PETROTEQ ENERGY IN (OTCMKTS:PQEFF) may just be back on the rise, after months of a steady decline, the stock has found some momentum and has moved from $0.363 to $1.83 within a month.
In this piece we give you the highlights of the firm’s activities and what to expect down the line.
First, take a look at the stock’s price movement below:
Petroteq Energy Inc. was founded by Aleksandr Blyumkin on January 4, 2008. It engages in the oil extraction and processing operations in the United States. The company is involved in the tar sands mining and oil processing activities using a closed-loop solvent based extraction system that recovers bitumen from surface mining.
It also engages in gas exploration and production on mineral leases located in southwest Texas held by Accord GR Energy Inc. (46% of which is owned by the Company), developing its oil sands resources and in expanding production capacity at its Asphalt Ridge heavy oil extraction facility (the “Facility”) located near Uintah County, Utah. It holds interests in the MCW Mineral lease covering approximately 1,138 acres; and the TMC Mineral lease on the Asphalt Ridge property located in Uintah County, Utah.
The Company owns all of the technology and intellectual property of its environmentally friendly heavy oil processing and extraction process.
Petroteq TMC’s sole asset is a mineral lease related to tar sands, oil and other minerals located in and within certain lands situated in Uintah County, Utah. The Lease is subject to a 1.6% gross royalty held by the owner of the property.
At its Temple Mountain site in Utah, the Company’s property contains an estimated contingent resource of 87,817,000 barrels of bitumen. Petroteq Oil Sands is the owner of the facility.
The company was formerly known as MCW Energy Group Limited and changed its name to Petroteq Energy Inc. in May 2017. Petroteq Energy Inc. is based in Studio City, California.
In November, Petroteq announced the execution of a memorandum of understanding (the “MOU”) with Deloro Energy LLC.
Pursuant to the terms of the MOU, and subject to all applicable director, shareholder and regulatory approvals, including approval of the TSX Venture Exchange, Deloro will loan Petroteq Energy CA, In., a wholly owned subsidiary of the Company, US$10 million under a convertible debenture, which will, subject to the terms and conditions of the Debenture, be convertible into up to 49% of Petroteq Energy CA.
Upon execution of the MOU, Deloro paid Petroteq Energy CA a US$50,000 non-refundable deposit. The terms of the agreement state that Deloro will be required to loan US$9,950,000 in three tranches.
Upon receipt of the first tranche (US$2,500,000) Deloro shall be entitled to receive an economic royalty equal to 25% of the net profits of the Facility (defined below) from the date that the Facility is operational.
The parties agree that at least US$2,000,000 of the first tranche shall be allocated by the Company towards the capital costs and related expenses associated with the Company’s planned expansion of the Facility’s processing capacity to at least 1,000 barrels/day.
Upon receipt of the second tranche (US$3,500,000) Deloro’s economic royalty will increase to 35%.
The second tranche shall only become due and owing by Deloro upon the Company completing its expansion of the Facility’s processing capacity to at least 1,000 barrels/day.
If Deloro fails to provide the second tranche by the deadline, subject to a grace period, the first tranche will automatically convert into a 25% equity interest in Petroteq Energy CA, with the Company maintaining an option to repurchase such equity for the principal amount of the first tranche for a period of 12 months.
Upon receipt of the third tranche (US$3,950,000), which is expected to occur on or before June 1, 2018, Deloro’s economic royalty will increase to 49%.
If Deloro fails to provide the third tranche by the deadline, subject to a grace period, the first and second tranches will automatically convert into a 35% equity interest in Petroteq Energy CA, with the Company maintaining an option to repurchase such equity for the principal amount of the first and second tranches for a period of 12 months.
While the Company continues to work towards completing the transaction contemplated by the MOU, there can be no assurance that a viable transaction will result or successfully conclude in a timely manner, or at all. Additional information will be released by the Company as it occurs.
The MOU contains a number of conditions precedent to the obligations of Petroteq Energy CA and Deloro, including, but not limited to, board of director and TSXV acceptance. Unless all such conditions are satisfied or waived by the party for whose benefit such conditions exist, to the extent they may be capable of waiver, the transactions contemplated by the MOU and the Debenture will not proceed. There is no assurance that the conditions will be satisfied or waived on a timely basis, or at all.
In addition, the Petroteq announced that it received subscriptions from two arm’s length investors for 473,000 common shares of the Company for gross proceeds of $0.12 million. The shares will be subject to a four month hold period from the date of issuance. The issuance is subject to final approval of the TSXV. The net proceeds will be used by the company for general corporate purposes and working capital.
In December 2017, Petroteq Inc reported its acquisition of a significant portion of the equipment needed to expand production of its facility. The company previously announced that it had successfully moved the equipment from its 250 bpd facility in Maeser, Utah to its lease site at Asphalt Ridge, Utah.
The company purchased approximately $3 million of equipment at a discounted price of $838,000, which was well below the company’s budgeted purchase price, greatly reducing the capex required by the Company to increase the production capacity of the Facility from 250 bpd to 1,000 bpd.
Petroteq was able to generate revenues for the first time since 2013, although the revenues did not reduce the net loss figures which was recorded at $12.1 million, higher than the $3.3 million loss in 2015.
The statement of financial position reveals that cash levels have dropped drastically to $6129 from $0.8 million in 2015, hence the need for such financing agreements with Deloro. The firm has been able to reduce its long term debt obligation showing that bankruptcy is an unlikely scenario for the firm.
Petroteq requires some more observation but in the short run, its management seems capable of taking the company forward.
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Disclosure: We have no position in PQEFF and have not been compensated for this article.