E American Sands Energy: A Revolutionary Unique Oil Sands Play

Adem Tumerkan: Very interesting. Tell me a bit about the oil business in Utah.

Peter Epstein: Again, the key points are that if the oil sands in Canada weren't damaging to the environment, it would be some of the best business in the world and many players would be involved and many people would be happy. The only thing holding it back is the environmentally damaging publicity. So here, in the Utah, another reason is because there is such a huge abundance of oil sands located there as mentioned above, with no water involved because it's an arid location. And the reason that oil sands is such an attractive investments is because there is a zero production decline, whereas most oil production has a decline curve. For example, shale (specifically fracking) can produce the oil well but after a year or two the production can be down 50% or greater. Whereas oil sands is more of a manufacturing process and mining process instead of the traditional oil well route. For starters there are no need to drill holes and investors don't have to worry about dry holes; reducing finding costs and capex.

Adem Tumerkan: Even in this highly uncertain oil market, are you comfortable being a shareholder of AMSE?

Peter Epstein: Yes. Because they just reiterated in a press release that they have a break-even of $49 dollars per barrel. That is safely above the current beaten-down price. The oil sand project itself has huge blue sky potential. There is high inside ownership (34%) as well, which is reassuring.

Once they reach a number up to 5,000 barrels per day, they can expand potentially to 50,000 barrels per day, even though that could take a few years to reach. Another thing is, the de-risking of the permitting. The obvious risk still remains of raising the capital and the mining operation itself, but that is true with all projects.

Adem Tumerkan: In your opinion, why should the market care?

Peter Epstein: Because AMSE can be tremendously profitable and once their technology is producing, not only will they be able to grow in the rich oil sands of Utah, but they will be able to deploy elsewhere. And that really has the bluest sky potential. They could have a joint venture with other oil companies or royalty arrangements in the future for their proprietary process in other countries.

Adem Tumerkan: Can you offer me some parting advice as being an investor in the current energy market?

Peter Epstein: Patience is key. And follow the investment thesis you made before investing. Listen to what management says, see if they work on their intended goals and follow through. And if they fail to execute? Then you reassess your investment proposition. At $49 cost per barrel, a huge oil sand asset, the safe jurisdiction, and competent management, the thesis is there.

Adem Tumerkan: Thanks Peter for your time, greatly appreciated.

Peter Epstein: Anytime Adem.

Conclusion - Limited Downside with Extreme Upside

AMSE is a company with a unique process and engaging project economics. The company also accomplished something rare: satisfying environmental concerns while satisfying investors. With the price of oil weak and many fracking companies that are high costs, it would be logical for investors to begin looking for phenomenal assets with long production lives at low costs; high margins. There are some serious questions that investors must contemplate:

  1. The U.S. is aiming at becoming oil independent and, with added pressure from turmoil in the middle east and the sanctions between Russia, how else will this be achieved without allowing new projects to open?
  2. With the price of oil weak, many high cost fracking and shale companies will suffer, straining supply. With much of the growth since the 2008 collapse being in energy, what will happen to the overall economy if marginal oil wells begin closing? Where can investors feel comfortable investing in America's continued energy independence if some companies begin closing?
  3. Or consequently with all the central banks globally keeping rates to nothing, 0%, and after launching trillion dollar/currency printing campaigns, what if inflation finally does arrive and oil prices explode upwards? With the Middle East conflicts growing, could that trigger oil prices to move north?
  4. The environmentalists' growing concern and complaints about the effects of rising carbon emissions, preserving wildlife, and the hazardous damage to the land from the intoxicated left over water, how can projects be permitted when the very people raising concerns are the ones whom elect politicians?

AMSE is still a speculation, but has a project where all the smart money and rationale seems to point. It will be in production located in a safe jurisdiction and operating profitably for decades. The company has stated in the long term it plans to extract 50,000 barrels per day. All this for roughly .50 cents per share currently.

If this isn't considered buying cheap for strong future value and thick margins, then what is?

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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.