Headquartered in Canada, Crown Point Energy Inc. is a leading oil and gas company with producing developments that, unexpectedly, dot the landscape of Argentina. The company established a foothold in the South American country a few years ago, and the venture proved so fruitful that Crown Point has continued focusing on exploration and development opportunities there. Art Madden, the company’s CFO and vice president of finance, has been in the petroleum industry for 38 years in various leadership and budgetary roles, and here he explains the challenges and rewards of helming a team that spans two hemispheres.
In the early 2000s, Crown Point was a junior oil and gas producer in Canada. In 2008, the company sold 100 percent of its Canadian lands before the drop in commodity prices and began to look outside of Canada for growth. Argentina was chosen because Crown Point’s board of directors and management believed there were better opportunities to develop a larger, profitable oil and gas company in that country.
Why Argentina? The country is large—it fits end to end within the continental United States—and has five producing oil and gas sedimentary basins, developed infrastructure, and a strong economy in which the domestic demand for oil and gas is high. When the decision was made to enter into Argentina, the country was recovering from a currency crisis, competition was low, and access to deals was high.
Now 100 percent of our production operations are in Argentina. What makes us special is that we’ve been able to keep our balance sheet strong, increase production, and grow and develop opportunities with limited access to capital markets.
It is challenging to be operating in a country when you do not have unrestricted access to capital markets. For example, you can take money into Argentina fairly easily, but for now, you’re restricted in the methods of redeeming that capital, though it can be done.
When Crown Point first moved to Argentina, Art Madden and others were not initially sure of the best way to gather the most talented professionals in the area. Luckily, Madden met and hired Mateo Turic, who had previously worked at the senior executive level at YPF, the nationalized oil company of Argentina. He ended up serving as president and CEO of Crown Point Oil & Gas S.A. Mateo, and he built a strong, professional local team before unexpectedly passing away in May 2013. Madden admires the work Turic was able to accomplish in a short amount of time.
Activities in Argentina require more planning and lead time than do operations in Canada. For example, when we acquired our concession in Tierra del Fuego, an island at the southern tip of Argentina, it took us nine months to source and mobilize a drilling rig to begin operations, in part due to limited access to available equipment in country and in part due to the remote location of the drilling operations.
They tell you that you have to visit the country to understand it when you undertake international operations. I cannot emphasize that point enough. In addition to operating challenges, it is very important to know and understand culture, bureaucratic framework, and the people you deal with. Personal relationships are critical to effective communication. It is very difficult with English and Spanish speakers to truly understand what you say or mean by e-mail, conference call, video, etc. You need serious face time, and learning the language, even at a basic level, can only help.
When we talk about how we wish to spend money to develop an oil and gas field, we tend to be aggressive and want to employ capital at a more rapid pace than they might do in Argentina. We know what return our shareholders expect and strive to meet or exceed the expected returns. So we must get the locals to understand why we take the risks we do, why we want to drill faster and use different technologies. Once they understand that, they start to see the logic behind it, and they do embrace it.