June 7 Shareholder Letter
Dear Shareholders,
We would like to update you since our last Shareholder Letter on April 2, 2018.
Status of CDU Phase 1 Refinery Project Financing. We announced in our April 2, 2018 Shareholder Letter that we executed a Term Sheet with an international debt fund to finance our CDU Phase 1 Refinery Project. We are still in the due diligence process with the lender’s technical and finance team. Most of our delay has resulted from our EPC’s adjustments for increased project construction costs in West Texas. As you may know, the boom times have returned to the Permian Basin with significant cost increases in steel, cement and per diem construction worker rates. In addition, we added desalting equipment to the front-end design of the CDU Phase 1 plant to further enhance our ability to receive higher prices for our residual fuel product and that equipment has added to our capex cost. Our total capex costs are now projected to be in the range of $69,000,000 for Phase 1. We expect the due diligence and final documentation to be completed by the end of this month. MMEX will continue to raise equity funding for Phase 1 thru private placements and additional convertible debt placements.
Significant Tail Winds for Refining. Refining industry fundamentals are more favorable than they have been in a number of years. Today, the take-away capacity of crude pipelines from the Permian Basin to the Texas Gulf Coast is constrained to ship more crude oil. The discount price to WTI posted prices is in the $10 plus per Bbl range. The ability to purchase our feedstock at these discounts adds to our normal “crack spread” and we are pushing to start construction and get into commercial operation as soon as possible to take advantage of this arbitrage. Our decision to locate our refinery on the Texas Pacifico-South Orient Railroad, allowing us to go by rail to the Texas Gulf Coast is now a major strategic advantage and in addition to product distribution we are also being approached for crude oil storage and transportation services as an adjunct to our refining capabilities.
