MCW Energy Group Turns Focus on Oil Sands Extraction Business
Since our previous update on MCW Energy Group (TSXV: MCW – $1.03 CAD & OTCQB: MCWEF – $0.80 USD), the Company went through a significant transition. A few weeks ago, it entered into an agreement to sell its mature, extremely-low-margin fuel distribution business, MCW Fuels.
Instead, the Company is going to concentrate on its oil sands extraction technology as the potential for significant profits is substantially higher in this business.
MCW Is Moving Towards 250 bbl/day Production And an Industry Low Production Cost of $28.00 bbl
MCW’s intention is to develop its oil sands operations by processing purchased native oil sands ore from Asphalt Ridge, Utah, using its patent-pending closed loop, continuous flow, and environmentally safe extraction technology.
MCW’s initial extraction plant was officially unveiled on October 1st, 2014 in Vernal, Utah, where the plant’s extraction capabilities were successfully demonstrated to a large group of investors, government officials and media. During the months of October and November, oil production at the site was independently evaluated as MCW had all the permits in place to produce up to 50 bbl/day.
The next phase is to move the plant into a commercial production mode which will have an anticipated capacity of 250 bbl/day. The Company is now in the process of obtaining “full production” permits from Utah State, for which it doesn’t foresee many issues. The Company anticipates to receive these permits in the coming weeks.
In the meantime, MCW has implemented a full winterization program on the oil sands extraction unit to ensure year round operation. Initially for its inaugural test run in October, the demonstration plant operated with rented utility equipment, which included the power systems, generator systems, boiler components and the cooling system. All of these components are now being replaced with permanent, compatible systems in order to further reduce ongoing production costs.
Due to this increase in efficiency and the lower costs of petroleum products used in MCW’s extraction technology, such as diesel fuel, propane, solvents and condensates, the Company anticipates an excellent production cost of just $28.00 bbl, probably the lowest cost in the entire unconventional oil industry.
Within a few weeks, MCW Energy will have a fully operational oil sands extraction unit, which will produce approximately 250 barrels of oil per day at an all-in cost of $28 bbl. The produced oil will be sold at a small discount to the West Texas Intermediate (WTI) crude price, for which agreements have already been signed with a local distributer.
That means that even at these extremely depressed oil prices, the Company will generate a profit of around $22 bbl. Assuming that the unit is operational during 350 days a year, it will produce a net profit of more than $1.9 million USD. This is very much in contrast to the high production costs and lower energy efficiency levels associated with the mega oil sands projects in Alberta, Canada. As a result of lower oil prices and the major Alberta oil sands producers averaging $60.00 – $70.00 per barrel cost, many of the major, new projects have either been delayed or cancelled altogether.
Subsequent to MCW’s successful demonstration of its proprietary extraction technology in October, the Company has been contacted by several companies interested in potential joint venture opportunities in their respective oil sands deposits in China, Asia, Dominican Republic and the Middle East.
Moreover, MCW is continuing its funding discussions in order to finance a 5,000 bbl/day extraction unit, which will be designed, fabricated and installed either on its own Asphalt Ridge, Utah lease or on the nearby Temple Mountain Energy lease site, which is the source of MCW’s feedstock supply.
MCW is an oil-related Company to keep a very close eye on, as it has a proprietary technology that allows the extraction of hydrocarbons at a very low cost from a wide range of both “water-wet” and/or “oil-wet” oil sands deposits and other hydrocarbon sediment types.
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