Thoughts On US Oil Sands

There are three companies (that I know about anyways) that all claim to be in production soon in the Utah oil sands.  All will use a solvent to remove the oil from the sands and do not need tailing ponds.  Canadian oil sands miners (not the in-situ companies) all use Clark Hot Water Extraction Process to remove the oil from the sands and need tailing ponds.  This technology could be a game changer (black swan) for the industry.

This post will focus on a company called US Oil Sands (USO.V).  General notes:

- 16 employees - rely heavily on contractors and consultants
- $0.13 current share price x 958.1 MM FD shares = $125 MM
- no debt
- $76 MM cash (3/31/14)
- 56% common or 54% diluted mgmt./insider ownership
- 184 MM bbls discovered resource - 100$ W.I. - 90-96% bitumen recovery
- $125MM mkt cap / 184 MMbbls = $0.67 per bbl
- $49MM EV / 184 MMbbls = $0.27 per bbl
- 25 ft overburden
- currently have a 24 bopd pilot unit
- bio-solvent to release the oil
- fully funded 2,000 bopd commercial demonstration unit - first oil in late 2015
- $30,000/bopd capital efficiency
- worldwide development potential thru 10,000 bopd modules
- first 10,000 bopd unit online in 3-4 years
- $15,000-$20,000/bopd capital efficiency
- $51 netbacks ($105/bbl)
- forecast $200+MM recurring before tax cash flow starting in 2019 (payout end of 2018)

Valuation
assumptions:
1) by 2019 - $200MM before tax cash flow (EBITDA)
2) EV/EBITDA = 4
3) EV = 800 MM

6x in 5 years -> 43% APY
I think of this as a rough speculative guess with lots of potential for company to keep on growing as there are lots and lots of oil sands around the world.  However, the process still unproven on a commercial scale.