DEPCO Ex Sum Final 8[1].23.07

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This document is for information only and is not an offering for the sale of securities of the Company. Information disclosed herein should be considered
proprietary and confidential. The document is the property of Delta Energy& Petroleum Co. and may not be disclosed, distributed, or reproduced without the
express written permission of Delta Energy & Petroleum Co. (DEPCO)
Overview
The petroleum refining industry currently has a great need for more refining capacity. Changing
economic, geographic, political, technological, and demographic conditions throughout the world have
created a demand for crude oil and petroleum products that is not being met.
Delta Energy & Petroleum Co. (DEPCO) will capitalize on this opportunity and respond to this
marketplace by refining petroleum products in the country of Guyana to be sold in Guyana, to satisfy
local needs, and to export all the excess downstream products on the international market. Because
Guyana is a Caribbean Community (“Caricom”) country, DEPCO has built in market share due to the
treaty that regulates the relationship between Caricom countries.1 DEPCO was incorporated in the
state of Delaware as a Corporation in 2006.
DEPCO will have the capability to refine petroleum products in Guyana, with the support of the
Government and state owned oil company (“Guyoil”), Texaco, Esso and Shell for the local market. All
Refined Petroleum products are sourced by the Guyana Energy Agency which is highly supportive of
this project thereby creating a virtual monopoly to purchase from a local refinery, DEPCO is confident
that all production output will be purchased on the international market due to the prevailing market
conditions, that demands an increase in Refining Capacity and our Caricom relationships thus
effectively mitigating off-take risk.2
Project Chronology
1
http://www.caricom.org/jsp/community/guyana.jsp?menu=community ; under this relationship community countries would be
required to buy products produced in other member countries before seeking to purchase products outside of the community.
2
See Exhibits - Trafigura off-take LOI page 16
2
DEPCO has located and secured a 36,000-barrel per day crude distillation unit (CDU) that has an
appraised value of approximately $35 million, in keeping with section 2 of the MOU.3 DEPCO will fulfill
its obligation that this unit will be upgraded to 55,000bpd in stages by installing a pre-flash column and
increasing the crude heater capacity. In total, the appraisal of this CDU along with all its ancillary
processing equipment refurbished, installed, and commissioned will have an estimated value of $550
million.4
A proposal is in place with Process Plant Equipment (PPE), for the managing, refurbishing, installation,
and commissioning of this refinery. DEPCO will obtain insurance on the refinery for the entire process,
from shipment until erection and operation.
DEPCO plans to ship out the first downstream products from the refinery within 18-24 months of
finalizing the financial arrangements. This will be accomplished concurrently while other processing
units are still being constructed, installed and fine-tuned.
The Management Team/Staffing
DEPCO management team includes several individuals whose expertise, talents, and backgrounds are
well established and represents over 100 years of professional experience within the petroleum
industry.5
Romeo Cipriani, the President-CEO of DEPCO, is a registered professional engineer with over 30
years of experience and a stellar reputation. He is particularly well known for his executive skills and
Project Management abilities at the HOVENSA refinery in St. Croix, USVI. Mr. Cipriani prior to
developing this project also operated his own Construction Company and Engineering Consulting firm
in the Virgin Islands.
Larry Kirkland will serve as the Operations & Maintenance Manager and will have the primary
responsibility for all operations, maintenance, and installation of equipment. Mr. Kirkland has over 38
years experience in assembling and operating instruments and is an electrical and mechanical
professional engineer. He has worked as a consultant to reputable firms such as Haliburton and
Bechtel
Amon Capps will be a Project Manager, and his primary responsibility will be processing, equipment
acquisitions, dismantling, refurbishing and shipping equipment. Mr. Amon Capps is a graduate
electrical engineer with over 36 years of experience. Emphasis is on process control technology and
instrumentation control. Mr. Capps has global experience in all production and refining, most
specifically in Venezuela.
Jerome Cipriani will serve as the processing manager/director and will have the primary responsibility
for all processing within the confines of the refinery, including but not limited to, the blending, and
training of all the processing operators. He has over 28 years experience in this field including
invaluable experience with Catalytic Crackers while working at the Hovensa refinery in St. Croix.
The Overall Market
The overall market for refined petroleum products in Guyana is approximately $295 million per year,
growing by about 2.5% per year.6 It is important to note that Guyana is already spending this money for
its refined product consumption. The undeniable propensity for demand to grow even higher and faster
3
See Exhibits – Government MOU page 18
Appraised value based on today’s refinery replacement cost of $10,000- $15,000 per barrel
5
Resumes attached in Exhibits – Pages 24 - 34
6
Source – information gathered from Guyoil
4
3
is there, through a discounted price facilitated by lower and non existent shipping cost for the local
consumption to be passed on to the consumers.
World oil demand is constantly increasing. Predictions of World liquids consumption in the IEO2007
reference case increases from 83 million barrels per day in 2004 to 118 million barrels per day in 2030.
Two-thirds of the increment is projected for use in the transportation sector. In the IEO2007 reference
case, world consumption of petroleum and other liquid fuels grows from 83 million barrels oil equivalent
per day in 2004 to 97 million in 2015 and 118 million in 2030. The demand for liquids increases strongly
in the projections, despite world oil prices that remain above $49 per barrel throughout the period.7
Our own market study confirms that, with agreements in place with the Government of Guyana and
Guyoil, DEPCO will emerge as the leader towards the marketing of petroleum products in Guyana, with
large secondary markets within Caricom and Northern Brazil.
Competitive Analysis in Guyana
There are currently no petroleum refining companies in the country of Guyana. DEPCO’s objective is to
fulfill Guyana’s needs for refined petroleum products by becoming the sole producer and distributor of
such products in the country. Both Trinidad and Venezuela, in close proximity to Guyana, have large
proven reserves and are exporters of petroleum products. Guyana is currently paying $120.54 a barrel,
which includes $5.38 shipping cost for each barrel of refined products imported into the country from
Trinidad. By using domestic labor and eliminating transportation costs of refined products, DEPCO will
be able to offer a discount on the price of refined petroleum products, putting us at a competitive
advantage. Our pricing policy will be fixed to the Gulf Coast Platts pricing for a barrel of refined
petroleum products without a premium.
As the price fluctuates, so will our wholesale price. With the present pricing structure DEPCO’s discount
coupled with no shipping fees, savings to local distributors currently importing these products will
amount to over $42M USD per year. This will be passed on to the consumers and the local economy.
Capacity, Development & Equipment
The commissioning of the refinery will be phased. In 15 months it is anticipated that phase 1 will be
producing some 20,000 bpd. In phase 2 within 21 months the plant thru-put should be 40,0000 bpd. In
phase 3 with the installation of additional heater capacity and a pre- flash column, the thru- put should
progress to a total production of 55,000 bpd. This will satisfy the domestic needs of Guyana as well as
allow the export of products to the Caricom, Northern Brazil, and International markets.
Through our strategic government alliances, we will develop products to meet the evolving needs of
Guyana. Equipment to be utilized at this facility to refine petroleum products, including a Crude
Distillation Unit (CDU), a Merox Unit, a Reformer, a Hydo-Cracker, a Vacuum Unit, and a Preflash
Column. Approximately 265 acres of land is required and over 800 acres has been pledged.8
Sales Forecast
Our sales forecast is predicated on the cost of crude oil as of July 17, 2007. At that time, Venezuelan
crude oil cost $72.10 a barrel and Brent cost $74.80 a barrel. The marketing price for our refined
product stream is based on Gulf Coast pricing for refined products. Unleaded gas was sold at $2.87 a
7
8
EIA "International Energy Oulook 2007" Report #:DOE/EIA-0484(2007) Release Date: May 2007)
See Exhibits – MOU starts page 18
4
gallon or $120.54 a barrel. We estimate the gross revenue of the goods sold to Guyoil, Texaco, Shell
and Esso, representing 25% of our down stream products.
Funds Required
To effectively launch the business, funding that is required is $300,000,000 (USD). The principal use of
the funds will be the purchasing of equipment, the dismantling, refurbishing, upgrading, and shipping of
said equipment, tank farm construction, and installation and operational costs. DEPCO has secured an
indicative letter from Quantek capital markets for $90 Million and is looking for senior debt in the
amount of $210 Million. We project that the company will be profitable in the second year of its
operation.
Risk Mitigation for Financing
•
At the end of the first 24 months post financing the refinery will be functional and producing
refined products with an appraised value in excess of $550 million.9
•
The primary customers (GUYOIL, SHELL, TEXACO and ESSO) have committed verbally to
purchase any locally manufactured product that meets the specifications and has the
appropriate discounts attached to the pricing once the plant is producing products.10
•
GUYOIL has issued a letter of intent to purchase and distribute DEPCO’s product output with
respect to the local market.11
•
The Guyana Energy Agency’s is mandated by statutes to source all refined petroleum products
thus creating a virtual monopoly for any refinery operating in Guyana.
•
The Company has identified and currently has an LOI from Apache Corporation to source all of
their crude requirements.12
•
The Company has an off-take proposal from Trafigura to purchase all our down stream products
beyond the needs of the local market.13
9
Based on today’s refinery replacement cost of $10,000- $15,000 per barrel
DEPCO anticipates the purchase of 25% of the refined product revenue stream to be sold to the local market.
11
See Exhibits – Page 35
12
See Exhibits – Page 37
13
See Exhibits – Page 16
10
5
Use of Proceeds
Financial Highlights
Net Profit
Net Cash Flow
Shareholder Equity
Year 1
Year 2
Year 3
Year 4
Year 5
$
(8,813,368.36)
$
11,169,876.34
$ (115,493,091.99)
$
$
$
$
$
$
$
$
$
$
$
$
45,612,813.99
55,093,447.39
(4,584,572.94)
211,772,550.38
166,294,917.28
198,377,104.45
215,474,609.13
166,294,917.28
413,214,774.86
219,444,290.02
166,294,917.28
631,976,081.81
Legal Structure
Delta Energy &Petroleum Co. (DEPCO) was incorporated in the state of Delaware as a “C” Corporation
in 2003 and re-incorporated in 2006. Presently the officers are Romeo Cipriani, President-CEO, and
Laurie Cipriani, Secretary-Treasurer. They are both US citizens. It is anticipated that officers will be
added, to accommodate the prospects of future financing structures and potential investors.
The company has also incorporated and registered a local company Crab Island Refinery Inc. (CIRI) in
Guyana in anticipation of financing.
6
Exhibits
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