Even the enemies of Randeep S. Grewal admire his enterprise savvy. Few might be stunned if the CEO of Green Dragon shows up some day on the Forbes magazine checklist of billionaires. His firm’s latest share providing on the London Inventory Change’s Aim, commencing with a market capitalization of US$525 million, was fairly the bold stroke, elevating a number of eyebrows. Green Dragon placed a bit more than 4.5 million shares, lower than 5 % of the company’s excellent shares, to lift $25 million. Randeep Grewal saved the remaining 95.2 percent of Inexperienced Dragon for himself.
Upon the company’s admission to the Purpose market Grewal remarked, “2007 guarantees to be a landmark 12 months for CBM and its contribution to the Chinese energy supply…This itemizing is an important and well timed milestone in our progress pushed technique.” The final time Grewal stooped to deal with the minor annoyances of the capital markets, he personally purchased up all of the shares of Greka Vitality Corp, then trading on the NASDAQ. Shareholders beloved him – he paid a sixty nine p.c premium for their shares in 2003. Greka delisted from NASDAQ and deregistered with the U.S. Securities Fee.
Since then, it has been harder to track Grewal’s latest accomplishments, however based upon the value of oil, his privately owned fiefdom is likely flush with money. In a 2002 news release, Grewal revealed the then-public Greka Vitality owned 800 million barrels of recoverable heavy gravity oil, which is good as feedstock for his asphalt refinery. That 12 months 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 sixty one % over the previous year. Excessive gasoline costs are driving major oil firms to squeeze more gasoline production out of their crude oil. In any occasion, Grewal simply gets wealthier with every new barrel of asphalt or crude oil his firm produces.
At the very least Green Dragon Gasoline is now publicly traded, offering shareholder participation. However, few shares are available to the general public. Grewal may be generous to shareholders at the tip of the day, however he is not parting together with his shares this early in the game. In his filing statement with Goal, the company noted that issuing additional shares to boost further cash would come as a last resort, or more delicately acknowledged, “… as appropriate under the circumstances.” Grewal would first flip to debt financings and different measures earlier than providing shareholders additional liquidity.
It’s not an accident the share price of GDG, which opened for buying and selling at US$5.56/share shortly rose to a current excessive of $6.60/share. A detailed study of Grewal’s final company explains the excessive confidence in Inexperienced Dragon Gas. Not to be confused together with his beforehand named Grewal Power, which is now called Greka Built-in, Green Dragon Gas is the father or mother firm of Hong-Kong primarily based Greka Energy. They hold five CBM manufacturing-sharing contracts with China’s state-owned CUCBM (China United Coalbed Methane Company). Green Dragon’s contracts are upon large tracts of land (greater than twice the dimensions of Rhode Island), which may potentially host 16.5 trillion cubic ft of methane fuel.
According to the Inexperienced Dragon Fuel web site, Grewal can also be chairman and chief executive of the California-based Greka Built-in, a company which is described as being “concerned in heavy oil and gas transportation, refining, actual estate and with pursuits in energy properties and refining belongings.” It’s Santa Barbara County’ largest onshore oil company with holdings in Bakersfield, Orange County and the Los Angeles basin, Greka operates virtually 70 onshore manufacturing, processing and transportation services in Santa Barbara (California), as properly because the Santa Maria Asphalt Refinery. It is similar one which produced 3400 barrels of asphalt daily during 2002.
Whereas others discuss a great recreation, Grewal excels at the power sport. In his final revealed interview which we were able to dig up (August 2001), Grewal explained precisely how he deliberate to make Greka Vitality a success story, i.e. promoting oil or utilizing it product asphalt and then sell asphalt, relying upon the price. And then he did. In a July 2002 information release, Grewal mentioned his company would have lengthy-term actions in China. And now it does – by way of Green Dragon Gasoline.
In explaining the corporate’s business plan, during his 2001 interview, Grewal unabashedly boasted, “We’re profitable at $10 oil. We’re profitable at $30 oil. We’re worthwhile at $2 fuel, and we’re worthwhile at $sixteen fuel.” He referred to as his asphalt plant “a natural hedge to fluctuating commodity costs.” It additionally provides consistent money move. And there is little doubt Grewal is ever extra worthwhile with crude oil selling around $70/barrel.
Steve Chase, Santa Barbara County’s deputy vitality director, who regulates Greka’s refinery (and has participated in fining Greka – see below), calls the corporate’s marketing strategy “absolutely good.” Chase praised Greka in a new Occasions newspaper article, explaining the company’s economics, “Oil sells both high or low, however asphalt does not. If you are an oil company with an asphalt refinery, you can promote into two totally different markets. When oil is low, you use it to make asphalt. When it is high, you (just) promote it.”
Regardless of Chase’s praise, Grewal’s highway to success has not been without just a few automobile wrecks along the way in which. In 2002 and 2003, his firm was cited for more than 70 violations, which included oil spills and fuel releases, in line with the Santa Barbara News-Press newspaper. The country’s district lawyer filed felony fees in opposition to Greka after an explosion near the asphalt refinery injured two staff. Greka settled for civil penalties of $200,000.
In November 2005, Greka Integrated lost its breach-of-contract lawsuit against a former safety supervisor, Gary Lowery. In June of this year, the U.S. Environmental Safety Company fined the company $127,500 for “unauthorized disposal of oil refinery wastewater into the ability’s injection wells, in violation of the federal Secure Drinking Water Act.” This Greka has paid out about $seven-hundred,000 in settlements since Grewal took the company personal. Life’s little annoyance grow to be less problematic when one is promoting oil for a lot more than $30/barrel. Particularly when this same oil was worthwhile at $10/barrel.
Grewal Turns to China to construct His Fortune
Randeep Grewal’s came into the vitality markets as chairman and chief executive of an oil and fuel horizontal drilling firm, Horizontal Ventures. Through the energy bear market, Grewal cleverly began a series of mergers and acquiring oil and fuel assets, which led to his first Greka Vitality Corp. He knew the place to search out deals and deftly began assembling his power empire. Horizontal drilling is integral to coalbed methane growth, which brings Grewal again to where he started – as a gas drilling company.
Also along the way, two of Grewal’s corporations have suffered bankruptcies. This past November, Saba Enterprises, formerly Greka Power Company, filed for Chapter 7 bankruptcy, after two creditors gained judgments totaling $19.5 million. In its petition the corporate introduced it had no belongings. The full creditor shortfall may rise to greater than $24 million. In 1999, one other firm of which Grewal was a director, Sabacol – a subsidiary of Saba Petroleum, was dissolved following the sale of its belongings after working its manner by means of Chapter 11 bankruptcy proceedings.
Life can be full of many second probabilities. This time, nonetheless, by means of Greka Vitality (Hong Kong) and Inexperienced Dragon Fuel (GDG), Grewal owns what would possibly someday develop into a multi-billion dollar fuel challenge. Smith & Williamson, Green Dragon’s IPO underwriter valued the corporate at $973 million, depending on its success in recovering GDG’s estimated methane gas in place and the wellhead price at time of supply.
Till not too long ago, coalbed methane was handled as a hazardous waste product which killed coal miners in tunnel explosions. In China, depending upon whose numbers you imagine, between four,000 and 6,000 coal miners die annually. At greatest, methane was an unwelcome byproduct of coal mining, which the Chinese vented into the environment aggravating an already atrocious air pollution crisis.
When the Chinese began to comprehend CBM was providing a greater proportion of the U.S. gas production, they wished to develop their own huge sources. After all, the Chinese language are pragmatists. Why pay by means of the nostril to import LNG, when you are throwing away all that methane? In 2004, coalbed methane accounted for 8 percent of U.S. gasoline manufacturing. That is the same share quantity China mandated in its eleventh 5-12 months plan for the function of fuel in its power combine. And as we have mentioned in previous articles, China has idled as much as forty p.c of its gasoline-fired plants as a result of it couldn’t acquire sufficient gasoline provides.
Methane or C4, which is a more pure gas than conventional gasoline, is found inside the carbon lattice of coal at a molecular degree. The much less “candy” pure fuel, which is discovered in additional conventional fields, was generated by hydrocarbon supply rocks and is trapped in a porous and permeable reservoir rock, reminiscent of carbonate reserve or sandstone. Water pressure holds coalbed methane in place, which required new drilling know-how, to effectively extract.
To extract coalbed methane, a company drills wells into the coal seam, after which perforates and fractures the coal seams. By growing permeability by this course of, water is ready to be pumped out of the coal seam. Throughout this de-watering course of, stress holding the fuel in place is lowered. This pressure differential vents the fuel through the fracture techniques into the well. Voila! What had been killing coal miners and polluting China’s environment could now be utilized to energy gasoline-fired vitality plants. ALL RIGHTS RESERVED.