Is ADM Energy the new bright star in the Oil Industry
“…We can recover typically 65 to 70% sellable oil from that tank bottom and get WTI based pricing for the tank bottoms that we take in. There’s great demand for this…”
ADM Energy is changing. Going is the name which was an abbreviation that paid homage to a Prince and past shareholder, and possibly going is Aje the once flagship asset focused on offshore oil in Nigeria. ADM is now venturing into the United States as Vega Energy.
Vega was the bright star which once led ancient mariners to their destination. Leading the company now is incoming chief executive Randall Connally with his boots on the ground business strategy as he steers the company to cash flow with its ‘cash cow’ midstream reclamation business based in Wilson, Oklahoma.
Cash cow is the term comfortably used by both Connally and Dr Michael Green, the analyst at Optimo Capital who has done a deep dive on the business.
For those mining-interested investors following the extraction of gold story from old mining tailings, this is not too dissimilar and concerns reclamation of oil kept in storage tanks. These tanks over time need cleaning and some producers prefer to landfill these tanks to bypass the marigold gloves graft. What ADM has under its new management is the know how to extract the oil from these tanks and get industry rates for the residue.
As Connally explains this residue is the secret sauce. “We can recover typically 65 to 70% sellable oil from that tank bottom and get WTI based pricing for the tank bottoms that we take in. There’s great demand for this. We could very easily ramp up the amount of oil we’re taking into this facility to 10 or 15,000 barrels a month.”
The caveat at this stage though is the company isn’t quite prepared for the processing of that amount of oil – yet. At present the company is looking to process up to 5000 barrels a month by mid 2025 and that needs more boots on the ground. “I think that we’ll be hard pressed to grow cells beyond about 3500 barrels a month without more people. We’re going to need to add shifts. We’re going to need to expand the number of days a week we’re operating. So really, my challenge over the next few months is going to be to find good, hard working, trainable people, get them trained up so that we can run more shifts. This is the business we can grow if we manage it right. I don’t need millions of dollars to invest in it.”
ADM, soon to be Vega, has 40% of that midstream business and Connally wants more. He also hasn’t given up on Aje yet. That asset which had been a pure oil play is being transitioned into a gas project by those with the experience to do so. Options are open as to whether the company sticks with it or divests its 9.2% profit interest.
As Randall explains to Sarah Lowther in this video interview, his immediate task is to complete the capital reorganisation of the company in its current form while he and Chairman Lord Bellingham re-instil corporate governance. From there on the company doesn’t need infrastructure or large investment to allow it to grow cash flow significantly over the coming two to three years.
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Follow the company on ‘X’ – @ADMEPLC
The author was remunerated but does not hold shares in the company
