One, and welcome everybody to another smart money circle
update. I'm Adam Sarhan.
With me today is James Hill, who's the CEO of MCF Energy.
Jim, thank you so much for taking the time and coming on
the show today. Yes, good morning.
Thank you for taking the time to interview me.
So Jim, I always like to ask, can you tell us a little about
your story and how you got to where you are today, please?
Oh, absolutely. Well, as you can tell by my Gray
hair, I've been in the industry for a little while, actually
started with the US Geological Survey back in 1971 and went
through various major and minor oil companies during their
career until I finally ended up forming my own, my own company
in 1986, which primarily was focused on consulting to
companies also acquiring assets, producing assets.
At that particular point in time, the price of energy was
very low and it was real hard to to stay alive and and of course
that was a good time to buy, you know, buy low, sell high.
And you know we went through a number of tough years with some
of the producing properties that we had, but we survived and that
actually ended up being vended into a company on the Canadian
Venture Exchange in kind of a reverse merger.
That was a way of of you know, raising capital and and and
getting into the public space. That worked out very well and we
got taken over in a hostile takeover and I didn't realize at
the point that banks have a deposit limit, not just a
withdrawal limit but a deposit limit, I had to go to the bank
twice. So that was a terrible day.
That was, that was a terrible day in any case.
Moving, moving on though, how I became involved with the the
people that were currently sponsoring MCF Energy is that
there was a company called Bankers Petroleum that had been
put together and at that time they had an asset in Albania.
And Albania is a country that was incredibly locked up because
of the the government at the time, political situations and
very few people realize that the largest one of the largest
onshore oil fields in Europe was in Albania Oh.
Wow. And we had the concession, it
worked out. Again that worked out very, very
well. We took the production from 600
barrels a day up to about 19,000 before it was finally purchased
out by the by the Chinese. From that point on, we had
actually made several discoveries.
One of them was in Oklahoma, which we butterflied off onto
what was called BNK Petroleum. And you know our focus was to
develop those assets that we found in Oklahoma.
And at the same time we started to explore in Europe because at
that point our focus was on shale gas.
I mean all companies at that time were playing shale gas.
It was, it was basically a zero risk proposition for investment
groups. Well, shale gas, you know at one
time you know the planet was all stuck together.
So you know shale is shale, you know, hey, Europe's got shale
Wahoo. So we went into Europe at that
point. That was about 12 years ago and
we had a very large concession holdings in Poland, Germany and
Spain. We couldn't really do much in
Germany and Spain at that point because of the political
environment and, you know, data requirements.
But we did get 6 wells drilled in Poland and actually found
shale gas in Poland. But because of some political
changes and some economic changes, we couldn't develop it.
It took an additional billion dollars besides the 100 million
I threw at it to develop a shale play.
And because of the changes in the Polish governmental rules,
we couldn't get a partner, so we had had to drop that.
At that point, I decided that you know, the, the focus of the
company should be a lot more in what we had, which of course was
in Oklahoma. So I actually retired from BNK
because I was, you know, not involved in international
exploration with BNK anymore and went into retirement.
I wasn't real retirement. Like so many guys like me, you
never really retire. The idea was is I consulted to a
number of companies in Europe, kind of kept my hand into what
was going on in the in the European scene.
So that when the Black Swan event happened, when Russia
invaded Ukraine, the same group of investors and money, money
venture people that bankers, petroleum and B&K both gave me a
ring and said, hey look, you know this is a unique
opportunity. Europe is going to be starving
for gas. There is going to be a real
problem here that you know, LNG will help help solve, but it
won't, won't completely cure the problem.
So at that point I came out of retirement and started to draw
on the the experience and the more importantly the people that
I knew within Europe. Having worked in Europe for so
many years, I knew all the companies that were there.
I knew the great people. I also knew the bad people.
And so you know, we put together a team of technical people that
I thought was was really, really unique and skilled.
And also here in the United States, one of my major advisors
was a geologist who actually went into machine learning and
AI in the remote sensing space. She actually helped the, the
software company develop this software package to review the
remote sensing data and extract those things that we can't see
with our eye. You know, a lot of the, a lot of
the stuff that you know, we as geologists and geophysicists
have done, we see it. You know you you, you shoot the
remote sensing data, you see where to drill well, there's a
lot more information in the data set and a machine learning pulls
that out and and and Deborah, Deborah Zachary has had an 80%
success rate drilling in areas that I never would have drilled
in my eye. So you know this is, this is
really a breakthrough technology and and don't get me wrong, more
and more companies are utilizing it, but this is one of the risk
mitigating factors that we apply in going after our targets
because when we reviewed 20 different projects in Europe, we
selected two. And of those two we were looking
specifically at a risk reward type of scenario.
I'm willing to accept more risk if the reward is there.
And of course, utilizing the technologies and the experience
of our people, we can significantly reduce the risk
over some of the other people. So this is, this is basically
how MCF came into into being. It's about a year old now.
We have 6 concessions in Europe at this point.
We purchased a private German company called Genexco, not only
for the prospects that they had, which were many, but also for
the operating team, because in doing that we had an operating
entity in Europe that was known by the ministry and more
importantly, they spoke German, right.
Right. And we're known by the Ministry,
so you know we, we, we we kind of leaped ahead very rapidly at
that point. So yeah it it's it's been a it's
been a good run. The other prospect is in Austria
that one is a risk to reward play.
This thing is so big you can see it from space.
The actual structure covers 100 square kilometers and there was
a well drilled not very far away that produced gas and condensate
at what today would be very economic rates.
So I'm very excited about that one as well.
So, So yeah, that's kind of a kind of us in a nutshell at the
moment. I love that.
So that's a great story about how you got involved now with MC
Energy specifically. Can you give us a overview about
some of your competitive advantages, what exactly you do
and speak to that a little bit, please?
Well, the real competitive advantage we had is we were kind
of first mover in the space. I mean we were, we were there,
you know, right after the invasion.
I mean the fact that I knew all the companies and I had
consulted for a number of those companies, you know, during the
years previous to the invasion, I knew kind of sort of who was
playing in the space. They were very willing to talk
to us. They gave us, you know, access
to their portfolios and data. And you know I brought together
the management team who had been operating in Europe for over 30
years. You know these, you know, the
rich Richie has drilled wells all over Europe and has has been
actively operating in, in you know, all over including
Ukraine, which by the way has has great possibilities.
I'm pretty sure the invasion was related to the fact that there's
a lot of energy resources in Ukraine.
Oh, wow, that's a really good point.
So yeah, that's a really powerful point.
OK, let's speak about you mentioned risk and reward.
I'm a very big believer in risk. And my next question actually is
how do you handle risk and what are some mistakes you see people
make with respect to risk management?
Well, risk is something that that you know is always present,
especially in the exploration space and in in balancing risk
to reward. Of course, you can't just let
the reward override the real risk of what you're looking at
here. So you have to do a very
detailed analysis on why do you think there's oil and gas here?
For instance, on the Austrian asset, you know, they it's a
huge structure, OK. It could it, it could contain,
you know, huge volumes of gas and when and condensate.
But on the other hand, how do I know there's gas there?
Well, you know, there was a well drilled nearby that produced
gas. So that told me I had gas in the
system. It also told me I had a
reservoir that could produce gas at economic rates.
I had a seal, which is very important.
You know, if you don't have a cap on the bottle, you're not
going to have anything in the bottle, you know, so, So
everything that I needed to accumulate oil and gas including
the gas was there. So the fact that this thing was
so big and had a limited data set associated with it because
there were no wells drilled on it, you know, that said, OK, the
risk is huge. I've got everything I need and
not only that, but the dry hole cost on this thing is €3.8
million. Wait, sorry.
You said the risk is huge. You meant the reward is huge.
No, the reward is huge. The risk, yeah, yeah.
But in balancing the risk and the the thing that was critical
was that to test the play was less than €4,000,000 for a
potential half to one TCF of reserves.
So you know when you're looking at something that large, you
know I'm willing to roll the dice on it and also you know
you've got to you've got to balance your participation, you
don't want to blow your brains out by taking 100% of it wiping
out your treasury. So we we only, we only took 20%
of the deal for paying half of the well cost which was only
which was less than €4,000,000. So this was a great shot.
And then to balance that in the portfolio we went into the
German company Genexco. They had a proven gas field with
you know 180 BCF of potential reserves there.
I think it's 180 BCF and it had three wells that proved that the
gas was there. So you know bringing that to
market of course was the next problem which we looked at in
great detail and looked at the economics in in that.
In that analysis and in looking at the prospects after we bought
Genexco, we realized that there was tremendous, tremendous
opportunities in some of the other areas that Genexco had
identified and they couldn't prosecute because they were a
small independent company. They didn't have the money.
Well, we brought it. So we've got Lek, which is a
major, major play for us right now.
Mobil drilled a well in 1983 which they were looking oil,
they found gas, what a terrible thing.
And this well you know flowed at at an extremely economic rate
and of course they, they abandoned it.
They drilled another well, they found oil.
It was less than their economics.
They abandoned it. As soon as that concession
became available, Genexco jumped on it and that's part of our
portfolio. We also wired the 100 square
kilometers directly offsetting it, which this trend goes right
up into that. So we've got tremendous
opportunities looking at us in the future.
If I understand your answer properly, when you look at risk
and reward is that you want to see asymmetric return.
So small risk if you're wrong, big reward if you're right.
And the way that you make those decisions is by looking at the
almost the Tam, the total address of mark.
How big is this market for you if it hits and what is it
possible R in the ROI and then you're able to say, OK, if it
cost me one unit or $1.00 and I can possibly make 1000, then
sure, I'll take that trade, so to speak.
If it's $1.00, I can make $0.50 and clearly I'm not going to do
it. Or 1:00 to 1:00 you won't even
do it. Is there a certain formula or
minimum threshold that you look at with respect to 1 unit of
risk versus how much reward like 5X10XA100X that you take?
Or is it just subjective and depending on the multiple
variables at play? The basic rule that I follow is
it has to be impactful to our investors.
In other words, for the outlay that we put out, it has to be
impactful to the share price and to the actual viability of the
company. You know if it's if it's too
small, it's it's not worth our time and energy.
You know, I've got I've got some of the best staff in the world.
I don't want them wasting their time on on itty bitty things,
put it that way. You know, it's got, it's got to
be impactful. Yeah, that's fantastic.
So, Jim, you've got a really great career and you've been
around now for decades doing this and it's extremely
successful at it. I love the deposit maximum, by
the way. I hope one day that I can get
there. What are some timeless lessons?
What are some timeless lessons you've learned along the way
that you'd like to share with the audience life, business
markets, investing anywhere you want to?
Go probably the the biggest one that I developed, because I've
gone through several periods of good times and bad times in this
industry, is that you have to maintain that positive attitude
you cannot fall victim to. Oh, woe is me, because really
good times and bad times are really only a matter of
attitude. I mean during during the bad
times, we were able to pick up 1700 acres on the north plunge
of an oil field that later on proved up 186 million barrels.
Wow. I mean, I mean, at the time got
it, it wasn't worth much. And of course, nobody saw the
potential. But you know, as the company, as
prices got better and the company recovered, this is when
the hostile takeover came. You know, other people saw it
and they said, well, thank you for playing.
You know, here's money, You know, it's like I said, it
wasn't a bad day. But this is extremely important.
And not only that, but but failure is not an option.
My previous partner kept this company together.
You know it despite the fact we should have gone bankrupt half a
dozen times. You know, he worked it out.
You know, he worked with the creditors, he worked with the
service providers. You know, every month we'd get
the run check and we would call them, we all the creditors, and
say, well, OK, here's how much I owe you, here's how much I can
pay you, and here's what I'm doing to get you paid.
Failure is not an option. And if you've got that attitude,
you will succeed. I love that.
That is so powerful. It's almost like rain.
And take what you're saying about perspective, rain is
neither good or bad. If you're in a drought and the
farmers want to grow crops and and then all of a sudden it
rains, they're really it's it's a good thing.
If you're trying to go on vacation and suntan and it rains
for the whole week and you have to stay indoors, it's a bad
thing. But it's it's just a matter of
mindset. It's your opinion if it's good
or bad and even if it's raining outside and you want it to not
rain, it still can be a good thing for you.
It all depends on your perspective and you control
that. That is so powerful and that fan
is not an option. I love that No failure, failure,
failure is not an option. I love that and and that that
is. That is the lesson that I
learned during during during that period of time when bad
times were actually the best of times.
You look back. Yeah, for sure.
You learned? Yeah, for sure.
So OK, next question. Timeless mistakes you've made
and or you've seen other people make.
And how do you avoid them? The biggest mistakes I've seen,
especially when I was working with major oil companies, was
the fact that they did not engage the communities or the
stakeholders when they moved in an area.
And this really generated, you know, it not just rancor against
the company because they're coming in and they're cutting
pads and they're running roads and that sort of thing.
But it it, it really built an era of distrust, you know, and
anger in the in the past couple of projects that we've done in
Europe, we have gone way out of our way to engage the
communities, to engage the stakeholders and to be as
transparent as possible with with these people.
In Poland, we held community meetings, not just with the
mayor or, you know, the Fire Chief or whoever.
We had actual community gatherings where people could
express their questions because there's a basic underlying fear
that you know has been generated and you've got to address that
fear. You've got to prove to these
people that you know, hey, we are going to be your neighbor,
member of your community and we are going to be around for a
long time and we want to be a positive member of your
community. And like you, we want to drink
clean water and breathe clean air.
Just OK. Now if we're going to be next
door, we're going to be living the same life that you are.
And if you could do that, you know, if you can, if you can
have that transparency. For instance, one of the things
we did was go around and sample every water well that surrounded
our drill site and we made that public information before we
drilled, after we drilled and completed, we did exactly the
same thing, same wells if we could get at them and again made
that information public to say, hey look, we are transparent.
If you've got a question that here it is.
You know we have preserved your environment and if you can and
be a positive member of the community, the community will be
behind you. Yeah, that's so powerful.
That is so powerful. So instead of hiding, so to
speak, get in front of it. It's like what we did with the
creditors. It's like, hey, here's the
situation. Yeah, absolutely lovely.
And you face your problems. OK, Let's talk about leadership,
Jim. What are some?
What makes a great leader, and what are some lessons you've
learned about leadership? Well, a great leader is is
somebody that that has the foresight to anticipate future
problems, but also the tenacity to work through those problems.
You know, you've got to have somebody who's who's willing to
step up and and face the bull with only that little red cloth
that you got in front of you, right.
And you know to not give up after the first or second pass.
I mean it's it's there you go there's the bull right there.
You know and and you know you know that is that is a person
that you can rely on to, to guide, to guide the ship.
But more importantly you've got to have a staff behind you.
And I do that will say, hey, you know maybe we should do it this
way. You know, my way may not be the
right way and I'm perfectly aware of that and I'm very, very
willing to listen to people who've been there before, you
know. But again, ultimately as the
leader, the decision realize you know with with you and in your
hands because you know, I I'm not big on taking boats, but I
sure do listen to everybody. Yeah, that's really powerful.
Now let's talk about adversity and obstacles.
How do you handle adversity and what are some obstacles you've
had to overcome? Well, you know the the main
obstacles are are you know in at least in Europe have been the
ministries and whatnot and ten years ago, 12 years ago it was
extremely difficult to get anything done.
It would take you years to get a permit to do, to do anything.
The company that we're partnered with in Austria just got a well
drilled and completed in six months.
Oh, wow. You know, the attitude of Europe
finally has changed. The EU has declared natural gas
green, renewable and a transition fuel to the
transition to a carbon free world, which it is.
I mean there is no way you can lay out enough solar panels or
enough, you know, wind farms to meet the energy demand and make
sure that the grid which is another real problem that people
don't realize is that you have to have the grid to carry that
power, you know, into the cities.
And of course when the sunshine and the wind doesn't blow, you
know, you've got to have a, have a have a backup power And and
natural gas is perfect for that plus the fact that natural gas
is very much a, a, an industrial fuel and a a base for Petro
chemicals. So you're always going to have a
need, need for that. So that's one of the things that
that you can't really control, but it's turning more in our
direction and of course the others is just public perception
and and I think I already addressed that by saying we we
try and engage the communities. Excellent.
And then let's talk about adversity, though.
How do you handle it? Let's say something bad happens.
I noticed you mentioned earlier the optimism.
I love that and having the tenacity to work through your
problems, getting in front of your problems.
These are all timeless lessons you've shared.
What happens when things go wrong or, quote, UN quote bad?
In addition to changing your mindset, how do you handle that
adversity? And what advice would you give
to other people that might be struggling or going through
tough times? Well, again, the idea is to not
let it overwhelm you, which is which?
Which in some cases it certainly tries and staff.
You know, I mean, let's face it, a Black Swan event is something
that that occurs very rarely and it's totally unpredictable.
But the idea is, is that, you know, in in in working through
the problem, there are always solutions.
It's when we didn't have enough money to pay the creditors.
What do you do? You call the creditors.
Exactly. Through the problem, you know
you find the solution and you know if you've got a good team
and tenacity, you will work through that problem.
Yeah, that's so powerful. Beautiful.
OK. Jim, final question for you,
what is the best piece of advice you'd like to share with the
audience or give your 30 year old self?
Well, again, you know, never, never fall victim to negative
thoughts. You know, there's always a
silver lining to the cloud and you never, you never let the
clouds get in the way of the silver lining.
You know, when there's, when there's, you know, an event that
happens, you say, OK, you know, what's the positive to this
because there's always a positive somebody, somebody's
always on the right side of the equation.
And #2, as an investor, you have to look very closely at the
management team, you know and and not not just the the, the,
the Board of Directors and and whatnot, which by the way, I've
got an exceptional Board of directors, but also the
technical team behind them. Who are they?
What's their experience level, what's their success level?
And also, when you're investing in micro cap companies, never,
never invest more in your portfolio than you are prepared
to lose, right? This is something I've always
told people you know. Yes, this is going to be a great
project, but you never want to put in more money than you're
prepared to lose. Yes, you could get a 100 return
on this, and again, one good one pays for a lot of bad ones, but
on the other hand, you've got to be invested in enough in enough
projects to get that one or two good ones.
So. The idea is, again, it's like
what we do is you blend your risk, you blend your risk to the
report. Love it.
Well, Jim, thank you so much for coming on the show.
People can learn more by going to mcfenergy.com.
Is that correct? That's correct.
Yeah. We've got our corporate
presentation there and our Investor Relations team is there
to answer any questions that anybody might have.
We love it. Well, thank you, Jim, and
hopefully we'll have you on again soon.
This is fantastic. Thank you very.
Much. I very much enjoyed it.
Take Care now.