The board of DXI Energy Inc (TSE:DXI) (OTCMKTS:DXIEF) has unanimously approved a new strategic direction for the company, which will see it transition to a regional producer of methanol, a product used in the oil and gas industry.
The plan is to convert the processing facility at Woodrush in British Columbia to allow scalable production, initially targeting a potential of 16,000 gallons of methanol per day beginning in August next year.
Internal estimates show a potential 900% increase in net income from operations for DXI as market demand for methanol in the region is high.
New chairman, president and CEO, Simon Raven, who initiated the detailed review of DXI's assets, said: "....producing and selling raw natural gas into an oversupplied market, with low gas prices today and for the foreseeable future, is not sustainable as a business model and is not in the best interest of our shareholders."
But he noted that methanol was a "value-added" product which sells for many times the value of raw natural gas and is in high demand throughout the region, as well as internationally.
"Our existing facilities and producing gas assets at Woodrush provide an excellent opportunity to cost-effectively transition to methanol production and sales in a short time frame."
Among the progress already made are discussions with First Nations in the region to become DXI's partner in the project, and begun detailed engineering of an available methanol plant which is in good working condition.
Moved in modules
This plant can be skid-mounted and moved in modules to the existing Woodrush facility site and is expected to cost around 30% of building a brand new facility (C$10 million compared to C$30 million), the firm noted.
DXI also revealed that initial discussions with Canadian institutions and dealers have been positive so far as it aims to raise C$15 million in new capital by the fourth quarter this year, consisting of a combination of equity and debt. This is aimed at:
- Expanding the Woodrush facility to produce methanol at a cost of C$10 million.
- Completion and tie-in of gas production from the two successful Gething gas wells drilled in 2018-19 at a cost of C$1 million.
- Eliminating trade payables and maintain requisite working capital at a cost of C$4 million
Methanol is used in the oil and gas industry to control water levels in pipes and other infrastructure.
DXI shares gushed 12.5% higher in Toronto on the day at C$0.045.
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