Bonanza Creek Energy: National Growth
Exploration & Processing
Written by Adam Swift   
Wednesday, 30 June 2010
Bonanza Creek Energy: National Growth
This oil and gas exploration and production company has seen tremendous growth by concentrating on some of the most prolific oil-producing regions in the US.
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Bonanza Creek Energy: National Growth
With oil and gas properties in four states, Denver-based Bonanza Creek Energy has grown rapidly since it was founded in 1999. Each year since 2006, the company has essentially doubled in size.

“Our company was built on a reputation for integrity, reliability, hard work, and commitment to our investors, our employees, and our community,” said Mike Starzer, president and CEO. The company prides itself on building strong relationships with everyone it works with and on being a well-run organization, he said.

Bonanza Creek Energy: National Growth
Mike Starzer, president and CEO
The company’s goal is to acquire and develop oil and gas properties in the Rockies and create shareholder value for its investors. In 1999, the company completed its first acquisition of 3,400 acres of oil and gas-producing properties, with 21 producing wells in Wattenberg Field, Colo. This transaction was the first step for Bonanza Creek in building a long-life stable production stream with substantial development upside, according to Starzer.

The company’s strategy is an acquire and exploit model, where the corporate development team looks for underdeveloped assets in core operating areas, according to Starzer. “Once acquired, the experienced technical team applies the latest techniques, including steam-enhanced oil recovery,horizontal drilling, waterfloods, and tight-sands gas drilling,” he said.

Starzer credits much of the company’s growth to the experience and knowledge of its executive, management, and operating teams. From 1999 through 2005, the company acquired 17 properties and increased production 18-fold through development activities.

Bonanza Creek typically invests between $25 million and $75 million per year and drills 40 to 90 wells on its 117,000 acres of fee and leasehold lands in California, Colorado, Wyoming, and Arkansas. Current activity includes 12 proven development projects as well as 11 unproved projects that are under evaluation. According to Starzer, the company operates substantially all of the development projects and can control the investment of capital to align with development pace and the economic environment.

A commitment to safety
The company is very proud of its safety record, according to Starzer. Last year, the company reached the significant milestone when its employees worked 250,000 man-hours without a lost-time incident.

“Reaching the 250,000 man-hour level is a significant challenge for a company of any size, and given our relatively low employee headcount, we safely worked for approximately two years for us to reach this goal,” said Starzer. “This is proof that each employee shares Bonanza Creek’s commitment to safety and cares not only about his or her own safety, but also about the safety of those around them. One of the most important measures of our success is the safety of our employees.”

That commitment to safety extends through the work the company does in three of the most prolific and active oil and gas producing areas in the US: the Rocky Mountain region, the Mid-Continent region, and California.

The company purchased its first oil and gas assets in the Wattenberg Field located north of Denver. The field was discovered in 1970 and is known for its low-risk geologic setting.

“Particularly noteworthy of our position in Wattenberg Field is that many of our interests are owned 100% by us and are located on contiguous or nearby leases,” Starzer said. “These properties provide us with a good balance between gas and light oil production, with low-risk recompletion and infill drilling opportunities for exploitation.”

Bonanza Creek’s reserves are long life, and although infill development has occurred in the area, the acreage owned by the company is relatively underdeveloped, according to Starzer. With full development of the proved reserves, he said the properties are forecast to achieve substantial production rate increases.

California is another core region of operation and growth for the company, particularly in the San Joaquin and Sacramento basins. In 2006, the company acquired 480 acres and 45 wells in the prolific South Midway Sunset Field in Kern County under the banner of the Forty Mile Creek Company, a subsidiary of Bonanza Creek. Bonanza Creek owns a 100% working interest in the property.

The property holds underdeveloped, long-life, heavy oil reserves, according to Starzer. “This transaction utilizes our extensive experience in thermal recovery operations and horizontal drilling and is complementary to our light oil and gas reserves in the Rockies,” he said.

Keys to continued success
According to Starzer, there are several keys to continued growth and success in the exploration and production business, including the development acreage a company has, the development and acquisition ability of a company’s management, financial position, and realistic expansion and acquisition opportunities. “We stack up very well against all those keys to success,” he said.

Starzer said there is plenty of opportunity for the company to grow. “Our reserve development inventory totals $323 million of investment opportunities, comprised predominately of low-risk infill drilling and recompletions,” he said. “In additon, our corporate development team has a proven record of growth through acquisitions with the capability to search out the most attractive external investment opportunities.”

With its investment in US exploration and production, Starzer said the company has much potential for its investors. “We believe the US provides the most stable platform for investments in hydrocarbon development and production because of its political stability and the certainty of its legal system,” he said. “This places it at the top end of the high-reward, low-risk scale in the global context. Even though a tremendous volume of US domestic oil and gas reserves that are recoverable under present economic conditions have been extracted, it represents only a fraction of the total US resource base that still remains.”
 
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