Gulf Basin Petroleum Recycling Company Lube Oil Recycling
Gulf Basin Petroleum Recycling Company Lube Oil Recycling and Re-refining
Company Overview • Focus • • Near-Term Plan • • Mgmt. Team • • Provide petroleum based environmental services to Gulf Basin industries Recover used oils and re-refine to generate valuable base lube oil and other refined products To develop the capability to recycle used oils having a high level of contaminants Construct a new, state of the art, 30 MM GPY used oil recycling /re-re-refining plant in Bienville, MS Utilize the rail and barge capabilities of Port Bienville Extensive experience in used oil re-refining operations, used oil collection, commercial, civil and industrial construction Exceptional track record in building and growing business across a wide range of industries 2
Vision & Mission Our Vision Our Mission To become the leading used oil re-refiner in the Gulf Basin and partner of choice to existing used oil collectors and generators of used oils. To make a significant and lasting contribution to the environment and to sustainable development. To aid in the economic recovery of the Gulf Region 3
Used oil re-refining is a compelling business opportunity Timely opportunity for growth and regional domination Exceptional Financial returns • • Favorable supply and demand chain • • There is currently over 1 billion gallons of used oil available for rerefining in the US. Approximately 25% of used oil is currently re-refined in the US (the rest is burned for energy recovery) versus nearly 80% in Europe There is adequate volume and opportunity to build several rerefineries across the US as logistics favor decentralized operations We want to be a dominant player in the Gulf Basin Used oil re-refining margins are very attractive – an EBITDA Margin of ~$1/gallon processed is very achievable Margins have been very stable historically as base oil is a high value special commodity IRRs of 30% + unlevered is achievable Suppliers of used oil (collectors) are extremely fragmented and rerefineries offer the best value for their collected oil Structural changes in natural gas availability and pricing have eroded the traditional customer base for collectors Lube Blenders are very interested in re-refined base oil as marketers like Valvoline are expanding the market for re-refined 4 lube oil
More than a billion gallons of used oil is available for re-refining US Lubricant Market (2. 5 B GPY) Re-refined Oil (290 MM GPY) Used Oil Generated (1. 6 B GPY) Used Oil Collected (1. 2 B GPY) Asphalt, Cement Kilns Rerefineries 5 Improper Disposal (400 MM GPY) Fuel Blending
Used oil volume – Million Gallons/year US market is in the early stages of development 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1200 MM GPY 620 MM GPY 120 910 500 290 USA Europe 6 USA 1. 2 billion gallons collected 290 million re-refined 8 Plants operating 3 Plants announced Europe 620 million gallons collected 500 million re-refined 28 Plants operating No new plants announced
There is ample room for new rerefineries in each regional market 7
The feedstock supplier (collector) market is extremely fragmented USED OIL COLLECTION n The collection market in the US is highly fragmented and estimated to include ~400 companies nationwide providing collection & recycling services n There is only one national company (Safety- Kleen) & approximately 30 significant regional Companies; the balance of the industry participants are small “Mom & Pop collectors n These small companies typically sell their used oil to Industry as an alternative to virgin fuels n Burning used lubricants is a poor use of the material from both an environmental and economic perspective n Used oil generators would prefer to have 8 their used oil recycled TOP 10 US COLLECTORS (MM GPY) Company Annual Volumes Safety-Kleen 180 ~ 200 Primary Service Area National FCC 75 ~ 80 Mid Atlantic / Gulf Coast United Solutions 30 ~ 40 North Central Thermo Fluids 70 ~ 80 Intermountain West De. Menno / Kerdoon 40 ~ 50 California Universal Lubricants 20 ~ 30 Midwest Inter Gulf Corporation 25 ~ 30 Southwest Universal Environmental Svcs 30 ~ 35 Southeast Lorco Petroleum 15 ~ 25 Northeast Aaron Oil 20 ~ 25 Gulf Coast
Supplying re-refineries is the best option for collectors • Majority of collectors are now selling into lower margin burner markets as an alternative to virgin fuels • Collectors are experiencing erosion of margins – Lower cost of natural gas – “Warm mix” asphalt reducing demand for fuel – General economic malaise • Due to margin squeeze, small collectors are losing market share to collectors with re-refining capability or access to higher paying markets such as fuel blending, exporting. • More re-refining capacity is needed to support used oil collectors • Most collectors desire to get into higher margin re-refining but don’t have the resources or expertise to go it alone – Capital cost of re-refining equipment – Lack of technical expertise to operate a re-refinery 9
Strengths • Constructed, commissioned & • operated a • re-refinery • Have the team & execution capabilities to grow Have significant Business experience over a wide rang of industries • • Have constructed, commissioned and operated a re-refinery in Chester, SC Team has significant expertise in building and operating oil collection and fuel processing facilities. Established customers for all re-refinery products Understand the challenges and opportunities in the business We have a very strong and experienced management and operations team to grow the business across multiple locations Lessons learned from prior operations and commissioning experience give us a strategic advantage for technology selection and commissioning of plants • Expertise in government, military and government bid contracts • Managed and Directed operation of construction firms operating across the globe • Managed and directed used oil collection company • Managed and directed fuel recovery company 10
The time is right to build re-refineries in the US CONSCIOUSNESS n n ATTRACTIVE ECONOMICS Increased public awareness of the harmful effects of unregulated disposal of waste on the environment and on the health of its citizens Increasing consciousness on recycling and people’s willingness to pay the same or more for recycled products n Increase in crude oil prices and tight supply of virgin lube oil n Payback period for re-refining is now less than 4 years. n Re-refined base lube sells at a discount of around ~10% to virgin base lube Propelling Growth GOVERNMENT INITIATIVES n n TECHNOLOGY IMPROVEMENTS Several national, international regulations are in place for collection and processing of used oil US DOE targets by 2015, 1. 0 -1. 2 B GPY to be re-refined. This will require a tripling of current capacity in the U. S. Thus, rerefining in the US is a phenomenal growth opportunity 11 n Through continuous development, the technology has improved and is cost effective. Several players are successfully using the company’s planned equipment set n Used oil collection systems have improved, partly through government initiatives
Lubricant Market Overview • Lubricating oils are largely (75 -95%) made of base oils, a mineral oil produced at an oil refinery; The balance would be additives, which are used to improve the lubricant’s performance • It takes approximately 2 barrels (84 gallons) of crude oil to produce 1 gallon of virgin base oil • The US Market represents 25% of global Lube Oil consumption, which total global consumption of approximately 10. 3 billion per annum Demand, Billion (Gallons /Year) Per Capita Demand (Gallons / Year)* United States 2. 5 8. 4 Latin America 0. 8 1. 8 Europe 2. 8 6. 9 Middle East 0. 5 3. 1 Africa 0. 5 0. 7 APAC 3. 2 09 -5. 3** Total 10. 3 1. 7 • Annual US sales of Lubricants between 20042010 have been relatively flat at ~ 2. 5 Billion Gallons, due to the link between economic growth – net new vehicle sales and manufacturing equipment sales, offset by extended intervals in oil changes. Region • There are vast differences in per capita consumption – United States 8. 40 Gallons; Asia 0. 80 Gallons; Western Europe 3. 47 gallons 12
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