Al Adler is CEO of ABA Energy Corporation joins us to provide a broad overview of the Oil and Gas sector. He describes his early career in the Oil and Gas industry and how he started out in the oil patch in the United States and then traveled to several countries. After a few years, he broke out on his own by heading up a companies Oil and Gas branch. That ended up being a tremendous success which spring-boarded him into launching the company ABA Energy in 1991.
Al lives and operates in Bakersfield California. He says, “They have been doing business pretty much the same way since 1991.” They are unique in that they make value for themselves by exploring and drilling for oil and gas. They have done well over the long term by minimizing risk via working on many smaller projects at any time. The Oil and Gas sector is a very cyclical market, and you have to be careful during the downtimes. They often partner with larger companies that work well with his team and who see the value in what they do.
ABA Energy does all of their own geology, engineering, land-work and has in-house legal counsel.
He outlines the three different drilling strategies that companies like his can do. They focus on old oilfields that have been dormant for years. They are very careful to secure the mineral rights and surface rights which is very complicated as title histories can difficult to trace. It can be costly if you hit oil only to discover it isn’t yours. There is a lot of due diligence needed, and very few companies have the specialized staff to handle it.
Often these old fields have areas that have overlooked including the potential for deeper reserves. So they look for opportunities with multiple chances to win. He says, “The best place to look for oil is in an oil field.”
They have two proficient geologists on their staff, and they examine old wells often online. They look at seismic data to understand the geology. Sometimes they do 2D and 3D seismic studies to reduce the risk.
Large oil companies still own some properties, in that case, they will often negotiate a deal with them. Then they focus on county government permits, and then they get the state permits. Once permitting is complete they engineer the well, figure out the optimum depth, and drilling type. Sometimes they need to directional drill to keep landowners happy and to reduce the environmental footprint.
He explains in depth how the oil drilling business works from beginning to end including the transportation and payments. The revenue cycle is pretty quick once a well is complete. They sell to a large national marketing company that handles the trucking and deals with the refiners. This is why they get the first check often within thirty days of an oil well completion.
He describes the different geologies of the United States and the different grades of crude oil.
Al discusses the tax benefits of investing in the sector and best strategies an investor may want to take. He points out that many large stock market deals are not structured that well and don’t benefit the investor as much as they help those doing the offerings.
Talking Points From This Weeks Episode
• A complete breakdown of how an Oil Exploration Company works.
• The various differences in grades, geologies, and types of drilling.
• Explains how horizontal drilling and fracking work.
• General investment advice and what to watch out for.
About Our Guest
Allan Adler is CEO of ABA Energy an independent oil and gas company headquartered in Bakersfield, California that he founded. They work with landowners, industry partners and regulators in a cooperative fashion ABA Energy and its dedicated employees are committed to exploring for and producing oil and gas in an environmentally sensitive manner. He has nearly thirty years of experience in the Oil and Gas sector. You can find out more at ABAEnergy.com