Economics

ECONOMICS OF MCW’S PROCESSING COSTS.

With the advent of slumping crude oil prices throughout the world, and with many major oil sands projects either being put on hold or cancelled outright, it’s important to note that MCW’s still attractive processing costs will be proportionately reduced due to lower costs for propane, condensate and diesel fuel required to process feedstock.

At the time of MCW’s original feedstock and processing estimates ( 2011 – 2012 ) oil was in the $ 100.00+ range, thus the costs for petroleum products needed for extraction were much higher.  A cost analysis prepared by Chapman Petroleum Engineering (Calgary, Alberta) in 2012 included a probabilistic model of operating costs which ranged from $ 24.51 USD/STB to $ 34.04 USD.STB, with the best estimate figure at $ 27.23 USD/STB.  These cost ranges were based on MCW receiving lower than average feedstock prices as a result of the long term feedstock supply contract signed with Temple Mountain Energy.

A recent OilPrice.com article focusing on MCW’s processing costs, questions… “Is MCW Oil Sands The Lowest Cost Unconventional Oil Play In North America?” (See link below.).  The article cites a 50% lower input cost for elements such as propane, diesel fuel and gas condensate which are used in the MCW oil sands/shale extraction process.  In addition, any cost born or accounted for by MCW to upgrade the 32 API oil to a 42+ API grade oil needed for easier transport is reduced roughly by 40 – 50% at $ 50.00 WTI from the original cost figures based on $ 90.00 - $ 100.00 WTI prices of the past two years.

Originally, MCW had assumed a much lower API oil (22 – 34) from the initial extraction plant, versus the light sweet 32 API crude actually being produced.  This product improvement has been accomplished by the enhancement of the extraction system, as well as retaining slightly more solvent in the end product.  OilPrice.com estimates for MCW’s total OPEX/CAPEX cost of oil produced would therefore range from 25% to 70% lower per barrel than most North American unconventional oil producing majors to the north in Alberta.

These cost estimates have obviously not as yet been proven as MCW readies for production from its initial plant in Asphalt Ridge.  And ideally, the Company’s profits would be greatly enhanced with oil prices back at $ 100.00 barrel, but even at $ 50.00 per barrel price levels, MCW can still achieve netbacks from $ 22.00 - $ 25.00 per barrel.

MCW’S PROCESSING COSTS WILL FLUCTUATE WITH PETROLEUM PRODUCT PRICES.

In January, 2015, MCW’s Chief Technology Officer, Dr. Vladimir Podlipskiy  provided the Company with a new set of production costs, which indicates a reduction of condensate prices by 50%, a reduction of solvent blends costs,  reduced costs of diesel fuel and propane prices by an average 40%, as well as a reduction of labour costs by 20%, due to streamlined and enhanced production stages of its proprietary extraction technology.  The reduced costs of the petroleum-based products reflect a production savings of 18%.  At the current sub- $ 50.00 USD barrel price of oil, these processing costs provide MCW with one of the most efficient oil sands extraction costs in North America.

As the world’s oil prices fluctuate over the balance of 2015, MCW will demonstrate that the Company can earn a good profit regardless of oil prices, while other oil sands projects will be delayed and/or cancelled outright.

Click here to read OilPrice.com’s MCW article, “Is MCW Oil Sands The Lowest Cost Unconventional Oil Play In North America?”