(Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long USO.V)
You Read that Right... Oranges for Oilsands
In the vein of bottom fishing in the energy sector while oil figures out which way it wants to go (my bias is obviously higher), I thought I'd dust off a blast from the past that has been left for dead.
Years ago I was introduced to a company called Earth Energy. The company was proposing to use a novel process to unlock oil from oilsands deposits using a (biodegradable) solvent extracted from citrus fruits. That same solvent was to be continuously recycled in the process. Initial test results were impressive, with 90-95% oil recoveries from processed oilsand material. The tests were small-scale, but the potential prize was huge. Not only did the process have the potential for high oil recoveries, but it also offered the promise of eliminating tailing ponds while cutting capital intensity per barrel of production by 75%. Greenhouse gas emissions were also expected to be significantly lower than traditional processing. Think about that. No tailings ponds, lower GHG emissions per barrel, and capital intensities at just a fraction of current oilsands mining and SAGD projects. It always sounded a little too good to be true, but I have followed the development of the story ever since; waiting for the day that an initial 2,000 bopd development phase to really prove commerciality.
The PR Spring project is in Utah, where the company has reported a resource of "discovered bitumen originally in place" of 184.3 million barrels. The oil-saturated sand is close to surface and will be mined using traditional strip mining methods whereby the cleaned sand will be returned to the mine cut for reclamation. The NPV of resources comprising just 7% of the project resource (12.5 mmbbls) was estimated to be $87 million as of December 31, 2015.
When stories like this are left for dead, I can't help but remember that the company has never been closer to its goal and yet has never traded at a cheaper valuation... and when it comes to speculating, that can be a decent place to start from.
Pass the orange juice...
Link to the company's corporate presentation here and read about it for yourself...