Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
3/04/09
AMOR daily
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Phone: (800) 646-6570 Email: info@am-oil.com Website: www.am-oil.com
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MARKET DATA
Symbol AMOR Exchanges OTC OB Current Price $0.31 Price target $0.63 Rating Speculative Buy Outstanding shares 71.4 Million Market Cap. $22.44 Million Average 3M Volume 38,138 Source: Yahoo Finance, Analyst Estimates
Millions
Am Oil Res & Technology, Inc 27240 Turnberry Lane Suite 200 Valencia, CA 91355
Feb
Mar
Company Introduction AM Oil Resources & Technology, Inc. (AMOR) plans to produce, use and market patent-pending technologies for enhancing or restarting oil production from non-producing oil wells that contain known reserves. According to geological studies, as much as 80% of oil in a formation remains in the ground after 30 to 40 years of pumping. AMOR`s innovative steam and gas injection technologies allow as much as 50% of the remaining oil to be recovered from old wells. AMOR plans to apply its proprietary technologies to enhancing production from marginal wells with known reserves. According to the U.S. Department of Energy, one out of every six barrels of crude oil produced in the U.S. comes from a marginal oil well, and over 78% of U.S. oil wells are classified as marginal. There are over 480,000 marginal wells in the United States, which together produce nearly 900 thousand barrels of oil per day, representing 15% of U.S. production. The Company holds the license to the technology and the rights to market the Portable Steam Generator System, the Portable ThermoGas Repressurizing System and the Deep Steam Generator technologies, and is aggressively pursuing worldwide application for its technologies in enhanced oil recovery. These technologies work by reducing the viscosity of oil, allowing it to be pumped more efficiently, and providing the pressure needed to drive oil through ground formations into the well shaft. The Company’s Portable Steam Generator System has been field-tested and is ready for commercialization. AMOR plans to construct 20 units in 2009 and is also preparing a mobile bio-diesel device for commercialization.
Am Oil Res & Technology, Inc (OTCOB: AMOR)
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
The Company, formerly known as Aventerra Exploration, Inc., was founded in 2007 and is headquartered in Valencia, California.
Investment Highlights Business model capitalizing on innovative oil recovery technologies The Company develops and plans to market innovative, environmentally friendly thermal oil recovery technologies that enhance oil production from marginal wells. To date, AMOR has patented and secured the rights to market the Portable Steam Generator, and filed patent applications for its Portable Thermo-Gas Repressurizing System and Deep Steam Generator technologies. Typically, oil companies are able to recover only 20% to 30% of oil reserves in place. AMOR’s technologies may help push the recovery rate to 50% or even 60%. The Company expects to generate revenue from deploying its technology in 2009. Substantial market opportunity There are over 400,000 wells in the United States, or over 78% of the total number of U.S. oil wells, which are classified as marginal. In addition, there are more than 260,000 natural gas stripper wells. Many of these wells are marginally economic and at risk of being prematurely abandoned. From 1994 to 2003, approximately 142,000 marginal oil wells were plugged and abandoned, costing the U.S. more than $3.0 billion in lost oil revenues. Marginal wells produce about 335 million barrels of oil each year. However, these wells hold significant untapped reserves. Specifically, about 50% of oil in the reservoir remains untapped, according to industry reports. A study by the Interstate Oil and Gas Compact Commission indicates that the use of enhanced sec¬ondary and tertiary recovery methods could recover as much as 90 to 200 billion barrels of oil in the United States alone. Mobile steaming provides significant advantages over competing technologies AMOR`s technology utilizes cyclic steaming one well at a time as the method for stimulating oil wells. This is in contrast with conventional steaming methods, which generally involve a central stationary steam plant providing steam to multiple wells. In these cases, a majority of the thermal energy is lost on the way to the reservoir. Because the Company`s trailer‐mounted Portable Steam Generator can be set up close to the well, thermal losses are minimal. This system is capable of delivering hot water and steam at temperatures of to 500‐700o F to well depths of 2,500 feet or less, and has the ability to deliver variable water temperature, pressure and volume as necessary. AMOR’s technologies provide an economic solution for independent oil field operators who lack sufficient capital to construct a conventional steam plant and/or lay pipelines to transport Am Oil Res & Technology, Inc (OTCOB: AMOR)
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
the steam to their marginal wells. First orders to deploy its technology in early 2009 AMOR plans to build a total of 20 patented MT-06 Portable Steam Systems in 2009 in operating capacities of both 10 and 25 million BTU. The Company recently completed pre-engineering and has begun construction of three 10 million BTU portable steam systems, which it plans to deploy in California oil fields. The Company expects to finalize sales of these units in the first six months of 2009. AMOR’s management is confident that sufficient interest exists among domestic and international oil producers to justify 20 units as an attainable near-term sales target. According to management, each MT-06 portable steam system may produce annual revenues of between $2 million and $6 million for the Company. Portable biodiesel technology may create additional revenue stream In addition to its oil recovery technologies, the Company has just completed design drawings for a mobile biodiesel device, which will be capable of producing 2,000 to 3,000 gallons of biodiesel per week. The designed unit fits into a standard truck-trailer and is self sufficient, adaptable for different grades of waste vegetable oil, environmentally friendly, and economical. The device will be used initially to produce fuel to power AMOR’s steam generators, oil field equipment and vehicles. Other applications, which include commercial sales of the bio-diesel device, are also being considered.
Business Model The Company plans to produce and sell portable systems that enhance oil recovery from marginal wells. AMOR`s proprietary technology is able to recover untapped crude oil from older, non-producing oil fields which still contain known reserves. To date, the Company has patented and secured the rights to market its Portable Steam Generator. In addition, patents have been filed on the Portable Thermo-Gas Repressurizing System and the Deep Steam Generator technologies. These technologies can more efficiently harvest the remaining oil from marginally producing stripper wells, recovering up to 60% of the remaining oil. These systems will be marketed to customers worldwide through joint venture opportunities. In 2009, AMOR intends to build 20 MT-06 Portable Steam Systems units. The MT-06 system is a self-contained steam generator unit featuring an innovative drumless boiler, generator set, pumps and water purification system. It is capable of producing variable temperature steam (500 to 750 degrees Fahrenheit) at variable pressures (300 to 2500 psig) and steam qualities of 70 to 85%. The systems are trailer or skid mounted and produce steam which can then be injected down the casing of oil wells to reach oil-producing zones and recover previously unrecoverable oil. These units are easily transported from well to well and can inject steam into the wells for several days or weeks. Management estimates each Portable Steam Systems could produce $2-$6 million in annual revenues for the Company. AMOR plans to build both 25 million and 10 million BTU systems. The Company has completed pre-engineering and commenced construction of three 10 million BTU portable steam systems which it expects to deploy in the California oil fields. The Company expects to finalize sales of these units in the first quarter or second quarter of 2009. In addition to its oil recovery technologies, the Company has just completed design drawings for a mobile biodiesel device. The mobile biodiesel production unit is capable of producing 2,000 to 3,000 gallons of biodiesel per Am Oil Res & Technology, Inc (OTCOB: AMOR)
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
week. The designed unit fits into a standard truck-trailer (dimensions 8 feet wide by 45 feet long by 9.5 feet tall) and is self sufficient, adaptable to different grades of waste vegetable oil, environmentally friendly, and economical. The device will be used initially to produce fuel to power AMOR’s steam generators, oil field equipment and vehicles. Additional applications, including commercializing the bio-diesel device, may be explored. Corporate strategy The Company is developing environmentally friendly and cost-effective technologies for bringing crude oil and natural gas buried underground to the surface more economically. AMOR plans to produce, use, sell, joint venture and license its proprietary technologies to worldwide oil producers and manufacturers of oil field equipment. In addition to marketing its technologies to independent oil producers, the Company plans to acquire, operate, co-venture, and develop its own oil-producing properties. AMOR plans to deploy its portable steam generation and gas repressurization technologies on its own oil properties to create additional revenue streams and cash flow. To increase awareness of its technologies, the Company has adopted a strategy of pursuing air time and print coverage through print and other media channels.
Technology Steam injection is a popular method for extracting heavy oil from marginal oil fields. It is considered an enhanced oil recovery method and is the principal type of thermal stimulation used on oil reservoirs. There are several different forms of the technology; the two best-known variations are Cyclic Steam Stimulation and Steam Flooding. These technologies work by reducing oil viscosity, allowing the oil to be produced more efficiently and providing the pressure needed to drive oil through ground formations into the well shaft. Both technologies are commonly applied to shallow oil reservoirs which and contain viscous crude oil. Steam injection is widely used in the San Joaquin Valley of California, the Lake Maracaibo area of Venezuela and the oil sands of northern Alberta (Canada)1. Cyclic Steam Stimulation Conventional steaming methods involve a central stationary steam plant that provides steam to a number of wells. This method is somewhat inefficient since much of the thermal energy is lost on its way to the reservoir. In contrast, AMOR’s technology utilizes cyclic steaming one well at a time as its method of steaming oil wells. Effective stimulation results from injected heat and pressure which reduce the viscosity of the oil in the reservoir, causing the oil to become more mobile and improving the efficiency of the pumping mechanism. The generator can be set up close to the well, minimizing thermal losses that normally occur with conventional steaming. Cyclic steaming is designed for wells that are less than 2,500 feet in depth. Cyclic Steam Stimulation, also known as the Huff and Puff method, is a three-stage process consisting of injection, soaking and production. The first step involves injecting steam into a well to heat the oil in the surrounding reservoir to a temperature at which oil flows. After it is determined that enough steam has been injected, the steam is left to “soak” for typically not more than a few days. Then, oil is produced out of the same well, at 1. http://en.wikipedia.org/wiki/Steam_injection_(oil_industry)
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
first by natural flow (since the steam injection will have increased the reservoir pressure) and second by artificial lift. Production will decline as the oil cools down, and these steps may be repeated multiple times. Cyclic Steam Stimulation Process
Source: Company presentation
The process can be quite effective, especially in the first few cycles. However, typically only 20% of the Original Oil in Place (OOIP) can be recovered. This is in contrast to steam flooding, in which as much as 50% of the OOIP may be recovered. It is quite common for wells to be treated first through the cyclic steam method for a few cycles before being treated with steam flooding technology. Steam flooding Steam flooding is a displacement process similar to water flooding. Steam is pumped into injection wells, which in some cases are artificially fractured to increase reservoir permeability, and the oil is displaced to production wells. Two mechanisms work together to improve the amount of oil recovered. The first is heating the oil to reduce its viscosity and facilitate the flow of oil through the formation into the producing well. The second mechanism is physical displacement similar to water flooding, in which oil is pushed to the production wells. Water is injected into an upper horizon of the formation then passes downwardly through the formation and back into the production well at a lower horizon in the formation. A mixture of displaced hydrocarbons and injected water are coproduced at the lower horizon of the production well and the hydrocarbons are recovered from the mixture2.
2. www.britannica.com/EBchecked/topic/564504/steam-flooding
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
Injection of thermal gases The injection of thermal gases works much like steam injection. The primary difference is that the combustion gases do not condense back into water, as does steam. Carbon dioxide, carbon monoxide, and nitrogen in the gases aid in the recovery of crude oil. Thermal gases may work better in formations with high clay content or where steam is not effective or in formations where water is not readily available. Injection gas technology may be used alone or in conjunction with steam technology to improve oil production.
Products MT-06-10 Portable Steam Generator The MT-06-10 Portable Steam Generator is a self-contained, fully mobile steam generator unit. The MT-06-10 system includes an electronic generator, high pressure water pump, a drumless hot water/steam generator, water system, low emission 5 million BTU per hour burner, computerized control panel and hot water generator system. The unit is mobile and can be easily moved from well to well. The system is capable of delivering hot water and steam at temperatures of up to 5000 F to well depths of 2,500 feet or less. The MT-06-10 is powered by propane to heat water pumped from a groundwater aquifer. The system can deliver variable water temperature, pressure and volume. The American Society of Mechanical Engineers (ASME) certified the MT-06-10 conforms with ASME standards relating to the construction of steam boilers and/or generators. What distinguishes this technology from other steam generators is the fact that water remains in a liquid state throughout the heating phase, and flashing water into steam occurs outside the steam generator. Although fresh water is the preferred choice, the device can also deliver treated brackish water (brine) or even sea water into an oil formation. The system is powered by propane. Propane is the fuel of choice because of its mobility and availability; however other gases may also be used.
MT-06-10 Portable Steam Generator (MT-06)
Source: Company presentation
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
Thermal Gas Injection (MT-08) The Thermal Gas Injection MT-08 is a portable thermal gas injector designed to inject inert flue gas directly into an oil formation to repressurize the formation and reduce oil viscosity, thereby increasing production. The MT-08 can work alone or in conjunction with other technologies to improve oil production. Injecting thermal gases into a formation acts much like steam does to stimulate the recovery of oil, except that gases will not condense into water. In addition, the carbon dioxide, carbon monoxide, and nitrogen in the flue gases have properties that aid in the oil recovery process. The MT-08 will provide the Company with the ability to service wells in which steam technology may not be cost-effective. This includes formations with high clay content or where water is not readily available. The MT-08 can deliver up to 1.3 million cubic feet of hot inert gas daily into an oil formation. Thermal Gas Injection (MT-08)
Source: Company presentation
Industry Outlook U.S. marginal oil and gas resources Hundreds of thousands of small oil wells across the United States, also known as stripper or marginal wells, are considered part of the solution to America’s dependency on foreign oil. Low production gas and oil wells are classified as marginal or stripper wells when they produce less than 60 cubic feet of natural gas or 10 barrels of oil per day. The United States is by far the largest producer of marginal oil and gas resources. According to the Stripper Well Consortium, about 80% of the roughly 500,000 producing oil wells in the United States are classified as stripper wells. Despite their small individual volumes, these resources add up. Between 1993 and 2003, about 142,000 marginal oil wells were abandoned, costing the nation more than $3.0 billion in lost economic output and leaving about 150 million barrels of crude oil in the ground . In the U.S., about one of every six barrels of crude oil produced comes from a marginal oil well. Domestic stripper wells produce, in aggregate, nearly one million barrels of oil per day . According to the Energy Information Administra¬tion, the United States consumed 20.7 mil¬lion barrels of crude oil per day during 2007. The report indicates that almost 4% of daily consumption is supplied by domestically pro¬ducing marginal wells. Combined, Am Oil Res & Technology, Inc (OTCOB: AMOR)
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
these marginal wells produced more than 291 million barrels of oil in 2007 – almost 28% of total U.S. production in the lower 48 states, according to The Interstate Oil and Gas Compact Commission.
Industry Outlook U.S. marginal oil and gas resources Hundreds of thousands of small oil wells across the United States, also known as stripper or marginal wells, are considered part of the solution to America’s dependency on foreign oil. Low production gas and oil wells are classified as marginal or stripper wells when they produce less than 60 cubic feet of natural gas or 10 barrels of oil per day. The United States is by far the largest producer of marginal oil and gas resources. According to the Stripper Well Consortium, about 80% of the roughly 500,000 producing oil wells in the United States are classified as stripper wells. Despite their small individual volumes, these resources add up. Between 1993 and 2003, about 142,000 marginal oil wells were abandoned, costing the nation more than $3.0 billion in lost economic output and leaving about 150 million barrels of crude oil in the ground3. In the U.S., about one of every six barrels of crude oil produced comes from a marginal oil well. Domestic stripper wells produce, in aggregate, nearly one million barrels of oil per day4. According to the Energy Information Administra¬tion, the United States consumed 20.7 mil¬lion barrels of crude oil per day during 2007. The report indicates that almost 4% of daily consumption is supplied by domestically pro¬ducing marginal wells. Combined, these marginal wells produced more than 291 million barrels of oil in 2007 – almost 28% of total U.S. production in the lower 48 states, according to The Interstate Oil and Gas Compact Commission. U.S. Marginal Oil State
No. Marginal Oil Wells Wells
2007 Production from Marginal Oil Wells (MMBbls)
California Colorado Kansas Louisiana Mississippi New Mexico North Dakota Oklahoma Texas Utah Wyoming SUBTOTAL ALL OTHERS TOTAL
29,460 6,866 17,020 19,547 1,302 14,975 1,471 45,892 130,106 1,412 12,572 280,623 115,914 396,537
39.28 7.17 14.54 19.93 1.19 14.83 2.37 27.91 119.68 2.27 8.26 257.45 33.62 291.07
2007 Oil Wells Abandonments 2,013 51 749 514 43 331 7 747 4,781 83 238 9,557 2,082 11,639
2007 Average Daily Production Per Well BOPD 3.7 2.9 2.3 2.8 2.5 2.7 4.4 1.7 2.5 4.4 1.8 2.9 0.8 2.0
Source: The Interstate Oil and Gas Compact Commission (http://iogcc.publishpath.com)
3. www.sciencedaily.com/releases/2005/02/050210004457.htm 4. www.netl.doe.gov/technologies/oil-gas/EP_Technologies/ImprovedRecovery/StripperWellTech/StripperWell.html
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
Although the situation is less severe for natural gas, there is growing concern about the premature abandonment of gas stripper wells. At present, there are more than 300,000 natural gas stripper wells in the lower 48 states. Together they account for over 1.4 trillion cubic feet of natural gas, or about 7% of the natural gas produced in the lower 48 states. Stripper wells are more common in older oil and gas producing regions, most notably in Appalachia, Texas and Oklahoma. According to EIA reports, consumption of natural gas in the United States during 2007 was slightly more than 23 trillion cubic feet (Tcf), about 70 % of which was produced domestically. Domestic marÂŹginal gas wells supplied about 7.7% of U.S. consumption. The latest available data indicate there were approximately 322,000 marginal gas wells in 2007 which together produced more than 1.763 Tcf of natural gas that year, or about 11% of total U.S. production in the lower 48 states5. U.S. Marginal Gas State
No. Marginal Gas Wells Wells
2007 Production from Marginal Gas Wells (BCF)
California Colorado Kansas Louisiana Mississippi New Mexico North Dakota Oklahoma Texas Utah Wyoming SUBTOTAL ALL OTHERS TOTAL
618 10,740 15,110 10,226 1,123 12,267 135 22,038 45,119 1,797 29,614 148,787 173,373 322,160
5.08 102.32 141.87 44.41 9.73 105.34 1.18 195.51 373.72 17.78 103.85 1,101 662.79 1,763
2007 Gas Wells Abandonments 106 53 136 277 48 244 11 343 249 42 468 1,977 1,354 3,331
2007 Average Daily Production Per Well MCFD 22.6 26.1 25.7 11.9 23.7 23.5 24.0 24.3 22.7 27.1 9.6 21.9 10.5 15.0
Source: The Interstate Oil and Gas Compact Commission (http://iogcc.publishpath.com)
The abandonment of marginal oil wells reduced production by 10.14 million barrels in 2007 and cut domestic oil revenues by nearly $650 million. Similarly, the abandonment of marginal gas wells reduced natural gas volume by nearly 20 billion cubic feet and reduced domestic natural gas revenues by more than $117 million. If all of these marginal oil and gas wells were abandoned, production would decline by nearly 300 million barrels of oil and 1.763 trillion cubic feet of gas, and revenues totaling $18.5 billion and $12 billion, respectively, would be eliminated. Several states have enacted incentive programs to encourage production from marginal wells. The National Petroleum Council recommended in its 2007 Global Oil and Gas Study that enhanced oil recovery be promoted by supporting regulatory streamlining and research and development programs for marginal wells and expediting permitting of Enhanced Oil Recovery (EOR) projects, pipelines and associated infra structure. The study indicates the potential impact from enhanced recovery programs could be an additional 90 to 200 billion barrels of recoverable oil in the United States alone6. 7. www.energy.psu.edu/swc/news/DOE%20-%20Marginal.pdf 6. http://iogcc.publishpath.com/Websites/iogcc/pdfs/2008-Marginal-Well-Report.pdf
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
Oil demand Through 2030, traditional fossil fuels will remain the most important sources of energy. Oil use will grow at 1.4%/year, moderated somewhat by increasing efficiency, particularly in transportation. At this projected growth rate, oil and gas combined will represent close to 60% of overall energy use7. Natural gas also remains an important fuel for energy generation worldwide, because it is more efficient and less carbon intensive than other fossil fuels. Oil consumption growth is concentrated in countries outside of the OECD, particularly China, the Middle East, and Latin America. In the U.S., record prices and the slumping economy reduced petroleum products consumption by about 1.2 million barrels per day, or 5.7%, in 2008. GDP is expected to decline 2% in 2009 and reduce domestic energy consumption by around 2% or nearly 400,000 barrels per day. An economic recovery in 2010 is projected to boost total petroleum products consumption by 1.1% or about 220,000 barrels per day.
Oil demand, millions of barrels per day
Total OECD North America Europe Other Total non-OECD Former Soviet Union China Other Asia Other non-OECD Overall total
2006
2007
2008
2009E
49.6 23.3 15.7 10.6 35.4 4.2 7.2 8.8 15.2 85.0
49.1 23.4 15.3 10.4 36.8 4.2 7.6 9.1 15.9 85.9
47.7 22.1 15.2 10.4 38.2 4.3 8.0 9.2 16.7 85.9
46.4 21.7 14.7 10.0 38.7 4.3 8.3 9.1 17.0 85.1
2010E 46.4 22.0 14.7 9.7 39.6 4.3 8.5 9.1 17.7 86.0
Source: www.eia.doe.gov/emeu/steo/pub/3tab.html
Oil supply Following skyrocketing oil prices in the first half of 2008, OPEC pushed its oil production to the highest level in its 48-year history in June 2008, even as demand was falling in the U.S. and Europe. Demand declines caused by the economic slowdown played a critical role in the collapse of oil prices. OPEC agreed in November 2008 to cut oil production by 1.5 million barrels per day. Following this earlier cut, OPEC announced in December 2008 its intent to further reduce oil production by 2.2 million barrels per day beginning in January 2009. OPEC crude oil production is expected to fall to 29.1 million barrels per day in the first quarter of 2009, representing the lowest level in five years. OPEC crude oil production is expected to average 29.4 million barrels per day in 2009 and 30.1 million barrels per day in 20108.
7. www.redorbit.com/news/science/384897/exxonmobil_energy_demand_to_increase_50_by_2030/ 8. www.eia.doe.gov/emeu/steo/pub/
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
Oil: supply, million barrels per day
Total Non-OPEC North America Other OECD Former Soviet Union China Others OPEC Overall total
2006
2007
2008
2009E
49.8 15.3 6.3 12.1 3.8 12.3 34.7 84.5
50.0 15.4 6.1 12.6 3.9 12.0 34.4 84.4
49.7 15.0 5.8 12.5 3.0 13.4 35.8 85.5
49.9 15.2 5.5 12.6 4.0 12.6 35.0 84.9
2010E 50.0 15.2 5.2 12.8 4.0 12.8 36.6 86.6
Source: www.eia.doe.gov/emeu/steo/pub/3tab.html
In 2008, U.S. crude oil production averaged 4.95 million barrels per day, down by about 110,000 barrels per day from 2007. In 2009, domestic output is projected to increase by over 400,000 barrels to average around 5.35 million barrels per day, the first production increase since 1991. U.S. oil supply and consumption, 2004-2010 (million barrels per day)
Source: http://tonto.eia.doe.gov
Oil prices Continued low surplus production capacity, weak petroleum inventories, and strong demand worldwide have all contributed to rising crude oil prices in recent years. West Texas Intermediate (WTI) began 2008 priced at around $100 a barrel and jumped to record levels of $147 per barrel in July 2008 before dropping to $31 per barrels on December 22, its lowest level in more than five years. Crude oil prices rose to nearly $50 per barrel in early January, supported by cold weather, fighting in Gaza and the Russian/Ukrainian gas crisis. Many analysts expect demand to fall further and inventories to increase in the coming months. Declining demand, Am Oil Res & Technology, Inc (OTCOB: AMOR)
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
in combination with rising inventories, could put further downward pressure on crude oil prices. On the other hand, OPEC supply cuts aimed at bolstering crude prices should begin to take effect. Analysts expect that, at some point, OPEC production cuts will help to rebalance the market.
Source: www.wtrg.com/daily/crudeoilprice.html
Oil prices have become increasingly volatile and more difficult to predict. Crude oil prices are expected to average between $50 and $75 per barrel over the next several months. Overall, WTI prices are expected to average $43.25 per barrel in 2009 and $54.50 per barrel in 2010, according to EIA.
Financial Record Outlook The Company has recently emerged as a developer and marketer of technologies that enhance oil recovery from margina wells. As a result, AMOR’s historical results are not indicative of the Company’s future performance. The Company holds the license and rights to market its Portable Steam Generator System, Portable ThermoGas Repressurizing System and Deep Steam Generator technologies, and is aggressively pursuing worldwide applications for its technologies in enhanced oil recovery. These technologies, used together or separately, are designed to recover more crude oil from marginal wells. Current oil production technologies leave two barrels of oil in the ground for every barrel produced. In the history of the domestic oil industry, some 160 billion barrels of oil have been produced but more than 330 billion barrels of oil have been left in the ground. The Portable Steam Generator (MT-06), is designed to stimulate production from oil wells with known Am Oil Res & Technology, Inc (OTCOB: AMOR)
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
reserves. This trailer-mounted system is an attractive, cost-effective alternative to cumbersome and unwieldy stationary steam systems. AMOR’s portable system eliminates the need to lay pipelines to bring steam to the wells since the MT-06 unit can be set up close to the well. Thermal loss is minimized since the steam travels shorter distances. Steaming oil wells is an effective method for enhancing recovery from marginally producing wells. However, the process is cost prohibitive for many smaller producers. AMOR’s technology provides an economic solution for independent operators who can’t afford to invest in conventional steaming equipment. In addition, the Company’s technology can be used as an investigative tool to assess potential for a full scale steaming program on a reservoir. In January 2009, AMOR announced that it has completed pre-engineering and begun construction of three portable steam systems. The units, targeted for California’s oil fields, are expected to produce revenues for the Company in the first six months of 2009. The Company plans to build 20 MT-06 Portable Steam Systems in 2009 and form partnerships with oil producers to deploy the technology. According to management, each Portable Steam Systems may produce annual revenues of between $2 million and$6 million for the Company. We forecast AMOR will produce revenues of approximately $20 million in 2009 and $50 million in 2010. Comparative Analysis The Company competes in the oil and gas equipment and services industry. Industry peers are currently trading at 0.77 times median forward Price/Sales multiples and 9.1 times median forward Price/Earnings multiples. Peer Comparison Company Name 3-Mar-09 Exterran Holdings, Inc. BJ Services Company Baker Hughes Inc. Smith International Inc. Halliburton Company Schlumberger Limited Median AM Oil Resources & Technology, Inc.
P/E Ticker Price per Mrkt. Cap. symbol Share, $ $ Mn 2009 2010 EXH BJS BHI SII HAL SLB
16.06 9.49 28.64 20.95 16.21 38.29
990 2,770 8,760 4,590 14,560 45,750
AMOR
0.32
23.2
7.11 7.97 9.68 9.35 9.37 12.94 9.36
8.03 9.30 9.39 8.84 8.44 13.07 9.07
P/S 2009
2010
0.31 0.60 0.91 0.47 0.96 1.97 0.75
0.32 0.64 0.90 0.45 0.90 1.94 0.77
Source: Yahoo Finance
We believe the Company should trade at the higher end of the peer group valuation spectrum, given its emerging status and the competitive advantages of its technology, which include portability and low cost. We value AMOR at a0.9 time forward Price/Sales multiple. Accordingly, we are initiating coverage of AM Oil Resources & Technology Inc. with a Speculative Buy rating and $0.63 price target. However, we strongly advise investors to consider the risk factors mentioned below since a Company at this early development stage faces Am Oil Res & Technology, Inc (OTCOB: AMOR)
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
many challenges in attaining its sales targets.
Risk Factors Limited operating history AMOR is a development-stage company with an unproven business model. The Company has begun construction of three 10 million BTU portable steam systems and plans to further develop its technologies. Despite an optimistic management outlook and the advantages of the Company’s technology, there is no guarantee that AMOR will be able to drive product sales and expand its business model on acceptable terms. Declining oil consumption due to worsening global economy The global economic downturn and a weak oil consumption outlook are keeping the world oil market well supplied, despite reduced OPEC production. U.S. consumption declined by almost 1.2 million barrels per day in 2008, the largest annual decline since 1980. U.S. petroleum products consumption is projected to fall by an additional 460,000 barrels per day in 2009, while world oil consumption is projected to fall by 1.2 million barrels per day. Patents pending on two technologies The Company has patent applications pending on two of its oil recovery technologies. There is no guarantee that patents will be obtained and the possibility exists that another company has already patented a similar technology. Threat from alternative technologies There are a number of alternative technologies that address unrecovered oil from old wells and enhanced oil production. The list of technologies and methods includes: infill drilling, gas injection, chemical injection, fire flooding, oil spill recovery using surface-treated iron powder, steam-assisted gravity drainage, the rapid thermal process, sand management, submersible pumps and others. If the technologies developed by AMOR fails to perform as well or better than these alternative technologies, the Company’s business prospects diminish. Need for additional capital The Company plans to build 20 MT-06 Portable Steam Systems in 2009 and further develop and test its Thermal Gas MT‐08 and Deep Steam MT‐09 technologies. In addition, AMOR is developing a mobile bio-diesel device. The Company will likely require significant additional capital to continue research and development and begin commercializing its technologies. If AMOR fails to raise the needed capital, implementation of its business plan could stall.
Am Oil Res & Technology, Inc (OTCOB: AMOR)
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
Management Team Keith A. Johnson President and CEO
Since January 2005, Keith Johnson has been director and co-founder of Integrity International Development Corporation, Inc. in Phelan, California. Integrity International assists at-risk youths and others through substance abuse education and job training programs. Since August 2005, Mr. Johnson has also worked as a broker for Desert Tortoise Realty in Phelan, California. From 2003 to 2005, Mr. Johnson worked with Dr. Robert P. Iacono, a neurosurgeon at Loma University Medical Center in California, to write a book about Dr. Iacono’s first 25 years of medical practice. He also assisted in the writing of several other books. From 1996 to 2002, Mr. Johnson served as executive vice president of marketing for Green Aero Energy Ltd. in Loma Linda, California. Prior to 1996, Mr. Johnson spent more than 20 years with Southern California Gas Company, now known as Sempra Energy, where his primary responsibilities were transmission and marketing management.
Bromely Howser Consultant
Mr. Howser has over 30 years experience in manufacturing and is considered an Engineering Master Craftsman (Millwright) with expertise in numerous engineering operations and construction trades. Mr. Howser is President of South Pacific Engineering, a full service fabrication firm located in Redlands, California. His company has expertise in machining, welding, fabrication, electrical, assembly, CNC, programming, design and engineering. His firm also served as the lead assembly firm in building earlier versions of the Portable Steam Generator and was instrumental in the fabrication and assembly of the initial MT-06 units.
Michael Freeberg Director
Since April 2003, Mr.Freeberg has been a broker and branch owner for Oceanfront Mortgage & Realty in San Diego, California. From March 2002 to April 2003, Mr. Freeberg was a financial analyst and director of sales for American Graphics Inc. in San Diego, California. At American Graphics, he supervised a sales force of up to 25 employees and developed and coordinated in excess of $3.0 million of new business in one year while structuring American Graphics for efficient growth and the introduction of new products.
Greg Brown Director
Mr. Brown has an extensive background in criminal investigations and has actively investigated over 100 cases involving money and investments. Since August 1997, Mr. Brown has been a police officer in San Diego County, California. His responsibilities have included gathering, recording and analyzing intelligence to achieve community safety and crime reduction objectives; preparing and presenting crime reports and case files to senior officers; and building and maintaining community relations, including advice and support in areas such as crime prevention and personal safety.
Brenda Hammond CPA, MBA
Ms. Hammond has over 20 years experience consulting to various businesses in the areas of finance, accounting and management. She presently serves as CEO of Positive Results Management, an independent firm specializing in business management of small and large businesses. Ms. Hammond’s professional, corporate finance experience includes positions with the following companies: Anderson & Company LLP, Quotron Systems, Inc - a Division of Citicorp (Senior Financial Accountant); Luz Partnership Managementa solar energy company (Controller, Consultant); Countrywide Home Loans- a real-estate firm (Controller, Financial Analysis and Controller-Consumer Markets & Correspondent Lending Division) and Interfirst Capital Corporation-(Controller). She holds a MBA Finance from Loyola Marymount University and is an executive member of several national associations, including the American Institute of Certified Public Accountants, the Accounting Career Awareness Program, National Association of Black Accountants and Association of Latino Professionals in Finance and Accounting.
Am Oil Res & Technology, Inc (OTCOB: AMOR)
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Analyst: Victor Sula, Ph.D. Report Update March 5th, 2009
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This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled companies. BlueWave Advisors, LLC, and/or its affiliated will hold, buy, and sell securities in the companies profiled. When compensated in shares, all readers should be aware that is our policy to liquidate all shares immediately. We reserve the right to buy or sell the shares of any the companies mentioned in any materials we produce at any time. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled companies. BeaconEquity.com is a wholly owned entity of BlueWave Advisors, LLC, which has been compensated thirty five thousand dollars from 546 Holdings Ltd., a shareholder of AMOR, as a marketing budget to manage a comprehensive investor awareness program including the creation and distribution of this report as well as other investor relations efforts. Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Subscribers are cautioned not to place undue reliance upon these forward looking statements. These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated. Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC. You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements. We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable. To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information). We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org. All decisions are made solely by the analyst and independent of outside parties or influence. I, Victor Sula, Ph.D, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report. Victor Sula, Ph.D. - Senior Analyst Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Productivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.
Am Oil Res & Technology, Inc (OTCOB: AMOR)
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