Imperial Petroleum Signs up For DEP Biodiesel

19 May 2006

Imperial Petroleum, a small ($3.2 million revenue) oil and gas operator, has signed a Letter of Intent with Domestic Energy Partners (DEP) to sell up to 25 million gallons annually of biodiesel manufactured by DEP using its proprietary process.

DEP claims it has developed a simplified process for the production of ASTM D-6751 standard biodiesel from virgin or waste oil using a solid catalyst in a “black-box” system. The process eliminates the need to wash the fuel to remove the acid or base catalyst used in typical production processes. (Earlier post.)

Under the terms of the intended agreement, Imperial’s subsidiary, Hoosier Biodiesel Company, will reserve a delivery commitment of up to 25 million gallons annually from DEP, with the right to increase its commitment to 100 million gallons annually, with the payment of $2.5 million in cash and 1.5 million shares of IPTM stock.

DEP will carry a non-recourse note for the balance of the biodiesel commitment that is convertible into IPTM stock at a price of $3.60 per share after giving effect to proposed four-for-one reverse split of the stock.

In addition, Hoosier Biodiesel Company will have the right to construct one or more plants using the DEP process in the Midwest, and biodiesel sold from those plants will offset any volume delivery commitments between the parties.

The process developed by DEP requires substantially less equipment and space than the traditional biodiesel manufacturing plants and is, according to the company, more cost-effective than conventional processes. Hoosier Biodiesel Company expects its margins to be about $0.40 per gallon of product sold. The parties anticipate closing in July 2006 with first sales expected in October 2006.