April 1998 Vol. 219 No. 4  International

Kurt S. Abraham,  International Editor

Pendaries Petroleum exemplifies new independents overseas

A new generation of independent oil companies has emerged recently and is becoming an important factor in upstream activity outside the U.S. While these "junior explorers" most often are non-operators, they do fulfill a vital role as important fundraising sources for E&P projects.

Take the case of Pendaries Petroleum, which is involved in five large tracts offshore China. Pendaries (pronounced pan-da-ray) is a growth-oriented Canadian company created to finance exploration and acquisition programs of Sino-American Energy Corp., based in Houston. Sino-American Energy was formed in 1994 by Texas native Bob Rigney, who has served as chairman and CEO of both firms. Pendaries is the continuation of Sino-American Energy following a "reverse takeover" transaction.

The Bohai 4 jackup has drilled several successful wells in Bohai Bay for Kerr-McGee, Pendaries Petroleum and Murphy Oil.

Rigney's career certainly has been colorful. His father was a professional baseball player during the era (1920s) of Ty Cobb and Babe Ruth. Rigney followed his father to Texas A&M University and graduated as a pre-med major. Rather than go on to Baylor Medical School, he fulfilled his military obligation by joining the Air Force, just as the Korean Conflict was winding down. He flew F-102 fighter jets, served three years as a flight instructor in Japan and was posted to Indonesia in 1964 as an intelligence officer, just as then-president Sukarno was overthrown by current president Suharto.

Rigney later served as a diplomatic attaché in Asia before returning stateside to become a securities broker. However, he later joined a cousin in producing heavy castings for Lufkin Industries. After the first big E&P downturn in 1982 – 1983, Rigney returned to Asia for fresh opportunities. Thanks to old connections, he arranged a deal for Valero Refining and Marketing Co. to purchase Chinese crude, something the firm had tried to achieve for some time.

This is where the link to Sino-American and Pendaries enters. The Valero deal proceeded so well that Chinese officials asked Rigney to try interesting some smaller U.S. oil companies in obtaining exploratory drilling concessions in China. He went first to Valero, which initially obtained a concession. However, the firm decided it didn't want to be in the exploration business, so Valero and Rigney contacted Kerr-McGee. The concession was traded to Kerr-McGee, with Valero retaining a 10% interest.

For two years, Rigney and Kerr-McGee geologists looked at onshore prospects before acquiring a four-block, shallow-water property in Bohai Bay, similar to the Gulf of Mexico. In fact, the 04/36, 05/36, Getuo and Laopu Blocks cover a combined 1.13 million acres, equal to 200 contiguous Gulf of Mexico blocks. Rigney then raised $3 million in cash to purchase Valero's 10% interest. He named his new company after the vacation home that he and his wife have in the mountains of Pendaries, New Mexico.

During 1995, Kerr-McGee (45%), Murphy Oil (45%) and Pendaries/Sino-American drilled a non-commercial wildcat on Block 04/36, followed in mid-1996 by the 7,000-bopd CFD 2-1-1 discovery. Meanwhile, Pendaries officially incorporated in Canada in September 1996. The CFD 2-1-1 success created a need for more operating capital, so after Gordon Capital provided an initial $4 million, Pendaries went public on the Toronto Stock Exchange in December 1996. An IPO netted US$25.9 million, and the firm set up shop in downtown Toronto, creating a board that is half-Canadian, half-American.

Also in December 1996, Pendaries, Kerr-McGee and Santa Fe Energy acquired South China Sea Block 27/11. Reportedly, the first well on that tract is slated for later this year. Back in Bohai Bay, an aggressive drilling program continued. In quick succession, the CFD 2-1-2 (May 1997), CFD 2-1-3 (July 1997) and CFD 2-1-4 (December 1997) appraisals were completed. CFD 2-1-2 flowed 4,100 bopd. CFD 2-1-3 was drilled to 12,992 ft and confirmed the reserve, although it was not drill stem-tested. East of the 2-1-1 discovery, the 2-1-4 well flowed 2,992 bopd and 3.73 MMcfgd.

With Kerr-McGee, Pendaries is studying alternative development options for the CFD 2-1 field. Meanwhile, the Lao Hai-1 wildcat was completed last July on the Laopu Block, but none of the numerous gas shows was deemed commercial. In Block 05/36, the BZ 8-4 well was spudded last July and encountered 800 ft of shows, but no commercial flow was indicated. The results are being evaluated to assess future drilling.

In all, perhaps another five wells will be drilled this year by Pendaries and partners. Since the Bohai Bay blocks are so large, it's obvious that Pendaries and partners have only begun to explore a small portion of all the available prospects.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company