Juan Costello: Good day from Wall Street. This is Juan Costello, senior analyst with The Wall Street Reporter and joining us today is Alex Gress, Chief Financial Officer for Canadian Oil Recovery and Remediation Enterprises Limited. The company trades on the TSX Venture, ticker symbol is CVR as well as on the OTCQX, ticker symbol is CRVYF. Thanks for joining us today Alex.
Alex Gress: It’s our pleasure. Thanks for having us to speak with you and your listeners.
Juan Costello: Great, anytime now. Starting off, please give us a history and overview of CORRE for some of our listeners that are new to the story.
Alex Gress: Absolutely. CORRE is an operating company that is focused on the oil waste management sector. Specifically, CORRE owns and operates equipment that cleans oil-contaminated soil, treats sludge, and does automated oil storage tank cleaning. As part of all of these operating processes, it also recovers oil.
Taking a step back and looking at the market size for these services, the World Bank has estimated that in the Middle East alone, which we all know is a great source of oil production, represents a hundred billion over the next ten years. Whenever there’s oil production, there is contamination.
There are a couple of short-term opportunities available for a company like CORRE which I’ll talk a bit more about later in the interview as well as the strategy that we have in place to go after these. But for now, take one country alone in the Gulf Region such as Kuwait. Kuwait alone represents over the next couple of years three and a half billion of future contract values for soil remediation services.
A majority of this work is coming from the clean-up of something that we all know about from history. The 1991 Kuwait Gulf War. Unfortunately at that time when Iraq pulled out of Kuwait, they detonated something like 798 oil wells. And that resulted in up to nine months of constant oil contamination.
Some of the stats that are available to us show that up to five million barrels a day at certain times spilled into the desert. Now, what that’s left in Kuwait today is approximately 115 square kilometers of oil-contamination and this has been called the Kuwait Oil Lakes. It’s obviously a mix of dry lakes which is just pure sand contamination and literally oil lakes.
So what’s happened over the last couple of years is as a result of the United Nations and funding for war reparations. There is currently an excess of three and a half billion that’s available for Kuwait now to use towards the clean-up of these oil lakes. This money has been put into place and is fully funded.
CORRE is one of the handful of companies that has actually been pre-qualified. This is a pretty important factor that we’re actually pre-qualified meaning that we’re able to directly bid or tender for these contracts. We expect the contracts to start coming out in early 2011. The point there is you have a large and growing market but in the short term, there are immediate opportunities that are available for a company like CORRE.
Juan Costello: Great. And can you update us on the ARES I?
Alex Gress: Sure. Well that’s one of our competitive advantages and talking specifically about ways to treat oil-contaminated soil and recover oil. ARES I is a proprietary operating facility that cleans oil-contaminated soil at a rate of 15 tons per hour and in the process, recovers oil and recycles water. From an environmental perspective has a low environmental impact. It also has a relatively low operating cost.
From all of our diligence and from our awareness of what will be required in some of these large-scale contracts, particularly in Kuwait, ARES I and more specifically soil washing is considered a preferred technology for these upcoming clean-up contracts. CORRE has invested into our first-generation ARES I in excess of millions of dollars in order to fully commercialize the facility and take it through its paces.
ARES I just completed several months of what we call internal optimization which means that it cleaned and recovered oil against a whole host of different levels of contaminated material in Kuwait. So our ARES I is, as I spoke about today, commercialized, well-positioned physically in Kuwait, and is attracting a lot of attention because of its technology and its cleaning capabilities right now.
Juan Costello: Well great. And so can you talk about some of the other trends right now in your sector and how well-positioned you believe that CORRE is to capitalize on them?
Alex Gress: Sure. Well one of the most important things to think about is this is a business that is scalable relatively quickly and there are currently available to CORRE some high value, large-scale contracts. In order to go after these contracts, as CORRE is a relatively early-stage company, albeit with strong operating facilities in place, CORRE has aligned itself with international and well-know operating partners.
CORRE has developed an operating partnership in the Middle East with the largest Norwegian oil waste management company called SAR. Our joint operating partnership with SAR is called SAR-CORRE MENA. The partnership was formed as a prelude to the Kuwait Oil Lake contracts coming out and also for the larger and other high-scale remediation contracts, which CORRE is pursuing through its partnership.
In the meantime, we have become a pre-qualified soil remediation provider to the Kuwait Oil Company. That means that SAR-CORRE MENA can directly tender for these contracts. Achieving this pre-qualification status with the Kuwait Oil Company also facilitates us being pre-qualified with other national oil companies.
And so Juan, what you’re seeing, long story short is a growing trend even outside of Kuwait but in other focused markets like Saudi Arabia for example where there is a growing need and requirement for the cleanup of oil-contaminated waste. Although there are no published statistics on this, but from our diligence and the way we think about it, one to one and a half percent of all oil production results in some form of contamination.
I mean we saw this even on a slightly different scale over the spring and early summer with the BP Gulf of Mexico situation. You’ve got cutting edge drilling technologies going after more mature wells and heavier oil that results in more contamination.
For CORRE and through its partnerships, with SAR for example, we believe we’re well-positioned in certain parts of the Gulf where there are immediate opportunities firstly in Kuwait and secondly, in Saudi Arabia.
Juan Costello: Certainly. So you also have a partnership there with the Waste Management Company in the Middle-East
Alex Gress: Sure. This is really what we view as part of the growing trend in oil waste management service. With SAR, going back to SAR and our SAR-CORRE MENA partnership, we are pre-qualified with the Kuwait Oil Company for soil remediation and separately, waste management.
This is the way to kind of think about it. CORRE is positioning itself to become a total oil waste management and environmental solution provider. Part of doing this is to leverage our partnerships. You tend to see that the national oil companies prefer dealing with contractors who bring full service lines.
So what CORRE has done, in addition to commercializing it’s ARES I and being well-positioned for some of the immediate contracts that are coming out in soil remediation, is to actually broaden its range of environmental services through these partnerships. This means that we can provide total waste management and oil and gas engineering and project management services. We believe that it becomes an easier decision for the national oil companies to contract with us because they view us as a solution provider across a suite of different services.
Juan Costello: Good and so anything else that you feel makes CORRE unique from some of the other players in your sector?
Alex Gress: Yeah. I think that there are a couple of things to think about. I mean for 2010, when people really want to dig in and look at CORRE and it’s story, it was all about developing a world-class infrastructure and putting the financing in place to go after these contracts that are going to start to come out in 2011 in addition to positioning itself to become a total oil waste management and environmental provider.
The way to think about CORRE is that it is a company that has a couple of things. CORRE has a proven operating technology in its ARES I facility and soil washing, as we know, has become the preferred solution for the cleanup of the Kuwait Oil Lakes. CORRE has also in place a good operating strategy where it’s brought top tier international partnerships and service providers specifically SAR AS out of Norway.
And equally and most importantly, the timing is right. The trends are there to provide these kinds of services. There’s a growing need for oil waste management services. As we said earlier and we’ve alluded to, the timing is right. There are some short term, high value contracts that will be released and available to CORRE starting in the end of the first quarter or second quarter 2011.
Juan Costello: And perhaps you can walk us through your background and experience Alex and talk a little bit about the strength of the management team over at CVR.
Alex Gress: Sure. CORRE has a fairly experienced management team and board of directors. The skill sets, as you would expect, range from very technical operating engineering experience to financial expertise etc.
Now the senior management of CORRE itself, the CEO is John Lorenzo. John has about 40 years of experience in oil services. He’s the founder in 1969 of what today is one of Kuwait’s largest oil service companies with over 5,000 employees. So he’s got a strong background in oil services, very strong in the gulf regions specifically.
I joined CORRE about a year and a half ago bringing with me a little bit more on the financial and business operational side. My background is in investment banking and spent most of my time with JP Morgan and Lehman Brothers. I got a CPA out of Price Waterhouse originally.
Our board which is about 11 deep now has really gained a lot of good traction and some strong operating people. To highlight, our two most recent board additions that came on is the president of one of New York State’s largest energy distribution companies and the president of an oil and gas engineering and project management service company out of Calgary.
So what you’re seeing in our board is really a shift as we get into contractual revenues and we get into some upcoming contracts. We certainly have the legal and financial expertise and background, but a shift with stronger engineering and stronger operating skills. This is what makes sense as we head into the next stage of our development.
Juan Costello: Well good. So what are some of the goals and milestones that the team is hoping to accomplish here over the course of the next year?
Alex Gress: Well, I’ll take a step back to think about what 2010 represented. 2010 was, as we said, the year of developing a world class infrastructure and putting the financing in place. This has meant really buckling down, securing the operating partnerships, achieving the pre-qualification status with the oil company, completing the commercialization of ARES I, and being in the position to broaden our oil waste management services.
In addition to these achievements, we closed some financing in the late spring, just under five million at double our share price. This was done through an institutional investor who really spent some good time to perform their diligence on CORRE and gain an understanding of where the business is heading.
So we head to 2011, it’s the year of contract execution but with some specific things that are ahead of us. As we said earlier, our target markets in the short term for 2011 will be Kuwait and Saudi Arabia. We know that the end of the first quarter, beginning of the second quarter 2011, we expect the release of tenders in the size of 150 million each for the cleanup of the Kuwait Oil Lakes. As we said, we’re one of the handful of pre-qualified global companies that’s able to directly tender for that.
In addition to this, we are also in-dialogue, as we recently press released, with other international construction and engineering and project management firms who are also pre-qualified. They have approached SAR-CORRE MENA to be a potential technology subcontractor for some of those contracts as well. So there are a couple of interesting things on the horizon.
Juan Costello: Certainly. When it comes to investors in the financial community Alex, do you believe that the CORRE story, your message, and ultimately the company’s full upside are completely understood and appreciated by investors and the financial community?
Alex Gress: No. I think we’ve been very much under the radar screen and this is a company that has been really focused on infrastructure and operational development. I think talking to you Juan today and to your listeners and our cross listing which we completed on the OTCQX about a month ago, should be taken as signs that we’re slowing that we are coming out of our shell, slowly starting to create a little more brand awareness for CORRE.
And we do that, knowing that we’re at the point we’re commercially ready to operate. The partnerships are in place and we’re looking to 2011 to be the right year. It will be a good start on the revenue side for CORRE.
So we think that one of our objectives is to continue to build ourselves operationally and get into contracts, but we equally want to begin to raise awareness for CORRE and our shareholders likewise.
Juan Costello: Well that’s good news. And so once again, joining us today is Alex Gress, Chief Financial Officer for Canadian Oil Recovery and Remediation Enterprises Limited or otherwise known as CORRE. The company trades on the TSX Venture, ticker symbol is CVR. And as mentioned on the OTCQX, ticker symbol is CRVYF and is currently trading at 18 cents a share.
So before we conclude Alex, to recap some of your key points here, why do you believe that investors should consider CORRE as a good long-term investment opportunity.
Alex Gress: Sure. I mean I think just a couple of things. This is a company that we believe firmly has the right strategy in place. We developed a world-class infrastructure to go after these contracts. And most importantly Juan, the timing is right to capitalize on the global opportunities that are ahead of us.
Juan Costello: Well we look forward to continuing to track your company’s growth as well as report on your upcoming progress. I like to thank you for taking the time to join us today Alex and-
Alex Gress: Our pleasure, anytime. Thank you Juan.