Freestone Resources Inc. (fka FSNR)

[RedShoulder]

FSNR DD for new eyes, Petrozene and Frack Water Facility

From the Petrozene web site (FSNR wholly owns Petrozene, no JVs):

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"PETROZENE has many uses within the oil industry. Below are the applications that are currently available:

Oil Tanker & Oil Tank Solutions:

PETROZENE has been shown to be an effective dispersant of oil sludge buildup. The research efforts of Freestone Resources, Inc. and industry partners have shown it to be especially effective in large, long range oil tankers. With the proper amount of PETROZENE applied to each shipment of oil, they have produced results that show a dramatic reduction in oil sludge buildup on the bottom of the tanks. These same results have been shown in oil storage tanks as well. With the proper application of PETROZENE, costs and operational downtime due to cleaning can be cut dramatically for each.

Oil Well Enhancement:

Freestone Resources, Inc. has also done thorough research concerning oil well enhancement with the application of PETROZENE. Freestone has discovered that a minimal amount of PETROZENE utilized down the wellbore will dissolve and further inhibit Paraffin and asphaltene buildup in the well casing. This buildup of paraffin causes other problems such as clogging up lines, pump failures, pressure bursts, and seal failures which can all be dramatically reduced with the proper application of PETROZENE.

Pipeline Solutions:

Numerous independent studies have shown that a minimal amount of PETROZENE decreases the viscosity of heavy oil. These tests indicate that PETROZENE can be utilized in pipelines that transport heavy oil in order to increases their efficiency and flow rate."

http://petrozene.com/uses-applications/

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Petrozene testimony from an earlier customer with "outstanding results", from the CEO blog:

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We have already started to make sales of Petrozene, and I’m pleased to report that we are getting positive reviews by our customers. We field tested Petrozene extensively before marketing and selling the first shipments in order to ensure that we had the best possible formulation. As a result of this hard work by members of the Freestone team we received the following review from one of our customers of how Petrozene worked as a demulsification agent:

“A tank with 192 bbl of oil was first rejected at 20% BS&W (Bottom Sediment and Water). I brought in a hot oil truck and heated oil up to 160 degrees and let it sit for 5 days. Oil was then rejected at 5% BS&W. I then treated tank with 10 gallons of Petrozene and rolled tank with compressed air for 1 hour. I let the tank sit for 24 hours and pulled 6 inches off the bottom. I then tested BS&W content. It came out at 1%. The oil was picked up 2 days later with a BS&W of .9 % BS&W. I am guessing that I would have had similar results with 5 gallons.”

These are outstanding results, because BS&W is an issue faced by many producers. It occurs because sediment from the formation, as well as water (especially in a formation that is pressured by a water drive) can get into the oil sales tank. Companies that purchase the oil from the producers can, and typically will, reject the oil if their BS&W is greater than 2%. Petrozene has shown to be a cost effective alternative to help demulsify the oil and thus lower the BS&W content in the oil sales tank.

I’m very excited by these results, and how well Petrozene is working in the field. I think the future for our new formulation of Petrozene is very promising. We will keep working on and evaluating other petroleum service related opportunities to keep growing our offering portfolio, and add increased value for shareholders.

http://freestoneresourcesinc.com/blog/ceo-blog/

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FSNR high profit margin of 54% on the sale of Petrozene from the 10-Q

General

On August 22, 2007, the Company changed its name to Freestone Resources, Inc. in anticipation of going into the oil and gas technology development business. Since that time Freestone has been actively engaged in the development of technologies that can enhance oil and gas production in an environmentally responsible way. The Company currently markets and sells Petrozene, which is a solvent derived from recycled hydrocarbons. Petrozene can cost effectively decrease paraffin buildup in oil and gas wells, and can be utilized to clean oil storage facilities. Furthermore, Petrozene has been shown to reduce bottom sediment and water in oil storage tanks and act as a de-emulsification agent.

Results of Operations

Three months ended September 30, 2013 compared to three months ended September 30, 2012

Revenue - Our revenue for the three months ended September 30, 2013 was $6,460, compared to $0 for the same period in 2012. Revenue increased due to sales of Petrozene that were not realized in 2012.

Cost of Revenue – Cost of revenues (Petrozene) were $2,925 for the three months ended September 30, 2013 versus $0 for the same period in 2012. This is the cost related to purchasing and transporting the product.

(Profit of $3,535 or +54% profit margin)

10-Q link:
http://secfilings.com/searchresultswide.aspx?TabIndex=2&FilingID=9604410&companyid=70606&ppu=%252fDefault.aspx%253freceiveddate%253d90_DAYS%2526amp%253bauth%253d1%2526amp%253bticker%253dFSNR

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This due diligence is in respect to FSNR providing needed water service for fracking operations in the arid Eagle Ford shale play of South Texas.

Their business model is based simply on a 'high demand' for water services in the Eagle Ford shale play; provided by a 'high supply' of water services by FSNR. They are at the right place, with the right product, at the right time.

FSNR's latest news development:
"Freestone Resources, Inc. (OTCQB: FSNR) announces that its joint venture, Aqueous Services, LLC is currently undergoing the final testing and preparation of the Aqueous freshwater load out facility in the Eagle Ford region of South, Texas in anticipation of opening at full capacity next week."

"Aqueous also has a marketing and development team currently working in the region to inform potential vendors of company's easily accessible freshwater supply. This same team is simultaneously working to implement a centralized frac and produced water recycling program on the facility with a proven technology that has been in operation, and is currently utilized in other regions throughout the United States."
http://finance.yahoo.com/news/freestone-resources-announces-aqueous-freshwater-130000450.html


The Product Demand in the Eagle Ford:
I highly recommend the following source as Due Dilligence on the water management planning, specifically in the Eagle Ford shale play, in which area Freestone is focusing it's first efforts to provide a complete one stop water service facility for fracking operations in shale plays:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=83654477


The Product Supply by FSNR:
This due dilligence directly relates to FSNR's JV. The great Carrizo Aquifer is the fresh water aquifer that FSNR is permitted to draw water from.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=83841064

The Product Supply by FSNR:
"Freestone Resources will own a one-third interest in Aqueous Services, LLC, which has signed a Water Right's Agreement to produce from an existing equipped and permitted fresh water well on the Pajarito Ranch. The Water Right's Agreement allows Aqueous Services the right to produce up to 1,500 acre-feet (the equivalent of 11,637,535 barrels) of fresh water per year."
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=83845014

The Product Demand and FSNR Suppy:
Data shows Carrizo Wilcox Aquifer contains
enough water to support oil and gas development.
"Freestone Resources will own a one-third interest in Aqueous Services, LLC, which has signed a Water Right's Agreement to produce from an existing equipped and permitted fresh water well on the Pajarito Ranch. The Water Right's Agreement allows Aqueous Services the right to produce up to 1,500 acre-feet (the equivalent of 11,637,535 barrels) of fresh water per year."
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=83854279

The Product Demand and FSNR Supply:
The Eagle Ford shale play in South Texas is "the largest single economic development in the history of the state of Texas and ranks as the single largest oil & gas development in the world."
Revenue will be some multiple of each 'Load Out Station' that FSNR plans to distribute through selected locations within the Eagle Ford shale play. The multiple will be some factor of the permit allotment and potential well output - not all permits and well outputs are alike.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=84417563

The Product Demand:
+ 200 Eagle Ford Shale Operators and Active Companies
The following is a list of active companies and lease operators that are potential customers for FSNR's drilling and frack water 'Load Out Stations' in the Eagle Ford shale play:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=84488225

FSNR Technology applied:
SCADA System
Aqueous water load out facility will use a SCADA System to automatically turn on pumps to keep the seven tanks filled with water at the appropriate level as water is sold. Also the system will have a card swipe station for customers to use that will automatically perform billing as well as keeping track of water from 'cradle to grave' as the TRRC is proposing oil and gas users to track. The system also has a security feature using security tracking cameras.
AND:
An important feature of the SCADA System is that it will allow the operation to be performed automatically with only one non skilled employee to be present to monitor the system. This will substantially save on overhead cost.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=85088550

Texas House Bill 3315 regarding recying frack and produced water:
which will be a revenue wind fall for the FSNR JV.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=86172448

Steady T's due dilligence:
"economic impact of the Eagle Ford Shale. The United States is going to become the largest oil and gas producer in the world by 2020, because of Texas. We’ll be bigger than Saudi Arabia.”
Dr. Thomas Tunstall of the University of Texas-San Antonio presented an update to his study, originally presented in May of last year, indicating that the overall economic impact of the giant shale formation would be $89 billion a year by 2022 — nearly $28 billion more than originally forecast."
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=86216305

falconer's due dilligence:
New Water Rules for Texas Oil Wells.
"Of course, the real issue in the exploitation of any of the existing or new tight oil plays in Texas is the a) the availability of frackwater, and b) its disposal or reuse after reprocessing for recycling."
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=86222461


The CEO's blog, which includes pictures of the 'Load out Station':
http://freestoneresourcesinc.com/blog/ceo-blog/

The FSNR Shareholders Blog, an independent Due Diligence source:
http://freestoneshareholders.wordpress.com/

Note, this is a collection of linked source material and can include opinions and estimates formulated mostly by our group based on our personal due diligence research.

Our personal and collective research includes basic factors for figuring water demand estimates, and basic factors for figuring water supply estimates; as well as estimated 'ball park' sales projections and expenses that may or may not be 'approximately' accurate.

As always, you should perform your own personal due diligence research, and come to your own conclusions.