rina Duisimbekova, a long term resident entrepreneur in Manama and President & Founder of Licorne Energy in Houston Texas, along with Omar Minhaj, President & Founder of Flamingo Oil in Houston shared with a panel of investors and diplomats the new business model their mutual companies would offer in GCC and Bahrain based on oil Royalties revenues,
Cocktail & conference held at the Capital Club of Bahrain, we had the opportunity to interview them on this model and their vision of the cooperation between Texas industries and the Gulf.
Can you share with us what Licorne Energy is all about and what it offers for the investor?
IRINA: Licorne Energy is a Texas based company that offers to investors several economic mechanisms in oil & gas field. One of our core investments are royalties in oil & gas that can generate to our investors a fast return, usually within 4-5 years, with 20-25% gross profit per year and monthly cash income after three months following the investment. Basically, an investor, invests in a physical production of oil or gas barrels and get his quota of produced barrels per day sold by a market current price which gives him/her a monthly revenu with proportion of the size of initial investments.
We are constantly looking for new royalties with our partner Flamingo Oil International in order to increase our portfolio of investments and offer more flexibility and choice to our investors.
Where do you see energy investment escalating and diminishing across the GCC?
OMAR: Energy investments will continue to grow in the GCC region for the very fact that the oil & gas reserves sizes are huge and will continue to require important investments from global investors to develop the resource and infrastructure in the GCC along with the Governments. Oil demand is solid and increasing and for last 3 years the capital investments have been quiet sluggish due to the weak oil prices which will have its effects on the reserve replacements and adding production capacity for the market. All across GCC the investments will escalate to catch up with global oil demand.
What are your interactions with third parties and what type of activity do you undertake with them?
OMAR: We work closely with third parties mainly drilling and completion services companies and to some extent EPC contractors to build out production facilities and water disposal infrastructure, oil services were hardest hit due to oil price collapse and a number of companies went through re structuring and lay off’s, there will be a human talent problem in this sector due to the lack of upstream investments.
How will an investor benefit when they participate in Licorne’s schemes?
IRINA: Licorne Energy offers to its investors a large portfolio of investments in oil & gas royalties and also services that come along with this type of investment, from setting up a local structure based in USA, opening bank account, obtaining tax identification number, accounting services, legal services etc. Basically, Licorne Energy will handle all the necessary administrative and legal stages that concern acquisition of an oil & gas royalty.
What differentiates you from similar organizations within your competitors in oil & gas or from trading houses?
OMAR: We purely focus on E&P business and keep our operations lean and efficient to produce the barrel of oil at a profitable rate, we are not in the trading business and certainly interested in working together on some bigger development across the globe with them.
Why this kind of investments could be attractive for GCC investors?
OMAR & IRINA: In reality, this product has been tailored made upopn the request of our usual investors from Saudi Arabia, Bahrain and Kuwait which were looking for something different that most of the investment industry is proposing locally. Gcc investors asked us to present them something secure with a fast return on investment and double digit return, and mainly allowing to have immediate available cash flow on a monthly basis immediately after 90 days maximum from the deposit on the account of the investment, compare to classic investments where you have to freeze your money for 5-7 years or even more which is the case of real estate and with very low profit 3-5% per year.
Some of our GCC private investors were looking for a scheme where they can have a quick return and cash available in order to reinvest and increase their investment portfolio.
OMAR : GCC investors can have exposure to US onshore oil & gas via partiipations in the royalties and direct drilling participations with Flamingo Oil, investors can diversify the portfoilio via drilling multiple wells targeting different reservoirs with established type curves in the basin. US onshore offers stable investments where an investor can particpate with a cash flow generating yield approach or a 3 – 5 year build and hold type strategy with an exit returning a multiple on the investment.
What about Flamingo? What is the role that you will play as partners?
OMAR: I am CEO of the company and discuss the company and projects future, with our investor base and new partnerships we form with JV partners participating on our projects. We do quarterly reviews and yearly business plan meetings to develop a road map and target yearly goals.
What excites you most about the future of Bahrain’s oil and gas and the role you hope to play in the industry?
OMAR: Bahrain does have a tremendous potential for Oil & gas business and financing oil and gas projects from Bahrain, we have met with several investment houses and heard very positive feedback on the subject. Flamingo Oil is going to keep Bahrain as a focus area in the middle east for participation of new oil & gas upstream projects and as well any JV opportunities with the groups in the Kingdom to partner up.
IRINA: First, our investment proposal allows our GCC investor to dispose of cash to continue sustaining their monthly opex locally in an actual tough industry… some of them finance their dayly company cost in Bahrain and GCC with the return they obtained through our royalties model.
The oil is and exhaustible natural ressource that will be constantly increasing in price as the demand and consumption on the world scale is growing every year by 1% nearly, equivalent to 900,000 BPD. (world is still consuming nearly 90 Millions Bpd)
Consequently, the oil of Bahrain will contribute more and more to local development and re-boost the Bahraini economy once the prices are back to normal. We are projecting the price of oil within two years around 60-70 dollars per barrel.
Due to our presence in Houston and in the Gulf, we have also a wild range of US Texas based companies willing to come, to invest and to operate into the GCC and because of my personal experience in Bahrain since now nearly 10 years, this US corporation rely on me to identify and introduce them potential local partners to invest in.
Moreover, we have also an advance relation with several Houston oil & gas banks and final coal funds which would be more than welcome to study Bahrain and Saudi Arabia oil & gas projects for investments, M & A, credit lines, etc.
This is our added value and we hope the contribution we could add to local oil & gas industries.
What are the risks and challenges to growing volumes and margins of the O&G trading business?
The risks are usually based on the volume of the trade and the hedging of the contracts which extend to the bank supports extra credit lines as well as capacities of ou usual clients in the trading part to absorb the quantities provided by GCC refineries.
Actually and exclusively through our trading department, GCC is a buyer market where we tend to acquire products from local refineries to export to our clients in Africa and Asia for most of them.
What do you see as the next big energy challenges?
If you have a quick look in the last four weeks, oil prices increased drastically to reach nearly 55$ per barrel of WTI with tends to be very profitable for USA shale gas coupled with US bank support for local producers as well as new technologies optimizing the cost of production.
This is might tempt US producers to restart drilling and extracting and could overflow again the market and contribute to the slump of oil prices while at the same time OPEC members tempt to reduce their productions to preserve their market share.
Keep in mid also that several non-OPEC low producers such as African or South American countries get their economy shrinking if its not dying because of the lo oil price.
This could by extension create social and economical problems, riots and destabilization, etc.
For that reason, as experts in royalties sales Licorne Energy and Flamnigo Oil are really for a balance of price where an average between 50-60 dollars per barrel would be beneficial for all industries as well as all consumers and government. Below this price its killing the industry and above the consumer and especially non-oil countries face difficulties.