E American Sands Energy: A Revolutionary Unique Oil Sands Play

  • A water-free extraction process which will produce oil without water contamination as many of the other oil sands projects do.
  • The process will require no tailings ponds because there is no water used and all the solvent used will be recovered and recycled.
  • The sand once separated from the oil is a dry clean sand with non-toxic byproducts and could be sold as an value added product instead (see photo below).
  • The process also does no discriminate against other types of oil sands, giving the companies process a globally competitive advantage as it could work in other countries.

As the above list states, the process is clean, which will satisfy the environmentalists.

The following list will discuss the economics of the process:

  • Relatively low operational costs due to the absence of water in the process.
  • There is 60% less energy used using this process compared to the "water wet" (Canadian) oil sands operations.
  • Low relative initial capital costs for the entire project to be built requiring only around $75 million.
  • Break even at roughly $49 barrel of WTI crude oil. Many Canadian oil sands companies are having costs around $100 per barrel.

(Source: AMSE) 

"Even riskier financially are the oil sands, or tar sands, of western Canada, which are profitable only if crude prices are as high as $150 a barrel," CTI (Carbon Tracker Initiative of London) said.

With the environmentalists at ease with the AMSE process, now the investors are impressed with the project's economics. With oil even at $70 dollar per barrel, AMSE will have a $20 per barrel net income.

The company has accomplished a difficult task: create a low cost, high margin project while not desecrating the environment.

Catalysts - Pending Permitting

In March 2014, the company had applied for its mining permit so that hopefully once approved it can raise capital to begin construction. In a recent interview the company's CFO, Daniel Carlson, spoke about the nearing of the end of the permitting phase. It is an interactive process in which the company speaks with the Utah Department of Oil, Gas, and Mining to answer their questions.

Currently the company has been making key progress on gaining permits.

Once the company is approved for the permit, they will proceed with the financing. These are two of the most important risks facing AMSE. And every step closer to permitting is also de-risking the company, creating clearness for skeptical potential investors.

Financing and Income

The company hopes to be in production within 16 months after the financing. Again they estimate raising roughly $75 million. Look at the income chart below:

(Source: AMSE)

The investor can assume that if oil prices were even to stay at $80, AMSE could still be very profitable. At 5,000 barrels/day at $25 dollar net profit/barrel, the company would clear $125,000 per each operating day. That is almost $900,000 per week. Which multiplying 52 operating weeks per year would transcend to almost $47,000,000 before EBITA.

The Pilot Plant Experience

In late July of this year I was invited by company CFO, Daniel Carlson, to visit the company's one-ton (12 barrels-per-day) pilot plant in Phoenix, Arizona. Thankfully I live in Scottsdale and was only an hour drive to the demonstration. We made arrangements for me to visit the following day.

(Source: AMSE Presentation)

The day came and I departed to the location in the early afternoon. I arrived at the facility and parked. I wandered around looking for an entrance when I was approached by a man with sunglasses standing by a car.

"Excuse me, but are you Adem Tumerkan?" he asked.
"Indeed I am," I answered.
"Nice to meet you, we spoke on the phone earlier. My name is William Gibbs (AMSE's CEO)."
"Thank you for having me, I greatly appreciate this."

We shook hands and continued through the back gate. I was very impressed that the company's CEO greeted me, and how enthusiastically of his company he spoke.

(Source: Adem Tumerkan Cellphone)

The facility was a large industrial plant with fences surrounding the place. The pilot plant was located in the back-left of the property.

Mr. Gibbs himself gave me an overview of the company and answered all of my questions. He informed me there was strong inside ownership of shares outstanding, an extremely underrated oil sand asset (150 million barrels currently, upwards of 650 million barrels), and most importantly an environmentally cleaner (no tailing ponds or enviromental hazards) and lower cost (net back at $49/barrel) process.

"Now, let's get to the most important part. Want to see liquid oil come from those dirt clods?" he said.

There were bags of what resembled black dirt clods. Gibbs had informed me these were oil sands from the Utah Sunnyside deposit, but also there were other bags of oil sands from other countries to test the proprietary process's magnitude.

(Source: Adem Tumerkan Cellphone)

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Peter Epstein 5 years ago Contributor's comment

American Sands Energy is high risk, but a real company with a real chance of making it really big. Obtaining permits is the first big challenge/opportunity. Permits should be in hand within a few months. First oil in 2016 is a lot closer than it sounds, it's almost 2015....

Adem Tumerkan 5 years ago Author's comment

Yes this is a speculation not an investment in my opinion. As all early oil development companies are extremely risky and need funding to survive. But AMSE has incredible deposit and cash costs that I dont believe can be ignored.

John Fitch 5 years ago Member's comment

Oil is a finite resource, so inevitably it will be gone. What then will happen to the countries counting on the revenue derived from oil? The majority of US oil consumption was in the form of fuel for our automobiles and airplanes. Ultimately there will need to be an oil-less solution for that (hybrid, electric, etc.) and what happens to oil then? These solutions are also more environmental friendly. Instead of looking for an environmentally clean oil company to invest in, why not find an environmental company to invest in? (i.e. a company that is developing cleaner alternatives to oil) Seems to be more forward thinking in my eyes.

Adem Tumerkan 5 years ago Author's comment

I agree we as people are a dynamic economy but how many people are going to sell their cars to purchase even more expensive energy efficient vehicles such as Tesla?

John Fitch 5 years ago Member's comment

The hope is that with technological advancement, the cost of producing energy efficient vehicles will fall; thus allowing other companies to enter the market, and subsequently, offer lower priced alternatives to Tesla. Perhaps competition in the space will also cause Tesla to lower their prices. Not in the near future, but eventually I do see those vehicles becoming the norm; and people will eventually need to sell their car and slowly begin transitioning to energy efficient vehicles.

Moon Kil Woong 5 years ago Contributor's comment

1) The US is still importing tons of oil due to current US oil company contracts thus leaving a surplus at home which they are now trying to export (a bit ridiculous).

2) The US oil collapse is coming. Now is not the time to invest in more production.

3) The oil price decline should have happened sooner along with everything else but the Federal Reserve is trying to prevent the natural price declines associated with a downturn which did nothing but prolong the downturn for years because the economy can't realign without the natural savings it gets from price declines.

4) Politicians and the government don't make jobs save ones that cost more jobs, they destroy them unless they cut taxes. Given they do not do that, they could care less if the US oil economy collapses or the rest of the economy. In fact a weak economy allows their banker friends to issue even more QE money and give them out like candy to them and the politicians. Thus, regardless of what everyone says, most bankers and politicians love the zombie economy. It means they get rich while you get poor.

Adem Tumerkan 5 years ago Author's comment

1. The US only produces at most 9% of the world supply. Low cost producers are what need investing.

2. As marginal producers came online in America many countries have reduced oil output such as Syria and Egypt, Libya and Nigeria due to internal factors.

3. The with the Fed's war on deflation and cost of productions increasing, I doubt falling energy prices will be short. With many countries bypassing the US dollar in all oil trade anyways is growing worrisome.

4. I agree completely.

Adem Tumerkan 5 years ago Author's comment

As you were just saying, oil prices will come down from globabl worries and growing supply and the feds "low" inflation.

But what will those high cost marginal oil producers do? They will turn off. Its not as if oil isn't a good business, its at what cost. And my argument is that AMSE will be a low cost producer with a great asset that could survive even $55 oil as many other producers in America go offline, which would inevitably lead to high prices anyway.