MMEX Resources Corp (OTCMKTS:MMEX) could be a bounce-back play if the ongoing recovery in the energy sector is anything to go by. Oil prices are stabilizing above the $60 a barrel mark, is seen as one of the catalysts that could make the stock an exciting pick at current valuation levels.
Money has started to stream into the energy sector, as selling pressure in the industry eases, after one of the worst routs in decades. A recovery of the energy sector continues to attract investors most of whom are looking for investment opportunities on highly undervalued companies.
MMEX Resources is one of the companies that appear to fit the bill as a long-term investment play, given its core business around oil and gas prospects. However, with the stock languishing at all-time lows, amidst waning trading volume, a lot needs to change.
The share price needs to stabilize above the $0.01 handle to affirm suggestions that selling pressure is slowly easing off. Failure to do so could see the stock plunging to new all-time lows below its 52-week lows of $0.006.
MMEX Resources is a development stage company that explores, extracts, refines and distributes oil, gas and petroleum products. The company also acquires and finances oil and gas projects with the aim of generating shareholder value. Its exploration and development projects are currently based in Texas, Peru and Latin America.
Pecos County Refinery Project
In response to oil, prices ticking higher, MMEX Resources has taken the first step to taking advantage of the high price. The company has begun construction works on a proposed Phase 1 crude distillation unit in Fort Stockton Texas
The unit which is slated for completion before the end of the year will generate up to 10,000 barrels of mid-range diesel a day and should act as a solid stream of revenue for MMEX resources, once complete.
Construction of the distillation unit is set to cost the company approximately $5 million. The company plans to raise part of the funds for the project through debt and another chunk through the issuance of equity.
In addition to the distillation unit, MMEX is also planning to construct a much larger refinery plant. The company plans to commence application process for the refinery project in the first quarter of this year. The refinery is to offer a full slate of fuels from gasoline to diesel as well as jet fuels.
MMEX Resources has since increased the capacity of the proposed refinery to 100,000 from 50,000. The refinery project is to cost the company a whopping $450 million. The company remains hopeful of raising the much-needed funds for the project, which it believes will help strengthen its value generation capabilities.
“We found that, for a little more incremental cost, we could double the size. The larger refinery will mean more jobs and a larger tax base for Fort Stockton. I still think it will be 400-plus technical and construction jobs at the peak. It’s hard to estimate but I know what happens is this will accelerate other jobs, from transportation to catering to housing,” said Jack Hanks, MMEX chief executive officer.
The two facilities are designed to be accessible by both rail and road. Depending on the refinery and production capacity, MMEX Resources could export some of its products to Mexico.
Access to Venture Capital
MMEX Resources is not expected to encounter any financial hurdles in the construction of the two projects that will define its future. The company is in the process of joining OTC market’s Venture Markets segment, in pursuit of venture capital
By joining, the segment the company stands a chance to engage investors in a bid to raise capital for its core projects. The venture market currently provides over 850 entrepreneurial companies a gateway to accessing much-needed financing.
What To Expect Of MMEX in 2018
MMEX Resources has been battered in the market over the past one year. There’s no doubt that investor sentiments in the stock are at all-time lows amidst concerns about the company’s operational efficiencies.
However, one thing that remains clear is that the company could experience one of its best years in recent years. The ongoing recovery in the energy sector has already reignited hope of investors flocking the industry, in pursuit of undervalued investment opportunities.
The company’s two major projects should continue to evoke interest from investors, looking to invest in small caps with huge potentials. The two projects once complete will act as a reliable stream of revenue as the company moves to refine and produce products for both the domestic and international market.
For the stock to be an attractive investment opportunity, it needs to stabilize above the $0.01 handle, and trading volumes need to spike higher. However, we remain bullish about the stock’s prospects on easing selling pressure.
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Disclosure: We have no position in MMEX and have not been compensated for this article.