STW Resources Holding Corp. recently gave an update on several of its projects in Texas including growth of STW Pipeline and signing an additional “alternative brackish water” lease in West Texas.
STW Resources plans for STW Pipeline in the first half of 2015 was to achieve net cash flow and increase their customer base. In March, STW Pipeline crossed over to operating with net cash flow and has maintained this position on a monthly basis since. Customer diversification has increased several times by adding customers such as Plains and Anadarko. The end of May, the company was operating 10 crews profitably.
Having achieved its goals by June, STW Pipeline set out to initiate our growth plan for the second half of 2015 by increasing the business by adding additional crews. It also plans to add an additional 8 crews by the end of the 3rd quarter. These crews provide a steady base of contracted work as well as time and materials billing for maintenance and repair of oil and gas pipelines. Each crew will generate approximately $1.1 million in revenues annually at a net margin of 11 to 12 percent.
STW Pipeline will continue the growth by implementing this more conservative strategy. Additionally the company is increasing their business and margins through new construction of larger pipelines that afford a net margin between 19 to 20 percent. STW is actively in the bidding process with several customers for this type of work.
In the third quarter STW Pipeline began providing additional environmental services for their customer base. This is a line of business that is in high demand with great margins. The company did not have significant capital expenditures to launch these services.
STW Resources also announced today that its STW Water Process & Technologies subsidiary purchased another brackish water lease in the Ft. Stockton, Texas area. This newly acquired water source is the second lease comprising several tracts of land as a key component in STW’s previously announced West Texas Water Project.
STW will be continuously adding additional water leases to the portfolio. The main purpose of the West Texas Water Project is to access “alternative” (other than fresh water) brackish water sources, process these water sources up to potable drinking water standards, and to supply the fresh water to water-starved communities and industrial customers in west Texas.
The newly purchased lease has artesian (free flowing) brackish water flowing from the San Andres formation, which is approximately 2,500 to 3,500 ft below the surface. Several of the eight water wells currently flowing have been producing approximately 1 to 2.5 million gallons per day (GPD) for the last 40-plus years, according to the Pecos County Water authorities.
The water produced is brackish and will be processed with STW’s proprietary Hybrid Brackish Reverse Osmosis System prior to sale to customers. The company’s plan is to supply the alternative processed water to the surrounding communities and industrial users and, in addition, supply a number of the water-starved cities north of Ft. Stockton without disturbing the fresh water supplies that Ft. Stockton relies on daily.
STW will initially sell 3 million to 5 million GPD within 50 miles of Ft. Stockton and Imperial, Texas. STW expects the sales of water to increase to the allowable limit, which could potentially exceed 30 million GPD from this particular water lease and surrounding water sources upon the completion of the proposed STW and investor owned 60-93 mile pipeline to the cities north of Ft. Stockton. This pipeline has been proposed in STW’s West Texas Water Project.
The Company’s strategy of developing alternative water sources involves adding other currently unusable aquifers throughout the Southwest United States to the company’s water lease portfolio. These alternative water sources can be treated and used for municipal (human consumption) and industrial applications.
STW’s pursuit of the Capitan Reef Aquifer water on the Ft. Stockton lease is advancing as rapidly as politics and regulations will allow. Currently, there is a temporary moratorium on the production and sale of Capitan Reef water until the Texas Water Development Board (TWDB) completes a hydrogeological (report of possible water reserves in an aquifer based on a scientific evaluation) report detailing how much water can be produced from the aquifer. The estimated time frame for the moratorium being lifted is by December of 2015 or January 2016.
STW’s immediate plan is to finish drilling the currently started well No. 2 and to obtain a production permit and begin sales of water from this lease within current production amounts previously established by the Middle Pecos County Groundwater Conservation District. STW expects water production up to 1,500 GPM or approximately 2 million GPD at a development cost of approximately $3 million per well and a brackish water processing plant at a cost of approximately $1 million.
“Our project investors are fully supportive and agree with our strategy regarding the new lease and are anxious to begin funding to drill several wells. The number of wells to be drilled will depend on the amount of water that can be produced from each well. The projected production appears to be approximately 1-2.5 million GPD from each well based upon the existing wells on the lease,” said Stanley Weiner, CEO of STW Resources.
He continued, “We currently have eight solid projects in our project pipeline, as discussed previously in the June Company conference call, with several more projects being qualified. Our business plan for the West Texas Water Project has remained consistent from the beginning and that is to drill wells into the Capitan Reef on the Ft. Stockton lease and produce the Reef water and drill wells on additional leases in the area for other communities in west Texas, as well as other benefiting industrial end users. This project has the potential to save the West Texas communities from potential drought problems for years to come.”