USO annual Shareholders meeting.Having attended the annual Shareholders meeting in Calgary at the Petroleum club I decided to take the liberty of Letting you all know of some of the key takeaways from the meeting.
At first they focused on the causes of the cost overruns. Many of which were not their fault but which did exist nontheless.
They then went over some other information such as advances in technology which has allowed them to lower the cost of producing a barrel of oil using their patented process.
Apparently there is one new patent that has been approved and a couple more that are pending approval at this time. (announcements to be made in the weeks to come)
on the production side, they did an estimate of costs of producing and getting the product to market.
the current estimates are based on an estimate of $50 oil.
based on information provided on the slides presented at the shareholders meeting, the netbacks are roughly $4.50 per barrel(rounded) at that price, and the breakeven point would be roughly $45.50 per barrel (rounded)
There are some potential technological improvements that may lower that breakeven number, but this appears to the the current best estimate on the cost of doing business once we are into full production.
Keep in mind that a lot of these costs include costs to transport the oil to market. My understanding is the actual cost of producing the oil itself should be below $40 per barrel.
so the one year loan from AMCO where repayment may be extended by 12 months if oil is produced at a cost below $45 per barrel seems realistic. Assuming that the actual results are anywhere close to the estimated results, it is fair to assume that this 12 month loan will likely be converted into a 24 month loan and there should be no issues with extending the repayment period if needed.
One other interesting fact that came out at the shareholders meeting is that the oil that they get out of the ground (unrefined) is very good for the making of Asphalt. so during the summer season when this product is in high demand, there is the possibility that this product may be able to generate additional netbacks that are not currently in the estimate.
This is nice info as I believe this actually lowers the potential risks associated with price fluctuations as additional buyers may enter the market for this product on a seasonal basis.
also, while not an issue, the process apparently works for both fresh and salty water so if some of the water acquired via the water well comes in salty (my understanding is that this is not an issue at the current location anyways because the water well brings in pure, uncontaminated water)
so if they were to licence the process out to others, it will work with salty water.
Also, first oil should be coming within 2-3 weeks (possibly sooner but they are currently waiting for a part that wasnt working to arrive. it is under warranty, and apparently has been shipped or will be shipped shortly, and depending on the timing, first oil could come as early as a week from now, but most likely we are looking at 2-3 weeks with 4-6 weeks being a worst case scenario.
I think those are the main takeaways.