Legitimate refining projects do not historically obtain their start as OTC-traded penny stocks.
These operations require scale to be profitable, and must be complete refineries, not simple atmospheric crude distillation units. A refinery is not built in phases, by starting with a front-end, at the scale of an in-field processing unit. Refineries in developing regions are modular, but in addition to ADU (crude, or topping units), also have vacuum units, reformers, cracking capability, de-sulphering capability, and so on.
Refineries also require well-developed infrastructure, including pipelines for feedstocks, fuel gas, electricity, and take-away capability, that includes rail, truck/bulk loading terminal, and pipeline connectivity to the markets they serve.
Using the crude feedstock as a starting point, without pipelines, how does the raw crude feed arrive? A standard barrel is 42 U.S. gallons. An over-the-road (OTR) tanker can carry about 10,000 gallons of crude, or about 238 bbl. To provide 10,000 bbl of input would require hauling in, likely by OTR, 42 OTR tankers per day, and placing it into storage, in some quantity greater than the 10,000 bbl throughput of the CDU/ADU. That presents a logistics and cost/margin issue in and of itself. To make the math easy, that is off-loading two tankers an hour, 24-hours a day. That could change, if there was a crude pipeline put in place, but that costs money, and it has to be a pipeline network, unless there is a single consolidated crude supplier who will guarantee that capacity.
In this case, there is a single rail connection on the Texas-Pacifico leased TXDOT South Orient line, which is marginal south of the facility to MMEX’s target market. Yes, there is a federal grant associated with rehabilitating more than 70-miles of road bed south of Alpine, and reconstructing the bridge near Presidio. So what. There is a big gap between the promise, and delivery of anything material on that single aspect of this project.
The rail line is largely useless as a crude feedstock source - the suppliers/producers are west of the spur. As it is, the spur is useless as take-away capacity, as there are no refiners south of the junction.
Setting all that aside, that region of the Permian produces a range of crude largely known as WTI. All WTI is not necessarily created as equal, some is sweeter, some is more sour. WTI is a proxy, based on a chemical make-up and spec. Its API varies, its sulphur content varies, its salt content varies, its water content varies. All crude oil is not created equal. The current “surplus” is generated by non-conventional means, and has high variability, depending on what region/structure it was produced from, and how it was (or was not) processed in the field.
Assuming a feed consistent with WTI, with an API in the high thirties, the stream yield on the percentage basis is about 2.00% flare/gas, 26.50% naphtha, 8.00% kerosene/jet, 31.50% raw diesel, and 31.50% resid/heavy oil (needs to be processed in vacuum).
A 10,000 bbl throughput unit, assuming no down-time, and steady-state processing would generate 2,650 bbl of raw naphtha, 800 bbl of kerosene, 3,150 bbl of raw diesel, and 3,150 bbl of resid. That neglects the water cut, which varies, but on average is about 1%. You can do the math on how profitable that would be, given that all three of the directly useable cuts require transport out of the facility, and further refining to be generally marketable. The resid and waste stream fractions are problematic, and their processing (or disposal) likely negates any profit on the usable cut from an ADU. This is why ADU is not a stand-alone means of generating profit.
All of that “product” must be moved out of the facility, either by OTR truck/tanker, rail, or pipeline. For the near-term, rail is a non-starter. For the near-term, pipelines are non-starters. That leaves OTR truck/tanker. That take-away for intermediate refined product is a huge margin hit.
If the feedstock changes to something outside the spec for WTI, for example sulphur content about 0.5%, or has a high salinity, the margins are further reduced, and the processing complexity/cost goes up.
If there were an actual business here, established refiners, like Andeavor, Alon, or Sunoco would be in the business already, ahead of a speculative venture like MMEX. MMEX assumes fantasy scenarios that can’t be realized. The S-1 contains no actual engineering or technical data, other than what was lifted from public sources ranging from Wikipedia, and plagiarized from industry publications circa 2000 - 2014, poorly pasted into the document without accreditation to the source.
The MMEX “jobs created” claim is also specious. For comparative purposes, a full-scale refinery operation like Endeavor’s WRU in El Paso, a 135,000 bbl system, employs fewer than 500 people. A modular, 10,000 bbl ADU/CDU unit can be started in a half-day by two people, and normally runs in an automated fashion, monitored by a single person. There might be a gate guard there… the basis used to sell this to the community and region is wholly false - there is no significant job creation.
Generating an illusion is cheap, and easy. Anyone can go out, contact a vendor, and get a quote on a CDU/ADU unit. Anyone can spend chump change on a consultant, or even a manufacturer to generate a PBR application to a state regulatory agency, spend the $100-bucks on the filing, and get a permit. Anyone can file an S-1 for change, using plagiarized material. Anyone can go out and buy rights to worthless land, for $10.00 and “other consideration,” and anyone can spend a few bucks generating PR. Spending a few thousand, or even a few hundred thousand of other people’s money to generate hype is trivial in this age. On the Internet, no one knows you’re a dog.
