Doubles capacity to 6,000 Barrels Per Day Significantly Expands Revenue Opportunity Company Expects to Immediately Utilize 20% of Expansion
DALLAS, March 22 /PRNewswire-FirstCall/ -- Arabian American Development Co. (OTC Bulletin Board: ARSD) today announced that the Company's Board of Directors has approved a $12 million expansion of the Company's Penhex Unit, currently operated by the South Hampton Resources, Inc. subsidiary. The expansion is part of the Company's plans to capture additional market share and respond to increased demand for the Company's petrochemical processing services.
"We are confident that 20 percent of the increased capacity will be immediately utilized," commented Nick Carter, the Company's President. "We expect to fill the remaining capacity within three to four years. The expansion will add an estimated $65 million to $80 million of revenue potential that the incremental 3000 barrels per day represents. We believe our current staffing levels and operating infrastructure will meet the near-term processing needs and as we approach full capacity approximately $1 million in additional operating expenses may be required for increases in contract or outsourced labor. In addition, the expansion will provide the operation with a segregated process train identical to that which is already in place. The separate segregated process train working in tandem with the current operation will provide duplication so that in the event of mechanical failure, production could continue to meet the customer's most pressing demands. The planned expansion will produce the same high quality products under the exacting standards currently in place."
$2 million of the expansion will be funded by the Company with the remaining $10 million financed by Bank of America under terms which are currently being negotiated. It is expected the project will be financed for a ten year period with a Libor based floating interest rate. The Company is considering the acquisition of interest rate swaps to dampen the exposure to rate changes.
"Two years ago we expanded operations and immediately filled the additional capacity thereby unable to meet demand approximately 80 percent of the time," Mr. Carter added. "With the North American market consistently growing at 2-3 percent, we recognize the need to expand our capacity in order to gain additional market share, and the expansion will now enable us to more aggressively pursue international opportunities. South Hampton Resources is committed to reinforcing our position as the vendor of choice, and this expansion initiative is a key component of that effort."
The Company has initiated the permitting process, and expects to begin acquiring the equipment necessary for the major components of the process. Management is targeting operations to begin in the first quarter of 2008.
About Arabian American Development Co.
Arabian American owns and operates a petrochemical facility located in southeast Texas just north of Beaumont, Texas, specializing in high purity petrochemical solvents and other solvent type manufacturing. Arabian American also has a mining project in Saudi Arabia which is under development and is expected to produce economic quantities of zinc, copper, gold, and silver when it is put into production. There are about 20 employees at the mine site.
Statements in this release that are not historical facts are forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon management's belief as well as assumptions made by and information currently available to management. Because such statements are based upon expectations as to future economic performance and are not statements of fact, actual results may differ from those projected. These risks, as well as others, are discussed in greater detail in Arabian American's filings with the Securities and Exchange Commission, including Arabian American's annual Report on Form 10-K for the year ended December 31, 2005 and the Company's subsequent Quarterly Report Form 10-Q.
SOURCE Arabian American Development Co.