CEO Blog

A New Year Brings New Opportunities to Freestone

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January 3  |  CEO Blog  |   Freestone Resources

I hope everyone had a wonderful holiday, and I want to wish you all a healthy, happy and prosperous New Year!

This past year was certainly one of substantial developments and continued progress towards realizing the goals of our company.  We successfully demonstrated our oil extraction technology prototype machine, had a major university test and analyze our oil extraction technology with extremely positive results and a few months ago we announced a joint venture with MEA Solutions.  Creating this joint venture with MEA was a major milestone towards realizing our goal of becoming a leader in providing innovative and exceptional solutions to the energy industry.

As mentioned in last month’s press release, pilot operations will commence this month to demonstrate our technology for treating and recycling flowback and produced water for subsequent reuse in the fracking process.   The next two weeks will be extremely busy for me.  I will personally be involved in overseeing the setup of the water treatment operation and will be on site for the demonstrations to our financial and strategic partners.  My hope is that these demonstrations will set the stage for proving and validating our technology and business model.

As you may have read, last week there was a magnitude 4.0 earthquake that struck Youngstown, Ohio.  The Christian Science Monitor reported that, “[t]he temblor struck Dec. 31 and was the latest and strongest of 11 minor-to-light quakes that have hit the region since March. The epicenters are clustered around a wastewater injection well for a hydraulic fracturing operation. Understanding the potential effect hydraulic fracturing or related activities could have on local earthquake risks is one question some researchers hope to answer as they try to develop tools for communities.”

Bloomberg News stated “A New Year’s Eve earthquake in Youngstown, Ohio, that prompted the state to stop operations at five wells used to dispose of wastewater from natural-gas and oil drilling won’t affect production.”

The most common way to dispose of flowback and produced water is to inject the water into disposal wells that carry it deep into formations beneath the surface. In some, but not all, locations a problem arises when these pressurized fluids find their way into faults.  This procedure causes the fluids to act like a hydraulic jack eventually separating locked sections in the formations allowing them to slip.  This process is believed to have caused the recent earthquakes in Ohio.

Freestone Water Solutions treatment system assists in reducing the amount of flowback and produced water that must be injected into disposal wells. Our ability to treat, recycle and most importantly reuse the water is what the industry and the affected communities need.  Water is our earth’s most precious commodity and Freestone Resources and MEA have pledged to do its part in safeguarding our nation’s precious resource, as well as providing, what I believe, is the best model for establishing the greatest value for our loyal and patient shareholders.

Freestone Resources will update our shareholders this month on the outcome of these important demonstrations.

 

Very Sincerely,

Clayton Carter, President and CEO

 

 

 

Market Volatility and the Oil and Gas Service Sector

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August 8  |  CEO Blog  |   Freestone Resources

There is a lot of uncertainty in today’s markets.  Specifically investors do not know what to think of the latest credit downgrade issued by Standard & Poor’s.  Last week the Dagong Global Credit Rating Co. (China’s premier credit rating agency) downgraded America’s rating to ‘A with a negative outlook’.  Due to the fact that China’s credit rating agency is a newcomer in the sovereign debt rating industry, the downgrade did not get much attention from the American media.  That has all changed since the S&P has followed suit.

The current market uncertainty stems from fact that Dagong Global is a new credit rating agency, and there is speculation that since it is a China-based agency that it might have ulterior motives for their recent downgrade.  It also stems from a poor S&P rating history that recently gave AAA ratings to the mortgage backed securities which led to the financial crisis in 2008.  Personally, I am watching Moody’s Investors Service and Fitch Ratings to see if they follow S&P’s lead (or should I say Dagong Global’s lead).  I am also watching to see if the executive and legislative branches of our government take active steps to decrease our spending and increase our revenues.  The debt problem will not be fixed overnight, but passing a balanced budget that shows fiscal responsibility will help prove to the world that America is nothing less than AAA.

Europe’s Problem

There is another global issue that we need to watch closely due to the fact that it could have a cascading effect on the global economy if it is not handled properly.  The creation of the Eurozone in 1999 bundled countries with high credit ratings and countries with low credit ratings by the introduction of the Euro currency.  (It sounds a lot like the creation of the mortgage backed securities doesn’t it?)  Now the European Central Bank is discussing a strategy to bail out the distressed economies of Italy and Spain, and Eurozone countries with a strong economy, such as Germany, may need to provide assistance to these distressed economies to avoid a European financial meltdown.

O&G Service Sector

Many sectors will feel the effects of this turbulent economy and the financial problems listed above, but I believe the oil and gas service industry will stay strong and mostly stable despite the market fluctuations.  Oil and gas prices may rise and fall with the current economic concerns, but the fact is that hundreds of companies have spent millions (if not billions) of dollars to secure leases in some of the major oil and gas shale opportunities throughout the United States.  These leases have term limits that require the companies to drill or forfeit their lease within a certain time frame (typically three years).  Rigs are also in limited supply, and many companies are on year long waiting lists with various drilling companies.  Thus, the drilling will continue and the need for pipe, tubing, compressors, pumpjacks, fracking equipment, operations, etc. will remain constant despite the economic fluctuations.  The costs for these services may fluctuate slightly, but they will not fall and rise as drastically as oil and gas prices.  For this reason, I am confident in Freestone’s sector and Freestone’s future despite the economic instability that may occur in our near future.

Clayton Carter, President and CEO

 

Oil and Gas Shale and the Deficit

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August 2  |  CEO Blog  |   Freestone Resources

Recently it would seem that “politics as usual” have consumed the airwaves.  CNN, Fox News, MSNBC and all of the major news networks were enamored with the recent debate, and subsequent vote to increase the Debt Ceiling.  We were told that if a vote did not take place by August 2, 2011 (oddly enough a date that became a moving target over the last few months) that the world markets would collapse and chaos would ensue.  Obviously this pending doomsday scenario is to network news as chum is to a shiver of sharks.

As expected, both parties eventually compromised and passed a bill at the last minute to save the day, and both parties took credit for staving off catastrophe.  What exactly does this mean for the state of our economic stability?  Unfortunately, it doesn’t do anything.  Typically debt negotiations include the lender (in this case China) and the borrower, but this debate was solely between borrowers, and thus no clear solution for fiscal responsibility was reached.    The Bill increases our Nation’s ability to borrow without increasing revenues.  This isn’t exactly the best business model for America’s future.

Now that I’ve said my peace, I think that we should look to our Lender as an example.  Currently China is purchasing natural resources and raw materials throughout the world.  They are even purchasing mineral rights in the United States!  Last week I had a discussion with the CEO of a company operating leaseholds in the Eagle Ford Shale, and he notified me that there are more than a few Chinese-owned companies purchasing producing minerals and working interest in his immediate location.  This is not a new occurrence.  Chinese-owned companies have purchased mineral interests in Utah, Colorado, Pennsylvania, and elsewhere in the United States (and even in the Canadian oil sands), and the oil and gas shale plays are fertile ground for their future investments.  Personally I would like to see American-owned companies develop these oil and gas shale plays, but the production of these natural resources here in the United States are necessary to reduce our immediate debt responsibilities.

 

Looking to Texas

I’ll preface this portion of the blog with the disclaimer that as a native Texan I am acknowledging some bias towards my state.  But there are some undeniable facts that the main reason the Texas’ economy is strong is because of our oil and gas production and exploration. Between fall 2009 and spring 2011 more than half the jobs created in the United States were created in Texas, and many of these were either directly or indirectly associated with the oil and gas sector.  Other states, such as New York, are taking steps to open their doors for business (to take a line from Gov. Perry) in the oil and gas sector.  The recent decision to lift New York’s moratorium on shale drilling is vital to job growth and additional revenues in one of the states that needs it the most.  Earlier this week Chesapeake announced its plan to commence drilling in the little known Utica Shale in Ohio, and preliminary analysis of this new oil rich formation indicates it could be a large shale play.  I predict that this new discovery will help Ohio look a lot like Texas over the next few years.

As a company focused on the oil service industry, the future production and exploration of our Nation’s oil and gas shale is paramount to our Company’s success.  This sector’s growth can continue in an environmentally responsible way with the innovation and development of new state-of-the-art technologies that Freestone intends to bring to the market for years to come.

 

Sincerely,

Clayton Carter, President and CEO

 

New York to Lift Moratorium on Hydraulic Fracking

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July 1  |  CEO Blog  |   Freestone Resources

When discussing the production of natural gas from shale formations one of the last states one thinks about is New York.  In fact New York has had a moratorium on the use of hydraulic fracking since 2008, but it looks like that might change.  Recently legislation has been proposed that would allow for the use of hydraulic fracking in approximately 85% of the state’s Marcellus Shale.  It also looks like proponents for this legislation have the votes to get it passed in the New York State Assembly.

Opponents of the plan to lift the moratorium are concerned that hydraulic fracking will cause contamination of underground aquifers and water tables.  It is common practice to dispose of frack water in injection wells, and it’s this process that is the cause for concern.  The frack water typically contains a variety of chemicals, hydrocarbons and salt that must all be disposed of, and for good reason no one wants this mixture to end up in aquifers and water tables that supply cities with drinking water.  That’s why I feel it’s important for the major oil companies to thoroughly consider recycling their frack water rather than disposing of it through the controversial use of injection wells.

The Pros of Frack Water Recycling

1)      It can be very expensive to pay a water disposal company to take the frack water.  Recycling the frack water would eliminate this cost.

2)      Disposing of the water via injection well creates an increase in 18 wheeler traffic on farm and ranch land that must haul the waste water to an injection well site.

3)      If you eliminate the need, or reduce the need for frack water disposal via injection well then fracking becomes less of an issue with environmentalists and local governments that might otherwise cause road blocks in the production of oil and gas from shale formations.

4)      The use of recycled frack water in new fracks reduces the amount of  new water that must be purchased.

In closing, our energy independence is the paramount issue at hand.  It’s my belief that reducing our dependence on foreign oil will stabilize our economy and ensure our national security.  The use of hydraulic fracking to obtain natural gas trapped in our vast shale formations is the first step to reducing our dependence on foreign oil.  Natural gas is abundant in the United States. Our vehicles can run on it, and it’s a cleaner burning, cheaper hydrocarbon than oil (we’ve all heard Mr. Pickens preach this for years).  The environmentalists, government agencies and oil companies can work together on a solution to responsibly produce natural gas from our domestic shale formations.  I firmly believe that frack water recycling is a key first step to resolving the issues between these groups.  I hope New York will embrace these technologies, and show the rest of the United States that even one of the most environmentally stringent states can responsibly produce this domestic energy source.

Clayton Carter, President and CEO

From Waste to Water: The Eagle Ford Shale

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June 21  |  CEO Blog  |   Freestone Resources

In response to yesterday’s post that discussed our evaluation of various water recycling technologies, I received an email that caught my attention. The email contained an article from Bloomberg that discussed water shortages in the Eagle Ford Shale formation. Bloomberg News reports that one well in the Eagle Ford requires 13 million gallons of fracking water, which is approximately the amount of water consumed by 240 adults per year. Since the Eagle Ford Shale formation is located in an area that is facing one of the worst droughts in Texas’ history, water will be at the forefront of every south Texan’s mind and more scrutiny will be placed on the fracking process.

The bottom line is that we can’t let the oil boom in the Eagle Ford Shale formation damage the ability of ranchers to feed their livestock and farmers to grow their crops. Studies indicate that more than 5,000 new wells will be drilled by 2020 in the Eagle Ford. This means that the demand for water will only increase, and the need for new innovative water recycling technologies will be continuously sought after. Furthermore, due to the massive scale of this issue multiple companies will be able to operate in this market, which will allow smaller companies, like Freestone, to work alongside the major oil and gas service companies.

The development of new technologies that can be utilized in various capacities in the oil and gas service industry, including a viable water recycling system, will continue to be the paramount focus of the management at Freestone. The ability to bring these new technologies to the marketplace will assist in the diversification of Freestone’s oil and gas service solutions and potential revenue streams.

I encourage everyone to read this article: http://www.bloomberg.com/news/2011-06-13/worst-drought-in-more-than-a-century-threatens-texas-oil-natural-gas-boom.html

Clayton Carter, President and CEO at Freestone Resources

Welcome! Blog Entry #1 from Freestone’s President and CEO

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June 20  |  CEO Blog  |   Freestone Resources

Good afternoon Freestone investors.  This is my first blog post as the President and CEO of Freestone Resources, Inc.  I felt that it was time to utilize the blogosphere as a forum to keep investors up-to-date, opine on issues that affect the energy industry, and discuss new technologies that can help promote a greener oil and gas industry.

As announced in our most recent Press Release, Freestone is working with Hydrex Technologies in order to develop the very first commercial Oil Recovery Units (or as we call them—the ORUs).  The ORUs are a unique mechanized technology that utilizes specially formulated, non-carcinogenic chemicals to separate oil from solid material.  As oil production increases in the United States and globally, there will be an increase of oil-based waste byproducts that must be disposed of at hazardous waste sites.  These hazardous waste sites are already facing environmental and capacity issues.  We plan to work with Hydrex in order to convert this waste into a viable energy source, and our primary focus is to get our first ORU operating on the frontline of this battle ASAP.

During the ORU development phase we are also evaluating other technologies that can be used in the oil and gas arena.  As oil and gas drilling and production increases in areas that are experiencing major drought conditions, we will be forced to protect one of our world’s most precious resources—water.  Water is used for the hydraulic fracking of oil and gas wells located in shale formations, and it is also a byproduct of daily oil and gas production.  As these drilling and production areas face difficult drought conditions, it will be important to manage and recycle this precious resource.  Thus I am actively working with Freestone’s advisory board to evaluate some of the state-of-the-art water recycling technologies, and desalinization technologies that are in production and in the development stage.

Thanks for taking the time to read my first blog post, and I look forward to many more entries.  Our precious resources are exactly that—precious.  While it is important to increase our domestic energy output for national security and economic stability, it is also necessary to do it in a responsible way.  It is my goal to keep Freestone active in the development of the technologies necessary to reach the goal of increasing domestic energy production while decreasing our environmental footprint.

Thanks for reading!

Clayton Carter, President and CEO at Freestone Resources

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