StockGuru Special Report:Visit to Calgary – Part 5
Lexington Energy Services Inc. (OTCBB: LXES)
Lexington Energy and Cost Increases
Jeff Rubin, Chief Strategist and Chief Economist at CIBC World Markets, noted in December 2006, that conventional oil capacity dropped in 2005 for the first time in history and will continue to decline for the foreseeable future, despite soaring crude prices. This bodes well for the non-conventional resources such as the oil sands of Canada.
An issue often raised with regard to drilling is the fact that costs typically exceed those originally projected and to be certain this occurs in the oil sands of Canada. Historically the cost and time consumption are usually doubled as originally planned to bring on new oil sands supply. However, it is important to note that the cost story for non-conventional energy worldwide is the same in that they are doubled as well. This indicates that cost overruns
are not unique to Canadian oil sands projects.
In essence, the bottom line is that depleting the conventional oil supply, higher cost and time delays simply equate to higher crude prices. Producers have no choice at this point. Conventional oil supplies are disappearing. Lexington Energy provides the technology and the product to help maintain a low cost profile in the oil sands of Alberta.
Basis for Strong Recommendation of Lexington Energy Services, Inc.
John Pentony’s personal insights on Lexington Energy Services:
– Lexington Energy has no debt. This provides Lexington an incredible springboard once contractual revenue is booked. The energy service business is a capital intensive business and Lexington Energy has the capital to continue to produce revenue generating equipment.
– Lexington Energy has a contracted revenue generating contracts for over sixty-nine oil sands exploration wells that begin the first week of January.
– Some original shareholders have to date experienced a ten fold return. These shareholders participated before the company was public. This common
stock became eligible for trading on the OTC Bulletin Board on November 30, 2006.
– Nitrogen Generation Systems – Lexington Energy has designed a mobile nitrogen generation unit that can be transported to a site and generates a
continuous supply of nitrogen — on location — without any of the additional costs associated with liquid nitrogen systems. This is a whole business in itself, and should not be looked at as “just another project.” It is far from that. It is a business worthy of being a core business on its own
This mobile unit extracts nitrogen from the air and purifies it from its original 78 percent to 98–99.5 percent purity. The unit processes twice the volume of air to reach the critical minimum of 98 percent pure nitrogen needed for many applications.
Nitrogen, an inert gas, is used to stimulate wellbores. Currently liquid nitrogen is transported to jobsite in trucks and is then pumped under pressure via a high-pressure pump into a heat exchanger, which converts the liquid to a gas at the desired discharge temperature.
Liquid nitrogen has historically been disadvantageous to use because it is considerably more expensive to use than air and difficult to obtain in remote locations. Lexington has developed alternative sources of nitrogen gas for well servicing.
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