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Wednesday, June 1, 2011

Q&A Interview with Kim Bradford, President and CEO of Osage (OTCBB: OEDV), Following News of Joint Venture with Slawson Exploration Company, Inc. and U.S. Energy Development Corporation

Point Roberts, WA - May 31, 2011 ( Energy Newswire) -, a leader in sector research including oil and gas stocks, releases a recent interview with Kim Bradford, President and CEO of Osage Exploration and Development, Inc. (OTCBB: OEDV), following news of the recent joint venture with Slawson Exploration Company, Inc. and U.S. Energy Development Corporation. Mr. Bradford discusses Osage's partners, reserves and potential for the Nemaha Ridge Project in Oklahoma.
The Company just announced it closed an agreement whereby Slawson Exploration Company, Inc. and U.S. Energy Development Corporation have acquired 45% and 30% respectively of Osage's Nemaha Ridge project in Oklahoma for gross consideration of $4,875,000.00 plus a 10% net carry on the first three horizontal Mississippian wells. Can you discuss the significance of the partners and what role they play moving forward?
A: Kim Bradford, President and CEO of Osage Exploration and Development, Inc.
Yes I can. Large oil companies have departments full of people and those people tend to be interchangeable in any given situation. Because we are not a large oil company, the individuality of the partners becomes paramount in determining how we go forward. In our situation, the Principals of each company come together and make decisions. The fact that Slawson and USEDC have done many deals together over the years, and the fact that Osage's VP Exploration, Greg Franklin, has known Steve Slawson for over 20 years means that from day one this partnership has a culture of trust and long term respect for each other. This is essential for success because in creating this financial partnership we have also created the Operating team. In this project there are no passive partners, we all bring a level of expertise in the various functional areas necessary to drill and exploit this resource. We are all rallying behind our Operator, Slawson, to provide leadership, but Slawson has selectively asked each of us to perform certain tasks along the way. From Osage's perspective, we have gained a tremendous amount of engineering expertise that we simply did not have. We have gained access to two superbly experienced land teams to complement the work that we have done already. Perhaps most importantly, Slawson as a driller owns rigs that we may elect to use in our project. The value of that can not be understated because as the Horizontal Miss play continues to heat up, it is pretty easy to forecast equipment shortages, and we have the solution already in place. This is a superb team with an abundance of talent, expertise, equipment and experience in horizontal drilling.
Can you discuss the potential reserves based on the report by Pinnacle Energy Services?
A: Kim Bradford, President and CEO of Osage Exploration and Development, Inc.
Pinnacle Energy Services is run by John Paul Dick, who is widely recognized as a carbonate formation engineer of the highest caliber. Our Mississippian formation is a carbonate. It only made sense to use Pinnacle for our engineering if we could get them. Needless to say, we have a very high degree of confidence in the work and the conclusions of this report. John Paul looked at Mississippian penetrations all around our area of concentration, and looked at all the Mississippian penetrations in our land block to arrive at his conclusions. As one would expect from a firm of Pinnacle's reputation, they used very conservative assumptions to derive their calculations. Probably the best example is that fact is that Pinnacle utilized a 7% recovery factor for our project. That number could easily end up much higher, but even so, the estimated recoverable reserves per section is almost a million barrels of oil, which does not include the gas. With the gas included, we go substantially over a million barrels per section. Perhaps the ultimate test of an engineering report is whether it makes sense in context with the surrounding areas. In this case, the numbers that Pinnacle prepared for Osage looks very similar to what we have seen in actual results from SandRidge Energy (NYSE: SD ) and Chesapeake Energy (NYSE: CHK ), who are probably the two most prolific drillers in the Horizontal Mississippian to date. Taken together with John Paul's reputation, the consistency of our report and the results to date gives me a very good feeling that we can achieve these results in the field, which will be an economic home run for Osage.
We currently have about 17 net sections leased, so it would appear that we have approximately 17 million boe recoverable according to the report, but that's not the whole truth. In Oklahoma, an Operator can “force pool” other mineral owners in a section by going to the state Commission and giving the other owners a chance to participate for their percentage or alternatively “force” them to lease the balance of the land to the Operator. Because we currently have leases in 40 sections, we will have the opportunity to drill in up to 40 sections, not 17, and pool some part of the acreage that we don't already have leased. The implication being that we will almost certainly end up with substantially more than the 17 net sections we currently have and commensurately more recoverable barrels net to Osage.
There is one additional thing to note from the Pinnacle report that is easily missed. Pinnacle talks about the fact that many other formations have been historically productive within the Osage block, which include the Layton, Woodford shale, Oswego, Hunton, and many others. Pinnacle says “It is anticipated that many of these formations will be found productive in the prospect areas as development and analysis progresses.” And while there is no attempt in this engineering report to quantify how much additional oil and gas might be contained in these known, locally productive horizons, our geological work has already identified multiple drilling targets in these additional zones that we will certainly exploit at some point.
Can you tell investors what other operators are in this area of Oklahoma and in particular, the publicly traded companies?
A: Kim Bradford, President and CEO of Osage Exploration and Development, Inc.
There are more than a dozen that I could name offhand. What is interesting is that in almost every case, it is Oklahoma based companies that are in this play. Ranging from very long term privately owned Oklahoma drillers such as Nadel & Gussman and Ceja, which date back to the 20's and 30's to Eagle Energy which was founded in 2009, all are finding success in the Horizontal Miss. The publicly traded companies such as Chesapeake Energy, Devon Energy, SandRidge Energy, and Range Resources with a combined market cap of almost $70 billion lend a tremendous amount of credence to the play by their very presence. It is fair to say that at least in SandRidge Energy's case, its commitment to the Oklahoma Mississippian play has totally transformed the company from a lackluster natural gas focused producer to one of the most dynamic mid sized oil companies in the market today, with a stock price performance to match that transformation going from $4 less than a year ago to roughly $12 today. If you go to their website, and you should, it is obvious that they largely credit the Horizontal Miss for that transformation.
The attribute that all the Horizontal Miss players seem to have, beyond the fact that they are almost unanimously Oklahoma companies with detailed local knowledge, is that they have been largely driven by people of conviction, ranging from most notably Tom Ward at SandRidge Energy to Loren Schmidt at Calyx, Charles Wickstrom and Shane Matson at Spyglass Energy, as well as Osage's own Greg Franklin, and many others. While the Mississippian formation has been known for decades, it took the ability to re-evaluate without prejudice, and move forward with conviction that the Mississippian could be an ideal candidate for horizontal exploitation.
Because the Mississippian is present in so many counties in Oklahoma, each of the companies involved are making unique contributions to the knowledge base. As an example, Pablo Energy and Eagle Energy of Oklahoma are in completely different areas of Oklahoma, use completely different drilling and completion techniques, but are helping us all to advance our knowledge and build efficiencies. Oklahoma is a fantastic place to drill for oil, and these are fantastic people and companies to be working along beside.
The$4,875,000.00 received as a result of the transaction - how far does that take the company into drilling?
A: Kim Bradford, President and CEO of Osage Exploration and Development, Inc.
We have a very clear view with Slawson and USEDC how we plan to move forward on this project. Based on that plan, we are adequately capitalized to move forward for at least a year of drilling. After we evaluate our first year's results, it appears that there is a strong likelihood that we will then increase our pace of drilling in the second year and going forward from there. The plan that we have in place is for the Mississippian development only, and could change based on other formations that we expect to encounter, because we know that we have “stacked” pay zones over our acreage block. We will wait to see what comes out of the first few drill holes before making any decisions on the additional zones, because some of them are shallower than the Miss and some are deeper.
What else should investors know about Osage Exploration and Development, Inc.?
A: Kim Bradford, President and CEO of Osage Exploration and Development, Inc.
First of all, I should point out that from an investor's point of view, it is important not to overlook Osage's Colombian assets. Even mid last year, when our market capitalization was under $1,000,000, we enjoyed between $150,000 and $200,000 a month in revenue from our Colombian operations. That is a case where the investors overlooked our assets and cash flows and as a consequence the stock was severely undervalued for a long period of time. Investors must not be fooled by what the markets tell them, because markets range from severely undervaluing assets to severely overvaluing assets and everything in between. Research and analysis has always been the key for investment performance.
Our Colombian assets give us a head and shoulders advantage over our micro-cap oil and gas peers, called positive cash flow. That in turn gives us the ability to prospect for new discoveries without having to worry about where our next dollar is coming from, which leads me to the next topic. While we could not be more excited about our Horizontal Mississippian acreage, we are already well advanced in evaluating our next potential project. The next project that we take on will certainly be in the US, hopefully with similar economics to our current project. At some point in the near future however, we plan another exploration play in Colombia because we have the infrastructure already in place. We have a Colombian subsidiary, which is required by Colombian law; we also have probably the best oil and gas accounting firm and one of the very best legal firms in all of Colombia. We have extensive knowledge about how the Colombian oil and gas regulatory agencies work; we have partners and former partners that are deeply involved in Colombia so that we have access to projects with which we already have familiarity.
About Osage Exploration and Development, Inc.
Based in San Diego, California with production offices in Oklahoma City, Oklahoma, and executive offices in Bogotá, Colombia, Osage Exploration and Development, Inc. is an independent exploration and production company with interests in oil and gas wells and prospects in the US and Colombia.
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Link to news release: read full news
About Slawson Exploration Company, Inc.
Headquartered in Wichita, KS, with regional offices in Denver, Houston, and Oklahoma City, Slawson was founded in 1957.
About U.S. Energy Development Corporation
U.S. Energy Development Corporation was formed in 1980 as a successor to Oilmark & Company, Inc., founded in 1978. The company has consistently been ranked among the Top 50 Independent Oil & Natural Gas Drillers in the United States and is one of the largest drillers in both New York and Pennsylvania. Since 1980, U.S. Energy has acted as operator with respect to the drilling of more than 2,500 wells.
Safe Harbor Statement
The information in this release includes certain forward-looking statements as defined by the Securities and Exchange Commission that are based on assumptions that in the future may prove not to have been accurate. Those statements and Osage Exploration and Development, Inc. are subject to a number of risks, including production variances from expectations, volatility of product prices, inability to raise sufficient capital to fund its operations, environmental risks, competition, government regulation, and the ability of the Company to execute its business strategy, among others.
Osage Exploration and Development, Inc.
Kim Bradford, President and CEO
Phone: 619-677-3956
Fax: 619-677-3964
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Osage Exploration and Development, Inc. (OEDV.OB) is a showcase oil and gas stock on
Visit the company showcase profile at
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Disclosure : (6 months starting May 24, 2011 thirty five hundred per month, 100,000 144 shares)