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The company is focused on three main initiatives:
Founded in 2006 by the founders of the Osisko Group of mining companies. Headquartered in Calgary with 160 full-time employees across Canada and Central Asia
The following sections summarize each of the company’s business lines/initiatives.
Until 2023, the company primarily generated revenue from gas production in Turkey. However, after depleting its reserves, CDR wrote off these assets, and is currently winding down its operations in the country
In early 2024, CDR obtained rights to gas fields in Uzbekistan, and transformed into a significant gas producer. The company is also actively developing an LNG project, and conducting lithium exploration in Kazakhstan
Uzbekistan – Highlights
The country has an urgent need for revitalizing domestic gas production to reduce import dependence, given the country’s high reliance on natural gas for energy consumption
In January 2024, CDR entered into a 20-year Production Enhancement Contract (PEC) with the Government of Uzbekistan. Under this agreement, CDR will act as the operator, utilizing proven Western technologies to increase production and recovery rates from eight natural gas fields. These fields cover 279 km² (69,000 acres), and include 77 active wells and 39 shut-in wells, producing 60,000 mcf/d. Condor will sell the produced gas back to the Government, which will receive a 20% royalty on revenue, and benefit from higher tax revenue, and increased gas volumes available for domestic distribution.
CDR owns a 51% interest, while the remaining 49% is owned by their partner, a gas distributor and marketer in Kazakhstan. CDR's fields are in the Bukhara province, one of the most active natural gas producing regions in the country
Uz reservoirs are geologically similar to those in Western Canada, making them ideal for Western technology
The active wells in CDR’s fields were brought into production in the past three to 10 years. These wells have an average annual decline rate of over 20%, well above the industry norm of 5%-10%, and relatively low recovery rates. Condor intends to use the following strategies to improve recovery and production, reduce decline rates, and lower carbon emissions.
Proven Strategies/Processes
Enhanced Well Performance:
Reservoir Exploration and Development:
Water Management and Efficiency:
Innovative Techniques:
The fields feature stacked carbonate and clastic reservoirs akin to the Western Canadian Sedimentary Basin
CDR’s goal is to increase production by over 50%, reduce decline rates, and lower carbon emissions by improving well performance, exploring new reservoirs, deploying proven modern technologies, and optimizing water management
A stable price environment. In H1-2024, CDR received US$2.6/mcf, in line with U.S. prices (US$2.4/mcf), higher than Canada (US$0.8/mcf), but far below Europe’s US$11/mcf
CDR’s Development Plans: Since assuming operations in March 2024, the company has successfully flattened decline rates by implementing some of the aforementioned techniques.
Producing 60,000 mcf/d.
Vertical wells typically have lower initial production rates, and lower CAPEX, compared to horizontal and lateral wells. A typical well can produce for 15-20 years, with an IP of 1.0-2.0 mmcf/d, and an average annual decline rate of 5-7%
Through a combination of workovers, the strategies mentioned above, and new wells, the company aims to boost production to over 100,000 mcf/day across 120 wells (total CAPEX - $80M+). In 2025, the company plans to drill a vertical, horizontal, and a multi-lateral well. If successful, this could yield 8+ mmcf/d of new production.
Wells are 2,000-2,500 m deep. Anticipating a reserve report in early 2025. Our AT-NAV10% estimate for the 20-year PEC is $1.20/share
CDR’s long-term objective is to establish similar agreements with the government for additional fields across the country. Our valuation of the project is based solely on the production potential from the current agreement. While the project lacks an NI 51-101 compliant reserve report at this stage, management intends to have one completed by early 2025.
Kazakhstan is the world’s largest uranium producer. Hosts several energy and mining majors
Kazakhstan – Highlights
LNG (Liquefied Natural Gas) offers a strong alternative to traditional fuels like diesel, particularly in sectors such as mining, railroads, and long-haul transportation
Unlike natural gas, LNG is easy and safe to transport and store. It can be delivered by truck or rail to regions lacking natural gas pipelines, increasing energy accessibility. Additionally, LNG burns cleaner than coal and oil, resulting in significantly lower greenhouse gas emissions.
CDR owns a 90% interest in this initiative, with the remaining 10% owned by local partners engaged in construction and marketing activities.Vital agreements in place with state-owned entities
The CAPEX for a large-scale LNG facility can range from several billions to tens of billions of US$. Condor plans to build smaller, modular LNG facilities that can be constructed much faster and cheaper than traditional facilities (12-18 months vs three-five years). More importantly, modular LNG facilities are well-suited for regions like Kazakhstan, with limited pipeline networks, and relatively low gas prices.
Condor is establishing Kazakhstan’s first LNG facilities, aiming to partially replace diesel for rail and mining haul truck transportation. This initiative is primarily driven by two key agreements:
Each tonne of LNG can displace up to 1.13 tonnes of diesel.
The TITR is the shortest, fastest, and a geopolitically secure transit corridor for freight between Asia and Europe, bypassing Russia and the Middle East
Kazakhstan is also expanding its rail network and constructing a new dry port at the Kazakhstan–China border
Development Plans: The company is planning to develop a series of modular LNG facility in four phases. When fully operational, these facilities will produce up to 600k tonnes of LNG annually, displacing 680k tonnes of diesel fuel. The first phase of the project is expected to produce 120k tonnes per year (CAPEX: US$80M), which is the energy equivalent volume of 440k litres of diesel per day (161M litres per year). This facility is scheduled to start operations in 2026.
Our AT-NAV17.5% estimate for the first two plants is $2.25/share. As the project is in early stages, we are using a relatively high discount rate of 17.5%
Key milestones:
Project Economics:
Lithium Brine Exploration, Kazakhstan
Earlier this year, Rio Tinto (LSE: RIO) commenced a lithium exploration program in the country
While Kazakhstan has yet to demonstrate commercial lithium production, we believe its geological landscape holds promise. China, Germany, and South Korea have initiated lithium exploration efforts in the country. In 2023, South Korea's Korea Institute of Geoscience and Mineral Resources (KIGAM) made a significant hard rock lithium discovery in eastern Kazakhstan, with impressive lithium grades of 5.3%.
In August 2023, CDR secured a 100% interest in the 37,300-hectare Kazakh lithium project, with a six-year license term. The project’s prime location between Europe and China offers a direct route to major lithium markets.
Location Map
Prospective for lithium brine deposits
Lithium primarily occurs in three types of deposits: pegmatites (hard rock), brines, and clays. Pegmatites and brines account for most of the global resource-base. Lithium brines are typically formed in desert climates where there is a slow inflow of lithium and other metals and salts, but no outflow. Gradual evaporation over thousands of years slowly increases lithium grades to an economic level.
Around 60% of globally mined lithium currently comes from hard rock resources, with the remaining 40% sourced from brine deposits.
Determining the more economically attractive deposit type is challenging; while pegmatite deposits typically offer higher-grade lithium with lower CAPEX, they often yield lower operating margins. Subsurface mapping underway
This pre-resource stage project has undergone geophysical surveys and drilling. A historic well targeting hydrocarbons encountered lithium concentrations of up to 67 mg/L. While this grade is lower than typical lithium brine deposits, historical data shows a substantial 670 m column of mineral-rich brine reservoirs. We believe the property's large area and its location in a geothermally active, faulted region, suggests significant lithium potential due to the migration of mineralized brines.
CDR is planning to drill two exploratory wells. We note that delineating a lithium resource is a faster and cheaper process vs mainstream metals such as gold and copper.
Management is also working to secure a second lithium brine license for 6,800 hectares in a region where a historic well revealed mineralization of up to 130 mg/L Li, and identified over 1 km of lithium brine sands.
Multiple Soviet-era wells drilled in the project area that can be utilized for regional geological exploration
Multiple near-term catalysts
Management and board own 6.4%. Management has a successful track record in the oil and gas industry in Central Asia. Three out of four directors are independent
Brief biographies of the management team and board members, as provided by the company, follow:
Don Streu – President, Chief Executive Officer & Director
37 years of experience in the oil and gas industry including 22 years with Chevron working in Angola, Indonesia, Canada and the United States, including deepwater operations, and various operations producing 100,000-350,000 bopd. He is currently the Honorary Consul of the Republic of Kazakhstan for Alberta and a national Board Director for the Canada Eurasia Chamber of Commerce (CECC). Mr. Streu has a BSc in Mining Engineering from the University of Alberta with post graduate studies in Petroleum Engineering.
Sandy Quilty – CFO
A Chartered Accountant with over 30 years of experience working for E&P companies in Canada, Netherlands, China, Kazakhstan and other CIS countries. He was previously VP of Finance at Arawak Energy Corporation, CFO at Altius Energy Corporation and accounting manager at Fracmaster/BJ Services.
Jon Erickson – Senior VP Operations
35 years of experience with international E&P companies including Oxy, Texaco, Chevron, Tullow Oil and Burren Energy. He has been involved in onshore and offshore asset management operations in the Middle East, Russia, Kazakhstan, Turkmenistan, Africa, and South America. Mr. Erickson has managed LNG projects in several countries including Mozambique, Chad, and Gabon, for gas to power and for diesel displacement. Mr. Erickson holds a degree in Petroleum Engineering and an MBA from Eli Broad Business School.
John Baillie – Senior VP Asset Development
40 years of experience in the international upstream energy industry, 25 years of which in various Chevron companies in North America and Africa, and as Executive with Sinopec-Addax Petroleum in Switzerland. He has extensive experience leading teams on major energy operations and developments in Angola, Congo, Gabon, Cameron, Nigeria, and the UK North Sea.
Trent Mercier – VP and General Counsel
Specializes in international resource project transactions and public-private investment, and has advised E&P companies, financial institutions and governments on projects in over 25 countries. He was a Partner and global co-chair of the oilfield services group of Norton Rose Fulbright (global law firm) and most recently a Partner at Stikeman Elliot (M&A and energy law firm in Canada).
Norman Storm – Managing Director
28 years of experience in Kazakhstan across a wide array of business activities, including oil and gas exploration and production, mining, oil field services, domestic and international transportation services, and manufacturing. He is the Managing Director of Eurasia Resource Value SE, a European-based private investment fund that is the founder of Condor Energies, as well as Osisko Mining, the developer of Canadian Malartic, Canada’s largest gold mine, near Val d’Or in Quebec.
Torsten Kritzler – VP Well Services
A drilling and completion professional with over 25 years in the international oil and gas industry. His expertise encompasses diverse environments, including Saudi Arabia, Indonesia, Angola, Nigeria, Canada, and the United States. Notably, his 15-year tenure at Chevron was marked by a focus on integrating new technologies to enhance asset recovery across different operational contexts.
Financials (Year-End: Dec 31st)
Historic production and revenue came from its now-depleted gas fields in Turkey. Production surged in H1-2024 following the takeover of gas fields in Uzbekistan
Revenue increased from just $12k in Q2-2023, to $19M in Q2-2024. EBITDA and EPS turned positive
Margins, and free cash flows improved as well. Although debt/capital is currently higher than the sector average, we anticipate it will drop below the average by 2025, driven by robust free cash flows
Can raise up to $4.09M from in-the-money options and warrants
Using a sum-of-parts model, we are arriving at a fair value estimate of $3.62/share. Our valuation is highly sensitive to commodity prices
Our valuations on the Uzbek gas fields and the Kazakh LNG project are presented earlier in this report. We are valuing the early-stage lithium projects based on the sector average Enterprise Value-to-hectare ratio of pre-resource stage lithium juniors of $250/ha.
We anticipate record revenue and EPS in both 2024 and 2025
Based on our valuation models and review of the company's initiatives, we are initiating coverage with a BUY rating and a fair value estimate of $3.62/share. We believe the market has yet to grasp the true potential of CDR’s LNG initiative. Additionally, the company must demonstrate that its efforts at the recently acquired Uzbek gas field contract will lead to an increase in production. Once the market gains clarity on these points, we believe shares will move closer to our fair value estimate.
We believe the company is exposed to the following key risks (not exhaustive):
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