When Alex Archila joined Houston-based Madagascar Oil Ltd. in 2006, going public was still a distant step in the company's evolution. Today, the company remains private, but that hasn't robbed it of any financial opportunities, he said at the Private Capital for Energy forum in Houston, sponsored by COSCO Capital Management and Oil and Gas Investor.

Madagascar Oil has raised $196 million for heavy-oil exploration in Madagascar. Its business plan is unchanged since formation: to exploit the oil-sands reserves of the island nation off Africa's east coast. Its capital sources include Credit Suisse, Touradji Funds and various New York- and U.K.-based hedge funds to hunt down more than 10 billion barrels in possible and probable reserves. There has been no rush for an IPO since the company is still trying to stabilize its assets, Archila said.

Oil-sands projects are "huge monsters," he added; while working in the Canadian oil-sands patch, the task can require some 8,000 workers. It can take anywhere from $7- to $15 billion in upgrader construction costs. "Capital costs have been going wild for the past few years, and for the oil sands, more so."

Madagascar Oil's capital providers play a very active role in the company: both Touradji and Credit Suisse have representatives on the board. Touradji presented itself as a capital partner through Jefferies & Co., which was Madagascar Oil's financial advisor. This and the other money sources "that came into the company realized these assets needed work and this wouldn't be a quick in-and-out."

New companies need to come on strong and fast if they wish to survive. "You must be careful where you spend your early dollars," he said. "You should create value quickly."

Working in Madagascar presents its own challenges. The locals are very friendly, more so than when he worked in Colombia for ChevronTexaco, he said. Still, the country has royalty and a caste system similar to India, which can create some social issues as far as workers are concerned. The country lacks any longstanding infrastructure, and the system doesn't always work.

Madagascar Oil sees both benefits and disadvantages of the work environment. On the one hand, since the country is poor, it is open to investment and the government is very accommodating to foreign operations.

However, the company also has to deal with local social leaders who try to paint the company as an invader that will destroy the country's indigenous-and internationally well-loved-lemur population (For more on this, see the movie, Madagascar.). This is despite that the country is mostly arid and Madagascar Oil's oil-sands reserves are not near the jungles.

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