News Flash On The Aim Market Message Board

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Gold/Mining/Energy : News Flash On The Aim Market

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Nov 7 9:30 AM EST

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From: miningoz	4/29/2014 3:30:35 AM
	of 161

Potential is what makes Mercom Oil Sands (MMO:L) such an exciting play Oil from Canada’s huge oil sands deposits are a key part of North America’s energy security. The Keystone XL pipeline project, now waiting for final approval, is designed specifically to bring crude oil from the Athabasca Oil Sands in Alberta, Canada to refineries in the United States for use by American consumers. Mercom Oil Sands (MMO:L) , a UK company trading on the London AIM market, is but one of many companies aiming to capitalize by getting in on the ground floor of a brand new oil sands project located right in the middle of the rich Athabasca Oil Sands. Mercom is seeking a 50% stake in the Chard field, an area of nearly 20,000 acres of oil sands deposits that contains as much as 60 million barrels of recoverable oil. The Chard field is surrounded by other companies that are already producing large quantities of oil. There is an existing highway and rail line on the Chard property and nearby pipelines to carry oil south the Edmonton and from there to refineries in the United States. The oil is there. The pipelines are there. Assuming management is successful in closing the deal to acquire its 50% stake in the Chard oil sands leases, investors could make a killing. Mercom’s share of the oil available in the Chard leases could be worth as much as $1.8 billion. Now consider that Mercom has a market capitalization of US$3.12 million and has US$3.3 million in cash on its balance sheet. If Mercom can close the deal on the Chard oil sand property, it could turn that $3.3 million in cash into as much as $1.8 billion in crude oil for refineries in the U.S. That potential is what makes Mercom such an exciting play. Oil extracted from Canada’s oil sands is in high demand from U.S. refiners. Most of the refineries on the U.S. Gulf coast are built to use heavy oil as feedstock. This is exactly what Mercom will be able to deliver from the Athabasca Oil Sands. Oil from Canada’s oil sands has other advantages. It is priced at about a $30/barrel discount to the U.S. standard crude oil, West Texas Intermediate. That makes heavy crude oil from Canada the cheapest crude oil on Earth. Since U.S. refineries are already set up for heavy oil, there is plenty of demand for this cheap oil and not much competition from overseas refineries that use lighter crude. Oil from Canada is also secure; none of our hard-earned cash is going to unfriendly countries in the Middle East. A vast pipeline network already exists to carry Canadian oil to the U.S. If the Obama Administration eventually approves the Keystone XL pipeline, that will greatly increase the carrying capacity of the pipeline network and will bring oil from the Athabasca Oil Sands directly to U.S. refineries on the Gulf Coast.

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