Canada Energy Partners

A minnow among whales┬áCanada Energy PartnersÔÇÖ CEO Ben Jones tells Gary Toushek how he left the exploited petroleum fields of Louisiana to explore coalbed methane in the wilds of British Columbia. Ben Jones seems like a down-to-earth character with a charming southern drawl and a drive to succeed. He considers himself a strange mixture, with a degree in engineering and another in theology. His career stomping ground for about 25 years was southern Louisiana, where he was a petroleum ÔÇ£explorationistÔÇØ in the Gulf coast region.  Explorationists, he explains, discover fields with potential, drill a few test holes, and if they hit petroleum, call in a company to do the heavy work and make a deal for the resulting production. ÔÇ£The oil and gas business is capital-intensive; it consumes money like a black hole,ÔÇØ says Jones. ÔÇ£ItÔÇÖs a whaleÔÇÖs game, and historically IÔÇÖve been a minnow. I was in exploitation for developmental drilling; I was not a rank wildcatter.┬áMany, many wells had already been drilled there, and my partner and I would try to find some little corner of the property that was close to production and try to pick up the crumbs that others had left behind. We did okay, but we were chasing progressively smaller targets.ÔÇØ Jones and his partner sold their interest to a large, publicly traded company, and he was wondering what he would do next in life. Always in his mind had been the notion of chasing ÔÇ£elephantsÔÇØÔÇöa trillion cubic feet of recoverable gas, or 100 million barrels of recoverable oil. HeÔÇÖd been researching coalbed methane (CBM, a natural gas) and gradually became convinced that it was an unexplored frontier with some big rewards associated with it. ÔÇ£CBM is hard to find, but it comes in large quantities. And I enjoy the hunt.ÔÇØ So in 2000 he put together financing from prior investors, family and friends in Louisiana and Texas, and he launched a joint venture to pursue coalbed methane plays.ÔÇ£If you research coal,ÔÇØ Jones says, ÔÇ£you discover that 80 percent of the coal in North America is in the Rocky Mountain region, and British Columbia has the largest resource of high-grade metallurgical coal, yet there wasnÔÇÖt a single coalbed methane well in the province. So it looked like the happy hunting ground. People who know me thought IÔÇÖd gone off the deep end, strolling into British Columbia, believing I would get the job done. They said to me, ÔÇÿYouÔÇÖve lost your wits, man.ÔÇÖ But IÔÇÖm an outdoorsman, so I went up to Canada and started searching through the geological archives in Victoria, and I found a large geological feature located near the Peace River and Hudson Hope, a small town in the northeast part of the province that had cretaceous coal draped over it. I got excited because it was an incredible structure, the best IÔÇÖd ever seen. It looked like an area fertile with opportunity because it had all the components that could create a world-class project.ÔÇØHe went up to Hudson Hope and bought a lease, drilled two core holes in 2002, got encouraging results, and the Peace River CBM Project was born. Now, traditionally, most explorationists would hand the project off to a large entity after the initial identification of a find. But he was so enthusiastic, and his partners could see it, that they didnÔÇÖt want to give up any interest. They wanted to proceed. So they leased more acreageÔÇö51 square miles of propertyÔÇöand drilled three more wells; all five were operated by Jones himself. ÔÇ£Then the stakes in the game got a lot higher than we were able to fund,ÔÇØ he says. ÔÇ£It was time to bring in some greater technical expertise and higher capital horsepower.ÔÇØ He and the investors invited GeoMet Inc., an independent petroleum exploration, development and production company with principal operations and producing properties in Alabama and West Virginia, and development rights in Alabama, Virginia and West Virginia, to become a 50/50 partner. ÔÇ£TheyÔÇÖre CBM specialists,ÔÇØ he says. GeoMet drilled a number of wells, and the project kept growing. Soon the Peace River CBM Project had leased 78 square miles, and it became obvious that this was potentially a massive project, quite capital-intensive. Jones and his partners considered accessing the Canadian public capital markets as another stage of development. One of his original partners, an investment banker, went to Vancouver and found John Proust, highly recommended by the Toronto Stock Exchange for taking several companies public in the natural resources sector. Canada Energy Partners (CEP) was formed in May 2006. It was phased in; the original group from Louisiana and Texas farmed out a portion of the project to CEP, which executed in an efficient manner, and a year later the remainder of the interest that was outside GeoMet was merged in. Jones became CEO of CEP.The project area is about half private surface ownership and half Crown surface. There are several First Nations in the area that have treaty claims to the Crown lands, and consultation with the First Nations is required by the regulators. A portion of the project, affecting 12 percent of CEPÔÇÖs acreage, lies within the Peace Moberly Tract, which is the object of extended consultation and negotiation with industry and government regulators.ÔÇ£But other than that, weÔÇÖve been able to work with the local landowners and First Nations and move the project ahead,ÔÇØ says Jones. HeÔÇÖs done a lot of public consultation with the community and keeps the mayor and council apprised of CEPÔÇÖs work. ÔÇ£As in any group of people, there are some who are opposed to any kind of development, but generally I think theyÔÇÖve been supportive of the project. And itÔÇÖs clearly had positive economic impact on the community.ÔÇØ Today he defines CEP as an early-stage exploration and production company thatÔÇÖs assembled about 100 square miles of gross leasehold. It also has two joint ventures with larger entities for the deeper geological formations in the area. ÔÇ£The normal food chain of the industry would be for us to get gobbled up by somebody bigger, but we want to hang in there long enough to maximize our shareholder value, and we think it will take more work.ÔÇØ  ÔÇô Editorial research by Richard Halfhide┬á