At this stage of commercial rollout, the $2.7 million Series B Preferred Offering, priced at $1.25 per share, is attractively valued at only a $13 million pre-money valuation. Based on this valuation, if the Company achieves its third-year pro forma net income and a conservative P/E multiple of five (5) times is applied to an exit this would represent a ROI of greater than eight times the original investment.

Of important note, the IX Power Team has successfully commercialized technical innovations from the U.S. Department of Energy in collaboration with Los Alamos National Laboratory for nearly 30 years and has spun out seven firms from U.S. DOE facilities.

IX Power Clean Water, Inc.

Frederick & Company, Inc.  is pleased to introduce an attractive investment opportunity in IX Power Clean Water Inc. (“IX Water”). The Company obtained the exclusive global rights for the commercialization of water technology developed under the direction of the Department of Energy (DOE) and in an R&D collaboration spanning ten years with scientists at Los Alamos National Laboratory, the University of Texas and New Mexico Institute of Mining and Technology.

 

It is widely recognized that water technology is considered the next major growth industry with a chronic global scarcity of clean, fresh water. In addressing this water crisis, the IX Power management team has spent the last four (4) years and just over $2 million to effectively commercialize this cutting-edge technology that is designed to clean-up toxic contaminated water creating an entirely new source of fresh, clean water.

Thoroughly validated, peer-reviewed and field tested, details available upon request, and operating in real time and with up to a 96% cost savings over the competition, the Company is preparing to execute on an initial sales pipeline of $35 million in addressing a $150 Billion per year industry opportunity.

IX Power Clean Water,  Inc. is offering securities under both Regulation D  through Frederick & Company, Inc. a registered broker-dealer, and member FINRA/SIPC.  Investments made under both Regulation D  involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Furthermore, the contents of the Highlights, Term Sheet sections have been prepared by Frederick & Company, Inc., and shall be deemed broker-dealer communications subject to FINRA Rule 2210 (the “Excluded Sections”). With the exception of the Excluded Sections noted above, this profile contains offering materials prepared solely by IX Power Clean Water, Inc. without the assistance of Frederick & Company, Inc., and not subject to FINRA Rule 2210 (the “Issuer Profile”). The Issuer Profile may contain forward-looking statements and information relating to, among other things, the company, its business plan and strategy, and its industry. Investors should review the risks and disclosures

The Next Big Bet in Fracking: Water

Investors sense opportunity in companies that handle drilling wastewater

A water pool surrounds a drilling rig in Midland County, Texas. Producers must dispose of the vast amounts of water that come out of a well, along with oil and gas. PHOTO: JAMES DURBIN/ASSOCIATED PRESS
 

By :  Christopher M. Matthews WSJ

Updated Aug. 22, 2018 6:44 a.m. ET

Some investors see fortunes to be made in the U.S.’s hottest oil field—by speculating in water, not crude.

Fledgling companies, many backed by private equity, are rushing to help shale drillers deal with one of their trickiest problems: what to do with the vast volumes of wastewater that are a byproduct of fracking wells.

When producers blast a mix of water, sand and chemicals to release oil and gas from rock formations miles underground, they not only unlock oil and gas, but also massive quantities of briny water long buried beneath the surface. Drillers in the Permian Basin in New Mexico and Texas currently generate more than 1,000 Olympic-size swimming pools full of this murky, salty water every day. Handling it amounts to up to 25% of a well’s lease operating expense, according to analysts.

Investors have expressed interest in this corner of the U.S. shale industry as oil production in the Permian soars to record levels. Analysts said the region could produce more than five million barrels of oil a day by 2023, more than the current daily production of Iran.

Sensing a chance for a big return, private-equity firms have invested more than $500 million into wastewater-disposal companies such as Solaris Water Midstream, WaterBridge Resources LLC, and Oilfield Water Logistics. There are roughly a dozen of these water-focused companies that analysts said could each be worth hundreds of millions of dollars.

 

These companies are building pipelines to transport the wastewater and dispose of it deep underground, hoping to displace the trucks that currently do the job. Some companies have a longer-term plan: recycling the wastewater to sell it back to drillers to reuse. Most of the companies are currently private; WaterBridge Resources in June announced plans for an initial public offering, and others are expected to follow suit.

“The math on this is really, really easy,” said Christopher Manning, a managing partner of Trilantic Capital Management LP, which has invested in Solaris Water Midstream and committed as much as $100 million to the company. “If the Permian goes up by one million barrels per day in oil production, it’s going up six million barrels in water. That’s an opportunity.”

Larger pools of capital are looking for a way into the game, and Mr. Manning and others expect the companies to attract billions of dollars in investment. KKR & Co., one of the world’s largest private-equity firms, has begun approaching companies in the space in recent months, according to people familiar with the matter. A KKR spokeswoman declined to comment.

Finding a long-term solution to the wastewater problem is essential for Permian producers. A single shale well can produce more than a million of barrels of oil over its lifetime, and many times that amount of water.

Energy consultancy Wood Mackenzie has found that in some parts of the Permian Basin, wells produce 10 times as much water as they do hydrocarbons. In the Delaware portion of the Permian, the area’s most popular geologic deposit, water-to-oil ratios conservatively average 5 to 1, analysts said.

For years, drillers have relied on trucks to move the water, but surging U.S. shale production means trucks alone may not be able to handle the growth, a problem exacerbated by the continuing trucking shortage. Moving the water by truck, about 125 barrels at a time, is no longer feasible when a single well produces thousands of barrels a day. And rising water-management costs could add as much as $6 to the cost of producing a barrel of oil, according to Wood Mackenzie, potentially curbing the growth of future Permian oil supply by 400,000 barrels a day by 2025.

Truckers and the new entrants typically dispose of wastewater in underground wells, but the latter group hopes it can provide drillers the service more cheaply using pipelines that are scalable. Outside of Pecos, Texas, WaterBridge is building a network of pipelines to take away wastewater from some of the area’s biggest producers—Occidental Petroleum Corp., Concho Resources Inc., Anadarko Petroleum Corp. and Noble Energy Inc. The company said it would have 125 miles of pipelines built by the end of the year capable of handling 600,000 barrels a day.

“We really don’t know the potential here,” said Jason Long, WaterBridge’s chief commercial officer, during a recent tour of one of the company’s roughly 20 disposal sites on the edge of the Chihuahuan Desert, a compound of steel tanks that process thousands of barrels of water before pumping them into an underground disposal well. “We could sit back in 2020 and have 500 miles of pipe in the ground.”

There are looming regulatory and environmental challenges. Studies have linked disposal wells to earthquakes as wastewater from fracking can put stress on underground faults and increase seismic activity, and some in the industry predict regulators will tamp down on permitting new wells.

RELATED

Still, producers are signing up for long-term contracts with companies like WaterBridge. That is a shift from what had been a spot market priced by the truck load and a sign that producers need to lock up a solution for their water, said David Capobianco, whose investment firm, Five Point Energy, has pledged $200 million to WaterBridge. Moving water by pipe costs anywhere from 60 cents to $1.50 a barrel compared with more than $2 by truck, said Mr. Capobianco, who previously headed Vulcan Capital, Microsoft Corp. co-founder Paul Allen’s investment firm.

Apache Corp., one of the largest producers in the Permian, wants to reuse more water to reduce the millions of barrels it must dispose of and limit the freshwater it purchases for fracking, according to a company presentation earlier this year. Apache recycled more than 22 million barrels of water from 2013 to 2016 in just one subsection of the Permian.

“Prudent water management is critical to our success. It’s good for communities, it’s good for the environment and it’s good for business,” said Apache spokesman Phil West.

That potentially means a new business opportunity for water-disposal players. Historically, producers have mostly used freshwater for fracking, but water companies are setting up their networks with an eye on treating produced water so it can be reused for fracking and resold to the shale drillers who paid them to take it away in the first place.

“You can flare gas,” said Mr. Capobianco. “You can’t flare water. Once the water stops flowing you have to shut in a well. When we began looking at this sector seven years ago, that was really an epiphany.”

—Miriam Gottfried contributed to this article.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

Click to read additional articles about the water problems in the Permian

Quick FACTS

  • IX Power Clean Water, (IX Water, or “Nine Water”) is a manufacturing, marketing, sales, and support company focused on innovative water treatment machines.
  • IX Water sells machines that cleanup the most contaminated waters: those from industry, mining, and oil & gas recovery and refining. This “produced water” contains deadly chemicals including benzene, arsenic, chromium, and toluene.
  • Total costs for using IX Water machines are up to 96% less expensive than other methods, including dumping the contaminated water or treating using other methods.
  • Customer sales range from $450,000 to $12 million depending on number of modules required to create a plant to treat specific daily volumes of water.
  • Water treated with IX Water modules meets or exceeds the most stringent standards for agriculture, livestock, and in community water systems — even discharged to the natural environment.
  • IX Water is a spin-out from Los Alamos National Laboratory (LANL) in the U.S.A. and holds exclusive global rights to technology developed at LANL, as well as to innovations developed solely by by the company.
  • IX Water has spent the last four years and just over $2 million in private equity capital developing, testing, and validating its products in the oil & gas industry.
  • The executive team has worked together on previous successful ventures over the last 25 years.
  • The Company has begun a soft marketing program (direct contact with potential customers) and developed an initial $35 million sales pipeline that supports Management’s revenue projections. Additional capital will allow the firm to market and sell to three initial regions: the U.S.A., North Atlantic, and China.

Please refer to the Quick Facts Booklet below for the complete IX Power Overview.

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Management Team

The IX Power Clean Water, Inc. team has successfully commercialized technical innovations from the U.S. Department of Energy for nearly 30 years and has spun out seven firms from U.S. DOE facilities.

John "Grizz" Deal

Executive Chairman & CEO

John R. Grizz Deal has over twenty-five years of experience in technology commercialization, tech-based startups, fast-growing ventures, and product development.

Grizz was CEO and a co-founder of Hyperion Power Generation, a Los Alamos National Laboratory (LANL) spinout developing a Small Modular Reactor (SMR). Click here to Read More

Deborah Deal-Blackwell

V.P., Marketing & Public Relations

Ms. Deal-Blackwell serves as the Vice President of Marketing for IX Power Clean Water and as the CEO of the IX Power Foundation which operates the Jeff Co Innovators’ Workshop and the Jeff Co Innovation Faire, among other activities.

Before IX Power, Deborah co-founded Hyperion Power Generation.  Click here to Read More

Robert L. Libutti, PhD

Chief Strategy Officer

Dr. Libutti is responsible for business and technology development strategy.

Dr. Libutti is a co-founder and the former VP of Engineering and Strategy for Hyperion Power Generation and for the software company LizardTech. Click here to Read More

Dr. Otis Peterson, Ph.D.

Chief Technical Officer

As Chief Technical Officer of IX Power, Dr. Peterson supervises the review of all energy technologies and the coordination of research efforts in the public and private sectors. Among his many career accomplishments, Dr. Peterson is the inventor of the original design for the unique Hyperion Power Module. Click here to Read More

Randall Wilson

Chief Financial Officer

Randall Wilson is one of two key founders and was Chief Financial Officer/Chief Operating Officer of Technology Ventures Corporation (TVC), a private foundation funded by Lockheed Martin Corporation to commercialize national laboratory-developed technologies. Click here to Read More

What is Produced Water?

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Securing the Future of Food & Water

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Recent Press Releases

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IX Power Clean Water, Inc. Business Plan

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Private Placement Memorandum

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Check out the background of our broker-dealer and investment professionals on FINRA’s broker/check

 All securities-related activity is conducted by Frederick & Company a registered broker-dealer, and member FINRA/SIPC, located at . Equity crowdfunding investments in private placements, and start-up investments in particular, are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest in start-ups. Additionally, investors may receive illiquid and/or restricted stock that may be subject to holding period requirements and/or liquidity concerns. In the most sensible investment strategy for start-up investing, start-ups should only be part of your overall investment portfolio. Further, the start-up portion of your portfolio may include a balanced portfolio of different start-ups. Investments in startups are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.