Today’s teaser comes in from a name I haven’t heard before, a newsletter called Oil & Gas Investments Bulletin that’s put out by Keith Schaefer. Apparently it’s been around for a year and a half or so, and focuses on new technologies in the oil patch.
And while I haven’t seen any teaser ads from Schaefer before, he seems to have gotten the hang of them right off the bat with this enthusiastic promise that he’s found the biggest advancement in the last 151 years (what was developed 151 years ago that was bigger? I dunno.) Here’s how he introduces the idea:
“A small Canadian company’s patented “fracking” process has oil & gas companies lining up to use it…
“It is a fortune in the making. Keep reading to learn how you can collect yours, starting now.”
So … that got me thinking that this might be a stock I wrote about a couple months ago, but I’m going to need some more detail. He goes on to clarify that this “biggest advancement” is getting oil and gas out of rock — the horizontal drilling and fracturing that has been headline news for a few years now as it has made fortunes in places like the Bakken and the Marcellus shales. And he’s clearly big on fracking, as he puts it:
“… it has become its own sector in the oil patch… A global Mega Trend. One that’s going to continue growing – quarter after quarter – for the next 20 to 30 years.”
So what is the particular advancement that he thinks will make us rich? Here’s some more from the ad:
“an extraordinary new technology… which will fuel the fracking Mega Trend for decades.
“So let me tell fill you in on what this patented technology does…
“It Increases the Reserves, the Production, and the Profits of Oil Companies
“At the same time, it also completely eliminates the biggest environmental risk the oil & gas industry faces today. (It’s the only company in the world that gets rid of this risk, which I’ll explain shortly.)
“And while the technology itself is quite simple, its process is so powerful… it will help the U.S. greatly reduce its dependence on foreign oil, while it significantly increases profits for everyone in the industry – especially for its shareholders.”
So what is that risk? Water, including the use of heavy amounts of water, and the possible pollution of aquifers. Here’s how he puts it:
“… most fracking operations demand huge amounts of water, along with tiny amounts of chemicals.
“Now get this – Not only does this company’s patented process eliminate both… It also practically guarantees the continued prosperity of oil & gas producers for the next 20 to 30 years – as they take their revolutionary fracking process global.
“In fact, the entire global resource sector stands to make absolute fortunes using this company’s patented, ‘perfect solution.’”
Ah, now you’re saying, “yes Gumshoe, this does sound a bit familiar” — and indeed this is a stock we’ve heard tell of before. This last bit from Schaefer confirms it:
“… this isn’t some risky, speculative micro-cap trade.
“The company behind this technology is already profitable – on expected revenue of almost $100 million in 2010.
“And the oil & gas industry is practically begging for its new fracking technology – which is why it’s literally building out and spreading its technology as quickly as it can….
“The idea came from a 40-year veteran of the energy services industry, only 4 years ago.
“His plan: A unique way to streamline the fracking process… while actually increasing oil & gas production.
“The result: A remarkably simple yet powerful new method for fracking oil & gas wells:
So yes, this is the same company I wrote about for a Brian Hicks teaser back in December: GasFrac Energy Services (GFS in Canada, GSFVF on the pink sheets).
He goes on to supply some more details about the company — that their propane fracking technology can ramp up production by 40% or more, that they have ten patents and seven patents pending for their technology, and have tested it in several reservoirs in Western Canada and successfully used it in over 50 formations … and have gotten a foothold in Texas, the Bakken, and the Marcellus “on their way to gaining serious market share.”
And he clearly feels pretty strongly about the stock, making it a large part of his personal portfolio and saying that …
“In addition to immediately solving every environmental concern over fracking in the U.S., there’s a very real possibility this company’s technology could actually get MANDATED… by every oil- and gas-producing country in the world.”
So, I don’t know if that will end up being the case, or if competing technologies that aren’t covered by GasFrac’s patents end up being as strong or stronger, but as far as I can tell GasFrac is the most prominent company using gelled propane — liquefied petroleum gas — as their fracking fluid.
I still find the stock interesting, though I haven’t bought it myself and it’s clearly quite volatile — just since I wrote about it for that teaser from the $20 Trillion Report the shares have moved from $9 to near $12 and back again, and they’re now at about $10.50. The company also had an “incident” with a leak and a fire that injured some workers and damaged equipment last month, and as a result operations were shut down for probably long enough to have at least a small hit to revenue, which appears to be the reason for one of the sharp moves in the stock (down close to 20% on January 17, the first trading day after the incident was reported). For what it’s worth, the company seems to believe that they’ve identified the cause of the leak and a solution — they recommenced operations about two weeks after the incident.
Fracking is clearly a huge move forward for the oil and gas industry, opening up previously inaccessible (or at least unprofitable) reservoirs of trapped hydrocarbons, and I wouldn’t be at all surprised if that business does continue to grow for decades as new shale deposits are explored and produced. That said, I don’t have anywhere near the expertise required to tell you whether LPG fracking will replace hydrofracking in the future — there are clearly some advantages, at least if you go by the information supplied by the company (better production, no water used or polluted, the drilling can extract both the trapped oil and gas and the injected propane for much higher efficiency), but you’ll have to decide for yourself whether or not this is the wave of the future. The company’s updated presentation is here, and it does a good (though optimistic, of course) job of explaining their technology and their prospects.
As I noted before, I am interested in GasFrac, in part because they did a big equipment build out last year (using the capital they raised in their recent IPO and a follow-on fundraising) that should be reflected in a dramatic increase in their revenues in 2011, but I don’t personally own shares (and now that I’ve written about them again, I can’t trade in the stock for at least three more days — not that I was necessarily anxious to move quickly anyway). I will be keeping an eye on GasFrac — a disruptive technology, if indeed it turns out to have a sustainable competitive advantage and any kind of reasonable patent protection, can be a beautiful thing to own. If you’ve got an opinion on this one, or if you happen to be a shareholder, I’m sure we’d all love to hear what you think — that’s why we’ve got the friendly little comment box for you below. Thanks!