I've been invested with IVAN for the past several weeks and was fortunate enough to see the breakout from the bottom and get on board. That said, when I was digging into the company, I continued to have trouble understanding why there were no partners yet found for the IVAN's HTL process. While I'm not a petro engineer, it all seems to make sense -- clean up the heavy oil as close to upstream as possible. The economics looked decent, environmental concerns seem to be addressed, and a reputable test regimen has been conducted. The process has been discussed within industry circles and I have to believe that Ivanhoe mgmt has had meetings with the usual suspects. So, why no takers yet?
This weekend I was reading an article in Bloomberg BusinessWeek discussing the Keystone XL pipeline -- designed to deliver heavy crude from Canada down to the Gulf Coast refiners -- kind of taking the wind out of the sales of Venezuela -- who says politics and business do not mix! Anyway, the article indicated that since those refineries had spent over $20B in upgrades for cokers etc. to handle the heavy crude -- they actually had little interest in getting more light or syn crude. The economics were more favorable for them to handle the heavy goo. Sooo -- does anyone believe that this may be why IVAN has had such difficulty in attracting joint partners to commercialize their HTL process? Is the problem with embracing HTL caused by a miss-match in refinery capability? And since the US has hot built a new refinery in more thant 30 yrs -- there seems little chance of this changing in the near term.
Appreciate comments from serious investors... and;
All the very best,
I think that there can be speculation on why HTL has not been commercialized and many have posted here. My take is the price of the heavy crude vs WTI made it more profitable to sell it in its heavy state rather than pay to refine it. Simply truck it out and sell it was their motto. Why pay to refine when one does not need to. However, the premium for the heavy crude in its raw form has been dropping and the light crude is rising, thus creates a sweet spot for IVAN. The whole concept with IVAN is simple. They purchased under priced lands with heavy crude selling at much lower price then sweet oil then they apply HTL and sell the crude for the same price as sweet but they call it synthetic. The price change of heavy oil in the downward direction is why IVAN initially filed for Tamarack with the option to do HTL and then told us that they might not use the HTL option and now have changed back to wanting to use HTL. the price of the heavy went up changing the economics to simply process the heavy as is a few years back and now the price of heavy has come down making HTL more attractive. I think with the shale oil coming into play that the HTL process will be more attractive to heavy oil players. I also think off shore riggers would be able to use this on a small scale to process the heavy oil they run into in the ocean. The main point here is for IVAN to find heavy oil fields that they can get an ownership advantage in (e.g. buy it low sell the oil high) much like they did in Tamarack. They bought it for a couple hundred million and the oil is worth several billion. They say they need about 1 billion over the project to finance the construction. So, they should make their investment 10 times over on just Tamarack. In Ecuador the same thing applies. With the price exchange they have and if they produce 100K barrels of oil a day they essentially get paid for 50K of those barrels with the price adjustment for today's dollars. They will make more in Ecuador then they will make in Tamarak once things get running, simply due to scale. I am holding for one reason and that is the cash flow that is due to come. The market for oil is robust and IVAN has oil. Once they realize production then the cash will come and when that happens IVAN will no longer be a penny stock. I don't care much for the negative spin on this board. To all of that, one needs to ask one question how many companies have an approved oil project, money in the bank, no debt and a patented process, an owner with 30+% personal stake in shares, a world class engineering team and most important hope. Yes its been more than 5 years for me to get to this point but they have gotten this far and to get past the ERCB is no small accomplishment. Thus, I have faith that the cash will come and once that does the opportunity cost of owning all these years will be realized.
Sentiment: Strong Buy
Thanks so very much for your comprehensive reply! It's great when these boards do what they are intended to do -- people helping make more informed investment decisions.
It response makes sense and I'll start learning more about the heavy to light spread. But, since I've been close to the Bakken oil shale situation, it would seem that more light product will put downward pressure on the heavy stuff. So, the since the cost of heavy takeaway is a constant -- when the differential for HTL more than makes overtakes the takeaway costs -- heavy oil holders will take a harder look at HTL.
Agree on the Tamarack economics -- wonder if the $130MM Ivanhoe has is enough to start commercial development -- we're still looking at probably 2 years before cash flow?
All the very best,
You asked "So, why no takers yet?"
It's because the "takers" do not want to waste time talking about a project that doesn't have regulatory approval, since that may take an indefinite time and presents a risk. The negotiations with potential JV partners begins an earnest TODAY, after completeness of application is received.
Thanks for your comments. I understand that Ivanhoe has gone through several reiterations of their application and that today's completeness approval marks a significant milestone. This is pretty much why I invested -- believing that the Tamarack approval process was coming to fruition. Had we not received completeness -- I would have bailed. But my question is if I was able to make a guess that the approval process was in order, why would not other investors also come to the same conclusion -- especially those that are close to the Canadian oil sands projects? So, it is nice to think that the action really takes off today -- but isn't the horse already out of the barn? But hope your're right!
All the very best,
Its because of 2 things,
1 Ivan is a SCAM
2 No one needs to Joint Venture with Ivan because everyone else already has their own oil sands equipment.
Conclusion: Sell IVAN (A Junk Stock Scam) and buy real companies.
Sentiment: Strong Sell
His main I'd is sonofzooloo88" As for HTL, it is not yet cost effective but will be at $100 bbl. Ivan will be in position to benefit and there is no rush to make deals yet, though there is more interest than our troll basher wants you to know. Do some mor research and you will see.