RE: Petroteq business development presentation17 Oct 2020 20:43
I think Quadrise MSAR is essentially the key element. Without MSAR Greenfield need to dilute the bitumen with distillates (light ends) to meet WTI specification; they buy the distillates from local refineries. Petroteq's disclosures to the SEC show that this costs in the order of $16-18 per barrel at least, and probably more like $19-20 once you include propane and solvents.
That massively erodes the value Greenfield+Petroteq can derive from a barrel, and distillate costs increase as oil prices increase (i.e. reduces benefit from increased oil prices). It also increases the net energy input per barrel due to refining energy inputs.
My view, from analysing their disclosures to the SEC, is that Utah oil sands will never be consistently profitable without using something like MSAR.
Why is MSAR better? It replaces the light ends with water and a chemicals package; that immediately knocks potentially $19 cost out of a barrel. The product is also ready for use by consumers, with no refining required. So all the value of the product goes to Greenfield et al. Of course, the wrinkle is that small alterations to the fuel pumping system are required to use MSAR. But, Valkor seem extremely well placed to make that happen as they are an EPCI company. MSAR seems a great fit, and I think the POC will be a clear success.
Petroteq have also proposed the option of using some of the bitumen output for sales to the local roads department and construction industries, which seems a good option during the summer time if you have excess bitumen. Obviously, if you can sell the bitumen as a premium fuel, you'd prefer to do that, but having flexibility seems very sensible to me.
Sign In
Follow the stocks
