2010 Annual Report
2010 was a solid year for oil, and a weak year for gas. Accordingly, Alturas oil plays did well, and gas plays did not. However, thanks to an advantageous oil acquisition, Alturas had a good year. Oil prices climbed from the mid $70 range at the beginning of the year to $90 by the end of the year. On the other hand, gas prices started the year in the mid $5’s and ended the year in the low $4’s. Average price for gas in 2010 was $3.99, nearly identical to $3.94 for 2009.
Our stated goal for 2010 was to transition our asset base to a more cash flow focused portfolio, and to make strides in making the company profitable. We realized significant progress in achieving both goals.
Asset Portfolio: We started the year with the majority of our asset portfolio in high risk plays. These high risk assets were carved out of Alturas Energy, and placed in a separate holding company. New investment dollars were spent primarily in acquiring cash flow producing assets, and to a much smaller extent, participating in a drilling venture in a proven area. At present, cash flow producing assets account for 90% of Alturas’s asset value, versus just 24% at the end of last year.
Strategic Plan: Our plan for 2011 is to focus on three areas:
1 – Profitably manage existing assets – As a result of our recent acquisition of assets in Montana and North Dakota, in addition to managing our non-operated assets, we have a new, relatively management intensive operated group of wells. Also, we have a Salt Water Disposal business, and oilfield services company to manage and grow. Focusing our efforts on profitably managing and growing these assets should have a significant positive impact on company value and cash flow.
2 – Acquire new assets – based on our existing operations in eastern Montana and western North Dakota, based on our existing travel schedule to and from this area, and based on the high level of activity in the area, we hope to identify and acquire other profitable, producing, mid-level acquisitions. We believe that with the attention associated with the monster wells and production in the Bakken, there are less glamorous, smaller, but still profitable assets that may be desirable to us, but not the majors. We believe focusing our attention on this specific geographical area is sensible.
3 – Divest of marginally profitable and/or management intensive assets – Some of the assets that have been in the company for a long time are not carrying their weight from a cash flow standpoint. We intend to liquidate these assets assuming we can generate cash in an amount that can be reinvested so as to produce more cash flow with less management attention.
2011: As we commence 2011, our Alturas team is optimistic. We are looking forward to capitalizing on our management strengths and new, valuable assets. We are confident the combination of our strategic plan, creative and intelligent approach to problem solving, and ability/willingness to work hard will have positive results for both the company and our shareholders.
Previous Reports
2009 Annual Report
2009 Fourth Quarter Report
2009 Third Quarter Report
2009 Second Quarter Report
Assets
Northern Indiana: Alturas currently has 127,000 acres secured with mineral rights leases in the Antrim shale, Utica shale, and Trenton. Reserves on the Antrim acreage total 80 bcf. Leases have 4 to 5 years left, including an optional 3 year extension. Our goal for 2010 is to find a major company interested in acquiring part or all of this acreage, or partnering in the development of this asset.
Southern Indiana: : Alturas currently has 37,000 acres secured with mineral rights leases in the New Albany shale. Reserves on this acreage total 16 bcf. Again, leases have 4 to 5 years left, including an optional 3 year extension. Our goal for 2010, as with our holdings in N. Indiana, is to find a major company interested in acquiring part or all of this acreage, or partnering in the development of this asset.
Kansas: : Alturas leases 1450 acres of land with gas wells. All 23 wells that were 100% owned were transferred to Osborn Energy in exchange for ORRI interests. Additionally, Alturas has an interest in 4 joint venture wells and 6 non-operated wells.
Texas: Alturas owns 10 stripper wells and 6 salt water injection wells. These wells are old wells with solid but small daily output, and generate good cash flow when oil is above $53 per barrel. Since workover and maintenance costs can be substantial and unpredictable, we have considered selling these wells. We will entertain purchase offers in amounts which would result in an improvement in our cash flow. Alturas also owns a variety of non-operated oil and gas interests throughout the state.
Oklahoma: Alturas owns a variety of working interests in a broad spectrum of oil and gas wells spread throughout Oklahoma. Most of these working interests are producing reasonable cash flow, even in these times of disadvantageous market pricing for gas. We have been aggressive in seeking out interests in these states that have promising cash flow potential.
Montana: Alturas owns some ORRI interests in eastern Montana. We are currently exploring expanding our interests in this geographical area.