Questions swirl around company touting new refinery – Last Best News, Aug. 20, 2014

August 22, 2014

Categories: News, Oil and gas

By Ed Kemmick

The company that is proposing to build five oil refineries in Montana and North Dakota — projects that would require funding of $2.5 billion — appears to have very few assets itself.

Bloomberg was reporting as of Wednesday afternoon that Quantum Energy Inc.’s market capitalization — the number of outstanding shares times the value of a share — was about $3.8 million.

Quantum’s stock was priced at .545 cents per share as of mid-afternoon Wednesday, with about 7.1 million outstanding shares.

Representatives of Quantum and its partner, Bilfinger Westcon Inc., went before the Yellowstone County Commission on Tuesday morning to talk about their hopes of locating one of the five refineries in Billings.

A story that ran on Page 1 of the Billings Gazette on Wednesday morning was headlined, “County officials roll out welcome mat for proposed refinery.”

Even before that story was published, a local blogger posted documents from an Arizona divorce case involving Quantum CEO Andrew Kacic, in which the presiding judge referred to Kacic’s “false claims” and “apparent tax fraud” and accused him of using a “purported charitable foundation” as a source of “personal funds for payment of his personal obligations.”

Kacic could not be reached for comment, but Russell Smith, Quantum’s vice president for communications, dismissed the blog post as the work of a “very serious environmentalist and activist.”

That was in reference to Alexis Bonogofsky, whose East of Billings blog makes no secret of her conservationist point of view. Smith also said that a judge in a divorce court — in this case Judge Dean Fink of the Superior Court of Arizona, Maricopa County — is not a judge of a court of “competent jurisdiction over IRS issues.”

And though he hadn’t yet read Bonogofsky’s post nor the court document to which she linked, Smith said, “I would take that with a grain of salt. It’s a divorce proceeding.”

County Commissioner Jim Reno was similarly dismissive of the blog post, saying “a lot of people don’t like the extraction industry or carbon.” As for allegations about Kacic’s financial dealings, Reno said, “Their investors would need to do their own due diligence, but we’re not one of them.”

“I’m not an investor,” he said a bit later. “If there’s tax fraud, call the department of revenue. We’re simply open for business.”

Commissioner John Ostlund, who asked to have the Quantum Energy presentation put on the commission’s agenda, said he was approached by a “mutual friend” who told him about Quantum’s plans.

He said he got some very basic information about those plans before the meeting Tuesday, but knew little beyond what was presented publicly. Asked whether Quantum appeared to have the financing and background to put together such a large group of projects, Ostlund said, “those questions are legitimate. I just don’t have the answers.”

He said the two companies asked nothing of the county, and that it is up to private investors to decide whether the projects are viable. “The process now is really in their hands,” he said.

Commissioner Bill Kennedy said he was cautioned by a local businessman to ask the Quantum representatives about their finances, which he did at the meeting. He said Kacic responded by saying that Credit Suisse was considering getting involved, as were some private investors.

“His said his financers are people who, once they have the land in place … that’s when the creditors, the investors, will jump on board,” Kennedy said.

According to the Gazette, Kacic told the commissioners he hoped to have more information about a real estate purchase in Yellowstone County by the end of the week. He said the $500 million refinery, with a 20,000-barrel-a-day capacity, would produce diesel and various other petroleum products.

Steve Arveschoug, executive director of Big Sky Economic Development, the county’s economic development agency, said the agency usually does “significant due diligence before going public” with an economic development proposal.

“Some companies turn that process around a little bit,” he said, and go public before that due diligence is done. It’s entirely up to the company as to when they announce their plans, he said, and in this case Quantum moved first.

“We have a very thoughtful due diligence process with every project we work on, and we’re just into that due diligence process right now” with Quantum, he said.

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