QEGY - QUANTUM ENERGY, INC. due diligence
QEGY Company Description
QUANTUM ENERGY, INC. is a development stage publicly traded diversified holding company with an emphasis in oil field development trading under the stock symbol “QEGY” on the OTC.PK with offices in Williston, North Dakota in the heart of the Bakken shale oil field. QEGY is working in the areas of land holdings and oil and gas holdings as it finalizes options to purchase real estate sites for refinery construction and oil and gas leases.
QEGY Products and Services
QUANTUM ENERGY, INC. proposes to develop a 20,000 barrel-per-day diesel refinery at the center of both the diesel demand and the supply of crude in the Williston Bakken field region of North Dakota. Removing the transportation component cost of moving crude to remote refineries combined with the ability to distribute high-demand diesel to the market within the immediate vicinity of the proposed refinery, creates margins sufficient to justify the capital investment. Based on the long-term projections for continued development of the well fields (expected to last a minimum of 20 years), these margins could logically diminish due to the continued development of pipelines. The refinery, however, should continue to remain economically viable for the long term due to the relatively high cost of transporting crude by pipeline (and rail) to locations as far as 1,000+ miles away, while the projected decades of drilling ensures a steady market over the long run.
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There are two key markets that affect the Mondak Diesel Refinery (the “Mondak Refinery”): the market for Bakken crude and the market for on- and off-road diesel fuel. The supply and demand for these two commodities determines the price of both and has a major impact on the refinery’s cost and revenues. The large price differential between the two commodities is one measure of potential profitability for the Company which is the economic incentive for the Mondak Diesel Refinery itself.
The Bakken play, including the Three Forks formation in the Williston Basin is perhaps the most well-known of the shale oil plays that are the major new sources of crude in the United States.
Capitalizing on fracking technology and sophisticated geophysical modeling, drillers are experiencing extraordinary success in the rate of wells successfully drilled and completed. New
technologies coupled with the sustained high prices of crude oil worldwide, has given rise to a true oil boom in the Bakken play. The number of oil rigs active in the Bakken region of North
Dakota alone has grown from 172 rigs at the beginning of 2011 to 218 rigs in May 2012. The initial production rates and estimated ultimate recovery from completed wells have far exceeded most expectations. North Dakota is now producing more than 880,000 barrels of crude a day (June 2013), with each rig drilling a new well every six to eight weeks.
Primary Product: Diesel Fuel
Light Gas Oil (LGO), is primarily diesel and kerosene. This diesel fuel is the primary target product of the Mondak Refinery. The Mondak Refinery will produce on average approximately
6,000 barrels of diesel fuel per day before blending with other distillates which will significantly increase the diesel fuel yield.
Kerosene is the lighter of the two fuels and is essentially premium #1 Diesel and is in shortsupply in the Williston Basin where its properties make it ideal for cold-weather use.
The Environmental Protection Agency (EPA) has established Ultra-Low Sulfur Diesel (ULSD) standards requiring ULSD be used in all mobile diesel engines newer than 2007 and requiring all diesel fuel produced and imported into the United States to meet the 15 parts per million (ppm) sulfur requirements by 2014. All on-highway, off-road, locomotive, and marine-use diesels must meet the 15 ppm sulfur requirement by 2015. This rule does not apply
to heating oil or stationary applications (Non-Road). The Non-Road fuel applications in the area would include use in generators, power plants, and crude-oil drilling. Currently, none of the
local distributors have storage to segregate Ultra-Low Sulfur Diesel from low sulfur diesel.
Secondary Products
Off-Gas/Propane and Butane
The plant produces approximately 900 barrels a day of light gases, including propane and butane. The plant will be designed to use the gas produced as a heat energy source for the boilers and heat exchangers. Dependent on market conditions for propane, butane and natural gas, the propane and butane components of plant energy can be separated and replaced
with natural gas and the propane and butane sold as a commodity.
Naphtha
The plant produce approximately 5,000 barrels a day of naphtha. Naphtha is a volatile, colorless by- product of petroleum distillation. Naphtha is also known as white gas, and when processed in catalytic reforming, it becomes high-octane motor gasoline. Since the process of making gasoline (catalytic reforming) is capital intensive and not justified given the current demand in the region, the naphtha produced will be sold in the Canadian market as diluent for tar sands oil transportation.
Kerosene
The plant will produce approximately 2,000 barrels a day of kerosene.
Industrial Diesel – Atmospheric Gas Oil (AGO)
The plant will produce approximately 1,400 barrels a day of atmospheric gas oil. Atmospheric
gas oil (AGO) is the equivalent of industrial fuel oil grade #4 Diesel. Until the market can be
proven for this material’s suitability as a drilling distillate, it is expected to be sold as catalytic
cracking feedstock to Midwest or Gulf Coast refineries.
Heavy Fuel Oil
The plant will produce approximately 5,000 barrels a day of atmospheric tower bottoms. The residual distillation product, or atmospheric tower bottoms (ATB’s), is also known as Heavy
Fuel Oil (HFO) or Residual Fuel Oil (RFO), and is classified as #6 Diesel. In the marine industry it is also known as Bunker C Fuel Oil, after the US Navy designation. Heavy Fuel Oil is used as fuel for very large diesel engines. Bakken crude’s distilled ATB’s are relatively light compared to many other crude feedstocks, in the range of API 20 gravity. They are also relatively free of asphaltenesand heavy metals and relatively low in sulfur (3,960 ppm), making them a premium ATB product. The atmospheric tower bottoms could be sold into the bunker fuel market, or most
likely as feedstock for coker units or fluid catalytic converter (FCC) units, which take this heavy product and produce diesel, coke (in the case of the coker unit) and other distillation products.
What we plan to do with it, and options with in the future
Sulfur
Due to the desulfurization technology selected d for the Mondak Refinery, namely the use of a LOCAT desulfurization unit and distillate hydrotreater, elemental sulfur will be an inherent by-product.
QEGY Key Company Management
Stanley F Wilson
Chairman and President Mr. Wilson is corporate executive as well as an M&A securities attorney whose legal and business career has placed primary emphasis in business combinations involving small cap publicly traded companies across a wide range of industries including oil and gas, fuel trading and marketing, telecommunications, specialty finance, insurance and retail automotive. This specialization has taken many forms including numerous going-public transactions, serving as President and General Counsel to multiple publicly traded holding companies trading on NASDAQ, OTCBB and the Pink Sheets, as well as legal counsel to new car dealerships, general counsel to statewide automotive dealer associations, automotive trade association executive, automotive industry lobbyist and CEO of sub-prime automotive finance companies both public and privately-held. Mr. Wilson has been an active member of the Nebraska State Bar Association since 1974, was appointed by the Governor as an acting Lancaster County Court Judge and served as The Staff Judge Advocate of the 67th Infantry Brigade of the Nebraska Army National Guard with the rank of Captain. Mr. Wilson is a partner with the Tempe, Arizona law firm of Davis, Miles, McGuire Gardner, PLLC www.davismiles.com
Andrew J. Kacic
Investment Consultant Mr. Kacic is an experienced oil & gas executive and investment banker with the following background: A seasoned expert in primary and secondary finance strategies, capital management and corporate organization, Mr. Kacic brings more than 28 yrs of progressive experience as a chief executive in investment banking, insurance services, public securities, automotive and oil and gas markets. Mr. Kacic served as CFO of an automotive and RV retailer with annual sales in excess of $350 million.,1999/2001. Mr. Kacic was president and founder of American Resources of Delaware, Inc. and its subsidiary Southern Gas Company. This company grew from $220,000 to $40 million in less than 4 yrs. Mr. Kacic also served as CEO for the oil and gas companies Proper Power & Energy, Inc. and Barclay Road Inc to assist in their SEC filings and corporate restructuring. Mr. Kacic was founder and CEO of Securities Network, Inc. (formerly Design Capital Securities Corp), an Arizona based NASD broker dealer with 22 offices and over 140 registered representatives. Advisory Services, Inc.(ASI) has acted as an advisory and consulting firm since 1982 based in Scottsdale, Arizona. In March of 2004, ASI successfully orchestrated the structuring and funding of a $221 million dollar (Canadian) IPO in Canada that set precedence in the industry. Mr. Kacic is currently based in Williston, ND involved in oil field related services.
QEGY Contact Info
Quantum Energy, Inc.
60 East Rio Salado Parkway
Suite 900
Tempe, AZ 85281
Phone: 480-366-5884
Website: http://www.quantum-e.com/
QEGY SEC Filings
http://www.otcmarkets.com/stock/QEGY/filings
QEGY Headlines
http://finance.yahoo.com/q/h?s=QEGY+Headlines
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