In the Media
The oil patch's other export: know-howAfter selling Pan-Ocean, David Lyons targets gas in Tanzania
The Globe and Mail, Monday October 23, 2006 (Page One, Report on Business)
DAVID EBNER
CALGARY — David Lyons was schooled in the oil and natural gas business in Calgary, growing up here and working under the tutelage of his father, Verne Lyons, an energy pioneer in Western Canada.
But Western Canada isn't what it once was in the realm of conventional oil and gas, as big finds become rarer by the day. So, in the late 1990s, David Lyons turned his eyes to international opportunities, relocating to a British town near London to lead Pan-Ocean Energy Corp. Ltd.'s search for oil in the West African nation of Gabon, and effectively taking his father's legacy overseas.
This summer, he sold Pan-Ocean for $1.6-billion in cash to Addax Petroleum Corp., a Swiss-based, Toronto Stock Exchange-listed firm.
After pocketing about $135-million himself, Mr. Lyons, 51, is already back in business, hoping to repeat his success with TSX Venture-listed EastCoast Energy Corp., a gas producer and hopeful explorer in the East African country of Tanzania.
The corporate moniker is set to become Orca Exploration Group Inc. at the firm's annual meeting in the tax haven of the Channel Islands on Nov. 14.
"I'm really an entrepreneur, an Alberta entrepreneur, that's found the formula for some sizable international success," Mr. Lyons said in an interview from Winchester, England, south of London.
He is one of several successful Calgarians with significant international successes, a group that includes Ed Sampson of Niko Resources Ltd., working in India and Bangladesh, and Rick Anderson of First Calgary Petroleums Ltd., developing major Algerian discoveries.
"There's tremendous human capital in Calgary. You don't necessarily see that everywhere," Mr. Lyons said.
In the late 1990s, as local eyes turned to global opportunities, a number of ventures failed spectacularly, notably in Russia, and the experience turned the minds of the city's energy executives and many domestic investors homeward.
But ventures such as the one run by Mr. Lyons, especially after the successful sale of Pan-Ocean, are attracting interest and investor support. EastCoast's class B shares have more than doubled in the past year and the firm is looking to raise $21.5-million in a rights offering -- of which Mr. Lyons is putting up about $5-million -- to fund exploration next year.
As was the case with Pan-Ocean, Mr. Lyons controls EastCoast by holding almost all the class A shares and, with the dual-class structure, the majority of the voting rights. EastCoast has a market value of about $190-million, based on Friday's close, which could rise to $220-million if the rights offering goes as planned, with Mr. Lyons's stake valued at roughly $50-million.
EastCoast's connection in Tanzania began with predecessor companies that worked to bring the offshore Songo Songo natural gas field into production. Songo Songo is a small tropical island fringed by palm trees and represents the largest gas field in eastern Africa.
For years, there was no infrastructure such as a pipeline to bring the gas to customers and Pan-Ocean got involved to help push the situation forward, an effort underpinned by World Bank support.
Songo Songo is now the first producing gas field in the region, helping cut the cost of power generation in Tanzania, where only about one in 10 people has electricity.
Pan-Ocean spun out its Tanzania holdings in 2004, creating EastCoast.
The company's production in the second quarter was about 12 million cubic feet of gas a day (equivalent to 2,000 barrels of oil). Most of it went to power generation but an increasing share was sold to industrial users, which helped drive a production gain of almost 20 per cent compared with the first quarter this year.
Just like juniors in Western Canada, EastCoast is starting on a small base and hopes to double, triple or even quadruple production.
"The real pop is in building the small ones," said Mr. Lyons, who noted that juniors are doing things internationally that they couldn't a decade ago.
Haywood Securities Inc., a Calgary broker, is a supporter and shareholder. Analyst Alan Knowles, who owns EastCoast stock, in an Aug. 2 report said the company is poised for "waves of growth." Mr. Knowles said he sees three potential waves. The first could see current production surge toward the equivalent of 10,000 barrels of oil a day by 2010. The second could see increased production by developing reserves more quickly than envisioned. And the third wave concerns exploration potential and 2007 plans that target a large prospect just two kilometres from the producing field.