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Thoughts / musings on Mike Kirk’s departure at the end of November AGM.
I would not be surprised, and pleasantly surprised in equal measure - for there to be an RNS to announce something very big; be it the MSC LONO confirmation, a PEMEX POC trial, or an equity position taken by an ii or an oil company looking for reduced Carbon /zero Carbon alternatives.
COP 26 starts tomorrow in a rubbish strewn and rat infested Glasgow; and in todays ST interview with Mark Carney, he opines that the money markets shall start to take a more critical view of oil companies that are slow to diversify away from traditional fossil fuels.
From the ST…
“He identifies the driving force as popular pressure in the West and warns that companies failing to set out credible decarbonisation plans will find it harder to gain access to funding, while greener ones will prosper.”
Oil companies on the decarbonisation acquisition trail.
Now, there’s a thought.
I have nine on filter, of which I suspect four belong to the same schizo. 30p and climbing will do for Christmas. MSC LONO confirmation, followed by news of the PEMEX trial, with Utah and Morocco to follow in short order.
Use the filter feature to relegate the non-shareholders & shorters to a band of green anonymity. Arguments are futile as you're competing with an irrepressible and childlike desire to be noticed and by association deemed relevant.
Was it “I must say, we have tried emulsion fuels before; but, more on that in the future"?
Possible buy out. But let’s not put the cart before the horse. Commercial revenues from Morocco first and the MSC LONO agreement. A personal view is that news of the MSC LONO will propel the sp to heights not seen since 2013/14. There are @45% more shares in circulation. But I think this factor will be offset by the markets’ interest in ‘drop-in’ low to zero Carbon emissions solutions.
I'm going to be a party pooper here and rain on the Utah parade.
I really thought Utah would beat Morocco to the post as our first commercial contract.
Not so, if we are expecting Tomco to come up with the goods. Valkor yes, Tomco; it's a no from me. Petroteq the same.
The TS-II Holdings site is the former Crown Asphalt Ridge plant abandoned in 2012. Down the valley is the Ashley Valley conventional oilfield producing 30 API crude oil since 1948, recently using CO2 injection as a tertiary recovery method after primary and secondary methods exhausted production.
My theory. Tomco are offering Ashley Valley Oil Co. the chance to drill 5 exploratory / delineation wells on the lease Tomco want to buy, and will pay the Oil Co (to complete the wells as producers assuming moveable oil is discovered) from subsequent oil production and profit oil. Tomco will also pay for the 10% lease deposit with monies from profit oil - oil produced from a lease they don't yet own. Also, oil production will require CO2 injection wells to help the oil flow to surface. The crude oil will require flow through separation equipment installed at surface before it can be fed into an MMU. There are a lot of if's and but's in that chain of events. And it's all because Tomco do not have any funds available to pay for 10% of the lease, let alone the 100 % of the lease, let alone $110 million to build a 5,000 bopd tar sands plant.
Petroteq are still mired in Stock Exchange disputes and are going nowhere fast with no income stream. From other BB discussions, Their POSP is apparently close to being an MOT failure and cannot be used as a shop window due to its condition. That leaves Valkor that have any money, and leases covering 20,000 acres. Steve Byle is sat in his eyrie,, stroking a white cat, waiting... waiting. ...
If I could chose my departure date -as Chairman and I presume that option is open to Mike Kirk, I'd have an eye on my legacy and reputation; and I'd do so at an AGM after a previous announcement of me signing a company defining commercial contract / LONO trial / tri-partite refinery deal / significant tie-in & buy-in by a blue chip strategic partner.
“My conclusion is absolutely nothing is happening”.
Absence of evidence is not evidence of absence.
Furthermore, why would ‘nothing’ be happening when there are five project leads on the go?
1. MSC
2. Morocco
3. Utah
4. BioMSAR engine testing
5. Mexico PEMEX.
6. AOB we don’t know about.
I’d offer a counterpoint that everything is happening and there’s not enough hours in the day for QFI employees and their contractors.
At least reserve judgment until immediately next Wednesday’s presentation and Q&A.
And then have the good grace to withdraw such a fatuous remark.
I’d reserve judgment on progress until the IMC next Wednesday.
From their RNS Tomco are in the process of persuading an adjacent oil company leaseholder to extend their oil well drilling programme across the boundary to include drilling five wells on the Tomco lease. For this the oil co. will pay Tomco a sum up front for the to-be-produced oil. Tomco will use the proceeds to pay the $1.5 million balance due on their lease by 15 November.
It’s inventive for sure. Quite how Tomco will then raise the remaining $18 million to secure the whole lease and then the $110 million to build a 5,000 bbl/day plant is open to debate.
After a month on remand, another one is now in the green filter for the oft- repeated pejorative use of the word 'stalwarts' and a childlike fixation with the post of sales director as the only means to move the company to commercial contracts.
A review of four production options available to the Utah JV of Petroteq, TomCo and Valkor;
1. Sell the 12 API SynBit to local refineries at WTI+
View: Non starter. It’s actually 10.9 API and it's not WTI+, it's not even WTI. Based on Canadian SynBit price discount at 19 API it's more likely to be WTI discounted by 20-40%. This production and sales model has sunk every previous Utah tar sands project.
2. Refine the SynBit slightly on-site using low temperature cracking.
View: Non-starter; cracking requires a combination of temperature, pressure and a catalyst, and custom built equipment. Reduce one and the other two have to increase. Increasing the pressure will increase the temperature. So it has to be the catalysts - and more of it - and more sophisticated. Still at the research stage. Not yet field proven and not oven ready.
3. MSAR /BioMSAR
View- the obvious choice for reasons previously expressed. In addition, LS-MSAR competes with VLSFO at WTI+15%. LS-BioMSAR has no identifiable competitors as it is a @50% 'well to wake' Carbon reduction 'drop-in' fuel. Hydrogen and Ammonia engines are a decade away.
4. Refine the SynBit onsite to a diesel fraction for subsequent blending with other diesel grades at a 3rd party refinery, and the residual bitumen sold for road building.
View; The Utah operation will be wholly dependent on the whims of a 3rd party refinery - or refineries to take the diesel fraction and dictate the price. The residual bitumen from a 5,000 bbl/day plant, or a 10,000 bbl/day plant - or the vision of multiple plants across Utah would require a cosmic road building / re-surfacing campaign for the next 20 years.
Option 3 is the only scaleable route to realise the objective of multiple 5,000 /10,000 bbl/day plants springing up across Utah; and to safeguard the continual sale of the end product whose market fluctuating base price is still at production cost plus 20%. A drop-in Low Carbon low polluting fuel fits that criteria. Selling a % of output as a diesel blend to a rapacious refiner doesn't.
Based on Valkor's moves to invest in Petroteq and Tomco, option 3 is predicated
on Valkor establishing a JV with a railroad / tanker truck hauliers and an LA or Houston Bunker.
Or a JV with a company that offers both - eg. Freepoint - with whom QFI have a pre-existing CMPDA.
Option 3 ultimately requires buyers across the USA in the marine / shipping, electric grid power generation, industrial process steam raising and process power generation sectors.
That’s quite a few potential customers to sign up across three not insignificant sectors - all of which are under pressure to de-carbonise.
Nothing we didn’t know already.
But no-one was holding Petroteq’s George Stapleton’s feet to the fire when he commented in the RNS that;
‘Confirmation that heavy oil extracted from Utah oil sands using our CORT process is suitable for production of MSAR® and bioMSAR™ fuels could allow for the production of fuel and biofuel with significant environmental benefits, while creating a higher value product stream for Petroteq's future commercial production’.
Damn right it can George. And that’s the answer to the future viability of your company.
My view is that it will all happen this side of Christmas.
The producer, refiner and end user chicken and egg situation resolves itself in Utah. The Greenfield / Valkor / Petroteq (GVP) is the both the producer and refiner rolled into one Joint Venture. Finding end users in today’s market will be the easy bit. I digress…
The JV looked shaky over summer with Valkor dropping off the radar then reversing into Tomco with a 29% stake. Then there was Petroteq’s mystery buyer, the Utah Mines Regulator’s suspension of POSP site operations, then the Ottawa Exchange trading suspension, then the crowing about selling penny packet volumes of SynBit to local teapot refineries at WTI rates, then mothballing their only asset, then announcing it was full speed ahead towards their $110 million 5,000 bbl/day plant despite multiple shares for debt issues to settle day to day bills. Meanwhile Tomco / Greenfield announced their work was done at the Petroteq plant. They were walking away and they too would build their own $110 million 5,000 bbl/day plant at the Tar Sands II site, once they’d paid the $2 million 10% site ownership fee due next week, and the $18 million balance – for a company worth £6 million due by Dec 2022.
The reality is that Petroteq and Tomco don’t have a pot to pee in. With the POSP cold stacked Petroteq don’t have a revenue stream either. Tomco have no revenue stream at all. Valkor’s finances are unknown as they’re an LLC. I suspect Valkor have access to deep pocketed investors so they are the only ones with any financial backing- and they have 13% in Petroteq and 29% in Tomco.
After the summer manoeuvres by all three, the dust has finally settled on news that their heavily-discounted-to-WTI SynBit can be spun into the premium to very premium -priced-to-WTI gold of LS- MSAR and LS-BioMSAR – and therein lies their salvation. LS-BioMSAR exceeds VLSFO and ULSFO in terms of CO2 and PM. I have commented before that in 100 years of Utah oil shale, not one company has made their SynBit pay because it always traded at a discount to WTI. The cyclical drop in WTI and the plants shut down. And the roll call of companies includes Shell and Chevron affiliates. The Valkor – for it is they who are the puppet master – USP was LS-MSAR. And now it’s both LS-MSAR and LS-BioMSAR. They know that without a revenue stream and a shop window they don’t have a moment to spare to get a contract signed with QFI, an MMU shipped and installed and the POSP brought back to life to produce LS-MSAR and/or LS-BioMSAR for sale and supply to the power generation, industrial and marine markets all fervently looking for easy to implement green and (most importantly) fungible solutions. LS-MSAR and LS-BioMSAR will sell themselves and in the Vallkor led JV QFI will have a commercial contract with both a producer and a refiner.
A masterstroke.
Steve Byle saw the potential of the bitumen from the Utah tar sands being converted into MSAR.
Jason Miles and Laura Ward took it another step further and created BioMSAR with crude glycerol produced as a waste product from FAME ( biodiesel) production at 10% v/v. The result is a US home grown low Sulphur power and marine fuel that uses a multi billion barrel standard resource in Utah, combines it with waste glycerol from the FAME process, and burns like gas with <30% less CO2.
The stuff will sell itself at not only a premium to WTI but at a premium to ULSFO.
That would imply that QFI had control on the timing of announcements of trial / contract signatures.
Given the size of our counterparties I don’t think that’s the case. We may have to enter the lead up period to the Late November/early December AGM none the wiser.
Forecasts of impending news have failed to materialise. I prophesied September was going to be transformational with one RNS after another.
But, like the roly-poly Jehovah Witness ladies who came every Friday evening to my student house in the 80’s to sell us The Watch Tower and inform us the World would end on 31 Dec ‘99, there have been ‘unrealised expectations’.
Like the JW ladies prediction of Armageddon, I’ll use the 31 Dec as the cut-off date;
1. MSC , the Big One. LONO trial confirmation with refiner ( Shell) breaking cover before 31 Dec. High.
2. Morocco OCP successful industrial/commercial trial burn taking place before 31 Dec. - High.
3.Biomsar tests with Utah bitumen successful, second stage CTA completed and licence to manufacture MSAR in Utah awarded to Greenfield; High.
4. Bio MSAR formulation nailed ahead of the MSC LONO trial; High.
5. Mexico Pemex /Redliner pilot trial of MSAR manufacture at a Mexican refinery; medium.
6. sp in double figures - High.
Wilson, am I right?
Because the client doesn’t want us to?
And for all we know the trial may have started. OCP are publicity shy in the extreme. QFI can only release news when the client says so. Up to a point of course. But why rush to an RNS if it’s contrary to the clients wishes?