Jeff Siegel’s been going a bit wild with his promos for the Power Portfolio newsletter, with several new “over the top” teaser ads blanketing the interwebs in the last couple months.
And since he’s running on so many huge mailing lists, his teasers always catch the attention of the finest and most erudite readers in cyberspace (that’s you, of course). So let’s get ourselves a solution, shall we?
Here’s how the tease opens:
“430 billion barrels of American oil remain untapped because they are too difficult to extract
“But that’s about to change — thanks to one simple technology.
“Oil companies are already using it, increasing production by 1,000%… And only one company makes it.”
So this is one of those “better mousetrap” companies — someone who has a technology that makes oil production much better in some way, either cheaper or more productive or more environmentally friendly, the kind of technology that we could easily imagine becoming “standard practice” in a massive industry. Which would, of course, lead to massive profits if it’s a proprietary and patented technology.
So … some more clues as to what kind of magic technology this is:
“Up to 90% of proven oil is simply abandoned by profit-hungry oil companies!
“Now just imagine what it would mean if these companies could finally get to all this “leftover” oil.
“If only they had the right technology…
“If only the right technology even existed…
“I’m here to tell you that it does….
“The Earthquake Effect …
“To understand how this technology works, it’s important to realize why it’s so difficult for producers to reach more than 20% of the oil beneath their feet.
“To extract the oil, companies inject hundreds of thousands of gallons of water and carbon dioxide into the ground to push it into another well where it can be pumped out.
“But instead of acting as one massive wave of pressure throughout the entire formation, water and CO2 flow the path of least resistance, with much of it seeping away into tiny rivers and nooks and crannies in the earth.
“The result is that only a fraction of the oil can be recovered before there is nothing left but water and CO2.”
We’re told that this technology was discovered fortuitously — scientists realized that earthquakes in Alaska led to increased production of oil in Western Canada, and tried to figure out how those seismic waves increased oil production.
“In the late 90s, with oil still at $12 at barrel, one tiny company put this question to the test.
“And the answer it came up with was a device so mind-bogglingly simple that it can be used right out of the box!
“All oil producers need to do is attach this device to the bottom of a fluid injection string…
“Then this ‘Petro-Pusher’ relentlessly pulses water through the ground at speeds of up to 100 meters per second….
“in some cases, the Petro-Pusher has increased individual well production as much as 1,000% — and secondary field recovery by 30% or more…
Last year, Core Energy almost doubled oil production at its carbonate pinnacle reef field from 46 barrels of oil per day (bpd) to 84 bpd…
At a formation in Crane County, TX, production soared 30%…”
And we also hear about a few well-known oil companies who are at least testing this technology:
“Small wonder why the Petro-Pusher is already being used by giants like Chevron, Penn West, Apache, BP, Halliburton, and others at more than 175 wells across North America…
“Or why the number of drilling stations equipped with it has soared 3,300% since 2007.”
So who is this? Toss all that info into the Thinkolator, and we learn that this is … Wavefront Technology Solutions (WEE in Toronto, WFTSF on the pink sheets).
Which has graced the pages of the Gumshoe before, as some of you might remember — the enticing combination of tiny stock, new technology, obscurity, and potentially broad base of customers is hard to resist for the newsletter guys, and this one was teased back in November by Keith Schaefer over at Oil and Gas Investments Bulletin, who is unabashedly focused on “story” stocks in the energy patch (small companies depend on small investors, after all, and small investors love cool stories).
Since that last wave of teasing (I think Schaefer might also be teasing this one again recently, though I’m not sure if those are new pitches or rehashed emails rolling in to Gumshoe HQ), Wavefront has mostly trended down this year — it is clearly driven to a large extent by these widely publicized newsletter recommendations. It just about doubled from 50 cents when Schaefer teased it in November and then gradually fell for most of the first half of the year, and since this last campaign from Power Portfolio started a few days ago it has bumped up by a quick 30-40%, though it remains to see how sticky those gains will be. You can rely on a newsletter with a pretty big mailing list to drive up a stock price for a microccap company like this (it is indeed very, very small — the whole company is valued at about $50 million right now), but you can’t rely on them to keep the price up — for that you either need an increasing flood of positive news from the company, or you need yet more people piling on to recommend it to their subscribers.
What does Wavefront do? They license their “wave” injector products that create pulsing waves of pressure — the Powerwave does this for oil and gas injection wells (where they pump water in for water floods, for example, though they say they can increase yields from any injections — of CO2, chemicals whatever), and the Primawave does this for cleanup projects, when remediation fluids are injected to clean up a damaged site. Powerwave is where most of the excitement and business is, since there are plenty of oil companies who know that increasing efficiency or yields of their fields could yield big bucks.
So if the technology does take off and whatever patents they might have prove to be sturdy, things could certainly work out well for Wavefront — it’s very, very hard to change the way oil companies work and to introduce new technologies (Hydraulic Fracturing was invented 50 years before it was really used for production in the late 1990s, and it took almost decade after those first efforts in the Barnett Shale before it opened up shale gas and oil fields around the country), but they do have some compelling data about the success their early customers have seen.
They’ve also had a fair amount of news out lately — one of their customers extended the number of wells they’re licensing last week, and this week they announced earnings and then followed that up with a press release about an independent validation of the effectiveness of their technology in some Canadian oil projects. So it might be that the shares are moving more on actual news this time than on Jeff Siegel’s tease.
So revenues are certainly moving in the right direction at the moment, though they’re a long way from recouping investments so far — the good thing about Wavefront is that their licensing model means that if they do get to a critical mass of customers they can build up a terrific high-margin business, but the bad thing is that they’re still not very close to that tipping point where their revenues exceed their R&D and marketing expenses. They’ve had some big-name clients try the system, including an announcement that Pemex will be trying Powerwave on their huge and declining Chicontepec field, but revenues are still quite low in comparison to the grandiose potential of the “story.”
I haven’t studied Wavefront in much detail and I’m still feeling quite cloudy in the head, I’m afraid (even more so than usual, thanks to powerful pain meds and antibiotics), but it is at least an interesting company — a great story and a revenue/earnings picture that’s not quite established yet, though they do have $10+ million in cash to keep them going for a while (they lost $1.5 million in the last quarter, though their spend on marketing is probably climbing quickly). Sound like the kind of story you’d like to dig into and make a gamble on mass adoption? Let us know with a comment below.