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Family Office Perspective: Convergence Of Bullish Rallies In Shipping & Infrastructure To Generate Alpha

|About: Turner Valley Oil & Gas, Inc. (TVOG), Includes: DRYS, GLBS, NAT, TOO
Summary

Baltic Dry Index (BDI) is on the rise.

Infrastructure boom is leading upswing.

PrimeStar Bitumen looks to take advantage of surge.

Hello friends, business colleagues, and investors. 

As we approach winter and Christmas nears, I am always struck by how many packages, letters, and other items are transported from one person or business to another. The amount is staggering and for companies like the USPS, Fed Ex, and UPS, it is remarkable how well they handle the rush. Everything for the most part gets right where it is supposed to be, and exactly when it is supposed to be there. It brings to mind a market that PrimeStar Bitumen Inc., (formerly known as Turner Valley Oil & Gas), of which I am CEO, is getting into. And that is very simply...shipping. To be more specific, PSB is acquiring a fleet of large bitumen tanker ships, along with manufacturing and storage facilities, to take advantage or President Trump’s $1 Trillion infrastructure build up initiative. I wrote previously about how the infrastructure build up could be such a benefit for PrimeStar here, and now I want to talk about how getting into the actual owning of a large fleet of bitumen shipping tankers will create revenue and profits for our company.

Increasing navigation in the Baltic Dry Index

Due to a variety of factors recently, the Baltic Dry Index (BDI) has been moving to its highest point in nearly 3 years. A number of factors are contributing to this rise including such events as:

  • A rally in industrial commodities as companies and countries prepare for the infrastructure expansion.
  • A rise in base metal prices.
  • The US economy improving.
  • Demand causing higher prices also reflects an improvement in the global economy.

The Baltic Dry Index (BDI) is a measure of freight rates for shipping dry bulk commodities around the world on ocean-going vessels of certain sizes. While the BDI does not represent the entire freight market including the bitumen industry, it is the primary benchmark instrument when it comes to measuring demand for shipping industrial raw materials from points of production to consumption.

The level of the Baltic Dry Index is often a function of economic expansion or contraction around the world. During periods of economic growth, infrastructure building tends to increase demand for the raw materials that are basic building blocks for construction. At these times, production of essential industrial commodities increases to meet accelerating demand. For example, the flow of commodities like copper from major production areas like Chile to consumption hubs like the Far East increases. When the business activity accelerates, the demand for shipping increases and freight rates move to the upside. During times when economies are contracting, demand for commodities tends to decline which causes production to slow. Economic contraction decreases the demand for raw materials and freight rates tend to move to the downside as a result. Over recent months we have witnessed rising industrial commodities prices, and freight rates have been increasing, most recently to the highest level since 2014.

A rally in industrial commodities

Why have shipping prices been rising and shipping activity been increasing? In recent months we have seen the prices of many industrial commodities soar, and while some have come back down to earth, others remain close to or at highs. It is likely that China had been buying raw materials in the lead up to their Party Congress that took place on starting on Oct. 18. As many know, China is actually the world's leading commodities consumer due to their huge infrastructure build up, and when China buys, prices tend to move to the upside. We have seen rallies in almost all industrial raw materials over recent months.

As a result, many of the bigger public shipping companies have begun to make major moves to the upside. Shipping stocks like DryShips Inc. (NASDAQ:DRYS), Globus Maritime (NASDAQ:GLBS), Nordic American Tankers (NYSE:NAT), and Teekay Offshore Partners (NYSE:TOO) have all been trending higher in recent weeks. In fact DRYS, which has always been a favorite of the short term trading crowd, has doubled the last month. 

Another big factor contributing to the rise in shipping activity and something that affects Turner directly, is the fact that the United States of America is about to embark on a large infrastructure overhaul of its own. President Trump has pledged to rebuild, restore, and replace much of America’s bridges, roads, and general overall infrastructure. To do this, it will take bitumen, or as most people know it, asphalt, to do this. And lots of it. And it will take ships sailing from around the world to supply this demand. 

Family Office Perspective: The Portfolio Company

This all ties into what we are doing at PrimeStar Bitumen, pending name change (OTC:TVOG), and I thought today, as CEO, would be a good day to talk about what our plans and goals are. We have been involved for the past several months, working in conjunction with our investment bank Network 1 Financial Securities Inc. (#Network 1 Financial), in bringing the assets of a bitumen shipping company into PSB. This would involve bringing large tanker ships that actually ship product around the world into TVOG’s fold.

I am happy to announce that yesterday, December 11 2017, we did in fact close on this historic event in company history. Infrastructure Closing Phase 1 of our initial infrastructure acquisition is now complete with 2 bitumen shipping vessels and a large financial commitment to fund asset acquisition.

That financial commitment was the result of a very positive response to our recently announced $25 Million preferred stock placement with our investment bank Network 1. In fact, so positive that there are now plans for an infrastructure investment expansion on top of this initial shipping acquisition. In June, we announced updated company guidance for our first acquisition of (5) bitumen shipping vessels with an estimated run rate of over $39,000,000 in annual revenue and $6,000,000 in EBITDA.  We are already entering the shipping markets at historic lows and have developed a plan that allows us to purchase these ships for pennies on the dollar. This opens the door for an aggressive growth strategy to expand from the initial 5 bitumen tankers to up to 30 tanker ships in the next 12-18 months.

Furthermore, now that the initial deal has been finalized, PSB, working in conjunction with Network 1 and an expert team of advisors, will begin targeting the purchasing/leasing of import/export facilities, asphalt refineries, distribution facilities, and related businesses. This will give the company inroads into practically the entire supply side chain for bitumen products. We can control everything from the cost of making the bitumen, how it is stored, whom to sell it to, and how, when, and where to deliver it. And as a result, we look for revenue and profits to rise in turn as we grow as a company and the infrastructure expansion takes hold. 

We are very enthusiastic about the prospects for PrimeStar. With the coming $1 Trillion spending bill and our entering the infrastructure market with a comprehensive plan in place, we believe we are in the perfect place, at the perfect time. Please stay tuned for more information as events develop. Existing shareholders and prospective investors can sign up to receive company news, announcements, and investor updates at http://bitumentankers.com/signup/.

Thank you,

Steve Helm, CEO

Helm Family Office / PrimeStar Bitumen Inc.

Phone: 1-713-588-9453

Email: ir@PrimeStarBitumen.com

Corporate Website: Bitumentankers.com

Address: 3270 Sul Ross, Houston, TX 77098

Disclosure: I am/we are long TVOG.

Additional disclosure: I am the current CEO of PrimeStar Bitumen. (TVOG)