USOG acquires solid companies with significant revenue, proven track records and experienced management. The company targets oil and gas distributors and suppliers that make money, even under economic downturn conditions. USOG works to streamline operations and grow the already profitable businesses of their subsidiaries.
Turnbull Oil
In May 2009 USOG acquired Plainville, Kansas-based Turnbull Oil, a growing regional distributor of oil and gas products. The acquisition includes Turnbull subsidiary Basinger Inc., an established propane distributor located in Utica, Kansas. Turnbull is a regional distributor of oil and gas products including propane, diesel, gasoline, and lubricants. Customers include farmers, commercial and industrial businesses, oilfield businesses, rural and small city gas stations, construction companies and residential communities.
Wholly owned USOG subsidiary Turnbull Oil was founded in 1965. It is currently managed by Jeff Turnbull who purchased the business from his father in 1991. The company owns two bulk storage plants, a fleet of tankers, both propane and fuel bobtails, and office, warehouse and maintenance facilities.
For more than 44 years Turnbull Oil has excelled at providing top quality service to its customers, currently numbering over 300. The company delivers three brands of gasoline in addition to its branded and unbranded lubricants. The company has maintained a consistent level of service and is widely recognized for its superior customer service and excellent facility maintenance, including meeting all federal and local environmental regulations.
Turnbull Oil is growing. The company recently increased its hauling capacity of refined fuels by 64% to meet demand. Turnbull purchased an additional tank wagon truck with 4,500 gallons of capacity. Based on existing capacity utilization rates and revenue of $2.7 million already generated from the sale of refined fuels during the third quarter of 2009, USOG can increase delivery volume and revenue from the purchase of this new hauling truck by an additional $1.9 million annually.
USOG recently announced that Turnbull Oil has added four new wholesale bulk agents to its customer roster. The new customers are expected to purchase a minimum of 100,000 gallons of diesel worth approximately $300,000 during the next twelve months. The company has also closed sales with two new drilling companies. Turnbull expects to sell combination of fuel and lubricants to the Kansas drillers for a combined $720,000 in annual sales.
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Pending Acquisition
USOG has signed a letter of intent to purchase a private Bottineau, North Dakota-based regional provider of oil and gas products including propane, diesel, and gasoline. The target company owns a bulk storage plant, a fleet of tanker trucks, and a retail outlet. Management, which is contracted to remain with the business for a minimum of three years, has over 30 years experience in the industry. 2009 sales are expected to be $8.0 million, up from 2008 audited financial results of $7.0 million.
The purchase, expected to close by year-end, includes all property, equipment and six acres of developable land located on the main highway. Alex Tawse, CEO of USOG, commented: "We have looked at numerous situations to grow our business and increase shareholder value and we feel that this acquisition provides the next piece of the puzzle." In addition to assets with a fair market value of $0.5 million, the target company has a long record of growth and financial stability and would provide increased geographic diversity for USOG.
In November USOG reported the target acquisition has increased its residential propane business customer base by 30% year-to-date through October 31, 2009. Compared to the same period last year, sales grew by over 94,000 gallons along with a significant amount of backlog of new customer orders.
Well-Defined Growth Strategy Already Delivering Value, More to Come
USOG is implementing a shrewd strategy for value creation:
1. Find and negotiate the acquisition of small to midsize oil and gas companies that have strong financial track records and experienced management. USOG has a proprietary method of identifying and securing acquisitions that meet the following criteria:
a. Solid growth history
b. Profitable
c. Opportunity to increase profits
d. Strong management team willing to stay on board for minimum of two years
e. Little or no debt on the books
These companies are primarily successful family owned businesses that are looking for a way to increase market presence and provide financial security for the owners while at the same time leading further growth and technological advancement. USOG offers all of that by taking the company to the public marketplace, providing valuable business management experience to identify operating efficiencies, linking companies together to exploit synergies, and providing technical expertise and technology to their already successful businesses.
Profitable, revenue-generating Turnbull Oil is an excellent example of USOG’s ability to execute on its objectives.
2. Develop “green” technologies that will improve efficiency, reduce damage to the environment, and provide positive marketing to the investment community. USOG has developed and maintains a portfolio of pending patents and patent applications for proprietary green oil and gas exploration and extraction technologies.
3. Apply technology and gain efficiencies from synergies provided by the multiple acquisitions. USOG will use its technology to improve the operations of the companies acquired and possibly license the technology for increase revenue at little to no additional cost. USOG will also exploit the opportunity to gain efficiencies from the consolidation of its acquisitions. The company managers will have the opportunity to share best practices and work together to gain market share and drive growth to the bottom line.
4. Continuously work towards increasing market awareness and move the stock to larger public markets. Currently listed on the Pink Sheets exchange, USOG is working towards moving to the Bulletin Board or Amex markets in 2009. This will be facilitated by the current acquisitions as well as additional prospects in the pipeline. USOG has experienced personnel to improve market awareness and gradually increase institutional holding of the stock. Value should come from continued growth through acquisition and deployment of developed technologies. The current strategy allows for rapid expansion of revenues and profit.
Proprietary Oil & Gas Technology
USOG is also developing proprietary technologies to enable more environmentally friendly oil and natural gas search, discovery and extraction. The company currently has two pending patent applications for eco-drilling and small footprint technologies. The company believes this intellectual property and technology base should ultimately provide a competitive advantage and will facilitate the successful development and commercialization of techniques and devices enabling greener exploration and production. USOG plans to leverage the technology to increase the competitive advantage of acquisition operations and/or license the technology for profit.
The company has filed a patent application for an automated leveling system for portable drilling rigs. The technology is designed to save setup time and increase precision drilling efficiencies with the smallest footprint to minimize environmental degradation.
USOG has also filed a patent application for a simple fiberoptic seismometer for rugged environments that the company believes will dramatically reduce the cost of seismic sensor arrays, having the fidelity and reliability necessary for permanent downhole and seafloor installations. The advancement promises to make big oil techniques for oilfield production management and exploration techniques available to middle market players.