The following interview of Mr. William Gibbs was conducted by phone and email on November 28-29. Mr. Gibbs is CEO of American Sands Energy, [AMSE] an unconventional oil producer proposing to extract oil sands in Utah. The company expects to be in production of up to 9,000 barrels of oil per day within 2-3 years.
Please give readers a brief overview of American Sands Energy.
American Sands Energy is a pre-production oil company, focused on cleaner and more efficient extraction of bitumen from oil sands. We control a large, proven resource in Utah and have a proprietary extraction process that is low cost and is water-free. Since our process is water-free, we will not require tailings ponds, making our process far greener and more acceptable to local communities.
Can you talk a little more about the Sunnyside Project?
Our Sunnyside project is unique to the oil and gas industry for two reasons. Foremost, we have a proven (P-50) resource of over 150 million barrels. It is very rare to have an early stage company like AMSE that controls such a large resource. We are fortunate at Sunnyside in that the site has been developed in the early 20th century for road paving in the area and, more recently, was fully explored by Chevron and Amoco. It is the exploration work of these majors that enables us to have a proven resource without spending tens of millions of dollars drilling the deposit. Secondly, our Sunnyside location is as close to infrastructure ready as possible. We are approximately three miles from paved road and 7 miles from a train heading. There is three-phase power already run to the site, and we are also 7 miles from a co-generation facility. Between the large resource, the available infrastructure, and the support of the local community, we believe that our Sunnyside project will be a showcase project for oil-wet oil sands development.
Please expand upon the significance of your new Project Feasibility Study reported in your November 7th press release.
The Project Feasibility Study is the result of many months of work spent preparing the project for the study and, as such, carries great significance to American Sands. There are several areas of particular significance that I'd like to highlight. Having a renowned, independent firm of the quality of FLSmidth performing the study carries great weight with potential financial backers of the project. Their work on both the capex requirements and the production costs validates what we have been saying; that our project is going to be among the lowest cost unconventional projects in the market on both capex and opex. We believe that the feasibility study, combined with permitting which we hope to have in the near future, lays the groundwork for a very successful project.
Does that mean American Sands needs to raise $127 million in 1h 2015?
Yes, American Sands will be looking to raise the project financing necessary to get us into production, $127M of which is the required capex for the Sunnyside project. It's important to note that, on a per barrel basis ($14,111/barrel), this figure is relatively low and we expect that potential project financers will see the value represented in AMSE once permitted.
Why not raise half of what you need and the remainder 6-12 months later when your stock price could be higher?
We believe that, on a project such as ours, you need the total amount at once. It's not like we could produce half the barrels with half the money. It will take $127M to build our facility and we don't want to be halfway there and looking for more money. Raising all the funds really de-risks the project from the investors standpoint; once it's raised, we shouldn't require additional financings and they can wait until we start producing positive cash flow without risk of dilution.
Has American Sands Energy selected any investment banks to help you raise capital?
AMSE has met, and is having ongoing conversations, with several banks. We expect to announce banking relationships around the time of permitting.
How is the permitting process going?
The Division of Oil, Gas & Mining (“DOGM”) in Utah is very proactive and communicative. We received comments from them on our initial application back in June and have worked closely with DOGM to address those comments. We believe that we have addressed most if not all of their concerns and are looking forward to hearing back from them on our resubmitted application this month. We hope to receive very few comments and possibly to get their green light to move forward. Either way, we believe we are much nearer the end of this process than the beginning.
For some, oil sands extraction is known primarily as a dirty, environmentally damaging process. How is your approach different?
To understand the difference in our approach, you have to consider that we are dealing with “oil-wet” oil sands. In Canada, there is a significant amount of water in the sand and the large byproduct of the bitumen extraction is the creation of dirty water tailings ponds. In Utah, we have basically no water in our sands. This not only allows for more efficient processing, but results in us having no byproducts other than clean, dry sand which is reclamation ready. We are underground mining for our bitumen and, when we are finished processing, we will be backfilling the sand into the mine rooms, thus minimizing surface disturbance. In comparison with other oil sands operations, we are very environmentally benign.
Besides the completion of permitting, what are some near and mid-term catalysts for the company?
Permitting is the biggest catalyst for AMSE as all the work done to date has gone into developing a process and a resource, that we could permit and put into production. Once permitted, we have really two more major catalysts which would be financing and commencing production. In and around those, we will have several catalysts that propel us towards our end goal. These would be incremental things such as engaging bankers, uplisting to a larger stock exchange, hiring of plant and operations managers, engaging an EPC contractor, etc. Really, though, once we are funded, there are few major hurdles for the company; it's simply blocking and tackling as we move our project towards production.
Is American Sands Energy speaking with any strategic or cornerstone investors?
As discussed, we are going to need $127M to fund our project. This money can come from an offering of stock, through project financing, or from a strategic investor. The Utah oil sands are attracting increasing attention from the oil and gas industry. We certainly are open to having discussions with a strategic investor who understands the tremendous value we bring not only at our Sunnyside location, but, potentially, globally through our industry leading, water free, process.
Are you pursuing sell-side research coverage?
Assuming that we embark on an equity financing, and an uplisting to a major exchange, sell-side research coverage is certainly something we look forward to receiving.
Can you tell us about your newest Director, Mr. Champion?
Bill Champion has been a tremendous asset to our company in the short amount of time that he has been on the board. His background in mining and project development is excellent; Bill has personally managed significant mining operations in the coal, copper, and diamond industries. With this experience, Bill has helped the Company in developing our mining strategy and, importantly, working on ways to minimize the mining costs. With his help, we hope to be able to further reduce our mining, and therefore, overall per barrel cost estimates as we move closer to production.
Are there any misconceptions investors might have about American Sands Energy that you would like to address?
Unfortunately, American Sands tends to get lumped in with other unconventional oil producers. While we're happy to compare ourselves with the Canadian oil sands industry, or the fracking industry here in the US, it is important to remember that we are very different from both those areas of the oil industry. Our process is environmentally benign, we use no water in extraction and we create no dirty water through production. We are also economical at WTI prices below $50 per barrel, which is much cheaper than either of them. So, while we compare well with the unconventional producers, we look forward to the day when oil-wet oil sands is known as an industry unto itself.
