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American Sands (AMSE) - Unique Play On Oil Sands - Proprietary Technology Provides Cost Advantage

|Includes:American Sands Energy Corp. (AMSE)
  • American Sands OTCPK:AMSE is a development stage company focused on oil sands deposits in Utah. The company has licensed technology to process oil sands without using any water and at a cost well below competitive approaches.
  • AMSE is raising capital to build out a 5,000 barrel per day facility in Eastern Utah to process sands from mining claims that they own or partly own. The company currently has 150 mn barrels of likely reserves that they control and is confident they could add 500 mn barrels of reserves in the area quite easily.
  • The company has licensed technology from Universal Oil Recovery Corp, which has a proprietary solvent and process that allows for a very clean, low energy process that uses no water and results in no emissions or waste products.
  • The technology has been tested on a pilot plant for the past two years and has proven to work efficiently.
  • Once up and running in 2015 the plant will be at break-even at oil prices of $45/barrel (WTI crude is currently at $106 per barrel).
  • The company's unique process mixes a proprietary solvent with the oil sands that separates the oil (in the form of bitumen) from the sand. The sand is then re-heated allowing the solvent to escape and be recycled for reuse.
  • The process results in clean dry sand that can be sold or used in mining operations and bitumen which can be used as is in road paving operations or processed into other products.
  • AMSE's process uses no water and creates no tailings or other waste that requires containment or permits.
  • Management is very experienced in oil sands and in this region in particular
  • Risks include permitting risk, processing plant scale risks, considerable related party transactions and exposure to a commodity market.
  • The company is currently loss making and has a market cap of $10 mn. The company estimates that their total capital requirements are $70 mn to put all of their properties into production. We have estimated the company's value using three popular methods for valuing development stage oil companies. Averaging these three estimates and adjusting for CAPEX and time to reach production provides a value of $58.8 mn or $1.56 per share. We believe American Sands is significantly undervalued and represents a unique way to play alternative energy sources in the US.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: AMSE