Many of you have emailed me about this one, and a few have ventured solutions in email or in the forums or comments on previous articles (most of you are right, of course). This is a teaser from Agora’s Energy and Scarcity Investor edited by Byron King, which I don’t think I’ve looked at before (though many have commented on their previous teaser, for the “China Lake” geothermal investments). The newsletter is one of the pricier ones I’ve looked at lately, $995 (which is the “lowest price ever offered” and a price that will “expire soon,” of course).
And the primary teaser here is for this “oil vacuum” technology, and the company that owns it. So let’s take a look …
Apparently, this technology is owned by a small company, with a stock price under $3, and, in their words …
“… the U.S. Department of Energy says the only company that has it could be key to unlocking an 800 billion barrel oil deposit in the Rocky Mountains.”
The ad says they’ll be producing oil with this technology by the end of next month, and it also says that they have a signed contract to produce from an oil field in Canada as soon as this coming Autumn, so there is some near-term catalyst here, perhaps, for the shares. What else are we told about them?
The technology is touted here as a way to extract oil from the challenging shale beds in the Rocky Mountains area, which is where the “3X the reserves of Saudi Arabia” bit comes in. But it also apparently can make oil in other ways, including from junk.
“That’s right. The “Oil Vacuum” can squeeze oil from landfill trash — using just pennies of electricity to make $5 of fuel and other products.
“Time named the “Oil Vacuum” one of its Best Inventions of 2007 — based on just this one capability.”
And they chime in with a quote from Popular Science, too:
“It sounds too good to be true; a machine that takes in trash and spits out oil and natural gas. But that’s exactly what [the Oil Vacuum] can do.”
Oil from trash? I’m sure there’s a catch in here somewhere, but that certainly sounds compelling, no?
Which is why, I suppose, the “conservative estimate” of returns from this company are 1,310%. Does the fact that they say it’s conservative make it likely? Well, that’s your call … let’s find a little more information to help you decide.
The copywriter here actually did a good job of explaining what the “oil vacuum” is and how it works — it’s based on microwave technology, which makes intuitive sense if we consider that adding heat to liquefy petroleum out of tar is a major way that challenging oil fields like the tar sands have been attacked in recent years.
Here’s an excerpt of that explanation:
“Here’s the thing: Microwaves are like radio waves. They operate across a wide spectrum of frequencies — more than 10 million. Your kitchen microwave operates within a very narrow spectrum of those frequencies to heat up a cold cup of coffee.
“Find just the right frequency among those 10 million, and you can heat up just about anything under the sun.
“Including things made of oil that have outlived their usefulness. They can actually be turned back into oil!
“That’s what dawned on a scientist in New Jersey one day in 1996 as he turned on the local news. He saw a giant tire fire at an illegal dump, belching acrid smoke for miles around.
“What if, he wondered, instead of loading up our landfills with old tires, you could blast a tire with just the right microwave frequency to break it down into the materials it’s made of — including oil?
“This was the beginning of the ‘Oil Vacuum.'”
Nice and clear, right? Makes you wonder why you didn’t come up with this invention yourself?
There’s more — this is apparently a working machine, at least the “trash to oil” microwave/vacuum (they had to put it in a vacuum to keep oxygen from getting in and making the metal trash, and the metal in the tires, explode).
So I guess that’s a crafty play on words to get our attention, too — how many of you pictured a giant vacuum cleaner that could suck the oil out of the ground? Come on, raise your hand — there’s no shame here! A vacuum sucking goodies out of the earth sounds more fun than a complicated machine that can only operate in a vacuum, huh? Dang.
More on the inventor’s progress:
“After some additional refinements, he perfected a machine about the size of a phone booth that in minutes can transform a 14-inch tire into…
“1.2 gallons of diesel fuel
50 cubic feet of combustible gas
7.5 pounds of carbon black (useful for making everything from ink to athletic gear)
2 pounds of high-strength steel.”
“And it’s not just the tires from a junked car that the “Oil Vacuum” can transform into oil.
“There are metal, plastics, rubber, foam… adding up to about 10% of the car’s weight… all of which can be run through the ‘Oil Vacuum’ and transformed into 80% combustible gases — and 20% oil. With no emissions. And no pollution. The amount of waste that goes to a landfill is cut by 65%.”
So, apparently this uses just electricity, and the teaser says that it uses 50 cents of electricity to generate $5 of oil and natural gas and other good stuff, even as it cuts down on the amount of junk that has to be tossed into the landfill.
This part of the business appears to be first in line for the “oil vacuum folks” …
“In fact, an auto recycler in New York State will be using it onsite no later than May 31. And a California firm will build a brand-new tire recycling plant in Arizona this year, built exclusively around the “Oil Vacuum.” It’ll process 60,000 pounds of tires every day.”
OK, OK, so enough excerpts from the ad.
The other use of this microwave “oil vacuum” technology is in recovering otherwise unrecoverable reserves — the 70% or so (depending on who’s estimating) of the oil in most basins that can’t be recovered using current conventional drilling. Apparently they drop the microwave thingy down the well shaft, heat up the stuff, and it comes out liquefied and partially refined (so this is another teaser about getting a head start on refining, too, not unlike the “underground refinery” that we looked at a little while ago).
And the third use is for shale oil — we’ve looked at a number of shale oil teasers in the past, and there are many more, but the big thing with shale oil is that the successful extraction techniques almost all involve heating up the shale to scare out the good petrocarbons in liquid form, then pumping that stuff to the surface (this is a simplification, of course, but your Gumshoe is a simple man). So, the theory goes, if they have to heat it up, why not a microwave instead of the super expensive stuff that Shell, among others, has been working on developing (and which involves using lots of natural gas, not completely unlike the SAGD process for oil sands recovery). One of Shell’s problems that they had was that you have to not only heat the shale, but also supercool the shale in surrounding areas to create a barrier so that you don’t just heat up the shale oil and then watch it drain deeper into the earth (again, this is the simpleton’s take). Could this “microwave oil vacuum” possibly solve that problem or otherwise make the extraction feasible?
The market cap of the company is, as of the time the email was put together, about $62 million. That’s certainly a teensy, weensy company.
And the Thinkolator happily spits out an answer when asked, “what’s the company?”
This is: Global Resource Corp (GBRC, trades over the counter on the pink sheets)
The shares are up about 20% today so far, thanks no doubt to this relentless advertising campaign — and, I assume the new, eager-to-buy subscribers that the newsletter has no doubt picked up as a result. They ran up to over $5 last fall, but are currently at about $2.40 (the $2-3 range is where they’ve been for most of the last six months).
So … that future promise? The ad said that “it’s just a matter of time before the “Oil Vacuum” is licensed … maybe even [to] one of the “Big Three” in the oil services field … there’s no telling how high this company’s stock will go once that happens.”
You know, in writing about these teasers for over a year now I expect that the absolutely most common phrase in these promises is “it’s just a matter of time,” since nearly every single promise made about one of these companies is couched in the fact that it will succeed over the long run, even if there is promise of a near-term blip.
Which does call to mind Keynes’ famous quote, “Long run is a misleading guide to current affairs. In the long run we are all dead.”
But still, what else is there to know about this company?
They really did make the 2007 “best inventions” list for Time. The iPhone was the overall top pick, incidentally.
The recycling technology is real, it apparently works, and it’s getting some attention. Here’s the Popular Science note that was quoted in the ad. They’re still working at perfecting the 1-ton version of this “recycling” machine, but they say that the delays they’ve had so far are unrelated to the core operations of the device. The company does a good job of providing lots of examples and explanation of their RF microwave technology and its application to various energy recovery projects on their website (though of course, they don’t say much negative about their prospects).
The company’s last 10K gives us a few things that might be worth investigating or worrying about, including the output from their main process (the recycling of tires into fuel is the most “proven” technology that they’re building on now):
“The precise composition of the resulting condensed liquid is not known but it has been tested and has a BTU content comparable to diesel fuel so the Company believes that it can be readily sold for fuel value.”
So that sounds certainly more couched than the teaser copy — it’s not like the machine spits out crude oil or diesel directly, so there might be some glitches there in selling the stuff (or maybe not — this is just one question).
Other risk factors that they cite, beyond the obvious ones that they are a developmental stage company with need for more financing, and they’re not profitable:
“The technology, while usable for the disposition of various waste materials, is primarily aimed at the recovery of hydrocarbons, i.e., energy. A major factor in the success of the technology, as applied, and the success of the Company, is the ability to recover energy which has a value greater than the cost of the energy being input into the process. That is uncertain until the initial machines are built and operated.”
“Our success will be dependent upon our ability to commercialize the technology, of which there is no assurance. While the processes work in the laboratory environment, in what are essentially “batch” procedures, commercialization will require that the processes be scaled up, with large machinery and equipment, and that such machinery and equipment operate on a “continuous feed” basis. While much of the material processing and handling
machinery and equipment is commercially available, the critical piece will be the microwave generators and their housing.
“We are in the process of building the first unit which will be used to demonstrate the technology in a continuous feed process and to prove the operational efficiency. There is no assurance that the unit will initially function as anticipated and it may require substantial redesign, remanufacture, and reassembly.”
And while you may picture in your mind a giant machine that you can just throw a junked car into and watch the oil flow out the other side, it is of course much more complex than that — everything has to be hacked into chips before it goes into the machine, they have to create a vacuum for each load and process the stuff, then clean the junk out of the device. So they need to perfect the constant flow of pieces into the machine, and it sounds like the machine has to be tuned for different materials — they’re working with an Ingersoll unit on the machines, but it sounds, to a non-engineer, like a significant engineering challenge to turn this from a proven concept to an easily-managed industrial process.
They also state, in that same filing which was released just two weeks ago, that their four key patents have been filed but are still “pending” — so they are confident in their intellectual property portfolio, but it’s certainly not guaranteed … and they own nothing else of value. Literally, nothing.
As far as the oil projects, which might be what interests more investors as the shale oil and tar sands and “unrecoverable” oil technologies always seem to get a lot of attention, this is the sum total of their description of that business in their annual report:
“With respect to the other hydrocarbon applications of the technology, the Company will continue its R&D in each of the areas and seek out joint venture partners for field testing and ultimate licensing to users.”
So … there may be hope, and there is some news since the end of last year, but this is still a loooong way away from making shale oil commercially feasible in new areas. They have licensed Canadian rights to Warwick for use in the oil shale up North — which includes an order for a machine to process the shale, and they gave them those rights for 20 years, so that should probably indicate something about either how much Global Resource needs the money, or how much of an early-state gamble the technology is. The press release is here, but do note (and this seems very important to me), that this is a machine for processing mined oil shale. It’s essentially similar to the machine for processing chipped tires, only larger (five tons versus one ton) and probably using different frequencies, but it requires that you dig the stuff up first and it runs into all the same processing/continuous vs. batch challenges. That makes this not terribly practical, at least yet, for the oil shale of the Rocky Mountain states — the dream for oil shale production, at least as I understand it, is in situ production, not mining of the rock and refining it, even if the refining uses a new and more effective microwave process. So maybe there’s hope, but this company’s technology looks like it represents but one small step.
The current company is a conglomeration of the technologies of Carbon Recovery Corporation and Mobilestream Oil, which were apparently acquired or merged or rolled into this Global Resources Corp back in 2006, so you might run into those two names as you do your research.
And — again, as of the end of last year, they had about $1 million in cash and assets, and had spent $10 million in 2007. So that math doesn’t work very well — they have since sold some shares to foreign investors, and have used shares to pay consulting fees, but I have little doubt that they’ll have to raise a lot of money if they’re going to continue advancing their business (unless they simply license out their patents and don’t build or develop anything themselves, and it appears to me that they’re probably a ways from getting to that point even if that’s the path they choose — the technologies, especially the field oil extraction technologies, probably have to be more proven first, I’m guessing).
This one is kind of interesting, if for no other reason than that the technology is fascinating and, if it does work at commercial scale, could make a big difference. The only cautions I would share are those above, and that the company’s real focus and expertise so far is in the trash recycling microwave — that’s probably the best bet if you’re wagering that one of their applications is going to work commercially in the next couple years, but it is, still, a bet. To me, it sounds unfortunately like it’s a better story than it is an investment, but I’ve certainly been wrong before and the shares might indeed shoot up by 1,300% if Byron King is right — but now, you can make that call yourself after you’ve done your research and gotten familiar with the company.
I’m sure many of you have looked into, and maybe bought shares of, this company already — if you’ve got an opinion, or some more facts about the company or their prospects, please feel free to share.
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