ULTIMATE TANK CLEANING UTC, Inc.
CONFIDENTIAL
ULTIMATE TANK CLEANING UTC, Inc. BUSINESS PLAN NuOil Energy, Inc. 12/1/2011
$3 Million Business Plan
DISCLAIMER The information contained herein (the “Plan”) was prepared to assist interested parties in making their own evaluation of Ultimate Tank Cleaning, Inc. (the “Company”) and does not purport to be all-inclusive or to contain all of the information that may be required to evaluate a transaction with the Company. While the information contained herein is believed to be accurate, no representation or warranty is made by the Company as to the accuracy, reliability, or completeness of this Plan. In all cases, interested parties should conduct their own investigation and analysis of the Company and the data set forth in this Plan. The Company expressly disclaims any and all liability for any representations (whether expressed or implied) contained in, or any omissions from, this Plan or any other written or oral communication transmitted to the recipient in the course of the recipient’s evaluation of the Company. The only representations and warranties made by the Company will be set forth in a definitive agreement approved by each party in its sole discretion. This Plan includes certain statements, estimates, and projections provided by the Company that reflect management’s views regarding the anticipated future financial and operating performance of the Company. Such statements, estimates, and projections reflect numerous assumptions concerning anticipated results. As these assumptions may or may not prove to be correct and there are numerous factors which will affect the Company’s actual results (many of which are beyond the Company’s control), there can be no assurance that any projected results are attainable or will be realized. The Company’s actual results may differ materially from those set forth in this Plan. Accordingly, no representations are made as to the accuracy or reasonableness of such statements, estimates, or projections.
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TABLE OF CONTENTS 1. Executive Summary………………………………………………………………….. 4 2. Investment Highlights……………………………………………………………….. 5 A. Value Proposition B. Strong Customer Base. C. Backlog and Customer Traction. D. Green Technology Solution E. Large, Growing Target Markets F. Fragmented Competition G. Risk Factors 3. Funding: Use of Proceeds………..………………………………………………… 10 4. Company Overview……………………………………………………………………. 10 A. Company Background B. Market Size C. Product & System Description D. Competitive Advantages E. Payback Analysis F. Service Capabilities G. Growth Strategy H. Competing Technologies I. Competition J. Facilities K. Management Team 5. Financial Projections and Projected Returns……………………………….17 A. Financial Projections Revenue Model Market Share Income Statement Balance Sheet Statement of Cash Flows B. Breakeven and Cash Burn Analysis
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1. EXECUTIVE SUMMARY Ultimate Tank Cleaning, Inc. (“UTC” or “the Company”) is a “to be formed” Texas corporation headquartered in Houston, TX. Upon securing an Agreement for funding the corporation will be formed as a subsidiary of NuOil Energy, Inc., a California corporation. NuOil Energy, Inc. founders have worked in the Oil and Gas Industry for over 200 years and have tremendous experience and contacts with all levels of customers including refineries, Independent, Major, and National Oil and Gas companies worldwide. The founders have put together a very strong management, support, and employee group that has a tremendous amount of experience in the tank cleaning industry. The Company’s plan is to spearhead the oil and gas cleaning service industry by introducing its Green superior products and technologies. The Company products and system will become the Green Chemical System Solution of choice due to its superior economics and greener presence. Currently, the sludge in tanks is cleaned by manual labor where the sludge is broken up and hauled away as hazardous waste. The UTC Proprietary Chemical Cleaning Service Technology & System will be used in oil and gas company’s oil fields, terminals, and refineries for reclamation of sludge into saleable oil from pipelines and tanks, and for stimulation of fluid flow from oil and gas wells (onshore & offshore). Based on Clean Chemistry Technology, the System is far beyond industry safety standards. It can be easily classified as eco friendly, or “green”, as it is powered by 100% safe or biodegradable products, low emission equipment, and highly trained personnel. The “Green” Cleaning Composition is used for treating Oil & Gas wells, lines, casings, equipment, storage tanks, and other applications for ultimate cleaning. The System can also be used in the tar sands industry and in the process of separating excess water or sludge from recovered crude oil and as a stimulation and injection system for oil and gas recovery. Each site (tank, well, line, etc.) is a new custom-made solution, designed to match each client’s needs. The System reconstructs heavy waxy sludge into fluid crude oil. There is no direct cleaning with human labor. The Company has an exclusive license agreement with the chemical manufacturer for the above applications and the chemicals will be private labeled for the Company. The Company management has been working for the last 2 years to position the Company for “out of the gate” growth upon receiving funding. The management has been working with a Petrobras refinery in Texas to secure a contract for cleaning the first tank. A Company test and technical proposal has been accepted by the refinery and a commercial proposal is now being reviewed. The NuOil Energy, Inc and UTC, Inc. Confidential
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refinery has provided data on a second tank to be cleaned. The Company is working on the proposal for the second tank. The refinery has shown a strong interest in the working with the Company and has expressed their desire to use the Company chemical system to clean their tanks (110 tanks at this one refinery) to reclaim crude oil from the sludge which they can process in the refinery into saleable products rather than dispose of the sludge as hazardous waste. The Company management strongly believes that it can penetrate the large available market at a rapid pace based on the initial feedback the Company has received from prospective customers and experts in the Industry about the superiority of the Company products and system over the competitors. The Company is seeking $3 million of debt or equity capital (or a combination) to grow the Company. The Company projects the following annual Revenues and EBITDA:
$ Year Year Year Year Year
1 2 3 4 5
Revenues 9.7 Million 19.9 Million 33.4 Million 45.2 Million 57.7 Million
EBITDA 3.5 Million 8.3 Million 14.7 Million 20.8 Million 27.3 Million
The forecasted Year 5 Revenue is derived from less than 1% of the total available market. The projected Year 5 company value using a 4 to 6 times multiple of EBITDA is between $100 million and $150 million.
2. INVESTMENT HIGHLIGHTS A. Value Proposition This plan presents a unique and rare opportunity. Turning build-up sludge in hundreds of thousands of tanks and pipelines into saleable oil will turn a costly hazardous material situation into a clean, green, economical situation for refineries, oil depot & terminal operators, and oil and gas companies worldwide. Also, the ability to maximize cash flow from oil wells by use of innovative, yet proven, new oil service “green” cleaning system technologies will enhance companies bottom line. In a world of booming technology, this is an exceptionally rare window of opportunity to replace archaic (century age) core cleaning systems & equipment, used widely to this day by the world’s largest industry, with twenty first century technology, with proven direct contribution to the bottom line. The oil industry is ripe and thriving for this change. There are millions of Oil Barrels being burned or buried everyday without recovery from its natural state from the current old cleaning operation worldwide. This opportunity will target millions of existing wells, tanks, NuOil Energy, Inc and UTC, Inc. Confidential
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terminals, and pipelines worldwide along with thousands of new wells every year; a $10 billion annual market. B. Strong Customers The worldwide customers are some of the biggest companies in the world which include Independent, Major, and National Oil and Gas Companies along with large private companies that own refineries, oil depots and terminals, pipelines, and tank farms. The company is now dealing with a National Oil Company, Petrobras of Brazil, on one of their refinery tank farms in Texas. Petrobras owns refineries around the world that have thousands of tanks. 1. Refineries An oil refinery or petroleum refinery is an industrial process plant where crude oil is processed and refined into more useful petroleum products, such as gasoline, diesel fuel, asphalt base, heating oil, kerosene, and liquefied petroleum gas. Oil refineries are typically large sprawling industrial complexes with extensive piping running throughout, carrying streams of fluids between large chemical processing units. In many ways, oil refineries use much of the technology of, and can be thought of as types of chemical plants. The crude oil feedstock has typically been processed by an oil production plant. There is usually an oil depot (tank farm) at or near an oil refinery for storage of bulk liquid products. There are over 700 refineries worldwide (150 in the U.S.) owned by large private companies and National, Major and Independent Oil and Gas Companies companies that have a need for the UTC cleaning technology system. (Oil and Gas Journal). Some of the largest refineries in the U.S. are owned by British Petroleum, Marathon, ExxonMobil, Hovensa LLC, Citgo, Sunoco, Chevron, Shell, Pemex, Petrobras, PDVSA, Valero, Total, and ConocoPhillips. Other refinery owners include Flint Hill Resources, Petro Star, Tesoro, Alon Oil, Cross Oil, Lion Oil, Gulf Atlantic, Kern Oil, San Joaquin Refining, Paramount Petroleum, Coffeyville Resources, Frontier, McPherson, HDG International, Motiva Enterprises, Murphy Oil, Placid Refining, Cenex Oil, Nustar, Hess, Holly Corp., Husky, PBF Energy, Sinclair, United Refining Co., Lyondell, Stratnor, Some of the largest international refineries are owned by Reliance Petroleum, CRP, SK Energy, GS Caltex, ExxonMobil, Saudi Aramco, S-Oil, KNPC, Shell, Citgo, Marathon, British Petroleum, Rosneft, Gazprom, Bashneft, Petrobras, Total, Pertamina, Nippon, Petrobras, Pemex, Surgutneftegas, Sunoco, ConocoPhillips, Valero, Saras, Irving, and Ecopetrol. 2. Oil Terminals An oil depot (sometimes called a tank farm, installation, or oil terminal) is an industrial facility for the storage of oil and/or petrochemical products and from which these products are usually transported to end users or further storage facilities. An oil depot typically has tankage, NuOil Energy, Inc and UTC, Inc. Confidential
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either above ground or underground, and gantries for the discharge of products into road tankers or other vehicles (such as barges) or pipelines. Oil depots are usually situated close to oil refineries or in locations where marine tankers containing products can discharge their cargo. Some depots are attached to pipelines from which they draw their supplies and depots can also be fed by rail, by barge and by road tanker (sometimes known as "bridging"). There are hundreds of oil depots worldwide. Most oil depots have road tankers operating from their grounds and these vehicles transport products to petrol stations or other users. An oil depot is a comparatively unsophisticated facility in that (in most cases) there is no processing or other transformation on site. The products which reach the depot (from a refinery) are in their final form suitable for delivery to customers. In some cases additives may be injected into products in tanks, but there is usually no manufacturing plant on site. Modern depots comprise the same types of tankage, pipelines, and gantries as those in the past and whilst there is a greater degree of automation on site, there have been few significant changes in depot operational activities over time. One of the key imperatives is Health, Safety and Environment (HSE) and the operators of a depot must ensure that products are safely stored and handled and that there are no leakages (etc.) which could damage the soil or the water table. The ownership of oil depots falls into three main categories:
Single oil company ownership. When one company owns and operates a depot on its own behalf. Joint or consortium ownership, where two or more companies own a depot together and share its operating costs. Independent ownership, where a depot is owned not by an oil company but by a separate business which charges oil companies (and others) a fee to store and handle products. The Royal Vopak from the Netherlands is the largest independent terminal operator with 80 terminals in 30 countries.
Most airports also have their own dedicated oil depots (usually called "fuel farms") where aviation fuel (Jet A or 100LL) is stored prior to being discharged into aircraft fuel tanks. Fuel is transported from the depot to the aircraft either by road tanker or via a hydrant system U. S. Oil terminal customers include American River Trans, Canal Barge, Chemserve (Allied), Chevron, Gateway Terminals, Houston Fuel Oil, IMTT, Innovation Fuels, Kinder Morgan, LBC, Magellan, New Haven, NuStar, Oiltanking, Omega Partners, Petroleum Fuel, Southwind Maritime, Stolthaven, Tanco, Valero, Vopak, and Westway.
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3. Oil and Gas Fields There are tens of thousands of oil fields worldwide that have a tank farm for separation of the water and oil. These tank farms require the same cleaning of sludge as refinery tank farms. These oil and gas fields are owned by independent, major, and National Oil and Gas Companies worldwide including Petrobras, Pemex, YPF, Repsol, ENI, Kuwait Petroleum Company, Aramco, PDO, Pertamina, Caltex, PDVSA, Gasprom, Chevron, Exxon, Shell, Valero, BP, ConocoPhillips, Marathon, etc. Many of these same oil and gas fields require stimulation of the formation to increase the oil flow from the wells. The UTC chemical system can provide the needed stimulation for these wells. C. Customer Traction There is a pending Petrobras proposal and contract for cleaning tanks at a refinery in Texas. The technical proposal has been accepted by the refinery. The commercial proposal is now pending. The refinery has also given the Company data regarding a second tank for cleaning and has indicated that they need more tanks cleaned. The company management has very strong contracts at the highest levels of Petrobras, along with strong contacts with the National Oil Companies in Mexico, Argentina, Venezuela, Ecuador, Peru, Colombia, Kuwait, Oman, UAE, Saudi Arabia, Egypt, Algeria, Libya, India, Indonesia, Russia, China, Romania, and Italy. The company management also has high level contacts with major and independent oil and gas companies in the U.S. and Canada such as Chevron, Exxon, Shell, BP, ConocoPhillips, Marathon, Oxy, Devon, Chesapeake, Valero, Kerr McGee, St. Mary’s, Apache, Anadarko, Husky, Encana, Suncor, Talisman, Canadian Natural Resources, and Imperial.
D. Green Technology Solution 1. Current issues:
Parrafin and asphaltene tubular buildup. Pipeline pugging. Corrosion. Scaling and emulsions. Near wellbore skin damage. Excessive pressure and reduced injection volumes on disposal and pressure maintenance wells.
2. Company Solutions and results:
Cutter stock blends with sludge/oil in tank to create stable emulsion.
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Nearly 100% of oil recovery is possible. So, you can think of the System as an oil recovery solution that just happens to leave you with a clean tank. Cleaning almost always pays for itself and yields significant additional revenue. Tank bottom sludge is usually 90% oil. The System performance is outstanding in tanks with sludge depth ranging from 1 to 28 feet. Immediately recovers oil from sludge in tank bottom for return to refinery. Faster and safer than other chemicals and systems (low risk procedures). Tried and tested. Non-flammable shipping classification. Hydrocarbon recovery. Minimum waste and product loss. Timesavings. Minimizes disruption. Black water segregation. Clean & de-gassed tank. Minimal solids in centre.
NOW YOU E. Large, Growing Target Markets There are hundreds of thousands of tanks and pipelines in refineries, terminals, and oil fields worldwide that require cleaning. Millions of oil and gas wells worldwide would benefit from chemical stimulation. Tens of thousands of new oil and gas wells are drilled each year. F. Fragmented Competition No other company is currently using a proven chemical system to clean tanks. The company plans on legally and linguistically protecting the UTC system making it difficult for competitors to copy. G. Risk Factors 1. Dependence on Key Personnel
The Company’s initial success depends to large extent upon abilities and experience of its key personnel, specifically its managing founders. The Company’s ability to grow rapidly and meet its objectives depends on the broad knowhow and experience of its management team, who are also the Company’s founders. The aggregate skills and experience of the founders’ team covers every business and technical aspect of the new Company, minimizing the need to seek top leadership talent for at least the initial growth phase. It is the management’s clear objective and intention to minimize the dependence of the Company’s growth and success on individuals by embedding their knowledge into a robust organization of newly hired personnel along with an efficient information management system.
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2. Industry Conditions
The Company's revenues and earnings are affected directly by the worldwide level of oil and gas industry activity. The level of such activity is affected by many factors over which the Company has no control, including, among others, the market prices of oil and gas, the volatility of such prices, the levels of production by OPEC and other oil and gas producers, governmental regulation and trade restrictions, the level of worldwide economic activity, political stability in major oil producing areas, the development of alternate energy sources and the long-term effect of worldwide energy conservation measures, all of which could adversely affect the Company's business and operating results. 3. International Operations
A portion of the Company's business operations will be conducted in international markets, including South America, the Asia Pacific region, Middle East, Eastern Europe, Canada and Mexico. In addition to the risks inherent in the chemical cleaning business, the Company's international operations are subject to certain political, economic and other uncertainties, including, among others, risks of war and civil disturbances, expropriation, nationalization, termination of existing contracts, taxation policies, foreign exchange restrictions and fluctuations and other risks arising out of foreign governmental sovereignty over certain areas in which the Company conducts operations. Although the Company seeks to protect against some of these risks through insurance, insurance is not available for all types of risks or for all areas in which the Company operates.
3. FUNDING: USE OF PROCEEDS The Company seeks $3 million of debt and/or equity financing. Proceeds will be used to reach cash flow positive during the first year. The following provides a breakdown of the sources and uses of the transaction. ANY OVERVIEW
Uses of Investment Funds: Operating expenses: $ 1,000,000 Working capital: 800,000 Capital expenditures: 1,000,000 Contingency: 200,000 Total: $ 3,000,000 4. COMPANY OVERVIEW
3. SERIES D
A. Company Background NuOil Energy, Inc and UTC, Inc. Confidential
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The management team of UTC has an average per person of 25 years experience in the oil and gas industry including chemical & tank cleaning, operations, production, equipment, service. The management team has contacts thru out the oil and gas industry worldwide and is using many of those contacts to grow the operations of UTC. Over the last several years the management team has been working directly with North and South American Oil and Gas companies to secure their business. As a result of these efforts Petrobras, the National Oil Company of Brazil has provided an opportunity to UTC to clean tanks at their Pasadena, TX refinery. This opportunity has led to the start-up of UTC. B. Market Size There are more than 700 refineries worldwide (150 in the U.S.) with an average of 200 tanks per refinery equaling 140,000 tanks. The average price to clean a tank is $500,000 making the refinery tank market a $7 billion market. There are hundreds of terminals and oil depots worldwide that contain hundreds of tanks in each terminal. There are over 10,000 oil and gas fields, and 1.2 million oil and gas wells with 70,000 new wells drilled each year. Each oil and gas field contains storage and separation tanks. Many of the oil and gas wells could use chemical stimulation to increase production. C. Product and System Description
The Company chemical cleaning products were born “green” as it was designed to protect its users. Amber, Non DOT restricted, Non flammable, Non Explosive, the chemical product is a very powerful dispersant that covers successfully a wide range from medium to high molecular weight paraffins. It’s a Multi-functional / fast acting sludge remover from plugs, tank bottoms, pipelines, wells, and flow-line blockages. The product faces up the toughest problems of Paraffin/Asphaltene deposits. Its outstanding solvency, water wetting, penetrating and dispersing properties within a short time and soak cycle, hence, make the cleaning product quite suitable for batch and squeeze applications and stable enough for oil field and refineries applications. SYSTEMS FOR STORAGE TANKS, TANK LINERS, BARGES SHIPS, ETC. 1. The system consists on attaching sets of stingers through man ways; even on every 45°around the tank when necessary for the project. Pull from water draw hook-ups Closed loop system 01 low-pressure, high-vol. pump NuOil Energy, Inc and UTC, Inc. Confidential
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NG 2. Add Cutting Stock (LCO or Diesel Fuel) and inject our Cleaner. 3. Create a vortex within the tank to dissolve the sludge.
Sludge, asphaltene, and paraffin are common residues on oil storage and transport tanks. Often a deep cleaning is needed to bring back operative levels for the tank itself, tank pumps and valve. Dirty tanks store less, overload pumps, clog valves, and lines.
The System works at molecular level of wax crystals changing size, shape, and density.
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The chemical melts sludge, asphaltene, and paraffin back into crude oil and segregates water.
In addition, brings back a clear tank and high quality water free production line refinery ready oil.
D. Competitive Advantages
Up to 80% increase in oil recovery, enabled by exceptional efficiency and inherent oil treatment optimization capability. Up to 50% decrease in operating product consumption, with the opportunity to eliminate the use of external manpower when a tank has to be scraped at the end of each job, or a tremendous amount of several different products are used to clean a pipeline or a well.
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Comparable or less standard chemical cost, with significantly favorable cost of ownership due to lesser costs of manpower, transportation, operation, pit rental well and equipment maintenance to keep the lines clean and flowing. Based on the above, the Return on Investment is relatively fast; being measured in months and sometimes-in weeks. Full innovation with equipment stingers blending a Green Chemical and recovering the clean oil in a modern friendly environment on any industry service situation. Exceptional reliability and time & money saving. Significantly lower cost, small footprint compared to other hot treatment equipment. A leading team that has led the development and evolution of the technology since its inception. The team masters every technical, operational, and financial aspect of the business. The technology has been presented to the highest reputable Refineries and Oil Companies world experts. All experts have agreed that the technology comprises the greatest potential to replace existing technology.
E. Service Capabilities It is recommended treating this type of tank by injection of chemical and circulation to promote contact and solubility. This method of treatment will reduce the manpower requirements, reduce the project cleaning time, and offer an economical benefit to the customer. By safety standards this system will allow the effective removal and recovery of liquid hydrocarbons. There will be NO ENTRY into the tank’s atmosphere prior to a final degassing treatment. This minimizes the danger to personnel working in confined spaces with tank internal environments containing flammable vapors with high LEL’s, hydrogen sulfide and/or hazardous materials. Upon completion of the service, the tank will have a minimal amount of residual bottoms (insoluble) remaining, a maximum amount of hydrocarbons will have been recovered as a refinable or sellable crude oil and the tank will be in a safe condition for final “sweeping” or cleanup as required. Once the solids have been removed and containerized, the final wash down of the tank will be completed. Monitoring will occur throughout the cleaning with analysis occurring for LEL, H2S and other parameters. F. Customer The Company management has very good contacts at high levels within the Petrobras organization to secure the first and continuing business. The Company also has contacts with distributors, representatives, and agents worldwide as well as National, Major, and Independent Oil and Gas companies worldwide. All owners of refineries, oil depots and terminals, oil and gas fields, tank farms, pipelines, and tar sands operations are potential customers. G. Growth Strategy NuOil Energy, Inc and UTC, Inc. Confidential
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The Company intends to service tanks, pipelines, and oil wells in refineries, oil fields, and loading & unloading oil terminals that will utilize its innovative solution, thereby leverage its initial investment. The superior productivity of the Company’s innovative service provides to the investors an outstanding opportunity to generate a tremendous additional source of recurring cash flow and wealth. The Company will initially focus on the U.S. market starting with Texas, Oklahoma, Louisiana, and California. The second stage of growth will cover the rest of the U.S., Canada, Mexico, and Brazil. The third stage of growth will cover the rest of the international community.
H. Competing Technologies Tanks are currently cleaned by manual labor where the sludge is broken up and removed from the tank and disposed of as hazardous waste. I.
Competition
Small to medium sized companies such as Evergreen and Midwestern. All of the competitors use manual labor to clean the tanks rather than chemicals. J. Facilities The Company is located in Pasadena, Texas at a 7,000 Sq. ft. office and warehouse facility. K. Employees A known strong and experienced team made up of operations manager, production manager, foreman, safety manager, maintenance manager, and crew will be employed by the company. L. Management The Company is led by a team of first class professionals. The team represents (a) a record of exceptional synergies of talents, skills and experiences (b) a multi-year excellent record of productive teamwork and high-level contacts with Oil and Gas Industry National & Major Oil Cos. (c) a combined Executive experience of over a hundred years in the oil and gas industry, product development, operations, business development, and financial management. (d) an unmatched combination of specific knowledge and experience of every technical and business aspect of the technology, and (e) a highest level of professional and personal ethics. Toni Lopes, CEO
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Mr. Lopes brings excellent Sr. Executive business development, sales, executive management skills, and over 25 years of hands on experience in the oil and gas industry specifically oil and gas equipment and chemical cleaning. Tremendous experience and high level contacts in Latin America and the Latin American Oil and Gas Industry. Michael Nofal, President, and CFO Mr. Nofal brings over 30 years of Sr. Executive (CEO, CFO, Sr. VP) experience in business management, financing and worldwide sales, & business development. He was one of the pioneers of the development of hydraulic rod lifting, with 20 years of business development, financing, oil field operations, oil and gas equipment sales, fund raising, and sales in this market. During his long career in the oil patch industry he has developed a broad network of domestic and international contacts and strong relationships with major domestic and international oil companies. Jacob Mail, COO Jacob Mail brings 36 years of engineering and operations experience, with focus on design, testing, and commercialization of hydraulic systems in the aerospace, automotive and oil industries. Mail built and managed modern high volume industrial organizations from ground to highest quality standards. Mike Christiansen, VP Mike Christiansen is one of the first few pioneers of hydraulic rod lifting technology. For over 20 years he participated not only in the evolution of every detail of this technology, but also built, fielded, and operated hydraulic rod lifting pumps in oil fields. His knowledge and hands on experience of hydraulic oil pumping technology and its application in the oil field, combined with his deep knowledge of the oil patch, make him one of a handful of world experts in this field. Fred Haase, Consultant Dedicated results driven senior management professional with over 25 yrs. experience in a broad background in design and building of terminals and tank cleaning equipment. Extensive experience in Sales and Marketing as well as Vendor Management. Also proficient in project management and a team-building concept, using individual skills to drive results. Held progressively more responsible positions as Terminal Manager, Oiltanking, and Manager-Terminal Operations, Allied Chemical Corporation. Also served in the U.S. Navy. Reinaldo Varela, VP Over 20 years experience as an Executive in the Oil and Gas Industry with major oil and gas equipment and service companies. Contacts with Oil and Gas customers in Major and National Oil and Gas Companies worldwide.
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Dean Webster, Consultant Experience as a Sr. Executive in the Oil and Gas tank cleaning business. Major contacts with customers throughout the tank cleaning industry. Developer of a unique tank cleaning application, M. Board of Directors The Board of Directors is made up of the founders who are seasoned professionals from the Oil and Gas Industry and Chemical Cleaning Industry. Additional Directors will be added.
5. FINANCIAL PROJECTIONS AND PROJECTED RETURNS A. Financial Projections UTC management over the last several years has laid the foundation to position the company for substantial “out of the gate” growth during the first year of operation. UTC has been working with a Petrobras owned refinery (“PRSI”) in Pasadena, TX to contract for the cleaning of their tanks. A UTC technical and commercial proposal has been accepted by PRSI and a contract for the first tank cleaning will be entered into. The first contract will be for $530,000 with 1/2 paid at the time of the contract signing and the balance within 30 days after job completion. PRSI has over 110 tanks with many needing cleaning, and UTC has already received PRSI information on a second tank that PRSI is requesting a proposal.
Revenue Model In the Revenue forecast an average contract price is $450,000. It is forecasted that the first revenue will occur in the first 3 months of operations from a pending contract with Petrobras for a tank in a refinery in Texas. It is forecasted that 19 tanks will be cleaned in the first 12 months of operations. Thereafter, 43, 70, 92, and 114 tanks will be cleaned in the following years 2 thru 5 respectfully. Market Share The forecasted numbers of units and annual revenue is a very small percentage of the total market; less than 1% of the market. B. Breakeven and Cash Burn Analysis
Breakeven is projected to occur after the 6th month of operations. NuOil Energy, Inc and UTC, Inc. Confidential
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Income Statement STATEMENT OF OPERATIONS ($000's)
YEAR 1
Revenues Sales Total Revenues COGS % of Revs.
YEAR 2
9,756 9,756 3,902 40%
YEAR 3
19,931 19,931 7,972 40%
YEAR 4
YEAR 5
33,418 33,418
45,239 45,239
57,739 57,739
13,367 40%
18,096 40%
23,095 40%
Gross Profit
5,853
11,958
20,051
27,143
34,643
Operating Expenses Payroll Outside Services Benefits Facility SG&A Depreciation & Amort. Total Expenses
1,114 223 38 909 56 2,339
1,884 377 42 1,344 98 3,745
2,811 562 44 1,927 168 5,512
3,308 662 46 2,285 182 6,482
3,842 768 50 2,645 200 7,504
Operating Income
3,514
8,214
14,539
20,661
27,139
-
-
107
293
553
Pre-tax Income
3,514
8,214
14,646
20,954
27,693
Income Taxes
1,263
2,875
5,126
7,334
9,692
Net Income
2,251
5,339
9,520
13,620
18,000
Interest Income, net
MARGIN ANALYSIS Payroll Benefits Facility SG&A Depreciation & Amort. Operating Income Net Margin EBITDA
11% 2.3% 0.4% 9.3% 0.6% 36% 23% 3,570
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9% 1.9% 0.2% 6.7% 0.5% 41% 27% 8,312
8% 1.7% 0.1% 5.8% 0.5% 44% 28% 14,707
7% 1.5% 0.1% 5.1% 0.4% 46% 30% 20,843
7% 1.3% 0.1% 4.6% 0.3% 47% 31% 27,339
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Balance Sheet
BALANCE SHEET ($000's)
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
ASSETS Current Assets Cash Accounts Receivable Inventory Prepaids and Other Total Current Assets Other Assets Property, Plant, and Equipment Less: Accumulated Depreciation Property, Plant, and Equipment (net)
4,000 900 180 18 5,098 303 (6) 297
342
519
405
296
Total Assets
5,395
10,961
22,154
36,523
55,313
144 -
371 -
2,005 -
2,714 -
3,464 -
3,000
3,000
3,000
3,000
3,000
2,251
7,590
17,149
30,809
48,849
5,395
10,961
22,154
36,523
55,313
8,356 1,854 371 37 10,618 351 (8)
17,671 2,747 549 668 21,635 687 (168)
30,751 3,718 744 905 36,118 586 (182)
48,167 4,746 949 1,155 55,017 496 (200)
LIABILITIES AND STOCKHOLDERS' EQUITY Payables, Accruals & Deferrals Note Payable Stockholders' Equity Common Stock Preferred Stock Additional Paid in Capital Accumulated Earnings (Deficit) Total Liabilities and Stockholders' Equity
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Statement of Cash Flows STATEMENT OF CASH FLOWS ($000's) Cash Flow From Operating Activities Net Income (Loss) Add Non-Cash Expenses: Depreciation Expense (Increase) Decrease in Accounts Receivable (Increase) Decrease in Inventory (Increase) Decrease in Prepaids and Other Assets Increase (Decrease) in Payables and Accruals Net Cash Provided (Used) by Operating Activities
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
2,251
5,339
9,559
13,660
18,040
56
98
168
182
200
(900)
(954)
(893)
(972)
(1,027)
(180)
(191)
(179)
(194)
(205)
(18)
(19)
(631)
(236)
(250)
144
227
1,634
709
750
1,352
4,500
9,659
13,148
17,507
Cash Flow From Investing Activities Purchases of Property, Plant, & Equipment
(352)
(144)
(344)
(68)
(92)
Net Cash Provided (Used) by Investing Activities
(352)
(144)
(344)
(68)
(92)
Cash Flow From Financing Activities 3,000 Proceeds (Repayment) of Financing -
-
-
-
-
Net Cash Provided (Used) by Financial Activities
3,000
-
-
-
-
Net Increase (Decrease) In Cash
1,000
4,356
9,315
13,080
17,416
Cash - Beginning of Period
3,000
4,000
8,356
17,671
30,752
Cash - End of Period
4,000
8,356
17,671
30,752
48,167
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Contact Information: Michael Nofal, CEO (626) 372-9346 [email protected]
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ULTIMATE TANK CLEANING UTC, Inc. BUSINESS PLAN NuOil Energy, Inc. 12/1/2011
$3 Million Business Plan
DISCLAIMER The information contained herein (the “Plan”) was prepared to assist interested parties in making their own evaluation of Ultimate Tank Cleaning, Inc. (the “Company”) and does not purport to be all-inclusive or to contain all of the information that may be required to evaluate a transaction with the Company. While the information contained herein is believed to be accurate, no representation or warranty is made by the Company as to the accuracy, reliability, or completeness of this Plan. In all cases, interested parties should conduct their own investigation and analysis of the Company and the data set forth in this Plan. The Company expressly disclaims any and all liability for any representations (whether expressed or implied) contained in, or any omissions from, this Plan or any other written or oral communication transmitted to the recipient in the course of the recipient’s evaluation of the Company. The only representations and warranties made by the Company will be set forth in a definitive agreement approved by each party in its sole discretion. This Plan includes certain statements, estimates, and projections provided by the Company that reflect management’s views regarding the anticipated future financial and operating performance of the Company. Such statements, estimates, and projections reflect numerous assumptions concerning anticipated results. As these assumptions may or may not prove to be correct and there are numerous factors which will affect the Company’s actual results (many of which are beyond the Company’s control), there can be no assurance that any projected results are attainable or will be realized. The Company’s actual results may differ materially from those set forth in this Plan. Accordingly, no representations are made as to the accuracy or reasonableness of such statements, estimates, or projections.
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TABLE OF CONTENTS 1. Executive Summary………………………………………………………………….. 4 2. Investment Highlights……………………………………………………………….. 5 A. Value Proposition B. Strong Customer Base. C. Backlog and Customer Traction. D. Green Technology Solution E. Large, Growing Target Markets F. Fragmented Competition G. Risk Factors 3. Funding: Use of Proceeds………..………………………………………………… 10 4. Company Overview……………………………………………………………………. 10 A. Company Background B. Market Size C. Product & System Description D. Competitive Advantages E. Payback Analysis F. Service Capabilities G. Growth Strategy H. Competing Technologies I. Competition J. Facilities K. Management Team 5. Financial Projections and Projected Returns……………………………….17 A. Financial Projections Revenue Model Market Share Income Statement Balance Sheet Statement of Cash Flows B. Breakeven and Cash Burn Analysis
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1. EXECUTIVE SUMMARY Ultimate Tank Cleaning, Inc. (“UTC” or “the Company”) is a “to be formed” Texas corporation headquartered in Houston, TX. Upon securing an Agreement for funding the corporation will be formed as a subsidiary of NuOil Energy, Inc., a California corporation. NuOil Energy, Inc. founders have worked in the Oil and Gas Industry for over 200 years and have tremendous experience and contacts with all levels of customers including refineries, Independent, Major, and National Oil and Gas companies worldwide. The founders have put together a very strong management, support, and employee group that has a tremendous amount of experience in the tank cleaning industry. The Company’s plan is to spearhead the oil and gas cleaning service industry by introducing its Green superior products and technologies. The Company products and system will become the Green Chemical System Solution of choice due to its superior economics and greener presence. Currently, the sludge in tanks is cleaned by manual labor where the sludge is broken up and hauled away as hazardous waste. The UTC Proprietary Chemical Cleaning Service Technology & System will be used in oil and gas company’s oil fields, terminals, and refineries for reclamation of sludge into saleable oil from pipelines and tanks, and for stimulation of fluid flow from oil and gas wells (onshore & offshore). Based on Clean Chemistry Technology, the System is far beyond industry safety standards. It can be easily classified as eco friendly, or “green”, as it is powered by 100% safe or biodegradable products, low emission equipment, and highly trained personnel. The “Green” Cleaning Composition is used for treating Oil & Gas wells, lines, casings, equipment, storage tanks, and other applications for ultimate cleaning. The System can also be used in the tar sands industry and in the process of separating excess water or sludge from recovered crude oil and as a stimulation and injection system for oil and gas recovery. Each site (tank, well, line, etc.) is a new custom-made solution, designed to match each client’s needs. The System reconstructs heavy waxy sludge into fluid crude oil. There is no direct cleaning with human labor. The Company has an exclusive license agreement with the chemical manufacturer for the above applications and the chemicals will be private labeled for the Company. The Company management has been working for the last 2 years to position the Company for “out of the gate” growth upon receiving funding. The management has been working with a Petrobras refinery in Texas to secure a contract for cleaning the first tank. A Company test and technical proposal has been accepted by the refinery and a commercial proposal is now being reviewed. The NuOil Energy, Inc and UTC, Inc. Confidential
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refinery has provided data on a second tank to be cleaned. The Company is working on the proposal for the second tank. The refinery has shown a strong interest in the working with the Company and has expressed their desire to use the Company chemical system to clean their tanks (110 tanks at this one refinery) to reclaim crude oil from the sludge which they can process in the refinery into saleable products rather than dispose of the sludge as hazardous waste. The Company management strongly believes that it can penetrate the large available market at a rapid pace based on the initial feedback the Company has received from prospective customers and experts in the Industry about the superiority of the Company products and system over the competitors. The Company is seeking $3 million of debt or equity capital (or a combination) to grow the Company. The Company projects the following annual Revenues and EBITDA:
$ Year Year Year Year Year
1 2 3 4 5
Revenues 9.7 Million 19.9 Million 33.4 Million 45.2 Million 57.7 Million
EBITDA 3.5 Million 8.3 Million 14.7 Million 20.8 Million 27.3 Million
The forecasted Year 5 Revenue is derived from less than 1% of the total available market. The projected Year 5 company value using a 4 to 6 times multiple of EBITDA is between $100 million and $150 million.
2. INVESTMENT HIGHLIGHTS A. Value Proposition This plan presents a unique and rare opportunity. Turning build-up sludge in hundreds of thousands of tanks and pipelines into saleable oil will turn a costly hazardous material situation into a clean, green, economical situation for refineries, oil depot & terminal operators, and oil and gas companies worldwide. Also, the ability to maximize cash flow from oil wells by use of innovative, yet proven, new oil service “green” cleaning system technologies will enhance companies bottom line. In a world of booming technology, this is an exceptionally rare window of opportunity to replace archaic (century age) core cleaning systems & equipment, used widely to this day by the world’s largest industry, with twenty first century technology, with proven direct contribution to the bottom line. The oil industry is ripe and thriving for this change. There are millions of Oil Barrels being burned or buried everyday without recovery from its natural state from the current old cleaning operation worldwide. This opportunity will target millions of existing wells, tanks, NuOil Energy, Inc and UTC, Inc. Confidential
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terminals, and pipelines worldwide along with thousands of new wells every year; a $10 billion annual market. B. Strong Customers The worldwide customers are some of the biggest companies in the world which include Independent, Major, and National Oil and Gas Companies along with large private companies that own refineries, oil depots and terminals, pipelines, and tank farms. The company is now dealing with a National Oil Company, Petrobras of Brazil, on one of their refinery tank farms in Texas. Petrobras owns refineries around the world that have thousands of tanks. 1. Refineries An oil refinery or petroleum refinery is an industrial process plant where crude oil is processed and refined into more useful petroleum products, such as gasoline, diesel fuel, asphalt base, heating oil, kerosene, and liquefied petroleum gas. Oil refineries are typically large sprawling industrial complexes with extensive piping running throughout, carrying streams of fluids between large chemical processing units. In many ways, oil refineries use much of the technology of, and can be thought of as types of chemical plants. The crude oil feedstock has typically been processed by an oil production plant. There is usually an oil depot (tank farm) at or near an oil refinery for storage of bulk liquid products. There are over 700 refineries worldwide (150 in the U.S.) owned by large private companies and National, Major and Independent Oil and Gas Companies companies that have a need for the UTC cleaning technology system. (Oil and Gas Journal). Some of the largest refineries in the U.S. are owned by British Petroleum, Marathon, ExxonMobil, Hovensa LLC, Citgo, Sunoco, Chevron, Shell, Pemex, Petrobras, PDVSA, Valero, Total, and ConocoPhillips. Other refinery owners include Flint Hill Resources, Petro Star, Tesoro, Alon Oil, Cross Oil, Lion Oil, Gulf Atlantic, Kern Oil, San Joaquin Refining, Paramount Petroleum, Coffeyville Resources, Frontier, McPherson, HDG International, Motiva Enterprises, Murphy Oil, Placid Refining, Cenex Oil, Nustar, Hess, Holly Corp., Husky, PBF Energy, Sinclair, United Refining Co., Lyondell, Stratnor, Some of the largest international refineries are owned by Reliance Petroleum, CRP, SK Energy, GS Caltex, ExxonMobil, Saudi Aramco, S-Oil, KNPC, Shell, Citgo, Marathon, British Petroleum, Rosneft, Gazprom, Bashneft, Petrobras, Total, Pertamina, Nippon, Petrobras, Pemex, Surgutneftegas, Sunoco, ConocoPhillips, Valero, Saras, Irving, and Ecopetrol. 2. Oil Terminals An oil depot (sometimes called a tank farm, installation, or oil terminal) is an industrial facility for the storage of oil and/or petrochemical products and from which these products are usually transported to end users or further storage facilities. An oil depot typically has tankage, NuOil Energy, Inc and UTC, Inc. Confidential
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either above ground or underground, and gantries for the discharge of products into road tankers or other vehicles (such as barges) or pipelines. Oil depots are usually situated close to oil refineries or in locations where marine tankers containing products can discharge their cargo. Some depots are attached to pipelines from which they draw their supplies and depots can also be fed by rail, by barge and by road tanker (sometimes known as "bridging"). There are hundreds of oil depots worldwide. Most oil depots have road tankers operating from their grounds and these vehicles transport products to petrol stations or other users. An oil depot is a comparatively unsophisticated facility in that (in most cases) there is no processing or other transformation on site. The products which reach the depot (from a refinery) are in their final form suitable for delivery to customers. In some cases additives may be injected into products in tanks, but there is usually no manufacturing plant on site. Modern depots comprise the same types of tankage, pipelines, and gantries as those in the past and whilst there is a greater degree of automation on site, there have been few significant changes in depot operational activities over time. One of the key imperatives is Health, Safety and Environment (HSE) and the operators of a depot must ensure that products are safely stored and handled and that there are no leakages (etc.) which could damage the soil or the water table. The ownership of oil depots falls into three main categories:
Single oil company ownership. When one company owns and operates a depot on its own behalf. Joint or consortium ownership, where two or more companies own a depot together and share its operating costs. Independent ownership, where a depot is owned not by an oil company but by a separate business which charges oil companies (and others) a fee to store and handle products. The Royal Vopak from the Netherlands is the largest independent terminal operator with 80 terminals in 30 countries.
Most airports also have their own dedicated oil depots (usually called "fuel farms") where aviation fuel (Jet A or 100LL) is stored prior to being discharged into aircraft fuel tanks. Fuel is transported from the depot to the aircraft either by road tanker or via a hydrant system U. S. Oil terminal customers include American River Trans, Canal Barge, Chemserve (Allied), Chevron, Gateway Terminals, Houston Fuel Oil, IMTT, Innovation Fuels, Kinder Morgan, LBC, Magellan, New Haven, NuStar, Oiltanking, Omega Partners, Petroleum Fuel, Southwind Maritime, Stolthaven, Tanco, Valero, Vopak, and Westway.
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3. Oil and Gas Fields There are tens of thousands of oil fields worldwide that have a tank farm for separation of the water and oil. These tank farms require the same cleaning of sludge as refinery tank farms. These oil and gas fields are owned by independent, major, and National Oil and Gas Companies worldwide including Petrobras, Pemex, YPF, Repsol, ENI, Kuwait Petroleum Company, Aramco, PDO, Pertamina, Caltex, PDVSA, Gasprom, Chevron, Exxon, Shell, Valero, BP, ConocoPhillips, Marathon, etc. Many of these same oil and gas fields require stimulation of the formation to increase the oil flow from the wells. The UTC chemical system can provide the needed stimulation for these wells. C. Customer Traction There is a pending Petrobras proposal and contract for cleaning tanks at a refinery in Texas. The technical proposal has been accepted by the refinery. The commercial proposal is now pending. The refinery has also given the Company data regarding a second tank for cleaning and has indicated that they need more tanks cleaned. The company management has very strong contracts at the highest levels of Petrobras, along with strong contacts with the National Oil Companies in Mexico, Argentina, Venezuela, Ecuador, Peru, Colombia, Kuwait, Oman, UAE, Saudi Arabia, Egypt, Algeria, Libya, India, Indonesia, Russia, China, Romania, and Italy. The company management also has high level contacts with major and independent oil and gas companies in the U.S. and Canada such as Chevron, Exxon, Shell, BP, ConocoPhillips, Marathon, Oxy, Devon, Chesapeake, Valero, Kerr McGee, St. Mary’s, Apache, Anadarko, Husky, Encana, Suncor, Talisman, Canadian Natural Resources, and Imperial.
D. Green Technology Solution 1. Current issues:
Parrafin and asphaltene tubular buildup. Pipeline pugging. Corrosion. Scaling and emulsions. Near wellbore skin damage. Excessive pressure and reduced injection volumes on disposal and pressure maintenance wells.
2. Company Solutions and results:
Cutter stock blends with sludge/oil in tank to create stable emulsion.
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Nearly 100% of oil recovery is possible. So, you can think of the System as an oil recovery solution that just happens to leave you with a clean tank. Cleaning almost always pays for itself and yields significant additional revenue. Tank bottom sludge is usually 90% oil. The System performance is outstanding in tanks with sludge depth ranging from 1 to 28 feet. Immediately recovers oil from sludge in tank bottom for return to refinery. Faster and safer than other chemicals and systems (low risk procedures). Tried and tested. Non-flammable shipping classification. Hydrocarbon recovery. Minimum waste and product loss. Timesavings. Minimizes disruption. Black water segregation. Clean & de-gassed tank. Minimal solids in centre.
NOW YOU E. Large, Growing Target Markets There are hundreds of thousands of tanks and pipelines in refineries, terminals, and oil fields worldwide that require cleaning. Millions of oil and gas wells worldwide would benefit from chemical stimulation. Tens of thousands of new oil and gas wells are drilled each year. F. Fragmented Competition No other company is currently using a proven chemical system to clean tanks. The company plans on legally and linguistically protecting the UTC system making it difficult for competitors to copy. G. Risk Factors 1. Dependence on Key Personnel
The Company’s initial success depends to large extent upon abilities and experience of its key personnel, specifically its managing founders. The Company’s ability to grow rapidly and meet its objectives depends on the broad knowhow and experience of its management team, who are also the Company’s founders. The aggregate skills and experience of the founders’ team covers every business and technical aspect of the new Company, minimizing the need to seek top leadership talent for at least the initial growth phase. It is the management’s clear objective and intention to minimize the dependence of the Company’s growth and success on individuals by embedding their knowledge into a robust organization of newly hired personnel along with an efficient information management system.
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2. Industry Conditions
The Company's revenues and earnings are affected directly by the worldwide level of oil and gas industry activity. The level of such activity is affected by many factors over which the Company has no control, including, among others, the market prices of oil and gas, the volatility of such prices, the levels of production by OPEC and other oil and gas producers, governmental regulation and trade restrictions, the level of worldwide economic activity, political stability in major oil producing areas, the development of alternate energy sources and the long-term effect of worldwide energy conservation measures, all of which could adversely affect the Company's business and operating results. 3. International Operations
A portion of the Company's business operations will be conducted in international markets, including South America, the Asia Pacific region, Middle East, Eastern Europe, Canada and Mexico. In addition to the risks inherent in the chemical cleaning business, the Company's international operations are subject to certain political, economic and other uncertainties, including, among others, risks of war and civil disturbances, expropriation, nationalization, termination of existing contracts, taxation policies, foreign exchange restrictions and fluctuations and other risks arising out of foreign governmental sovereignty over certain areas in which the Company conducts operations. Although the Company seeks to protect against some of these risks through insurance, insurance is not available for all types of risks or for all areas in which the Company operates.
3. FUNDING: USE OF PROCEEDS The Company seeks $3 million of debt and/or equity financing. Proceeds will be used to reach cash flow positive during the first year. The following provides a breakdown of the sources and uses of the transaction. ANY OVERVIEW
Uses of Investment Funds: Operating expenses: $ 1,000,000 Working capital: 800,000 Capital expenditures: 1,000,000 Contingency: 200,000 Total: $ 3,000,000 4. COMPANY OVERVIEW
3. SERIES D
A. Company Background NuOil Energy, Inc and UTC, Inc. Confidential
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The management team of UTC has an average per person of 25 years experience in the oil and gas industry including chemical & tank cleaning, operations, production, equipment, service. The management team has contacts thru out the oil and gas industry worldwide and is using many of those contacts to grow the operations of UTC. Over the last several years the management team has been working directly with North and South American Oil and Gas companies to secure their business. As a result of these efforts Petrobras, the National Oil Company of Brazil has provided an opportunity to UTC to clean tanks at their Pasadena, TX refinery. This opportunity has led to the start-up of UTC. B. Market Size There are more than 700 refineries worldwide (150 in the U.S.) with an average of 200 tanks per refinery equaling 140,000 tanks. The average price to clean a tank is $500,000 making the refinery tank market a $7 billion market. There are hundreds of terminals and oil depots worldwide that contain hundreds of tanks in each terminal. There are over 10,000 oil and gas fields, and 1.2 million oil and gas wells with 70,000 new wells drilled each year. Each oil and gas field contains storage and separation tanks. Many of the oil and gas wells could use chemical stimulation to increase production. C. Product and System Description
The Company chemical cleaning products were born “green” as it was designed to protect its users. Amber, Non DOT restricted, Non flammable, Non Explosive, the chemical product is a very powerful dispersant that covers successfully a wide range from medium to high molecular weight paraffins. It’s a Multi-functional / fast acting sludge remover from plugs, tank bottoms, pipelines, wells, and flow-line blockages. The product faces up the toughest problems of Paraffin/Asphaltene deposits. Its outstanding solvency, water wetting, penetrating and dispersing properties within a short time and soak cycle, hence, make the cleaning product quite suitable for batch and squeeze applications and stable enough for oil field and refineries applications. SYSTEMS FOR STORAGE TANKS, TANK LINERS, BARGES SHIPS, ETC. 1. The system consists on attaching sets of stingers through man ways; even on every 45°around the tank when necessary for the project. Pull from water draw hook-ups Closed loop system 01 low-pressure, high-vol. pump NuOil Energy, Inc and UTC, Inc. Confidential
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NG 2. Add Cutting Stock (LCO or Diesel Fuel) and inject our Cleaner. 3. Create a vortex within the tank to dissolve the sludge.
Sludge, asphaltene, and paraffin are common residues on oil storage and transport tanks. Often a deep cleaning is needed to bring back operative levels for the tank itself, tank pumps and valve. Dirty tanks store less, overload pumps, clog valves, and lines.
The System works at molecular level of wax crystals changing size, shape, and density.
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The chemical melts sludge, asphaltene, and paraffin back into crude oil and segregates water.
In addition, brings back a clear tank and high quality water free production line refinery ready oil.
D. Competitive Advantages
Up to 80% increase in oil recovery, enabled by exceptional efficiency and inherent oil treatment optimization capability. Up to 50% decrease in operating product consumption, with the opportunity to eliminate the use of external manpower when a tank has to be scraped at the end of each job, or a tremendous amount of several different products are used to clean a pipeline or a well.
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Comparable or less standard chemical cost, with significantly favorable cost of ownership due to lesser costs of manpower, transportation, operation, pit rental well and equipment maintenance to keep the lines clean and flowing. Based on the above, the Return on Investment is relatively fast; being measured in months and sometimes-in weeks. Full innovation with equipment stingers blending a Green Chemical and recovering the clean oil in a modern friendly environment on any industry service situation. Exceptional reliability and time & money saving. Significantly lower cost, small footprint compared to other hot treatment equipment. A leading team that has led the development and evolution of the technology since its inception. The team masters every technical, operational, and financial aspect of the business. The technology has been presented to the highest reputable Refineries and Oil Companies world experts. All experts have agreed that the technology comprises the greatest potential to replace existing technology.
E. Service Capabilities It is recommended treating this type of tank by injection of chemical and circulation to promote contact and solubility. This method of treatment will reduce the manpower requirements, reduce the project cleaning time, and offer an economical benefit to the customer. By safety standards this system will allow the effective removal and recovery of liquid hydrocarbons. There will be NO ENTRY into the tank’s atmosphere prior to a final degassing treatment. This minimizes the danger to personnel working in confined spaces with tank internal environments containing flammable vapors with high LEL’s, hydrogen sulfide and/or hazardous materials. Upon completion of the service, the tank will have a minimal amount of residual bottoms (insoluble) remaining, a maximum amount of hydrocarbons will have been recovered as a refinable or sellable crude oil and the tank will be in a safe condition for final “sweeping” or cleanup as required. Once the solids have been removed and containerized, the final wash down of the tank will be completed. Monitoring will occur throughout the cleaning with analysis occurring for LEL, H2S and other parameters. F. Customer The Company management has very good contacts at high levels within the Petrobras organization to secure the first and continuing business. The Company also has contacts with distributors, representatives, and agents worldwide as well as National, Major, and Independent Oil and Gas companies worldwide. All owners of refineries, oil depots and terminals, oil and gas fields, tank farms, pipelines, and tar sands operations are potential customers. G. Growth Strategy NuOil Energy, Inc and UTC, Inc. Confidential
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The Company intends to service tanks, pipelines, and oil wells in refineries, oil fields, and loading & unloading oil terminals that will utilize its innovative solution, thereby leverage its initial investment. The superior productivity of the Company’s innovative service provides to the investors an outstanding opportunity to generate a tremendous additional source of recurring cash flow and wealth. The Company will initially focus on the U.S. market starting with Texas, Oklahoma, Louisiana, and California. The second stage of growth will cover the rest of the U.S., Canada, Mexico, and Brazil. The third stage of growth will cover the rest of the international community.
H. Competing Technologies Tanks are currently cleaned by manual labor where the sludge is broken up and removed from the tank and disposed of as hazardous waste. I.
Competition
Small to medium sized companies such as Evergreen and Midwestern. All of the competitors use manual labor to clean the tanks rather than chemicals. J. Facilities The Company is located in Pasadena, Texas at a 7,000 Sq. ft. office and warehouse facility. K. Employees A known strong and experienced team made up of operations manager, production manager, foreman, safety manager, maintenance manager, and crew will be employed by the company. L. Management The Company is led by a team of first class professionals. The team represents (a) a record of exceptional synergies of talents, skills and experiences (b) a multi-year excellent record of productive teamwork and high-level contacts with Oil and Gas Industry National & Major Oil Cos. (c) a combined Executive experience of over a hundred years in the oil and gas industry, product development, operations, business development, and financial management. (d) an unmatched combination of specific knowledge and experience of every technical and business aspect of the technology, and (e) a highest level of professional and personal ethics. Toni Lopes, CEO
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Mr. Lopes brings excellent Sr. Executive business development, sales, executive management skills, and over 25 years of hands on experience in the oil and gas industry specifically oil and gas equipment and chemical cleaning. Tremendous experience and high level contacts in Latin America and the Latin American Oil and Gas Industry. Michael Nofal, President, and CFO Mr. Nofal brings over 30 years of Sr. Executive (CEO, CFO, Sr. VP) experience in business management, financing and worldwide sales, & business development. He was one of the pioneers of the development of hydraulic rod lifting, with 20 years of business development, financing, oil field operations, oil and gas equipment sales, fund raising, and sales in this market. During his long career in the oil patch industry he has developed a broad network of domestic and international contacts and strong relationships with major domestic and international oil companies. Jacob Mail, COO Jacob Mail brings 36 years of engineering and operations experience, with focus on design, testing, and commercialization of hydraulic systems in the aerospace, automotive and oil industries. Mail built and managed modern high volume industrial organizations from ground to highest quality standards. Mike Christiansen, VP Mike Christiansen is one of the first few pioneers of hydraulic rod lifting technology. For over 20 years he participated not only in the evolution of every detail of this technology, but also built, fielded, and operated hydraulic rod lifting pumps in oil fields. His knowledge and hands on experience of hydraulic oil pumping technology and its application in the oil field, combined with his deep knowledge of the oil patch, make him one of a handful of world experts in this field. Fred Haase, Consultant Dedicated results driven senior management professional with over 25 yrs. experience in a broad background in design and building of terminals and tank cleaning equipment. Extensive experience in Sales and Marketing as well as Vendor Management. Also proficient in project management and a team-building concept, using individual skills to drive results. Held progressively more responsible positions as Terminal Manager, Oiltanking, and Manager-Terminal Operations, Allied Chemical Corporation. Also served in the U.S. Navy. Reinaldo Varela, VP Over 20 years experience as an Executive in the Oil and Gas Industry with major oil and gas equipment and service companies. Contacts with Oil and Gas customers in Major and National Oil and Gas Companies worldwide.
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Dean Webster, Consultant Experience as a Sr. Executive in the Oil and Gas tank cleaning business. Major contacts with customers throughout the tank cleaning industry. Developer of a unique tank cleaning application, M. Board of Directors The Board of Directors is made up of the founders who are seasoned professionals from the Oil and Gas Industry and Chemical Cleaning Industry. Additional Directors will be added.
5. FINANCIAL PROJECTIONS AND PROJECTED RETURNS A. Financial Projections UTC management over the last several years has laid the foundation to position the company for substantial “out of the gate” growth during the first year of operation. UTC has been working with a Petrobras owned refinery (“PRSI”) in Pasadena, TX to contract for the cleaning of their tanks. A UTC technical and commercial proposal has been accepted by PRSI and a contract for the first tank cleaning will be entered into. The first contract will be for $530,000 with 1/2 paid at the time of the contract signing and the balance within 30 days after job completion. PRSI has over 110 tanks with many needing cleaning, and UTC has already received PRSI information on a second tank that PRSI is requesting a proposal.
Revenue Model In the Revenue forecast an average contract price is $450,000. It is forecasted that the first revenue will occur in the first 3 months of operations from a pending contract with Petrobras for a tank in a refinery in Texas. It is forecasted that 19 tanks will be cleaned in the first 12 months of operations. Thereafter, 43, 70, 92, and 114 tanks will be cleaned in the following years 2 thru 5 respectfully. Market Share The forecasted numbers of units and annual revenue is a very small percentage of the total market; less than 1% of the market. B. Breakeven and Cash Burn Analysis
Breakeven is projected to occur after the 6th month of operations. NuOil Energy, Inc and UTC, Inc. Confidential
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Income Statement STATEMENT OF OPERATIONS ($000's)
YEAR 1
Revenues Sales Total Revenues COGS % of Revs.
YEAR 2
9,756 9,756 3,902 40%
YEAR 3
19,931 19,931 7,972 40%
YEAR 4
YEAR 5
33,418 33,418
45,239 45,239
57,739 57,739
13,367 40%
18,096 40%
23,095 40%
Gross Profit
5,853
11,958
20,051
27,143
34,643
Operating Expenses Payroll Outside Services Benefits Facility SG&A Depreciation & Amort. Total Expenses
1,114 223 38 909 56 2,339
1,884 377 42 1,344 98 3,745
2,811 562 44 1,927 168 5,512
3,308 662 46 2,285 182 6,482
3,842 768 50 2,645 200 7,504
Operating Income
3,514
8,214
14,539
20,661
27,139
-
-
107
293
553
Pre-tax Income
3,514
8,214
14,646
20,954
27,693
Income Taxes
1,263
2,875
5,126
7,334
9,692
Net Income
2,251
5,339
9,520
13,620
18,000
Interest Income, net
MARGIN ANALYSIS Payroll Benefits Facility SG&A Depreciation & Amort. Operating Income Net Margin EBITDA
11% 2.3% 0.4% 9.3% 0.6% 36% 23% 3,570
NuOil Energy, Inc and UTC, Inc. Confidential
9% 1.9% 0.2% 6.7% 0.5% 41% 27% 8,312
8% 1.7% 0.1% 5.8% 0.5% 44% 28% 14,707
7% 1.5% 0.1% 5.1% 0.4% 46% 30% 20,843
7% 1.3% 0.1% 4.6% 0.3% 47% 31% 27,339
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Balance Sheet
BALANCE SHEET ($000's)
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
ASSETS Current Assets Cash Accounts Receivable Inventory Prepaids and Other Total Current Assets Other Assets Property, Plant, and Equipment Less: Accumulated Depreciation Property, Plant, and Equipment (net)
4,000 900 180 18 5,098 303 (6) 297
342
519
405
296
Total Assets
5,395
10,961
22,154
36,523
55,313
144 -
371 -
2,005 -
2,714 -
3,464 -
3,000
3,000
3,000
3,000
3,000
2,251
7,590
17,149
30,809
48,849
5,395
10,961
22,154
36,523
55,313
8,356 1,854 371 37 10,618 351 (8)
17,671 2,747 549 668 21,635 687 (168)
30,751 3,718 744 905 36,118 586 (182)
48,167 4,746 949 1,155 55,017 496 (200)
LIABILITIES AND STOCKHOLDERS' EQUITY Payables, Accruals & Deferrals Note Payable Stockholders' Equity Common Stock Preferred Stock Additional Paid in Capital Accumulated Earnings (Deficit) Total Liabilities and Stockholders' Equity
NuOil Energy, Inc and UTC, Inc. Confidential
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Statement of Cash Flows STATEMENT OF CASH FLOWS ($000's) Cash Flow From Operating Activities Net Income (Loss) Add Non-Cash Expenses: Depreciation Expense (Increase) Decrease in Accounts Receivable (Increase) Decrease in Inventory (Increase) Decrease in Prepaids and Other Assets Increase (Decrease) in Payables and Accruals Net Cash Provided (Used) by Operating Activities
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
2,251
5,339
9,559
13,660
18,040
56
98
168
182
200
(900)
(954)
(893)
(972)
(1,027)
(180)
(191)
(179)
(194)
(205)
(18)
(19)
(631)
(236)
(250)
144
227
1,634
709
750
1,352
4,500
9,659
13,148
17,507
Cash Flow From Investing Activities Purchases of Property, Plant, & Equipment
(352)
(144)
(344)
(68)
(92)
Net Cash Provided (Used) by Investing Activities
(352)
(144)
(344)
(68)
(92)
Cash Flow From Financing Activities 3,000 Proceeds (Repayment) of Financing -
-
-
-
-
Net Cash Provided (Used) by Financial Activities
3,000
-
-
-
-
Net Increase (Decrease) In Cash
1,000
4,356
9,315
13,080
17,416
Cash - Beginning of Period
3,000
4,000
8,356
17,671
30,752
Cash - End of Period
4,000
8,356
17,671
30,752
48,167
NuOil Energy, Inc and UTC, Inc. Confidential
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Contact Information: Michael Nofal, CEO (626) 372-9346 [email protected]
NuOil Energy, Inc and UTC, Inc. Confidential
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