and driving performance improvements in the oil and gas industry, consistently delivering breakthrough change in performance. With his broad experience, David is well known in South East Asia, Australia and Canada. He has been relied upon to successfully manage difficult situations, having worked for 14 years with Husky Energy Inc. in Canada, and 12 years for Gulf Canada Resources Ltd. (acquired by ConocoPhillips in 2001) in Indonesia and Australia. The majority of David‘s career has been focused on monetizing gas reserves in Indonesia having successfully closed 5 major gas supply contracts with Caltex in Indonesia, export to Singapore and domestic sale to Java totaling 12.5 Tcf producing in excess of 1.5 Bcf/d, thus pioneering the modern-day gas industry in Indonesia. David is the former President and CEO of ASX-listed Nido Petroleum Ltd. Through a series of partnerships and land acquisitions, Nido gained control of the offshore NW Palawan basin. The previously stranded Galoc oil field was brought on-stream, and an exploration portfolio generating >60 drillable prospects was built. Under his leadership, the company raised $145 million AUD through equity and convertible debt. The share price of the company rose from 1.6 cents in 2004 to 62 cents in 2008 resulting in a market cap of $600 million AUD to become an ASX-200 company. David grew up in Swift Current, Saskatchewan, and studied Mechanical Engineering at the Royal Military College in Kingston, Ontario, and served in the Base Engineering Unit at CFB Calgary before joining Husky. As Vice-President, David re-structured Husky‘s heavy oil operations, returning it to profitability by increasing production from 28,000 boepd to 33,000 boepd while reducing OPEX from $7.26/bbl to $4.86/bbl in under 2 years. As Managing Director of Gulf Australia (a subsidiary of Gulf Canada), David grew production from 5,400 Boe/d to 18,500 Boe/d in 3 yrs through the divestiture of 3.5% WI in SWQ Cooper Basin to Santos and the acquisition of the Jabiru/Chalise FPSO from BHP and increasing production through facility optimization from 6,000 bopd to 13,100 bopd. David also led the defense against the ConocoPhillips takeover of Gulf Indonesia on the NYSE (closing at $14.37 USD/share, a 60% increase in historical share price generating $437 million USD for shareholders). David also led Pertamina’s negotiations with ConocoPhillips on the unitization of the 7.4 Tcf Suban gas field in southern Sumatra, generating incremental annual revenue for Pertamina of $267 million/yr for 16 years totaling $4.27 billion. David also rejuvenated Nido Petroleum from a market capitalization of $1.4 million to $620 million AUD in 42 months.
Gabriel brings a solid background in finance and economics, as well as several years of corporate finance experience and investment banking. His experiences in the energy industry include consultant roles for major public companies in the oil and gas industry in South America and the Middle East, and roles as Business Development Manager and Commodity Trader in the North American market.
VP Corporate Development, Director
John brings his decades of leadership experience in financial communications, raising capital and corporate restructuring. He lives in North Vancouver and in his spare time plays jazz guitar, rock climbs and practices yoga. His favourite charity is the Kettle Friendship Society. Following a successful career in specialty chemical sales, John became part of a team that raised $140 million to launch Western Potash Corp. While head of Corporate Development at Western Potash, John honed his talent for raising capital, overseeing financial operations and building growth strategies. John has assisted numerous companies in partner identification, intellectual property management, recruitment and public relations. He is adept at building relationships with stakeholders, clients and partners, and is an accomplished investor relations expert, calling on his network of media, brokers and investors to maximize clients’ exposure.
Oleg is a highly experienced CPA with over 20 years experience in financial management and accounting with publicly-listed companies. He is a member of the Chartered Professional Accountants of British Columbia and a licensed CPA in Washington. He holds a Master degree in Accounting and Audit, and a Bachelor degree in Laws. Oleg worked in senior financial management roles in the mining, construction and oil sectors, and provided strategic consulting advice. Previous roles include CFO of TSX.V-listed companies such as Westminster Resources Ltd., Jaxon Mining Inc. and Global Cobalt Corp.
Markus has more than 30 years of experience in the banking and finance industries. He has been an active investor in the resource industry for over 15 years and is currently the Founder and CEO of a private investment company in Germany. Markus is one of G2‘s largest shareholders. He holds a diploma in International Business Administration from the University of Applied Sciences, Furtwangen, Germany.
Kai is a natural team player, capable of articulating goals and objectives clearly, while balancing opinions. He demonstrates leadership skills by motivating others through own commitment and drive. Kai‘s educational and professional achievements within Canada, Germany, and the UK contribute to a broad perspective and strong business acumen, knowledge of varying organizational cultures, excellent organizational skills, adaptability, and diplomacy. He is a highly motivated, performance-driven professional with integrity and drive to improve business results.
Advisory Board Member
Erin is an experienced entrepreneur and capital markets expert who has led development teams for industrial and energy projects, including Kanata Clean Power, which is developing new zero carbon electricity generation opportunities, and Be Solutions Corp. operating biomass energy plants. Erin brings over 2 decades of hands-on expertise in projects requiring financing solutions. She has developed key relationships with global technology stakeholders including manufacturing and financial groups. Through ECMB Capital Partners, she is also a Director and Advisor to public and private growth companies. Erin was recognized by Business in Vancouver’s “40 under 40 Award” for her outstanding accomplishments as a young CEO.
Full size / One of G2 Energy‘s operating oil wells at the Masten Unit in Texas.
G2 Energy Corp.
Suite 430 – 744 West Hastings Street
Vancouver, BC, V6C 1A5 Canada
Phone: +1 778 775 4985
CUSIP: 40054T / ISIN: CA40054T1075
Shares Issued & Outstanding: 86,587,885
Canadian Symbol (CSE): GTOO
Current Price: $0.015 CAD (05/02/2023)
Market Capitalization: $2 Million CAD
German Symbol / WKN: UD9 / A3DG5Y
Current Price: €0.009 (05/02/2023)
Market Capitalization: €1 Million EUR
Disclaimer: This report contains forward-looking information or forward-looking statements (collectively "forward-looking information") within the meaning of applicable securities laws. Forward-looking information is typically identified by words such as: "believe", "expect", "anticipate", "intend", "estimate", "potentially" and similar expressions, or are those, which, by their nature, refer to future events. Rockstone Research, G2 Energy Corp. and Zimtu Capital Corp. caution investors that any forward-looking information provided herein is not a guarantee of future results or performance, and that actual results may differ materially from those in forward-looking information as a result of various factors. The reader is referred to G2 Energy Corp.´s public filings for a more complete discussion of such risk factors and their potential effects which may be accessed through its profile on SEDAR at www.sedar.com. Please read the full disclaimer within the full research report as a PDF (here) as fundamental risks and conflicts of interest exist. The author, Stephan Bogner, does not own any equity position of G2 Energy Corp., but he owns equity in Zimtu Capital Corp., and is being paid by Zimtu Capital Corp. for the preparation, publication and distribution of this report, whereas Zimtu Capital Corp. currently does not holds an equity position in G2 Energy Corp. Note that G2 Energy Corp. pays Zimtu Capital Corp. to provide this report and other investor awareness services.