In the gold rush of 1840s, a German immigrant named Levi Strauss
got rich supplying miners with denim overalls. Investment
historians insist that equipment suppliers (picks & shovels)
made more money from the California gold rush than the miners.
Intercept Energy Services (TSX-V:IES) operates a fleet of trucks
that supply super-heated water to the rapidly growing North
American fracking industry.
The IES trucks use proprietary technology making the water
heating units the most safe, economical and environmentally
friendly available. For the last two years, IES has been
servicing oilfield and gas companies in Western Canada.
On January 29, 2014, Intercept Energy deployed two new trucks to
North Dakota, where the fracking oil & gas boom has reduced
unemployment to 3.5% and created a $1 billion-dollar state budget
surplus.
Ten thousand fracking wells open up each year in the U.S.
creating a growth opportunity for "picks and shovels" suppliers
like Intercept Energy.
Randy Hayward, Intercept Energy CEO, has spent 25 years doing
fund raising, corporate development and strategic planning for a
variety of public and private companies.
"Intercept Energy was formed in 1995 as a junior capital pool
company trading on the TSX-Venture Exchange," states Hayward,
"We've created enough revenue and raised enough money to steadily
grow the size of our heating truck fleet."
Lynn Helms, Director of North Dakota's Department of Mineral
Resources recently predicted that the State's daily oil production
will double – from 875,000 to 1.6 million by 2017. North
Dakota also produces over 800 million cubic feet of natural gas
daily.
"Our business is entirely harnessed to the fracking industry,"
confirms Hayward, "In Canada most of the drilling activity takes
place in the winter months, because the remote northern sites
require frozen roads to provide access for the men and machinery."
Intercept's clients often require water as hot as 60 degrees
Celsius. The new IES trucks are installed with 6th generation
technology which makes them extremely efficient in all weather
conditions. Traditional heating-truck technology may incur
heat loss of 50%, compared to Intercept's rate of 1% to 3%.
"Our heating system generates potentially higher profit
margins," states Haywood, "Companies that rely on diesel fuel would
likely incur fuel costs three times larger than ours. For
obvious reasons we do not like to divulge the technology inside the
tank. But suffice to say we have enormous cost efficiencies
built into our proprietary technology."
Intercept's potential customers include big energy companies
active in fracking like Shell and Exxon Mobile.
"We are in active discussions with a number of large clients,"
confirms Hayward, "These relationships take time and patience to
establish. Typically a 'Master Service Agreement' will be
reviewed, covering issues like safety protocols and cost
efficiencies."
"As we meet with big fracking companies in North Dakota," says
Hayward, "We are finding that they are often frustrated with their
existing suppliers. There are two areas in which we feel we
have a competitive advantage. The first is cost. Our
proprietary heating technology allows us to heat water quicker with
lower fuel costs."
"The second advantage is service," explains Hayward, "We have a
company policy of only charging for 'heating hours'. So
if it takes 30 minutes to set up the rig - that is our time. Our
clients appreciate this. Just yesterday, an operations manager
told me, 'you wouldn't believe how many companies start billing
from the moment the truck rolls onto the site – we think it's
unfair and we are looking to grow our business with well-run
companies that have honest and transparent billing policies.'"
For a supplier like Intercept Energy, it is vital to be surfing
a wave that is pushed by economic necessity and political will.
"Abundant low-cost energy is stimulating a revival of
manufacturing in the U.S." states Daniel Yergin, a Pulitzer Prize
winning author and Chairman of Cambridge Energy Research Associates
(CERA).
According to Yergin, shale gas extraction could support 4
million jobs by 2020. By this time, the U.S. is expected to
pass Saudi Arabia as the world's biggest oil exporter. At the
current rate of production growth, natural gas will to overtake
coal as the second largest source of energy worldwide by 2025.
On December 13, 2013 – IES closed a non-brokered private
placement at a price of $.075 per share, receiving gross proceeds
of $656,750 for the purchase of 8,756,666 shares in two separate
tranches. IES intends to use the proceeds to purchase additional
water heating units and for general working capital.
Hayward's goal is to generate at least $100,000 a month
per-truck average throughout the year ($1.2 million per
year). The payback time for each unit is about 18 months at
the current revenue generation schedule.
Intercept Energy is currently trading at .04 with a market cap
of $4.9 million.
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CONTACT: Intercept Energy Services Inc.
Suite 600 - 666 Burrard Street
Vancouver, BC, V6C 3P6
Phone: 1 (604) 687-8855
Email: info@interceptenergy.ca
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