Quantum Energy announced five refineries before Stoughton, none are built

Estevan– Long before Quantum Energy, Inc. announced a 40,000 bpd oil refinery near Stoughton, Sask., the company made similar announcements at five other locations in Montana and North Dakota, each time announcing a new refinery, then usually a short time later, that they had secured the land. The company’s own press releases, on marketwired.com (search for “Quantum Energy Inc.”) tell the tale.

On Dec. 5, 2013, the company announced a change in its direction, towards refining. “…it has redirected its oil and gas focus from the West Texas Barnett Shale fields to North Dakota with the opening of an office in Williston, North Dakota in the heart of the Bakken formation. The company has secured the consulting services of Andrew J. Kacic and Advisory Services, Inc. with offices in Williston to assist in identifying oil and gas opportunities in that region," said Stan Wilson, the new chairman and president of Quantum. ‘We are impressed with the diesel refinery model being constructed by MDU in Dickinson and believe it can be replicated throughout the Bakken,” Wilson said. “Mr. Kacic has recent experience in funding efforts for refineries and we are in discussions with potential refinery sites to assess feasibility,” Wilson explained.

“In addition to refinery development opportunities, Quantum will continue its oil and gas exploration, drilling, well completion and fuel distribution efforts in reliance on Mr. Kacic's experience in those areas as well.”

Refinery No. 1, East Fairview, N.D.

In short order, the company started announcing locations for new refineries in Montana and North Dakota. In under four months, it announced its first refinery site purchase agreement, on March 20, 2014. That was an 80 acre site at East Fairview, North Dakota, right on the Montana border, southwest of Williston. In what would become a pattern, the site was near a rail transloading site.

The “Fairview Refinery” was going to be a 20,000 bpd diesel refinery. “The Fairview Refinery will process 20,000 barrels of Bakken crude oil per day and will operate as a topping plant. It will convert around one third of the crude oil into diesel fuel. The refinery will produce approximately 7,000 barrels of diesel per day which will reduce the amount of diesel imported into North Dakota by marketing the diesel output in the Bakken region.”

They announced it would generate annual revenues of US$600 million per years, with an EBITDA in excess of US$60 million and employ 100-plus employees. “We anticipate further announcements soon on funding for the expected $250,000,000 investment," Wilson said in their press release. Six days later, the company announced that Andrew J. Kacic was their new CEO. As of May 17, 2018, he was the company’s secretary and director.

They were also going to explore CO₂ capture, EOF and stripping NGLs. A week later, on April 1, 2014, (yes, April Fools) Quantum announced it increased its site to 122-plus acres. Three weeks later, they announced Quantum “received a Conditional Commitment Letter from NBM Strategic Capital and its Grey Fox private equity arm for the $250 million dollar projected cost to construct the Fairview Refinery in East Fairview, North Dakota.”

On May 20, 2014, the company announced, “Quantum has engaged Shelley International CPA of Mesa, Arizona as its auditor for its February 28, 2014 year end and has begun the drafting of a Form 10 to be filed upon completion of the audit so as to become a fully reporting company with the SEC. Once audited and fully reporting, Quantum plans to immediately apply for trading status with a major stock exchange.”

That is significant, as similar verbiage was used with reference to the proposed Stoughton refinery, three years later.

Just under a week later, when announcing its third refinery, the company announced it had signed a two-year option to purchase 144 acres in Richland County, Montana, near Fairview. “Quantum had a purchase agreement for a site in East Fairview, North Dakota that previously expired due to difficulties in accomplishing the necessary local zoning which Quantum does not anticipate being a problem given the initial reception from Richland County,” their Aug. 27, 2014 press release said.

Refinery No. 2, Baker, Montana

Three months after the initial announcement of its first propose refinery, Quantum announced on June 19, 2014. The announcement stated, “Quantum has entered into a fully executed Letter of Intent for the acquisition of 400 acres near the city of Baker in Fallon County, Montana for the development of a 21st Century Energy Center to include a 20,000 barrel per day diesel refinery. The LOI calls for a contribution agreement to be executed no later than July 3, 2014 by which title to the 400 acres is to be exchanged for shares of Quantum common stock. Quantum also has an existing purchase agreement for a refinery site with Northstar Transloading LLC in East Fairview, N.D.”

The press release notes, “Quantum Energy CEO Andrew Kacic, who visited Baker, said he plans to build five such oil refineries, called “21st century energy centers” by the company...”

Of note, the next day, WTI traded for US$107.26, and then began is decline which lead to the nearly four-year downturn the oil industry has seen since.

On Aug. 14, 2014, Keith Stemler is first mentioned, brought on as part of a five-member advisory board.

On Aug. 28, 2014, the company announced, the “signing of a two year option on 160 acres in Fallon County and a companion three year option on an adjoining 240 acres for a total of 400 acres under contract.”

Two weeks later, Quantum announced a strategic alliance with Bilfinger Westcon, Inc. of Bismarck.

Refinery No. 3 Billings, Montana

On Aug. 21, 2014, the company announced it had “made a presentation to the Yellowstone County Commissioners and Big Sky Economic Development Tuesday, August 19, 2014 in Billings, Montana about their proposed five refinery plan to bring a new generation of refineries to North Dakota & Montana including one in Billings.”

In this announcement, the company stated, “the goal is for 100 per cent of the diesel to be used within a 100 miles radius of the facility.”

It also references capturing CO₂, and over 100 “good paying, permanent jobs in the refinery.”

By Oct. 14, 2014, the company said its audit was complete, and it was ready to seek fully reporting status. As of March 9, 2018, they still had not received “fully reporting status.” On Oct. 31, 2014, Neil Amondson was named president of Quantum Energy, Inc.

The Bakken Oil Business Journal October/November 2014 edition publishes a story by Alexis Bonogofsky entitled, “If it’s too good to be true, then it probably is! The Quantum Energy, Inc. tale.”

Refinery No. 4, Stanley, North Dakota

Eight months down the road now, Quantum announced it had secured a 260-acre site near Stanley, North Dakota for another 20,000 bpd topping plant diesel refinery. Like the others, it would incorporate CO₂ capture and NGL stripping. This fourth refinery, too, would provide 100-plus full-time jobs, according to Amondson, in the press release of Nov. 3, 2014. WTI oil on Nov. 7, 2014 was US$78.65/bbl. The company started using the term “Energy Centre” to describe their proposals.

Refinery No. 5, Berthold, North Dakota (near Minot)

On Nov. 24, 2014, just three days before OPEC agreed to flood world markets with crude, sending oil prices into a sharp nosedive, Quantum Energy announced a fifth location, although curiously, the press release says it is their fourth Bakken site for an “Energy Centre.” Their list in the press release no longer includes Billings, Montana, the third location initially announced. Again, this will be a 20,000 bpd topping plant diesel refinery, with CO₂ capture and NGL stripping capacity. The diesel is intended for “Meeting the much-needed local diesel markets for agriculture and industry…”

“Quantum has signed two year option agreements in Baker, Mont., Fairview, Mont., Stanley, N.D. and now Berthold, N.D. for Energy Center sites and is making progress in firming up relationships with other strategic alliance partners, refinery design teams, engineering firms, major diesel off-take sources and potential funding sources as well as crude supply candidates as a result of recent meetings in Bismarck, N.D., Williston, N.D. and Oklahoma City.”

Three months later, on Feb. 19, the company announced it was engaging the legal services of Securities Compliance Group, Ltd. on February 18, 2015.

The press release said, “We are excited to reach another milestone of moving forward in becoming a fully reporting registered SEC company,” Wilson said.

“Upon completion of the registration and funding, Quantum intends to seek a listing on a major exchange and begin the permitting and entitlement process on the first of our Bakken refineries,” Wilson added.

Wilson, in a letter to OTC Markets Group, Inc., dated June 27, 2017, describes himself as “I am an attorney at law duly admitted to practice in the State of Nebraska. I am general counsel and a member of the Board of Quantum Energy, Inc. I am a resident of the State of Arizona.”

On Feb. 20, 2014, WTI oil is now going for US$50.34/bbl.

On May 26, 2015, the company announced it didn’t need that law firm, and was working with another to handle its S-1 filing. It also said it had increased the acreages of the Fairview, Mont. site, from 144.6 acres to 154 acres.

On July 16, 2015, Robert L. Monday joins the Quantum advisory board. For the middle part of 2017, he becomes the company’s CEO.

Quantum announced on July 17, 2015 it had teamed up with Native Son Holdings, LLC to form a joint venture for the construction and operation of a 40,000 barrel per day refinery in Berthold, N.D. The joint venture will be known as “Quantum Native Processing Partners, LLC, and will be owned by Quantum and Native Son Refining LLC, a subsidiary of Native Son Holdings LLC.”

This is the first reference to a refinery with double the capacity of the initial announcements, also on par with the later Stoughton announcement.

This is also the first reference to Canada, with the following statement, “Quantum and NSR have also been approached about a possible JV with a Canadian TSX company to build a 40,000 bpd facility in either Manitoba or Saskatchewan and ongoing discussions are taking place.”

With all five of these refineries, the company had announced approximately 120,000 bpd of new refining capacity, roughly the same capacity the Regina Refinery Complex.

Construction was also recently completed for the Boundary Dam Integrated Carbon Project at Estevan, which employed 1,400 people at peak and cost C$1.6 billion, of which roughly $1 billion was for the capture plant. The first four refineries Quantum announced were to each include the ability to capture carbon dioxide. That was not referenced in the Native Sons Refining announcement for Berthold.

On July 29, 2015, Quantum Native Processing Partners, LLC, announced the filing of a minor source air quality construction permit application with the North Dakota Health Department, Division of Air Quality. This announcement now projects, “The Berthold refinery annual revenues using June 2015 prices are projected at approximately US$1.2 billion while resulting annual EBITDA is projected at approximately US$345,000,000. The capital commitment to build the facility is estimated at US$645,000,000. The estimated output of the primary products from the crude processing facility in barrels per day based on a 360 day operating year include 18,400 bpd of gasoline; 13,200 bpd of diesel #2; 5,600 bpd of diesel #1 and 2,800 bpd of AGO/bottoms.”

This is the first reference to a refinery that does not focus on diesel alone. Five days earlier, a barrel of WTI was going for US$48.14.

An Aug. 26, 2015, press release highlighting “Favourable Refining Operating Conditions” now only refers to the Berthold site. The other four proposed sites are not included in the press release. This pattern carries on henceforth, and the other sites are dropped from all references.

Refinery No. 6, Stoughton, Saskatchewan

The first time Stoughton comes up in Quantum Energy, Inc.’s press releases is on Aug. 6, 2016. It stated, “Quantum continues its Bakken refinery development projects with ongoing permitting efforts in North Dakota and an increased emphasis on a 40,000 bpd proposed project in the Stoughton area of Saskatchewan, Canada. Quantum is in the process of forming a Canadian subsidiary, Energy Processing Group, Inc., to develop the Stoughton processing center and will be announcing its board and officers soon.”

This press release also makes reference to the company’s previous roots as a junior oil and gas producer, something the company apparently had not entirely given up while it announced these six refineries. “Quantum Energy, Inc. a diversified energy holding company, is pleased to announce that it has begun to diversify its refinery development plan through the acquisition of opportunistic projects which generate revenue for the company. The first such projects are oil and gas prospects and properties. QEGY has simultaneously acquired a company with approximately 3,000 acres and 89 well bores in the Texas Panhandle along with an approximate 5 per cent working interest in a heavy oil project in Missouri. "These acquisitions add $3,500,000 in assets along with $1,900,000 of net equity," said Stan Wilson, Quantum Chairman. Both acquisitions were completed by means of a share exchange and contribution agreement.”

Andrew J. Kacic was replaced as CEO by Stanley F. Wilson on July 1, 2016. Kacic would return to the board Nov. 8 2017, and Wilson would resign as an officer then.

On Dec. 1, 2016, Quantum announced the establishment of a wholly-owned Canadian subsidiary, Dominion Energy Processing Group, Inc., “to conduct the development, construction and operation of a 40,000 bpd full slate refinery in Saskatchewan, Canada.”

Keith Stemler was announced as its CEO. In early 2017, Stemler held public meetings in Stoughton, Weyburn and Estevan regarding the proposal.

Merger, Wilson and Stemler leave

An April 12, 2018 press release stated that “Effective February 24, 2018, Lorne Keith Stemler resigned as a director and officer of Quantum and its subsidiaries.”

Similarly, effective Feb. 28, 2018, Stanley F. Wilson had resigned as a director and officer of Quantum and its subsidiaries. Why Wilson’s departure was announced effective Nov. 8, 2017, and then Feb. 24, 2018, is unclear.

On April 17, 2018, Quantum announced a proposed merger with Inductance Energy Corporation, a Wyoming corporation.

“The proposed merger is conditioned upon, among other things, IEC’s successful completion of its due diligence examination of Quantum, the negotiation and execution of a definitive agreement and IEC raising in the aggregate up to $50,000,000. Provided such conditions are satisfied including IEC’s funding of the Total Capital Investment, Quantum will issue to IEC such number of shares of Quantum common stock as shall represent 60% of the then issued and outstanding shares of Quantum common stock. Quantum will also, based on valuations as yet to be determined, issue additional shares (after the initial issuance to IEC), to additional investors, as necessary to accommodate the closing of the Total Capital Investment. The combined entity will also provide the necessary funds required to prove out the viability of the development of the refinery currently planned to be developed in Stoughton Saskatchewan, Canada including (a) obtaining environmental and engineering studies to prove the viability of the intended site, (b) if the site is determined to be viable, to acquire the land, (c) obtain required permits and (d) pay other related costs.”

The press release went on, “The transaction is expected to be completed on or before August 31, 2018, extendable to December 31, 2018.

“Also, upon completion of the merger, William J. Hinz, who is currently a member of the board of directors of Quantum and a member of the board of directors and CEO of IEC, will become interim chief operating officer of Quantum.”

The release stated, “IEC is a development stage company that holds certain exclusive intellectual property licenses for the application of the science and mechanical application of magnetic propulsion. Magnetic propulsion is a technology that uses highly concentrated magnetic energy to move physical objects in a rotary, reciprocating, angular, linear, or vertical direction, purely through the manipulation (use) of a magnetic field (magnetic radiation). IEC has the exclusive license to design and manufacture a broad range of high quality magnetic propulsion engines, as well as related and support equipment marketed through a worldwide distribution network, under a variety of brand names. IEC’s licensed products are used principally to produce electrical and mechanical energy.”

As of May 17, 2018, construction has not started on any of the six refineries Quantum Energy, Inc. has announced to date.