Whitefish, MT / ACCESSWIRE / October 22, 2014 / The oil industry has been pressuring President Barack Obama to end the
40-year-old ban on most crude exports, but many large oil companies
would just as soon avoid waiting for change on a federal level.
While raw crude oil cannot be exported overseas, products refined from
oil can be sold abroad. The problem is that many U.S. refineries are
operating near capacity, with operating capacity reaching 94.6% in July
of 2014, according to data from the U.S. Energy Information Administration. The proposed Keystone XL Pipeline could further reduce capacity and make it difficult to refine more oil for export.
BP plc (NYSE: BP) has skirted these government regulations by utilizing
mini-refineries developed by Kinder Morgan Energy Partners LP (NYSE:
KMP), initially in the Houston area. These mini-refineries lightly
process raw crude oil – removing natural gas liquids ("NGLs") that make
transportation difficult – in order to enable exportation. For large oil
producers, exposure to international markets could enhance
profitability.
Refiners like Valero Energy Corporation (NYSE: VLO) and pipeline
operators like Magellan Midstream Partners LP (NYSE: MMP) appear ready
to jump on the bandwagon with plans for a dozen such plants capable of
processing more than 460,000 barrels of condensate a day, according to
RBC Capital Markets. But, investors looking for a pure-play may want to
look at a smaller firm in the space.
Executing a Similar Strategy in the Bakken
Quantum Energy Inc. (OTC: QEGY) is an emerging micro-cap stock that aims
to mimic Kinder Morgan's strategy in the Bakken formation. With plans
to build five micro-refineries across North Dakota and Montana, the
company hopes to create new markets for the region's raw crude oil,
which is now transported to major refineries on the coast before being
sold or exported.
In addition to the benefits to oil producers, the micro-refineries would
provide lower diesel fuel costs for local agricultural producers and
other businesses; capture CO2 for use in local oil and gas activities;
and provide natural gas that should help lower the cost of local
propane. Management's goal is for 100% of the diesel produced to be used
within a 100-mile radius of its facility.
See Quantum Energy's corporate video discussing the Bakken plans here. If the video below does not display correctly, follow this link https://www.youtube.com/watch?v=xaVZCOSgX1c:
Quantum Energy's micro-refineries would each produce 7,000 barrels of
diesel per day, with an adjacent NGL stripping facility that not only
will make Bakken crude eligible for export but will provide an important
source of local propane and other NGL by-products production. For
municipal governments, each $500 million project would generate 150 high
paying jobs starting in the six-figure range. These dynamics have led
to strong public support for the company's proposed micro-refineries.
So far, the company has secured two of the five micro-refinery sites, in
Fairview, MT and Baker, MT. Management is in the process of securing
two of the three remaining sites in Stanley and Berthold, ND with
several sites under consideration for the fifth. The Baker, MT property
is especially promising given that it has the pipeline of a major
producer projected to cross through the site, which could enable the
company to reach capacity sooner than later.
Management Moves Past Major Hurdles
Quantum Energy's market capitalization of just $3 million may turn some
heads, particularly given that its projects involve a $500 million
investment per site and management is projecting a rapid and significant
payoff over the coming years. With small companies and limited track
records, investors must look at the qualifications of the management
team and evaluate their ability to execute.
Chairman and President Stanley Wilson is an experienced M&A
securities attorney whose legal and business career has been emphasized
by combining small publicly traded companies across multiple industries.
As an active member of the Nebraska State Bar Association since 1974,
Mr. Wilson has extensive experience in executing transactions, which
provides credibility to Quantum's plans within the Bakken.
The company's CEO, Andrew Kacic, is an experienced oil and gas executive
and investment banker. In the past, Mr. Kacic founded and led American
Resources of Delaware Inc., which grew from $220,000 to $40 million in
revenue in less than four years. He was also instrumental in a number of
other transactions, including a $221 million Canadian IPO in March of
2004 that set a precedent for the industry.
In addition to securing its planned sites and dealing with municipal
authorities in the process, the team successfully completed an internal
audit of its 2013 and 2014 year-end results in order to seek fully
reporting status. The fully reporting status will be instrumental in
arranging financing for its micro-refineries, as well as putting
investors' minds at ease regarding its future.
Furthermore, and of great significance, Quantum finalized a joint
development agreement with Bilfinger Westcon Construction of Bismarck,
ND, giving the firm a powerful joint development partner that is
currently in the process of completing the only greenfield refinery to
be built in the United States since 1976 just outside of Dickenson, ND.
The bonding capability of Westcon provides extensive investment risk
mitigation for Quantum's potential capital partners.
Looking Ahead
Micro-refineries have become popular across the U.S., as oil and gas
billionaires like Richard Kinder have partnered with mega-firms like BP
plc. In addition to complying with the language of the 1975 U.S.
regulations surrounding the export of raw crude oil, Quantum Energy's
proposed micro-refineries would greatly benefit local economies in the
Dakotas and the northern Mountain West through lower diesel, propane and
other NGL by-product costs.
While the stock has a market capitalization of just $3 million,
investors should take a closer look at management's experience in
growing public companies, as well as their experience in executing
M&A transactions. Combined with the strength of the company's
relationship with Bilfinger Westcon, these dynamics lend an air of
credibility to an ambitious plan to capitalize on the Bakken formation's
tremendous oil and gas production that is poised to increase over time.
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SOURCE: Emerging Growth LLC