MCW Enterprises Ltd. (TSX VENTURE: MCW) (MCW.V)
www.mcwenergygroup.com
MCW is led by Texas oilman CEO Dr. Jerry Bailey, who is a retired president of Exxon Arabian Gulf. It is dedicated to reducing America's dependence on foreign oil by producing energy from Utah's oil sands in an economically profitable and environmentally-friendly manner. Utilizing a patented, proprietary standalone, extraction technology acquired from Russia, production is slated to begin with MCW's initial extraction plant in January 2013. For stability, MCW's start-up division, MCW Oil Sands Recovery, LLC, has recently been integrated with a profitable California fuel distribution company. The U.S. produces only about a third of the oil it consumes, so there's lots riding on MCW's pioneering. Fortunately, CEO Bailey has a track record for finding oil and generating big profits.
Recent Price: C$1.00
52-Week Range: C$1.20 - 0.90 :
Shares Outstanding: 34 million
Market Capitalization: C$34 million
Average vol. (one month) 4,118 shares
Amalgamated figures of the combined enterprise will be available in the future.
By Robert J. Flaherty and Arnaldo Arroyo
Buy Recommendation
A Two Pronged Company: MCW Enterprises Ltd. (MCW.V) is a two pronged company. First it has MCW Fuels, a booming profitable California fuel distribution company and one of the leading distributors in southern California. Revenues should surpass $1 billion during fiscal 2014 as it moves into northern California and adjacent states. It is an exciting operation worthy of investment in its own right. Fuel delivery revenues have been going up 35% annually and now net profit should build up even faster. That's because MCW Fuels will increase revenue without adding much more G & A costs to hurt the bottom line.
But the main focus and why Dr. Jerry Bailey chose to become CEO of this tiny company is MCW Oil Sands Recovery LLC, a new venture in oil sands production. Utah has 55% of all the oil sands in the U.S. and about 32 million barrels of oil locked up so far by the absence of a proven profitable environmentally -friendly extraction technology. "We will be producing oil hopefully in January- a small extraction plant," says Bailey. "We have come up with a situation which is unique. It has not been done. It is nice to be involved with something everyone wants and everyone needs. I want to be a part of making this happen."
While tiny MCW has leases owned or under control of 70 million barrels of oil and a Letter of Intent on a former Exxon lease with 936 million barrels, quick, massive expensive exploitation of the ores is not the goal.
"This is really going to be a technology play," explains Bailey. "I don't plan to build another Exxon out there in the desert." Instead, our initial plant will produce 250 barrels per day (bbl/day) and can be expanded in modular pods to 500, 2000 or even 5,000 bbl/day. The process is simple and small so plant expansion can be modular, like expanding a Lego set. Right now, MCW plans to have two plants each producing 500 bbl/day and then decide its further progress path.
Co-founder Dr. Boris Goldstein has already been in contact with other countries which have sands similar to Utah's oil sands deposits. It's not only that MCW will make good money in the Utah desert because MCW plants will be cash positive with good payback margins ( $26.00 to $43.00 per barrel). It will also enjoy the non-necessity of building multi-billion dollar infrastructures such as required in Alberta, Canada. Most importantly, MCW will be able to take this new technology to other countries and license it.
"That is when it will really take off," says Bailey. "People have been looking for this type of efficient, environmentally-friendly process. Countries with lots of conventional oil don't worry about alternatives too much. However, those who don't have it but have a lot of oil sands can use this solution. And here at home our technology can also be a key. America will have new technology to speed moving toward energy independence." Once its technology is proven in Utah, MCW could be on its way to being America's very first environmentally-friendly oil sands project!
The goal of a Flaherty Special Situation is a gain of 50% to 100% over two years. The stock of MCW began trading on the Toronto Venture Exchange on October 23rd with a recent price of C$1.00. After raising more capital, the company plans to list on the NASDAQ or Amex in the first quarter of 2013. We believe investors can achieve a 100% gain and astute patient ones much more as MCW plays an important role in helping America move toward energy independence.
Overview
Texas oilman CEO Dr. Jerry Bailey, PhD., of MCW Enterprises Ltd. has a solid reputation for finding oil. This retired president of Exxon Arabian Gulf spent 19 years in the Middle East, where he oversaw all of Exxon's vast operations (Saudi Arabia excluded). For a period, Bailey was also in charge of all of the operations of Exxon's refinery in Aruba, which at the time was the second largest refinery in the world. He has also spent time developing big oil projects in Qatar and Libya.
"I know how to run a big organization," says Bailey. "I ran budgets in the multiple billions of dollars. I'm leveraging my credentials into what MCW can do. I'm an oil man. I know how to find oil. My doctorate is in chemical engineering so I know the process. I know how to produce oil and I know how to make money in it."
MCW Fuel has successfully achieved a 35% compound annual growth rate over the past three years with projected 2013 deliveries of 156 million gallons of diesel and gasoline fuel products throughout California. MCW Enterprises is now mainly focused on building its second division, MCW Oil Sands Recovery LLC. This technology start-up owns an environmentally-friendly, fully-patented hydrocarbon extraction technology which could become the key to unlocking the billions of barrels of oil trapped in the Utah oil sands.
MCW's technology utilizes no water during the extraction process, giving it a major competitive advantage when applying the technology in desert areas in the western U.S., where water is basically unavailable. The closed-loop system generates an extremely small footprint, produces no greenhouse gases, requires no high temperatures and is capable of extracting more than 99% of all hydrocarbon content.
Another huge advantage is that the technology is scalable. "We are starting with a 250 bbl/day plant, but we can scale it up in steps once we get going with our process to as much as 5,000 bbl/day," Bailey says. "It is like putting a Lego set together. We treat the sand with our proprietary benign solvents and we end up putting the clean sand back in the earth. We extract oil from gooey stuff like asphalt, about 15% of sand, and put the fresh clean sand back in the ground."
MCW's Oil Sands Recovery, LLC division is situated in the heart of the prolific Asphalt Ridge, Uinta Basin Region in Utah, one of the state's major oil sands areas. The 1,138 acre lease is approximately 10 miles southeast of Vernal, one of the state's infrastructure hubs for oil and gas exploration and development. Utah is represented by seven term Republican Senator Orrin Hatch. He is a very pro-development governing force who is encouraging the state's development of its vast oil sands and oil shale resources. MCW's property contains more than 50 million barrels of oil (Prospective Resources - U. S. D.O.E) and is ideal for MCW's proprietary oil extraction technology, with considerable deposits which can be scraped from surface to down to 200 feet in depth.
"We're working in one of the most prolific basins in Utah," says Bailey. "55% of the oil sands in the U.S. are right there in North East Utah. Most people in pro-development Utah are currently working on conventional oil production. Oil sands are a great potential which so far we haven't gone after."
Bailey states that MCW's extraction technology can produce oil from the oil sands for about $30 a barrel, all costs in, including truck delivery to the nearby refineries in Salt Lake City. "In the oil business, the people who own the sources are the people who make the big money," he adds. "In our case, it's like having a machine where you put in a $30 bill on one side and get an $80 bill out of the other side."
Of even greater magnitude there is a Letter of Intent and due diligence is currently being performed on former Exxon leases in nearby P.R. Spring (one of Utah's 8 major deposits), with reserves of 936 million barrels. MCW estimates net backs of between $26 to $43 a barrel.
MCW's oil sands extraction technology was developed in Russia by the Bashkortostan Oil & Gas Institute & Research Laboratory to clean up conventional oil tailings. The institute was not looking to market the technology, but rather to use it to clean the environment. To test the technology for use in the U.S., MCW shipped several tons of oil sands from Utah to Russia. After successfully testing the technology, Dr. Goldstein, who has a list of contacts both in Asia and Europe, acquired the technology as well as all the patents. MCW's research/engineering team has joined forces with the experienced Russian engineers to enhance MCW's extraction technology even further from the original design that worked well in Russia. Several modifications have been made to the major components of the initial extraction plant that will be assembled in Utah during December, 2012. The unit also has been winterized to ensure year round operation in Utah.
MCW Fuels
As a leading California distributor of wholesale branded and unbranded gas and diesel fuels, MCW Fuels has built a phenomenal growth record over the past three years. Revenues in 2010 totaled US$188 million, rising to US$350 million in 2011 and are going to surpass US$500 million in 2012. With the recent acquisition of Ocean Park and Westco, two west coast distributors, MCW sales should reach US$600 million in 2013 and exceed $1 billion in fiscal 2014.
Right now, MCW Fuels has 12 trucks which pick up fuel from the refineries of major companies and distribute it to 250 fuel stations in throughout California. Why so few trucks? Some major clients such as Exxon and Mobil usually provide their own trucks. The giants are happy to be rid of billing and collecting. That is a big deal for them. From its Glendale, CA office, MCW handles the collection and accounting and lots more for its clients.
Fuel distribution contacts are for 10 years. "We make our money being a middle man on the spread and we are taking the risk mainly on a change in the price of oil and delivery and collecting the money," says Bailey. "We get $0.04 to $0.05 for every gallon we distribute and we now distribute something like 150 million gallons a year. On unbranded deals it's $0.06 a gallon."
In the wake of consolidation in the fuel distribution industry, MCW plans to continue to acquire additional distributors and to expand throughout California and into neighboring states by acquiring other distributors.
Finance
MCW's current financing goal is to raise US$10 million to US$15 million but MCW is not under extreme time pressure to do so. Its California fuel distribution division is profitable and cash positive. Also while MCW has under control one billion barrels of oil which could be extracted from the sands, it has a five year contract to be supplied with ore from a supplier on a nearby mountain. That will enable MCW to demonstrate the effectiveness of its extraction technology without the expense of mining its own ore.
MCW's first plant required about $5 million and funds have already been raised to pay for this initial unit. If all goes according to plan return on investment would be achieved in 18 months. Additional funds raised would be applied to the fabrication of at least two additional extraction units, to the acquisition of additional oil sand leases and also to acquire more fuel distribution operations.
As for the huge Utah oil sands reserves, these assets should be a great economic value to MCW. Some leases would be developed by MCW or sold to be developed by others. Success of MCW's extraction process should make the value of the reserves skyrocket.
The stock of MCW only started trading on Toronto Venture Exchange on October 23, 2012 and a shareholders' vote will be held on December 12 to change the company name to MCW Energy Group Limited. After funds are raised, the goal is to list on a U.S Exchange such as NASDAQ or NYSE Amex in 2013.
The Management Team
(MCW's management team is comprised of individuals who have extensive knowledge in both conventional and unconventional oil and gas projects and production, as well as refinery and fuel distribution experience.)
R. Gerald Bailey, PhD., is Chief Executive Officer of MCW Enterprises Ltd. Dr. Bailey has over 45 years of experience in the international petroleum industry in all aspects, both upstream and downstream. He has specific Middle East skills, U.S. onshore/offshore and is currently chairman of Bailey Petroleum, LLC, a consulting firm for major oil and gas exploration/development corporations, chairman, BCM Energy Inc., an oil production company, chairman, Vanguard Energy Corp. (Houston, TX), director, Fortune Oil & Gas (Willis, TX), and is a partner with Ephraim Oil, LLC. He is a retired president of Exxon Arabian Gulf. He was also the operations superintendent Exxon Lagos Oil, Aruba and has spent time in Libya as operations superintendent for Esso Standard Libya, Brega.
Bailey holds a BS in Chemical Engineering from the University of Houston, an MS in Chemical Engineering from the New Jersey Institute of Technology, Newark, NJ, a PhD from Columbia Pacific University, San Rafael, CA and is a graduate of Engineering Doctoral Studies from Lamar University, Beaumont, TX. He has written many articles, papers and studies on the oil industry. He has been a keynote speaker at many industry conferences, most recently in Las Vegas at the Money Show Conference with his address, "The Future of Oil & Gas Developments."
Alexsandr Blyumkin is the Executive Chairman of MCW Enterprises Ltd. A second generation entrepreneur, Blyumkin has a wide range of experience in the oil development industry. He has been a key figure in the development of a variety of oil development properties in Eastern Europe (Ukraine), Central Asia (Azerbaijan). Most recently in the U.S. he has focused his interests in oil sands lease development and environmentally-friendly oil sands extraction technologies as employed by MCW.
Based in the company's offices in Glendale, CA, Blyumkin is currently involved in acquiring additional oil sands leases in Utah for the company's resource portfolio, with a keen interest in resource development with long term potential. He will be instrumental in deploying MCW's unique oil sands technology as well as devising an operational plan for oil production. He will serve as a liaison between the company's operational personnel, its geologic team and its environmental consultants through the various permit stages prior to coming on-stream with production.
David Sutton is Chief Operating Officer of MCW. Sutton joined the MCW Fuels in 2005 and his immediate task was to revitalize the company's overall branded gasoline marketing operations. This was accomplished basically through the acquisition of a master branding retail agreement which he completed with Conoco Phillips 76. He has worked with other petroleum companies such as Valero and Shell in acquiring branding agreements. Second tier brand agreements have been established with Alliance and MCW Fuels. Sutton concentrated on expanding the MCW's credit limits with major oil companies and is currently focusing on the acquisition of government and large contractual supply contracts.
His efforts have transformed MCW Fuels into a focused, energetic company which not only delivers reliable results to shareholders but provides a superior product range to its customers. His successful brand strategies and the reinforcement of its management team resulted in the enlarged product lines as well as the expansion into new, growing markets. Prior to joining MCW, he owned and managed several successful companies in the medical products/services industry.
Warren M. Dillard is Chief Financial Officer of MCW. Since 2010, he has been President, CEO and a Director of Vanguard Energy Corporation (VNGE). Dillard is currently serving as a director of Surge Global Energy, Inc. (SRGG), which is also a publicly-traded oil and gas corporation. Since 2005, he has served as the president and director of Enercor, Inc., a private corporation involved in oil and gas exploration/development in western U.S. Previously, Dillard was the CFO of Pepperdine University and was also a private investment banker. He holds a degree in Accounting from Texas A & M University and an MBA in Finance from the Harvard Business School.
Sami Dabbas is an Executive Board Member and Chief Operating Officer of MCW Fuels. He is responsible for managing the overall operations of the company, with an emphasis on global expansion, supply procurement and corporate acquisition activities.
Dabbas has over 30 years of experience in the petroleum industry, commencing with the purchase of his first Shell service station in 1980, followed by many additional service station acquisitions including Chevron, Texaco, Shell, Valero, Union 76 and Arco. He helped in the establishment of a ConocoPhillips Master Branding Retailers' Agreement, which was the benchmark for the branding of hundreds of service station locations throughout California. He is a member of the Pacific Oil Conference, California Independent Oil Marketers Association, Western Petroleum Marketers Association, the National Hydrogen Association and the Society of Independent Gas Marketers of America.
His corporate team is developing the introduction of alternative fuels into the marketplace. A sustainable energy future will include a wide array of power generation sources, including hydrogen, CNG, LNG and a variety of emerging technologies involving biofuels.
R. Burk Adams is Chief Operating Officer for MCW Oil Sands Recovery, LLC. His diverse range of experience includes industrial project management, engineering design, and the economic evaluation of petroleum, mineral and chemical process projects with an emphasis on oil sands processing, asphalt production and heavy oil upgrading. His past projects include corporate and project management, comprehensive project development, field engineering, pilot plant design/operation, bankable feasibility studies, contract development/administration, facility start-up, detailed operating/capital cost estimates, financial/risk analysis, process simulation, flow-sheet and P& ID development, Process Safety Management, including Process Hazard Analysis, process modeling (HYSIS, UNISIM), project scheduling/tracking, equipment sizing/design, criteria development, energy/mass balances and technical writing.
Most recently, he was a Senior Consulting Engineer for Worley/Parsons Canada/Imperial Oil Resources, Calgary, Alberta. He was responsible for the processing/project development of a non-aqueous extraction method for extracting bitumen from oil sands. Prior to that, Adams was a senior process engineer for Ringstrom Engineering, Albian Sands, Fort McMurray, Alberta and was responsible for the review of system (normal and abnormal) venting scenarios. There, he managed the UNISIM mode for the project and developed scenarios to prepare operations for start-up. Adams was Senior Process Manager for Korea Technology Industry (America) in Vernal, Utah, where he was responsible for leading a Process Design Team in the design, construction and commissioning of a 1200 BPD oil sands extraction demonstration facility. This included ore preparation, extraction, dry tailings system, water treatment (full water recycle), froth treatment (hexane dilution) and solvent recovery.
Adams holds an MBA Degree in Operations/Finance Emphasis and a BS Degree in Chemical Engineering from Brigham Young University. He holds a Professional Engineering License - Chemical for the State of Utah. He has been published: "Study and Demonstration of a Process to Extract Bitumen from Utah Tar Sand," (Adams, R.B., Coleman, P.W.), Society of Petroleum Engineers Paper No. 86945, March 16, 2004.
Vladimir Podlipskiy, PhD, is Chief Technology Officer for MCW Oil Sands Recovery, LLC.
Podlipskiy has extensive experience in many senior science disciplines as a researcher within oil extraction technologies, car care products, household consumer products and cosmetic products, including research on mold remediation products. He has spent part of his previous careers in new product development for EMD Biosciences, Inc. (Merck KgaA, Darnstadt, Germany), and as a chief chemist in research & development for Nanotech, Inc., Los Angeles, CA, and was the Chief Chemist for Premier Chemical, Compton, CA. He is a former premier chemical scientist at UCLA Department of Chemistry. Podlipskiy is the holder of several patents of innovative fuel additives and car care products and is the author of multiple patents in the fuel reformulation product field, as well as the mold remediation industry. He is currently involved in the research and development of new products/systems/technologies in the petroleum industry and has an impressive portfolio of accomplishments in the field of human-friendly, natural and organic compounds in product formulations.
Podlipskiy will be front and center in MCW's technologies for oil extraction programs in Utah and is currently finalizing the details for the fabrication of the company's first extraction unit. He is responsible for the planning, fabrication and assembly of the unit through liaison with MCW's suppliers in Eastern Europe. He holds a PhD Degree in Bio-Organic Chemistry, (Institute of Bio-Organic Chemistry & Petroleum Chemistry), Kiev, Ukraine and a degree in MS-Organic Chemistry from the Kiev State University, (Department of Chemistry), Kiev, Ukraine.
History
MCW Enterprises Ltd., a holding company with two operations, MCW Fuels and MCW Oil Sands Recovery, LLC, began trading on TSX Venture Exchange on October 23, 2012. MCW Fuels was launched in 1938 with a single distributorship in Van Nuys, CA. Since then, MCW Fuels has become one of the most recognized distributors of oil and diesel products throughout the western U.S., currently supplying over 150 million gallons of branded and unbranded fuels per year to more than 250 service stations as well as commercial fuels to over 100 businesses. MCW Oil Sands Recovery LLC, which is working towards the production of oil extracted from sand at its oil sands lease location in the Uinta Basin of Utah, was formed in October 2010 and will start up its initial plant in the first quarter of 2013.
Competition
There are only a handful of companies using extraction technologies in the oil sands of Utah. For example, US Oil Sands Inc. (USO.V), based in Calgary, Alberta, Canada, is using its own patent-pending technology based on a non- toxic solvent as a resource owner and technology developer. As technology advances and the price of oil continues to rise more and more new entries can be expected to go after the treasure locked up in Utah's oil sands. Over the years there have been several attempts to exploit Utah's oil sands, some technologies utilizing the SAGD methods of highly pressurized, underground steam and others using harmful solvents. No one has successfully operated an environmentally-safe technology in the state which has been commercially viable to date. The low price of oil in the late 1980's and early nineties when oil plunged to $ 10.00 a barrel basically put a temporary halt to most extraction techniques in the state. Now the high price of oil should start a new rush.
Risks
MCW is confident that their technology will work...and with excellent profit margins. But in the very worst case if not, MCW will still have a very profitable and growing fuel distribution in California. Because MCW is a technology play, one risk is that someone else will develop a better technology, ending MCW's global licensing dreams. That would not be all bad. Any successful process should increase the value of MCW's vast oil leases.
Another risk is that the price of oil per barrel always fluctuates and the market price will determine whether production is economically feasible. MCW Enterprises estimates paying $30 to produce a barrel of oil from the Utah oil sands. This efficient cost rate gives MCW an attractive cushion for fluctuating oil prices. The process of obtaining usable oil from oil sands is more complex than drilling for oil. Because of the steps and capital required to produce a usable product from oil sands, the cost of producing a barrel is higher than from crude oil reserves. Therefore, the price of oil on the market has to continue trending upward in order to make production economically feasible. If the price drops sharply, the netback will be squeezed.
If oil sands do hit a dead end MCW does have a plan B which it doesn't discuss because it is confident Plan A will work. Plan B would be to process the oil sands and produce asphalt for Utah's roads. But using Plan B would be a big disappointment. Succeeding in Plan A and proving the technology would help shorten the time U.S.A. achieves energy independence.
COMPANY CONTACT INFORMATION
MCW Energy Group
www.mcwenergygroup.com
1218 West Georgia Street,
Vancouver, B.C. Canada V6E 2Y3,
U.S. Office:
344 Mira Loma Avenue,
Glendale, CA 91204
Phone: (800) 979-1897
Investor Relations/Communications:
Paul Davey
Telephone: 1-(800) 979-1897 Ext. 3
Email: [email protected]
