Welcome to Beacon Equity Research. Today is Sunday, 20 January 2008
 Home   Covered Companies   News and Commentary   TraderNotes   Our Team   Ratings   Contact Us   Charity   Affiliates  
   
USA Superior Energy Holdings, Inc (OTCBB: USSU)
Untitled Document
USA Superior Energy Holdings, Inc. (USSU, The Company) is a development stage energy company focused on development, ownership, and operation of prospects and energy projects in East and Southeast Texas. The Company is targeting the application of nitrogen-based enhanced oil recovery technology to recharge and produce oil and gas from under-pressured partially depleted reservoirs. This process reduces the risks involved in exploring for oil and gas and decreases the exploitation risks and expenses.
USSU is composed of a team of experts in their field, highly qualified with over 200 man-years of oil and gas field experience; from finding to drilling, well completion to operations and production, to problem solving, seasoned with success
During the 2007, the Company acquired oil producing Bateman & Dale McBride project in Texas and plans to use the Nitrogen and CHHD technology to increase the daily production rates to 10 barrels of oil per well. In addition, USSU have partnered with Generon Division of Innovative Gas Systems, Inc. to combine the Company's proprietary technology and Generon's equipment to have the nitrogen generating equipment at no capital cost.
USSU was founded in 2005 and became publicly traded in 2007.
A business model focused on innovative technology to increase the oil recovery rates
USSU is leveraging its innovative nitrogen enhanced oil recovery process to recharge and produce oil and gas from under-pressured partially depleted reservoirs. When an oil reservoir is discovered, the initial natural pressure found underground (natural flow) typically produces from 10% to 40% of the oil found in the reservoir, leaving 60% to 90% of the oil still in the ground. USSU's technology injects nitrogen under pressure (secondary production) into the well to help artificially pressurize and pump additional oil out of the reservoir. Primary and secondary production can produce from 60% to 90% of the oil in the reservoir.
In addition, the Company focuses development and utilization of complimentary technologies to oil, like the cased hole horizontal drilling to increase the "communication" from the wellbore to the fluids in the reservoir; and the XIOM process to be used as a protective coating.
High oil prices revitalize the exploitation of historically uneconomic oil and gas reservoirs.
Increasing demand for oil, supply/demand imbalances, declining inventories and geopolitical instability will keep crude oil prices high through 2008. Prices for benchmark West Texas Intermediate (WTI) crude are projected to increase from an average of $66.02 per barrel in 2006 to $71.36 per barrel in 2007 and to nearly $80 per barrel in 2008. West Texas Intermediate (WTI) crude was trading near $100 per barrel in November 2007, however decreased to $87 per barrel in the first days of December.
In today's price environment, many of the historically uneconomic wells and reservoirs that were abandoned may now be profitable to develop. Historically, in shallow tight reservoirs, heavy oil sands, and small marginal reservoirs in low prices environment it was not cost effective to attempt to remove the volumes of oil. Therefore, the large volumes of oil were left in reservoirs all across the US. These previously discovered, but poorly exploited oil fields lie ready to be producing, if the right technology, at an economic cost can be applied.
Joint Venture Agreement to implement the strategy of increased production without significant capital expenditures
In 2005, USSU purchased an 80% interest in a joint venture Superior Energy, LLC with the Generon Division of Innovative Gas Systems, Inc. a producer of custom designed nitrogen and instrument air membrane generator units. In exchange for 20% of the cash flow, Generon provides to the joint venture the nitrogen generating equipment at no capital cost. The joint venture, Superior Energy, LLC was created to utilize USSU's nitrogen gas generation technology to enhance oil and gas production on a property in Navarro County, Texas. We believe, the Company will use the same Joint Venture
mechanism for other projects, thus sharing with partners the required capital expenditures to establish a secondary production process.
A number of technology advantages indicate an attractive ROI
Unlike CO2 pressuring technology, the USSU's nitrogen based technology is environmentally friendly, adaptable to large and small reservoirs, requires limited equipment to capture and transport since nitrogen is sourced from the air we breathe.
In addition, field experience over a 6-year period has shown a 2-4-fold increase in production with only a slight increase of water production at a nitrogen usage of 1-4 MCF for every barrel of oil produced. At a cost of $4-8 for nitrogen produced and $85 per barrel of oil, this represents a very attractive return on investment.
6 exploration projects to prove the technology potential
Beginning with 2005, USSU have acquired interests into 6 operating projects, to prove the viability of its business model and technology potential. In February 2007, the Company acquired the 88 operating wells Bateman & Dale McBride project in Texas. The wells are 15 years old and have an average production capacity of 40 barrels of oil per day. USSU plans to increase production with the use of Nitrogen and CHHD technology and double-to-triple production rates with minimal financial efforts already in 2008. This project is likely to be used as a "poster child" of what USSU can do to older oil fields.
Revenue generating property to support technology rollout
The acquisition of Bateman & Dale McBride project in Texas has allowed the Company to report approximately 281 thousands in revenues during the first 9 months of 2007 and 91 operating wells as of September 30, 2007. Going forward, the expansion to 142 wells and implementation of enhanced oil recovery process at Bateman & Dale McBride and Navarro County projects should allow the company to report a production rate of 1420 BOPD (id. est. 10 BOPD per well). With these numbers achieved, the Company's 2008 revenue can exceed $32 million.
Seasoned management team
The management team of the Company has wide knowledge of the oil and gas exploration and exploitation industries. Collectively the team has nearly 200 years of experience and many of the members have worked with other companies in the oil and gas business prior to joining their efforts at USSU. Experience includes operations and completions for several thousand wells, several hundred well drilled, water flood and heavy oil production, etc.
Randy Holifield and Ben Terrel, field operations specialists at USSU are experts in the CHHD technology. Ben Terrel also holds a total of twenty-seven patents pertaining to down hole tools, mandrels and wire line tools.
Strong demand for oil and gas
World energy demand is expected to remain strong over the next few years. Population and economic growth, as well as technology improvements, are key determinants of oil and gas consumption. Given the tight oil market and global political instability, we anticipate the US-based oil and gas sources to become more valuable and the companies with significant reserves within the US to enjoy premium valuations.
In 2007, global oil demand is expected to increase by 1.3 million barrels per day (m bbl/d), mainly due to increased demands from China and the US. According to EIA, world oil demand in the fourth quarter of 2007 is forecasted at 1.8 m bbl/d more than fourth quarter 2006 levels. In addition, EIA projects world oil consumption to increase by 1.4 million bbl/d in 2008.
 

Fill out the form to
get regular FREE
information updates
on this and other stocks.
 
name

lastname

address

city

state

zip

phone
email



 
Copyright 2007 Beacon Equity Research