Partnership with Native Son Holdings set to build refinery in North Dakota
Quantum Energy (ticker: QEGY) and Native Son Holdings announced that they plan to form a joint venture in order to construct and operate a 40,000 barrel per day (BOPD) refinery in Berthold, North Dakota. According to a press release from the companies, the JV will be known as “Quantum Native Processing Partners, LLC,” and will be owned by Quantum and Native Son Refining (NSR), a subsidiary of Native Son Holdings.
“Native Son Refining includes a team of engineers who have prepared a construction permit application for a 40 MBOPD facility that doubles our planned capacity. Teaming with NSR on a Berthold site accelerates our plans and is the equivalent of building two of our previously planned facilities,” said Quantum Energy Chairman Stan Wilson.
“Our engineers have successful prior experience with the North Dakota permitting process for refineries and we are excited to lend that capability to Quantum,” said NSR Managing Member Rob Monday. “This alliance with Quantum fast tracks our own previous plans for a 40 MBOPD refinery and is a welcome strategic event to our efforts.”
The companies’ press release also says that the partnership has been approached by a Canadian TSX company for a possible JV to build a 40 MBOPD facility in either Manitoba or Saskatchewan. The release does not indicate which company approached Quantum Energy and NSR, but the companies say talks are ongoing.
Low oil prices driving higher margins at refineries
Quantum Energy has signed two year Option Agreements with landowners in Berthold and Stanley counties of North Dakota, in addition to Baker and Fairview counties in Montana, for refinery sites as the company continues to expand its refining capacity. As much of the rest of the oil and gas industry feels the pressure of lower oil prices, the downstream segment has enjoyed strong margins on the back of lower oil costs.
In the past four years, the top four performing energy companies on the Standard & Poor’s 500 Index have been downstream companies: Tesoro Corp (ticker: TSO), Valero Energy (ticker: VLO), Marathon Petroleum (ticker: MPC) and Phillips 66 (ticker: PSX) according to Bloomberg.
All four have seen four-year share returns over 100%, with TSO showing returns of 350%. Refiners have benefited from low-cost feedstock, which is essentially landlocked since U.S. producers are prohibited from exporting crude oil. With nowhere else to sell their production, U.S. E&P companies sell their crude at a discount that might not be seen elsewhere.