realizing the full potential from bitumen and … february 2013.pdfrealizing the full potential from...

Realizing The Full Potential From Bitumen and Heavier Crudes – IYQ Upgrading

February 2013

ETX Systems Inc. © 2013

AdvisoryAdvisory

This presentation contains statements that may constitute "forward-looking statements" within the meaning of applicable securities legislation. These statements include, among others, statements regarding business

strategy, beliefs, plans, goals, objectives, assumptions or statements about future events or performance. By their nature, forward looking statements are subject to numerous risks and uncertainties, some of which are

beyond ETX System's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, environmental risks, competition from other industry

participants, lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in

the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect and, as such, undue reliance should not be placed on forward looking statements. Actual results,

performance or achievement could differ materially from those expressed in, or implied by any forward looking statements in this presentation, and accordingly, no assurance can be given that any of the events anticipated

by the forward looking statements will transpire or occur, or if any of them do so, what benefits ETX Systems will derive there from.

All of the forward-looking information and statements contained in this presentation are qualified by these cautionary statements. The reader of this presentation is cautioned not to place undue reliance on any forward-

looking information and statements. ETX expressly disclaims any intention or obligation to update or revise any forward-looking information and statements, whether as a result of new information, events or otherwise,

except in accordance with applicable securities laws.

Non-Solicitation

This presentation does not constitute or form part of any invitation, offer for sale or subscription or any solicitation for any offer to purchase or subscribe for any securities of ETX nor shall they or any part of them form the

basis of or be relied upon in connection therewith or act as any inducement to enter into any contract or commitment with respect to such securities. The information contained herein was not prepared in connection withbas s o o be e ed upo co ect o t e e t o act as a y duce e t to e te to a y co t act o co t e t t espect to suc secu t es e o at o co ta ed e e as ot p epa ed co ect o t

an offering of securities and in no way constitutes an offering memorandum for the purposes of applicable securities law. Further, this presentation is for informational purposes only and must not be used or relied upon for

the purpose of making any investment decision or engaging in any investment activity.

Neither ETX nor any of its directors, officers, employees, agents or advisors make any representation or warranty in respect of the contents of this presentation or otherwise in relation to ETX or any of its respective

businesses. In particular, no representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information or opinions contained herein, which have not been independently

verified. No person shall have any right of action (except in case of fraud) against ETX or any other person in relation to the accuracy or completeness of the information contained in this presentation. The information

contained in this presentation is provided as at the date hereof and is subject to amendment, revision and updating in any way without notice or liability to any party.

Certain information contained herein has been prepared by third-party sources. The information provided herein has not been independently audited or verified, by ETX. ETX has used its best efforts to ensure the accuracy

and completeness of the information presented.


Executive Summary – IYQ Upgrading by ETX Systemsy pg g y y Emerging technology for Primary Upgrading (coking) of heavier crudes

Industry-altering ability to maximize yield of premium refinery feedstockP t t t t d ith l t d i t l f t i t Patent protected, with lower cost and environmental footprint

Progressing final development step - a 1,000 bpd Field Pilot

Growth in oil sands requires significant new investment in coking capacity Growth in oil sands requires significant new investment in coking capacity $75+ million / day of upside currently being forfeited with “dilute and ship” New coking capacity is required to address structural basis for collapse

IYQ Upgrading is positioned to capitalize Addresses pricing, pipeline and environmental challenges to future growth Unlocks $10/bbl of new value with every barrel of bitumen processed Unlocks $10/bbl of new value with every barrel of bitumen processed


The Role of Coking Technologiesg g

Primary Upgrading: Converts non-distillable “bottom” portion of a crude oil barrel into refinery feedstock, rejecting impurities in the process Heavy oil and bitumen contain more non-distillable components than light oil Coking is particularly important for getting full value from heavier crudes

Production Primary Upgrading

Secondary Upgrading Refining

100

50

PitchDistillate +Gasoil

0Percent

PUG t it h f ti Sulfur


PUG converts pitch fraction

4

Coking Landscape Delayed Coking: currently the over-whelming choice of industry

Mature, with decades of commercial experience, but far from “ideal” Fails to maximize liquid yields, impairing economics and increasing q y , p g g

environmental impact of bringing heavier crude to market IYQ Upgrading has been rigorously benchmarked against delayed coking

Significant increase in distillable liquids from same barrel of feedstock Lower Capital Operating costsLower Capital, Operating costs

5 ETX Systems Inc. © 2013

IYQ Upgrading – How We Do Itpg g

Patented IYQ Upgrading approaches “ideal” coking Combination of two commercially proven technologiesCo b a o o o co e c a y p o e ec o og es

Plug-flow dryers Fluid bed coking

Fl idi tiFl idi ti

Cool

Liquid feedLiquid feed

H t

Fluidization gasand reaction products

Fluidization gasand reaction products

IYQ Upgrading closes the gap

Fluidization gas

Cool solids

Hot solids

80

90

100

(wt%

)

Gas

60

70

80

Delayed Coking "Ideal Coking"

Yiel

d Coke

Liquid


ETX Executive

Gerard Monaghan (PEng, MBA), CEO A decade of front line experience with Syncrude / Exxon ER&E Leading edge exposure to advances in fundamental understanding of

Upgrading science Wayne Brown (PEng, PhD), CTO

25 f i h t ti d ti t ti d l t 25 years of experience orchestrating and executing top tier development Demonstrated track record through staff positions with both industry

(Syncrude) and academia (McGill) Awarded 2011 ASTECH Prize for Innovation in Oil Sands ResearchAwarded 2011 ASTECH Prize for Innovation in Oil Sands Research

Bernie LeSage (MEng, MBA), COO 30 years of experience in technology development and commercialization Significant international marketing and operations experienceg g p p

Combined 40 years of experience covering most major Integrated Oil Sands projects


The Team

Demonstrated ability to align with world class individuals and organizationso ga a o s

Independent Directors George Crookshank

Energy Consultant Keith MacLeod

President, Sproule AssociatesPresident, Sproule Associates Sean Monaghan

President, Promac Industries Randy Ollenberger

Managing Director Research BMO Managing Director, Research, BMO


Incremental Benefits – An Oil Sands Examplep Relative to delayed coking, IYQ Upgrading provides:

$10+/bbl of new value for every barrel processed Direct 9% reduction of upstream environmental intensity metrics

$1+ Billi f i t l NPV f t i l i l ll t $1+ Billion of incremental NPV12 for typical commercial rollout

$12

IYQ Advantage vs. Delayed Coking*

$8

$10

ue $

/bbl

$4

$6

Incr

emen

tal V

al

$0

$2

Liquid Yield Advantage

Operating Advantage Capital Advantage Netback Advantage

* When processing whole Athabasca bitumen, $75 WTI


Development ActivitiesDevelopment Activities

Conception Feasibility Process Piloting C i li tiConception Feasibility Process Development

Piloting Commercialization


Field Pilot ProjectField Pilot Project

Last development step is to execute a 1,000 bpd Field Scrubber, pPilot project to demonstrate operability of IYQ Upgrading

“Hot box” from 1,000 bpd Field Pilot Design Basis Memorandum

• Carrying $95 million as all-in cost, based on Design Basis Memorandum completed in 2012 for a Central Alberta

Heater

2012 for a Central Alberta location

• Expect significant support ReactorExpect significant support from Government, based on advanced discussions

Reactor


Why Invest in Primary Upgrading (Coking)?Why Invest in Primary Upgrading (Coking)? The next big opportunity in Oil Sands Investment! Have reached a “tipping point” for continental coking infrastructure

Increasing ability to source suitable feedstock (linked to oil sands growth) has overwhelmed current and planned coking capacity

Until balance is restored, incremental bitumen is stranded, pricing is distressed Expect premium investment returns from new coking projects over this period

95.0%

100.0%

2,500,000

3,000,000

Day

US Coking Capacity Versus Coking Inputs

80.0%

85.0%

90.0%

95 0%

1,000,000

1,500,000

2,000,000

,500,000

Util

izat

ion

ls P

er C

alen

dar D

70.0%

75.0%

-

500,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Bar

rel

Year

Ability of refiners to source discounted feed increases as Utilization exceeds 90%


Capacity Actual Capacity Forecast Inputs Actual

Inputs Forecast Actual Utilization Forecast Utilization

Opportunity Continues to Growy

Increasing demand for refined products and robust economics for increasing supply of heavy oil will drive new investment in coking

Coupled with limited ability of coking infrastructure to accommodate currentCoupled with limited ability of coking infrastructure to accommodate current supply, expect massive investment over extended periods to bring market back into balance “Golden Age of Upgrading”

10 000

15,000

20,000

on (M

bbl/d

)

Global Heavy Oil Production

4,000

5,000

6,000

(Mbb

l/d)

Canadian Oil Sands Production

0

5,000

10,000

2010 2015 2020 2025 2030 2035

Pro

duct

io

North America South America 0

1,000

2,000

3,000

2010 2015 2020 2025 2030

Pro

duc

tion

(

Hart Energy 2011 Long Term Scenario 2012 CAPP Crude Oil Forecast

Europe, Russia,& Central Asia Asia Pacific

Middle East Africa

2010 2015 2020 2025 2030

Oil Sands Mining Oil Sands In-Situ


Why ETX and IYQ Upgrading?Why ETX and IYQ Upgrading?

Team, Technology, and Timing

Team: Dedicated and Award winning Fundamental grasp of science, front line exposure to Industry needs Demonstrated ability to steward and leverage capital over the past ten years

Technology: Doing more, with less. Getting 9% more refinery-ready feedstock from a given barrel of bitumen Less capital and operating cost

I d l i bili ff $10/bbl d i i h d i i i d Industry-altering ability to effect a $10/bbl reduction in the crude pricing required to support break-even economics for oil sands development

Timing: Positioned to capitalize on next big wave of Oil Sands Investment 100+ commercial coking projects (50 000 bpd) are required to support forecast growth 100+ commercial coking projects (50,000 bpd) are required to support forecast growth

of heavy oil, ETX only needs to convert on one of these (with 10% retention of value created) to recover development costs.

Opportunity to convert on additional commercial rollouts provides significant upside


Bitumen Pricing: How Low Can It Go?g New coking investment is incented by heavy oil discount Despite global crude oil benchmarks that have consistently traded at $100+/bbl in

recent years, bitumen at the well head currently receives only a fraction of thisy y y At current prices Western Canadian Producers are forfeiting $2- $3 billion / month

to midstream / downstream entities


Inherent Value in Bitumen Inherent value of bitumen is unlocked with well contemplated strategy to link new

bitumen supply to motivated refiners While indications are that it may not last, recent pricing of Mayan crude (global

benchmark for heavy crude) is indicative of this inherent valuebenchmark for heavy crude) is indicative of this inherent value Better technology for coking (IYQ Upgrading) can add significantly to this inherent

value

100

120

140

Heavy Oil Pricing Potential

40

60

80

100

US$

/bbl

0

20

ay-1

987

ar-1

988

n-19

89ov

-198

9p-

1990

ul-1

991

ay-1

992

ar-1

993

n-19

94ov

-199

4p-

1995

ul-1

996

ay-1

997

ar-1

998

n-19

99ov

-199

9p-

2000

ul-2

001

ay-2

002

ar-2

003

n-20

04ov

-200

4p-

2005

ul-2

006

ay-2

007

ar-2

008

n-20

09ov

-200

9p-

2010

ul-2

011

ay-2

012


Ma Ma

Ja No

Se J u Ma Ma

Ja No

Se J u Ma Ma

Ja No

Se J u Ma Ma

Ja No

Se J u Ma Ma

Ja No

Se J u Ma

Brent Mayan

Market for New Coking CapacityMarket for New Coking Capacity

Strong economic case emerging to consider new coking capacity in lower cost jurisdictions in Alberta (Sturgeon County, Peace River ...) Ability to eliminate requirements to source diluent Ability to address heavy oil discount and maximize ROI Ability to reduced imposition on takeaway infrastructure (pipelines) Motivated Government with an ability to improve access to financing for

new Upgrading investment

Case is aided by the fact that US Refiners are focused on shale oil opportunity rather than new investment to process heavier crudes


ETX Revenue ModelETX Revenue Model

Focus on maximizing market penetration rather than maximizing retention of upside

Licensing to entities that are set up to assume role of “project developer” Target 10% retention of upside for initial capacity

Joint Venture with entities that require or desire assistance in project set up Technology farm in, resulting in equity share in project

Ro alt E it

Technology S

ETX

Licensing Joint Ventures

Royalty

Technology S

ETX Equity

Support

Project Support

Licensing Joint VenturesSupport

Project Support


pppp

Valuation and Returns - – A Licensing Example

Assume successful field pilot, 25 million share float, NPV12

Incremental ~$1 Billion upside with each 1% market penetrationIncremental $1 Billion upside with each 1% market penetration Technology royalty allows ETX to retain a portion of upside

450

300

350

400

150

200

250

300

NA

V ($

) / S

hare

10%

20%

30%

Upside Retained

0

50

100

150


00 5 10 15 20 25 30 35 40 45 50

Market Penetration (%)

SummarySummary

The “dilute and ship” strategy that has underpinned current development of oil sands and heavy oil supply Western Canada is bustedof oil sands and heavy oil supply Western Canada is busted Strategy failed to provide for critical infrastructure required to support pricing

After a successful Field Pilot, IYQ Upgrading by ETX will be wellAfter a successful Field Pilot, I Q Upgrading by ETX will be well positioned to become the patent protected backbone of a far more robust strategy designed to maximize returns from production of heavier crudes Returns from commercial capacity expected to justify multi-fold returns to new

investors

ETX is focused on financing and executing this Field Pilot to unlock value f h h ld d h i f i d t i blfor shareholders and usher in a new era of economic and sustainable development of heavy crudes.


realizing the full potential from bitumen and … february 2013.pdfrealizing the full potential from...

Documents