Stratum Energy was founded as an oil and gas exploration and production company by Qasim Sharif in 2005. While many E&P startups today seek large amounts of institutional capital, he funded the startup phase entirely from his own resources. Stratum’s management team had a distinct, ambitious vision for the future and thoughtfully navigated those early years to ensure a controlling position by management in shaping Stratum.
After achieving the first commercial discovery, Stratum solicited capital from family and friends. This funding round included prominent, well-respected personalities in the energy industry – including CEOs of large, publicly-listed companies. These early funders have helped guide Stratum in advisory roles as Stratum has grown over the past 10 years.
Stratum’s goal from the onset was to develop exploration & exploitation expertise in-house. A guiding principle for this vision was to look at projects that others ignored. Most prospects under consideration were tight reservoirs or over-thrusted plays, where subsurface imaging with seismic was difficult. These assets had profiles that Stratum valued, and more established companies ignored.
Another guiding principle for Stratum was good geography and not just geology. In the 2000’s, the most sought after plays were the technically-attractive opportunities in Russia, Yemen, Egypt, Libya and India. These assets were highly attractive when commodity prices were high, but good instincts regarding potential political instability steered Stratum to areas where commercial and surface risks were more manageable.
The first project Stratum pursued was in Turkey. Stable politics, high demand for commodities and great gas price there meant discoveries could be monetized quickly and without fear of undue government interference. Stratum farmed into four onshore blocks in Turkey in 2007. These licenses were in Bartin located approximately 300 km north of Ankara. The Bartin licenses represented over-thrusted tight gas plays in a sparsely-explored area. Stratum drilled its first exploration well. Thereafter it sidetracked this well and an existing old well. These operations led to exploration failures. The subsurface challenges proved to be too daunting for a small startup company the size of Stratum.
A prompt decision was made to exit Turkey altogether in 2009 upon completion of the committed work program. The main reason to fully exit Turkey was the lack of other sufficiently attractive exploration opportunities in the country. The company needed a new direction.
After exiting Turkey, Stratum patiently considered other investment options. Opportunity came in 2008 when Toreador, a Dallas, Texas based firm, elected to exit central Europe and sell their stake in Romania. The profile of their Romanian asset appeared to be compelling to Stratum: proved up oily area, great fiscal terms, ignored by major players and in a politically stable region. Stratum’s initial acquisition was a 70% working interest to farm into the Moinesti EV1 Concession. The company acquired the remaining 30% in 2009.
The Moinesti concession is located in the eastern Carpathian Mountains, approximately 300km north of Bucharest. Historically, it is an extremely productive area- with over a billion barrels produced since 1870- all from shallow horizons of less than 1500 meters deep. But this opportunity came with one significant risk: no new commercial discovery had been made there since the 1970s. Stratum was making a big bet on itself to find new oil in an old area.
The company focused on new technology to evaluate the Moinesti block. Tactics included: extensive seismic reprocessing using proprietary technology; wide azimuth 3D seismic data acquisition; drilling with synthetic OBM and K-Formate mud; open hole completions with expandable packers; and Quanta Geo Log for fractured reservoir characterization.
In 2012, after years of diligence and a steep learning curve, Stratum finally had success. The discovery was a large gas-condensate-oil discovery in the Poduri Field. This commercial discovery is one of the largest in onshore continental Europe this decade.
The next phase for Stratum was to become a producer. In 2015, the Poduri Field was approved as a Production Area by the National Agency for Mineral Resources (NAMR). Stratum was given production concession through September, 2034; with an option to extend for an additional 10 years.
Concurrent with commencing the Poduri development, Stratum has extended its Moinesti Concession through September, 2019. NAMR has approved the Moinesti Concession as an appraisal area in the belief that there are more discoveries like Poduri to be made in the Moinesti region.
Commercial oil and gas production from the Poduri Field commenced in September, 2014. Approximately 80% of Stratum’s current production is gas and the remaining is condensate and oil. There are no material water production or impurities in the gas. The oil is paraffinic and in line with historical crude production from the Moinesti area.
All gas production from this field has been committed for sale under a take or pay contract valid until September, 2021. The buyer is one of the world’s largest, most prominent European energy trading companies with an excellent credit profile. Stratum is free to market its condensate and oil as it sees fit.
Stratum also secured a credit facility of over US $30 million in 2013 to fund its initial development, which it has fully repaid in principal, fees and interest. In December, 2015, Stratum closed a US $75 million credit facility with an investment bank in London from which it has drawn US $54 million. This was one of a very few number of debt transactions that closed in the London market at the time.
The management team intends to replicate their success in Poduri with other highly prospective and low risk on trend leads in Moinesti. Extensive 3D seismic with enhanced acquisition parameters are planned for 2016 and 2017. The combination of highly-motivated leadership, human ingenuity, and advanced technology, sets the stage for Stratum’s future growth.
Stratum has chosen the less traveled path in making strategic decisions: gas over oil; tight play in Romania versus prolific high quality sands in Nigeria or India; onshore instead of offshore; and self-funding & early credit facility as opposed to private equity. These decisions have largely stood the test of time and survived early pitfalls experienced in Turkey.
Stratum is confident in it’s future vision and feels optimistic about the continued profitability of its Romanian assets. Even with the low oil and gas prices of late, Stratum is able to drill profitably and can aggressively pursue its exploration and development program.