Steady T is right. No real new news, just some clarification and detail about things that have already been announced, but there were questions in the meeting about the ORU business. Freestone believes they have to tread water on any action on ORU until the Hydrex contract runs out this summer (or longer if they comply with the contract requirements). The contract terms are public. Clayton said the territory conditions in the contract don't leave Freestone much viable territory to work with outside that contract. He said Hydrex ran into problems on the land they were intending to use for the site being designated by the Fed as wetlands and that the primary contact at Hydrex who was managing the deal for them left the company a few months after the contract was done. He said he still hoped that Hydrex would build a unit, but also acknowledged their difficulties in doing so. It sounded to me like the original plan from Hydrex would have been ideal with barge and railcar access and they had State approval on the wetlands issue, but after the contract the Fed declared it wetlands and it rendered the site unusable.
They see the more immediate return coming from frac water rather than ORU, although they acknowledged the possibility of building their own ORU sites in the future. In Q&A they estimated the construction cost of a 350 gal per minute water unit ($350-400k range)to be about half the cost of an ORU unit capable of doing tank oil sludge and the time to construct a unit also much quicker (est 4-8 weeks to produce a water unit). He maintained that the field testing from a broad sample of sources (water from different formations) gave them the information they felt they needed to start chasing capital. Regulatory trends are emphasizing the tracking of frac water and the use of recycled water in the fracing process. He gave the local municipality of Denton as an example of growing water control regulations in the area. They expect saving the producer the cost of both production water and frac water disposal combined with the resale of recylced water for fracking to be a very viable business model.
On financing he expected to have the first proposal on his desk in a week, but had no idea if what they wanted for the capital would be excessive. He said they had in mind what they wanted and what they were willing to give up and how they would like to see the funding structured in a mix of debt and equity- no idea yet what would be required in the end. He said they were visiting with multiple sources and his hope would be to have more than one option to choose from.
FYI since I don't post much, I am just an investor and had never met anyone from Freestone before the meeting. I appreciated meeting them and was impressed with Clayton (who ran the meeting). Like SteadyT mentioned, I am "under water" on my small position on this stock and am not selling, but not buying. If they are able to secure the funding, the picture would change.
