“The Biggest Oil & Gas Advancement of the Last 151 Years”

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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:

“Propane.”

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!

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50 Responses to “The Biggest Oil & Gas Advancement of the Last 151 Years”


  1. I just got the teaser and figured it was GasFrac. Planning on buying into this technology, it has all the potential for world wide growth to avoid the water frack issues currently being used. 100's of frack wells being drilled in the Marcellus shale and other U.S. natural gas areas. This is a winner in my view.

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  2. Make that 1000's of new wells planned…….all the big players doing active drilling for several years now.Enter text right here!

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  3. Funny, i just sold it off today after the run from $9.05 to $10.80, I decided it was looking like a pullback and took $10.50. Now that this is being hyped again i'm having second thoughts.

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  4. I prefer EOR to play the oil boom. If you like, take a look at Terrex Energy. Just announced an acquisition today. Market cap around 15 million.

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  5. Well let me confirm to all, it is none other than Exide Technoligies (XIDE) not a bad pick so far, since he recommenced it Jan. 31 at $9.63 and closed today at $11.84. Other than that I have no opinion as to if you should buy it. I did not, nor am I likely to. Lot's battery makers out there, no new breakthrough technology that I can see here, just lead-acid batteries.

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  6. I'm in the industry and I know several completions engineers that specialize in designing fracs. Specifically in the Bakken and other shale plays, and they are not sold on this technology.
    Does it work better than water, yes! Do the benefits outweigh the costs, no! Most companies do not use this technology becuase it costs a fortune to get the quanitity of LPG you need on location. Maybe this technology will catch on, but it appears most completion managers and industry executives are not willing to pony up this capital for their already pricey completion programs.
    I personally believe these fracs will only be extensively used on extremely sensative water formations, in which deisel fracs have already been used for 20 years.

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  7. I am in the energy business, and fracked my first well in 1955 using refined oil as a carrying agent. I own some of this stock, and believe that they have an excellant idea. Water is very valuable and I think the use of water will deminish as a fracking fluid.

    Charles

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  8. Another of Keith’s great picks (a double) and looks like it has ways to go. I’ve even been recruiting subscribers for him.

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  9. I was impressed enough to pick up some shares of Gas Frac on the pink sheets. As a retired engineer the propane gel process they use seems to solve most of the objections with using water to frac the soft rock without contaminating local water supplies.

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  10. I wonder if Keith is any relation to Mike Schaefer. Mike was very good at finding under radar oil and gas plays. I played several of his picks like: GTE (which at the time was gtre.ob), AZC, Conacher (a Canadian oil sands play), another was bought out. He also had some stinkers (Storm Cat energy), but that is to be expected with anyone.

    I would be curious to know if Keith has any relationship to Mike.

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  11. Keith is the real deal. He's up some 50-60% a year for the last 18+ months. I've subscribed for the last 3 months. I wouldn't quite put him at the Brent Cook level, but he's on his way.

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  12. COST AND DANGER WILL KILL THIS CONCEPT..ANOTHER COMPANY UNDER THE RADAR IS FLO-TEK WITH A CITRUS BASED FRAC PRODUCT-THIS CO HAS A RABID FOLLOWING AND JUST HIRED A 800 LB FEMALE GORILLA TO CLEAN UP BOOKS AND GET THEM DOWN THE ROAD IN HIGH STYKE.

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  13. The only thing holding this company back is capacity. $20-30 million in revenues in 2008 and 2009 and $55 million for the nine months thru September 30, 2010. Chevron developed the frac gel and licenses it to GasFrac. Solves a lot of problems and is first choice of drilling companies when available. Initial cost is somewhat higher, but overall cheaper taking into consideration less flaring, no waste water ponds, no proppant bacteria to kill,etc. (see GasFrac's website). And then higher efficiency of extraction. 2010 annual numbers should be out soon. I do own the stock, not in the industry, but did check it out.

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  14. From technical point of view, this Gas Frac has just IPO'ed last summer so not really sufficient data to analyse it. But for whatever is worth, it would be solid buy under $10, that's the psychological support. A good buy would range in $10 area. If you believe in the fundamental, put buy limit around $10.10-@10.25. Good luck, am placing my order there as well.

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  15. When mentioned to a relative in the fracing business:
    We call it gas fracing and we actually do it as well only we use CO2… it’s very very expensive and not cost effective. We charge $100,000-$500,000 per a stage of hydraulic fracing. Wells usually have 12+stages. CO2 fracing starts at $400,000-$1,000,000 a stage. Propane is even more expensive than CO2.

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  16. I have reservations about "Gas Frac". According to my sources liquid propane is highly combustabile. Therefore, a nasty side effect would be explosion. One major explosion could wipeout this company. I'm not buying shares at this time.

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  17. I have a web site where I research stocks under five dollars I have many years of experience with these type of stocks . I would like to comment about fracking I would avoid companies in this business. I have a great deal of doubt about whether the process of fracking is safe. their have be reports that ground water has been contaminated by the chemicals used in fracking.

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  18. I too had not heard of Keith Schaeffer before and it would be interesting to know whether he is related to the Mike Schaeffer who had an excellent reputation except for his Storm Cat Energy which he probably lost money on himself since he was one of the principals who financed the company. I still hold some shares because they are not even worth the cost of selling them.

    I identified GasFrac myself before sending the promo to the Gumshoe and bought a 100 shares to keep me focussed on its progress. I can also confirm that Byron King of Outstanding Investments has recommended Denbury DNR in their latest issue, so given his focus on the energy industry, it would seem that with the concerns about contaminated ground water from traditional fracking, which has been BANNED in some states, new and safer technology could be a growing market given its demonstrated ability to increase production.

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  19. The newsletter I received didn't talk about propane fracking, but instead, storing solar energy for later use. Researchers at MIT have discovered a new way to store the sun’s heat and release it on demand. Its name? The thermo-chemical approach. This is most likely what Henry Chiang is working on in China.

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  20. Oil services is going to be hot for the near term and beyond. Fracking requires aggressive additions to equipment and manpower to keep up with the demand for deeper, longer horizontals and new frac methods. I hold Gasfrac, GFS.v and Canyon Services, FRC.to from about C$6. Both have been winners. Expect both to be near C$20 by late 2011.

    Another smaller oil services firm that hasn't run as much and is much smaller is Leader Energy, LEA.v/LDRXF.pk. Made .08eps last qtr and guiding for better results in Q4 and Q1.

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  21. I was an independent operator '74-'82. I have owned the stock for several months & believe they will be highly successful– especially in the uncoventional shale plays with very tight formations.

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  22. I paid $99 tp the millionair portfolio a few weeks ago. Best Investment i have ever made. Boght 1000 shares at 9 and when they had a fire and went down boutght some more. Made about $10000 in 3 weeks. Planning on it going to 30 or m,ore sometime. Who is to say what invoiromental problems may be in the future./ Nothing is certain in life especailly in stocks.
    Or will they have a new stock issue.?

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  23. I have been in the oil and water business for 45 years, and in my experienc, oil can be pumped to 1000-3000 psi, it will do the job of fracking, but can cause subterranean contamination to the aquifer. Oil is very compressable and requires large quantities of fluid to get the desired results. Water on the other hand will do the fracking job better because water is incompressibl requiring smaller quantities than oil. Pressures can be built up extremely high in the so called closed container of piping hoses, and rock formations. One of the problems with water being used is that it will freeze in cold environments, and there is also a corrosion factor.

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  24. I'm new to StockGumshoe.com, and have been reading it for the last few days. Each time I've read about the Stock Gumshoe uncovering a stock, sure enough that stock has greatly increased in value. My question is, how can I know about these stocks BEFORE they greatly increase in value?

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  25. Talked to a junior that used fracgas process and they really liked it.The issue is getting enough propane. to the pad.,many truck loads needed.A solution 9I brought it up)in a big field setting would be to have a propane pipeline as a central hub then truck it to nearby pads.I asked the engineer from this junior company if this option was being looked into.He said yes.This could greatly reduce shipping propane costs.
    Pros:
    no water,no flaring,faster production,more producted extracted,100% retrival of frack solution,may get all the patents on it(becomes a real take over target)N.Y hasn't placed the process on moritotium because it's considered green.
    When a company keeps expanding exponentially it's a trend.
    Cons:
    fire (what fire in the oil&gas business) It like everybody else in the voletile business,it happens,so you make it better.270 wells completed so far,one mishap,luckily no one seriously injured,this is a good thing in a way,they won't be complacent and will redouble efforts for safety.And I'm not saying those guys that suffered a burn are guinypigs,I'm just glad it wasn't worse for them ,but that incedent will prevent similar futur incedence with worse outcomes.
    Do your DD

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  26. GasFrac's pending patent position is very weak. I don't think any significant claims will ever issue. HAL and others tried this approach years before GasFrac. The value is in GasFrac's trade secrets, experience and know-how. I like this business model and the timing of the news about environmental issues is a short term positive. I have a long position in GFS and CRR.

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  27. Yes I do hold shares. Yes it sounds like a great technology and yes there are thousands of wells that will require fracs. And yes I'm in the industry.

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  28. There is a company that just may need this type of Frac…and there may be several others…BBEP has several fields located in populated areas of Los Angeles and they have fields over Monterey Shale…said to hold 500 Billion Barrels of Oil. Thus they can't have contaminated water problems. I'm sure Frac use for Natl Gas is costly…but
    oil – wait till it hits 200+ a barrel…then it's peanuts. I own GasFrac.

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  29. What is the symbol Len? Thanks for your tip.

    Please send ifo to my email. With thanks. drnaz2001@yahoo.com

    Here is a one to folllow SLV on the TSX venture. Has the makings of huge upside. Look at the international advisory board. Regards

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  30. No doubt LA residents would just LUV TO DEATH the idea of their earthquake-fault-ridden area (with, so it is claimed, considerable pent-up pressure) being fracked by oil companies.

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  31. I own the stock in 2 accounts that I have, it is currently trading at 14.35 and is rising going into earnings which are to be reported on march 10th. the company has stated that they will double revenues and profits this year and with their recent 2 buildouts of equipment which the 2nd should be delivered in the next 2 weeks this company is going nowhere but up.

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  32. Richard. GFS was definitely a success. 1st issue at 5.00; 2nd issue I think over 8.00 and then a huge run up.

    What has been the performance of the others recommended?

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