A micro-cap company making high-tech waves by unlocking expensive American oil sands for bottom-of-the-barrel prices is now the subject of a hostile takeover that’s sending share prices soaring.
Shares of Petroteq Energy Inc (OTCMKTS: PQEFF) saw $6.6 million in trading volume on Tuesday alone after news of a $500-million takeover offer from Viston United Swiss AG.
Investors are now swarming over this one as Viston United Swiss AG’s offer of C$0.74 per share represents a 279% premium over Petroteq’s most recent closing price on the Toronto Stock Exchange (TSX.V.).
The offer was sent to Petroteq on October 25th, and shares have skyrocketed upward since, gaining over 57% on Tuesday, and over 44% over the past five days:
The offer is open until 5:00 pm (Toronto time) on February 7th, 2022, and investors are starting to get why suddenly a little-known micro-cap is stealing the show, with plenty of room to grow, still.
It’s all about the tech.
The Patents Targeted for Takeover
What Viston United Swiss AG wants is the EOR (enhanced oil recovery) tech and the lucrative patents that go along with it.
Traditional oilsands extraction tech uses more water than we can part with and leaves behind toxic tailing ponds. That has rendered oilsands a no-go zone in the climate change atmosphere.
Petroteq claims its system can extract oilsands without leaving behind any toxic tailing ponds and even taking it one step further: It claims to leave behind clean, dry sand that can be used by the shale (fracking) industry or returned to its origins without doing any damage.
Petroteq is unlocking trapped oil in U.S. oilsands for as little as $22 per barrel - and that’s at a time when oil prices are soaring above $84 for WTI and above $85 for Brent.
The micro-cap company has a patented Liquid Extraction System that is a first in North America.
This tech could unlock another American oil treasure… and it’s not in the shale patch, where producers are locked down by shareholders who don’t want to see discipline breached in the name of the first good margins since 2014.
According to Petroteq, its technology extracts over 99% of all hydrocarbons in the oilsands and generates zero greenhouse gases. Nothing resonates more than that in the current clean energy environment combined with an energy supply crunch that has Washington begging OPEC to produce more.
Petroteq’s proprietary technology is called “CORT”, Clean Oil Recovery Technology. And it’s all about remediation.
It can be applied to water-wet deposits and oil-wet deposits, and the output is high-quality oil and clean sand.
It doesn’t use any water, and it doesn’t produce any wastewater.
“It's a closed-loop system, which means that over 95% of the solvents used in the extraction process are recovered, recycled, and reused while roughly 5% remain within the oil that is extracted.”
What the Takeover Bid Is All About
This isn’t about a single oil play. It’s about technology and global licensing fees for anywhere and everywhere that has oilsands to extract. That’s trillions of barrels of oil sands around the world.
- Canada has 100 billion boe of oilsands worth $6 trillion
- Venezuela is home to a huge oilsands reserve
- China has trillions of barrels it’s just waiting to unlock for margins that make sense and climate issues that do, too
- Even the US states of Utah, Colorado, and Wyoming are believed to hold over a trillion barrels of oilsands that no one wants to extract without guarantees that they won’t be harming the environment.
But this is about more than just oilsands.
CORT is currently being used for production from oil sands, but the technology can be used to remediate elsewhere, as well. Again, there’s some serious resonation here that Viston United Swiss AG seems to be picking up on.
This will be a very interesting battle that investors should keep a close eye on between now and February.
Other energy companies looking to capitalize on the global crunch:
Guyana is shaping up to be South America’s and potentially the world’s hottest offshore drilling location, and global energy supermajor ExxonMobil (NYSE:XOM) is one of the few Western energy companies to invest in developing the country’s burgeoning oil industry. By the end of 2020, when global oil companies were tightening their belts and learning to live in a sub-$50 per barrel world Exxon announced it was focusing capital spending on offshore Guyana. That decision is paying off in spades for the global energy supermajor.
Aside from the considerable drilling success and exploration upside to be unlocked in the Stabroek Block, operations are proving to be highly profitable. And it hasn’t stopped there. Exxon is also developing the Payara oilfield in the Stabroek Block, located to the north of Liza one at a water depth of around 2,000 meters. The Payara field is expected to break even at $32 per barrel, highlighting the operations’ considerable profitability in an environment where Brent is selling for over $85 per barrel.
More importantly, a combination of low breakeven prices for the oilfields in the Stabroek Block and a very favorable production sharing agreement with Guyana’s government, with a low royalty rate and the means to recover development costs, makes Guyana a highly profitable jurisdiction for Exxon.
Exxon's close peer, Chevron Corp. (NYSE:CVX), is expected to report earnings on October 29 before market open. Chevron has a consensus EPS forecast for the quarter of $2.20, with reported EPS for the same quarter last year being $0.11. Q3 revenue is expected to clock in at $40.18B vs. $24B a year ago. Chevron Chairman and CEO Michael Wirth recently expressed optimism about the oil price trajectory, saying that he sees "a fair amount of support" after prices spiked above $80 a barrel in recent weeks.
Wirth noted that oil prices have been making strong gains in a seasonally weak October period, which normally sees a lull in demand. "The fact that we've seen prices actually strengthen at a time when they typically weaken, suggests that there's a fair amount of support in the market," he said.
For the long-term outlook, Wirth noted that the rising demand for green energy has made it more difficult to develop new supplies of oil and also increased pressure on companies to return excess cash to shareholders in the form of dividends and buybacks rather than spending it on new exploration and drilling.
ConocoPhillips (NYSE:COP) is expected to report third-quarter earnings on the 2nd of November 2021 before market open. ConocoPhillips has a consensus EPS forecast of $1.46, a huge improvement over $-0.31 reported for last year's corresponding period, while revenue is expected to clock in at $10.81B vs. $4.38B for last year's period. COP has beat earnings estimates for three straight quarters.
A couple of months ago, Bank of America upgraded ConocoPhillips shares to Buy from Neutral with a $67 price target, calling the company a "cash machine" with the potential for accelerated returns.v According to BofA analyst Doug Leggate, ConocoPhillips looks "poised to accelerate cash returns at an earlier and more significant pace than any 'pure-play' E&P or oil major."
Leggate ConocoPhillips shares have pulled back to more attractive levels "but with a different macro outlook from when [Brent] oil peaked close to $70." Best of all, the BofA analyst believes COP is highly exposed to a longer-term oil recovery. But BofA is not the only Wall Street punter that's gushing about ConocoPhillips.
Cheniere Energy (NYSE:LNG), whose terminals on the Gulf Coast allow U.S. gas to be processed and shipped overseas is another promising pick in the fossil fuel realm. . Cheniere Energy, Inc., an energy infrastructure company, engages in the liquefied natural gas (LNG) related businesses in the United States.
With the global shift towards cleaner energy sources in full swing, LNG and natural gas bring the benefits of being the cleanest-burning hydrocarbon, producing half the greenhouse gas emissions and less than one-tenth of the air pollutants of coal. Consequently, LNG demand is expected to grow 3.4% per annum through 2035, with some 100 million metric tons of additional capacity required to meet both demand growth and decline from existing projects. Natural gas use in power generation capacity is expected to grow by an additional 300 GW by 2040, equivalent to 300 million tonnes of LNG, with the majority of that demand coming from Asia, especially China, India, and other Southeast Asia countries. And that’s great news for Cheniere Energy.
That marks natural gas/LNG as the only fossil fuel that will experience any kind of growth over the next two decades. Goldman sees a strong ramp in contracted U.S. LNG export capacity and solid exposure to spot pricing for remaining volume helping Cheniere record free-cash-flow growth of ~50% from 2021 levels. Indeed, LNG could record even stronger growth, with Woodmac saying adoption of carbon capture and storage (CCS) technology could massively boost the sector's green credentials at little extra cost.
Calgary-based oil company, Crescent Point Energy Corp. (NYSE:CPG; TSX:CPG) explores, develops, and produces light and medium crude oil and natural gas reserves in Western Canada and the United States. The company's crude oil and natural gas properties, and related assets are located in the provinces of Saskatchewan, Alberta, British Columbia, and Manitoba.
Crescent Point shares once traded above $45 per share and even paid out a generous dividend, compared to the current $5.15 share price.
Unfortunately, the 2014 oil price meltdown left the company battling plunging cash flows and high debt levels leading to heavy dividend cuts–and the shares have never fully recovered. Even after this year's 120% gain, Crescent Point shares are trading 80% below 2014 levels.
Thankfully, the ongoing oil price rally has allowed Crescent Point to start generating healthy cash flows and make several strategic acquisitions. That said, this stock is likely to remain volatile, and any setbacks in the near future could send the shares crashing again.
Canadian Oil Sands oil company Cenovus Energy (NYSE:CVE; TSX:CVE) develops, produces, and markets crude oil, natural gas liquids, and natural gas in Canada, the United States and the Asia Pacific region. The company operates through Oil Sands, Conventional, and Refining and Marketing segments.
CVE shares have shot to a 52-week high after J.P. Morgan upgraded the shares to Overweight from Neutral with a C$14.50 price target (45% potential upside), citing progress on execution of last year's takeover of Husky Energy (OTCPK:HUSKF). Cenovus shares remain undervalued, and with WTI now above $80/bbl for the first time in four years, the company is in a great position to generate enough free cash flow to buy back its ConocoPhillips' stake.
A subsidiary of Exxon Mobil Corporation, Imperial Oil Limited (NYSE:IMO; TSX:IMO) is an integrated oil company that produces and sells crude oil and natural gas in Canada. As of December 31, 2020, the company Upstream segment had 138 million oil-equivalent barrels of proved undeveloped reserves.
A few months ago, Imperial Oil announced plans to move ahead with the production of renewable diesel at a new complex at its Strathcona refinery in Alberta. The facility is expected to produce ~20K bbl/day of renewable diesel when it is completed in 2024, which the company says could reduce emissions in the Canadian transportation sector by 3M metric tons/year. The company says the renewable diesel will be produced from blue hydrogen, involving natural gas reforming accompanied by carbon capture and storage.
By. Tom Kool
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