Even the enemies of Randeep S. Grewal admire his business savvy. Few could be stunned if the CEO of Inexperienced Dragon shows up some day on the Forbes journal checklist of billionaires. His company’s current share offering on the London Stock Trade’s Purpose, commencing with a market capitalization of US$525 million, was fairly the bold stroke, elevating a few eyebrows. Green Dragon positioned a bit more than four.5 million shares, lower than 5 % of the company’s outstanding shares, to raise $25 million. Randeep Grewal kept the remaining ninety five.2 percent of Inexperienced Dragon for himself.
Upon the corporate’s admission to the Intention market Grewal remarked, “2007 promises to be a landmark 12 months for CBM and its contribution to the Chinese power supply…This itemizing is a vital and timely milestone in our progress pushed technique.” The last time Grewal stooped to deal with the minor annoyances of the capital markets, he personally bought up all of the shares of Greka Energy Corp, then buying and selling on the NASDAQ. Shareholders beloved him – he paid a sixty nine percent premium for their shares in 2003. Greka delisted from NASDAQ and deregistered with the U.S. Securities Commission.
Since then, it’s been more difficult to track Grewal’s newest accomplishments, but primarily based upon the worth of oil, his privately owned fiefdom is probably going flush with money. In a 2002 information launch, Grewal revealed the then-public Greka Vitality owned 800 million barrels of recoverable heavy gravity oil, which is right as feedstock for his asphalt refinery. That year Greka’s throughput was 3400 barrels of asphalt per day. In line with ABC Information, the state of California paid $359/ton for asphalt – up 61 percent over the previous 12 months. High gasoline prices are driving major oil firms to squeeze more gasoline production out of their crude oil. In any occasion, Grewal merely will get wealthier with every new barrel of asphalt or crude oil his company produces.
At the least Green Dragon Gasoline is now publicly traded, providing shareholder participation. However, few shares are available to the general public. Grewal could also be generous to shareholders at the end of the day, however he isn’t parting together with his shares this early in the sport. In his filing assertion with Aim, the company famous that issuing further shares to raise extra money would come as a last resort, or more delicately stated, “… as acceptable below the circumstances.” Grewal would first turn to debt financings and other measures earlier than offering shareholders further liquidity.
It’s not an accident the share value of GDG, which opened for buying and selling at US$5.56/share quickly rose to a recent excessive of $6.60/share. A detailed examine of Grewal’s last company explains the excessive confidence in Green Dragon Fuel. To not be confused along with his beforehand named Grewal Energy, which is now known as Greka Integrated, Green Dragon Gas is the father or mother company of Hong-Kong primarily based Greka Vitality. They hold 5 CBM manufacturing-sharing contracts with China’s state-owned CUCBM (China United Coalbed Methane Company). Green Dragon’s contracts are upon massive tracts of land (greater than twice the dimensions of Rhode Island), which might probably host 16.5 trillion cubic feet of methane gas.
In accordance with the Green Dragon Fuel website, Grewal is also chairman and chief govt of the California-primarily based Greka Integrated, an organization which is described as being “involved in heavy oil and gasoline transportation, refining, actual estate and with pursuits in energy properties and refining assets.” It is Santa Barbara County’ largest onshore oil firm with holdings in Bakersfield, Orange County and the Los Angeles basin, Greka operates virtually 70 onshore manufacturing, processing and transportation facilities in Santa Barbara (California), as effectively because the Santa Maria Asphalt Refinery. It is similar one which produced 3400 barrels of asphalt every single day during 2002.
Whereas others talk a very good game, Grewal excels at the energy game. In his final published interview which we have been in a position to dig up (August 2001), Grewal explained exactly how he deliberate to make Greka Energy a success story, i.e. promoting oil or utilizing it product asphalt after which sell asphalt, relying upon the value. After which he did. In a July 2002 information launch, Grewal mentioned his firm would have lengthy-term activities in China. And now it does – by means of Inexperienced Dragon Gasoline.
In explaining the corporate’s marketing strategy, during his 2001 interview, Grewal unabashedly boasted, “We’re profitable at $10 oil. We’re worthwhile at $30 oil. We’re profitable at $2 gasoline, and we’re worthwhile at $sixteen gasoline.” He known as his asphalt plant “a natural hedge to fluctuating commodity prices.” It additionally supplies constant money movement. And there’s no doubt Grewal is ever more profitable with crude oil selling round $70/barrel.
Steve Chase, Santa Barbara County’s deputy energy director, who regulates Greka’s refinery (and has participated in fining Greka – see below), calls the company’s business plan “completely good.” Chase praised Greka in a brand new Times newspaper article, explaining the company’s economics, “Oil sells both high or low, but asphalt doesn’t. If you are an oil firm with an asphalt refinery, you’ll be able to sell into two totally different markets. When oil is low, you use it to make asphalt. When it is excessive, you (simply) promote it.”
Regardless of Chase’s praise, Grewal’s street to success has not been with out a few automobile wrecks along the way in which. In 2002 and 2003, his firm was cited for greater than 70 violations, which included oil spills and fuel releases, in line with the Santa Barbara Information-Press newspaper. The nation’s district lawyer filed felony expenses in opposition to Greka after an explosion close to the asphalt refinery injured two employees. Greka settled for civil penalties of $200,000.
In November 2005, Greka Built-in misplaced its breach-of-contract lawsuit in opposition to a former security supervisor, Gary Lowery. In June of this yr, the U.S. Environmental Protection Company fined the company $127,500 for “unauthorized disposal of oil refinery wastewater into the facility’s injection wells, in violation of the federal Safe Drinking Water Act.” This Greka has paid out about $700,000 in settlements since Grewal took the corporate private. Life’s little annoyance turn out to be less problematic when one is selling oil for a lot more than $30/barrel. Particularly when this identical oil was profitable at $10/barrel.
Grewal Turns to China to construct His Fortune
Randeep Grewal’s got here into the vitality markets as chairman and chief government of an oil and gasoline horizontal drilling company, Horizontal Ventures. In the course of the vitality bear market, Grewal cleverly began a series of mergers and acquiring oil and fuel belongings, which led to his first Greka Power Corp. He knew the place to seek out deals and deftly began assembling his energy empire. Horizontal drilling is integral to coalbed methane improvement, which brings Grewal back to the place he began – as a gasoline drilling firm.
Additionally along the way, two of Grewal’s firms have suffered bankruptcies. This previous November, Saba Enterprises, previously Greka Vitality Company, filed for Chapter 7 bankruptcy, after two creditors won judgments totaling $19.5 million. In its petition the corporate introduced it had no assets. The entire creditor shortfall may rise to more than $24 million. In 1999, another company of which Grewal was a director, Sabacol – a subsidiary of Saba Petroleum, was dissolved following the sale of its assets after working its method by way of Chapter eleven bankruptcy proceedings.
Life can also be full of many second possibilities. This time, nevertheless, by way of Greka Energy (Hong Kong) and Green Dragon Fuel (GDG), Grewal owns what might sometime grow to be a multi-billion greenback gasoline mission. Smith & Williamson, Green Dragon’s IPO underwriter valued the corporate at $973 million, depending on its success in recovering GDG’s estimated methane fuel in place and the wellhead price at time of delivery.
Till lately, coalbed methane was handled as a hazardous waste product which killed coal miners in tunnel explosions. In China, depending upon whose numbers you believe, between four,000 and 6,000 coal miners die each year. At greatest, methane was an unwelcome byproduct of coal mining, which the Chinese language vented into the environment aggravating an already atrocious air pollution crisis.
When the Chinese language started to comprehend CBM was providing a better share of the U.S. gasoline manufacturing, they wanted to develop their own huge assets. After all, the Chinese language are pragmatists. Why pay by way of the nostril to import LNG, if you find yourself throwing away all that methane? In 2004, coalbed methane accounted for eight % of U.S. gas manufacturing. That’s the same proportion quantity China mandated in its eleventh 5-yr plan for the position of gas in its vitality mix. And as we have mentioned in previous articles, China has idled as much as forty % of its gasoline-fired plants because it couldn’t get hold of sufficient gas supplies.
Methane or C4, which is a more pure fuel than conventional fuel, is found inside the carbon lattice of coal at a molecular naphtha degree. The much less “sweet” natural gas, which is discovered in more typical fields, was generated by hydrocarbon source rocks and is trapped in a porous and permeable reservoir rock, corresponding to carbonate reserve or sandstone. Water pressure holds coalbed methane in place, which required new drilling expertise, to efficiently extract.
To extract coalbed methane, a company drills wells into the coal seam, after which perforates and fractures the coal seams. By increasing permeability by way of this process, water is ready to be pumped out of the coal seam. Throughout this de-watering course of, pressure holding the fuel in place is diminished. This strain differential vents the gas by the fracture methods into the effectively. Voila! What had been killing coal miners and polluting China’s ambiance could now be utilized to power gas-fired energy plants. ALL RIGHTS RESERVED.
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