Even the enemies of Randeep S. Grewal admire his business savvy. Few is perhaps shocked if the CEO of Green Dragon reveals up some day on the Forbes journal checklist of billionaires. His firm’s latest share offering on the London Inventory Alternate’s Purpose, commencing with a market capitalization of US$525 million, was fairly the daring stroke, elevating a number of eyebrows. Green Dragon positioned a bit more than four.5 million shares, lower than 5 p.c of the company’s excellent shares, to boost $25 million. Randeep Grewal stored the remaining 95.2 p.c of Green Dragon for himself.
Upon the corporate’s admission to the Purpose market Grewal remarked, “2007 promises to be a landmark year for CBM and its contribution to the Chinese energy provide…This itemizing is a vital and timely milestone in our progress driven 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 Vitality Corp, then trading on the NASDAQ. Shareholders liked him – he paid a sixty nine p.c premium for his or her shares in 2003. Greka delisted from NASDAQ and deregistered with the U.S. Securities Fee.
Since then, it has been harder to trace Grewal’s newest accomplishments, however based mostly upon the worth 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 ideal 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 p.c over the past 12 months. High gasoline prices are driving major oil firms to squeeze more gasoline manufacturing out of their crude oil. In any occasion, Grewal simply will get wealthier with each new barrel of asphalt or crude oil his company produces.
At the very least Inexperienced Dragon Gas is now publicly traded, offering shareholder participation. But, few shares are available to the public. Grewal may be generous to shareholders at the tip of the day, but he’s not parting together with his shares this early in the game. In his filing assertion with Intention, the corporate noted that issuing further shares to raise additional money would come as a last resort, or more delicately acknowledged, “… as applicable beneath the circumstances.” Grewal would first turn to debt financings and other measures earlier than offering shareholders extra liquidity.
It isn’t an accident the share worth of GDG, which opened for buying and selling at US$5.56/share rapidly rose to a recent excessive of $6.60/share. A close study of Grewal’s final company explains the high confidence in Inexperienced Dragon Gas. To not be confused along with his beforehand named Grewal Vitality, which is now known as Greka Built-in, Inexperienced Dragon Gas is the father or mother firm of Hong-Kong based Greka Power. They hold 5 CBM production-sharing contracts with China’s state-owned CUCBM (China United Coalbed Methane Firm). Inexperienced Dragon’s contracts are upon huge tracts of land (more than twice the dimensions of Rhode Island), which could potentially host sixteen.5 trillion cubic feet of methane fuel.
In response to the Green Dragon Gasoline webpage, Grewal can be chairman and chief executive of the California-based mostly Greka Integrated, an organization which is described as being “concerned in heavy oil and gas transportation, refining, real estate and with interests in energy properties and refining property.” It’s Santa Barbara County’ largest onshore oil company with holdings in Bakersfield, Orange County and the Los Angeles basin, Greka operates almost 70 onshore manufacturing, processing and transportation amenities in Santa Barbara (California), as properly as the Santa Maria Asphalt Refinery. It is the same one which produced 3400 barrels of asphalt day-after-day throughout 2002.
While others discuss a very good recreation, Grewal excels at the power sport. In his last printed interview which we have been capable of dig up (August 2001), Grewal explained precisely how he deliberate to make Greka Energy successful story, i.e. selling oil or using it product asphalt after which sell asphalt, depending upon the worth. After which he did. In a July 2002 news release, Grewal mentioned his company would have long-time period actions in China. And now it does – via Inexperienced Dragon Gas.
In explaining the corporate’s marketing strategy, throughout his 2001 interview, Grewal unabashedly boasted, “We’re worthwhile at $10 oil. We’re worthwhile at $30 oil. We’re worthwhile at $2 gasoline, and we’re profitable at $16 fuel.” He known as his asphalt plant “a pure hedge to fluctuating commodity prices.” It also offers constant cash circulate. And there may be no doubt Grewal is ever extra profitable with crude oil selling around $70/barrel.
Steve Chase, Santa Barbara County’s deputy power director, who regulates Greka’s refinery (and has participated in fining Greka – see under), calls the company’s business plan “completely brilliant.” Chase praised Greka in a brand new Instances newspaper article, explaining the corporate’s economics, “Oil sells either excessive or low, however asphalt doesn’t. If you are an oil company with an asphalt refinery, you possibly can promote into two different markets. When oil is low, you employ it to make asphalt. When it’s high, you (just) sell it.”
Regardless of Chase’s praise, Grewal’s road to success has not been with out a couple of car wrecks alongside the way in which. In 2002 and 2003, his firm was cited for more than 70 violations, which included oil spills and gas releases, in response to the Santa Barbara Information-Press newspaper. The country’s district legal professional filed felony prices in opposition to Greka after an explosion close to the asphalt refinery injured two staff. Greka settled for civil penalties of $200,000.
In November 2005, Greka Integrated misplaced its breach-of-contract lawsuit against a former security manager, Gary Lowery. In June of this yr, the U.S. Environmental Safety Agency fined the company $127,500 for “unauthorized disposal of oil refinery wastewater into the facility’s injection wells, in violation of the federal Protected Drinking Water Act.” This Greka has paid out about $seven hundred,000 in settlements since Grewal took the corporate personal. Life’s little annoyance develop into much less problematic when one is promoting oil for much 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 came into the power markets as chairman and chief executive of an oil and gasoline horizontal drilling firm, Horizontal Ventures. Through the power bear market, Grewal cleverly began a collection of mergers and acquiring oil and gas belongings, which led to his first Greka Power Corp. He knew the place to find offers and deftly started assembling his power empire. Horizontal drilling is integral to coalbed methane development, which brings Grewal back to the place he began – as a fuel drilling company.
Also alongside the way, two of Grewal’s firms have suffered bankruptcies. This previous November, Saba Enterprises, formerly Greka Energy Company, filed for Chapter 7 bankruptcy, after two creditors won judgments totaling $19.5 million. In its petition the corporate announced it had no assets. The full creditor shortfall could rise to greater 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 property after working its means through Chapter eleven bankruptcy proceedings.
Life can also be full of many second chances. This time, nonetheless, by means of Greka Energy (Hong Kong) and Green Dragon Gasoline (GDG), Grewal owns what may someday change into a multi-billion greenback gas project. Smith & Williamson, Green Dragon’s IPO underwriter valued the company at $973 million, relying on its success in recovering GDG’s estimated methane gasoline in place and the wellhead value at time of supply.
Until recently, 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 4,000 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 atmosphere aggravating an already atrocious air pollution crisis.
When the Chinese began to appreciate CBM was providing a greater proportion of the U.S. gasoline manufacturing, they needed to develop their very own huge resources. After all, the Chinese language are pragmatists. Why pay via the nostril to import LNG, when you are throwing away all that methane? In 2004, coalbed methane accounted for eight p.c of U.S. gas manufacturing. That is the identical share quantity China mandated in its eleventh 5-year plan for the position of gas in its energy combine. And as we have talked about in earlier articles, China has idled as much as forty percent of its gasoline-fired plants as a result of it could not receive enough fuel provides.
Methane or C4, which is a extra pure fuel than standard gas, is discovered inside the carbon lattice of coal at a molecular degree. The much less “candy” natural gas, which is found in more standard fields, was generated by hydrocarbon supply rocks and is trapped in a porous and permeable reservoir rock, comparable to carbonate reserve or sandstone. Water strain holds coalbed methane in place, which required new drilling technology, to efficiently extract.
To extract coalbed methane, an organization drills wells into the coal seam, after which perforates and fractures the coal seams. By rising permeability through this course of, water is ready to be pumped out of the coal seam. Throughout this de-watering process, stress holding the gas in place is lowered. This strain differential vents the fuel by way of the fracture programs into the effectively. Voila! What had been killing coal miners and polluting China’s atmosphere may now be utilized to energy gasoline-fired power plants. ALL RIGHTS RESERVED.
