This article was originally published in February, but we’ve had a few questions about this one so we’re re-running it for you today — the stock is up nicely since the original publication thanks to some improving results and, more importantly, to a recent joint White Paper with Pemex that got them quite a bit of attention and hopes for more business. The original article below has not changed and we have also left the original reader comments attached, I still do not own the stock. The version of the ad that’s currently circulating can be seen here if you’re interested.
Keith Schaefer is pitching a “spy” stock for his Oil and Gas Investments Bulletin that he says makes oil discovery far more efficient and effective, cutting out some of the wasted exploration efforts, particularly in completely unexplored “frontier” markets. And as a bonus, it’s a small and unknown stock that doesn’t trade much yet (so institutions can’t really buy shares), and it generates business with very high profit margins.
Sounds appealing, right? Well, let’s see if we can name it for you and provide a bit of a head start so you can do your own research. Here’s how he entices us:
“Oil’s ‘Seismic Shift’
“This New ‘Spy in the Sky’ Technology Is Finding the World’s Frontier Oil – In Ways Never Before Possible… and Ushering in a New Wave of Profits….
“Everyone wants to know… Where is the next big oil discovery?
“In the last decade, the answer surprised everyone—it was the United States and the Shale Revolution.
“New technologies created a whole new class of low hanging fruit for energy investors—tight oil.
“Today I’ll tell you about a new technology that is already finding the next set of oil discoveries.
“And it is doing it much cheaper, and much more quickly, than you might think.
“This company is already getting a lot of business from big companies in frontier areas…where their technology is working best.”
OK, so that’s all well and good. How about a few actual clues?
“Seismic, you see, has become the industry standard method of searching for oil.
“Surveys are conducted, on the ground or from the air, with data that helps point to underground oil and gas deposits.
“There’s 2D, 3D, even 4D seismic – all brilliant technological advances in oil exploration.
“As I said, though, the process is agonizingly slow, incredibly expensive, and labor-intensive.
“Enter the seismic shift…
“I call it that because this new, patent-pending, ‘disruptive’ technology gives oil explorers the ability to find new Big Reward oil and gas deposits all over the world—much faster and cheaper than ever before.
“It is the next wave of seismic… because it turbo-charges the development stage for oil and gas producers… while it eliminates seismic’s biggest, most difficult challenges.
“It’s an incredible 10 TIMES faster than 2D seismic. It’s also one-tenth the cost – even down to one-twentieth the cost.
“Most importantly, it improves the success rate in finding new oil & gas plays.”
Seismic surveys can take quite a bit of time and money, which is why you often hear about companies doing aerial surveys of exploration tracts before investing in seismic — so is this some kind of aerial thingamabob? Sounds like yes … here are a few more clues about the company …
“It’s like viewing the world’s untapped oil resources… through the lens of the world’s most powerful airborne microscope.
“That’s why some of the biggest energy companies in the world are using it.
“This small company enjoys high margins while saving these big customers up to 90% – even 95% – on their exploration. They are cash flow positive and debt free.”
And we get a few hints about some of their customers:
“… one of South America’s biggest independent oil & gas exploration companies is—in their own words– ‘making extensive use’ of this technology to ‘select the best areas for future exploration.’
“It just finished its data acquisition with a big client – a major national oil company in south Asia –contract that’s worth nearly $3 million.
“In Mexico, its biggest client is engaged in a contract worth nearly $5 million – and bought more, given the success of its program to date.”
Schaefer is a story hunter as much as anything else, and he has been known to get caught up in the stories (as do we all) of stocks that turned out to have massive flaws, like Poseidon and Gasfrac, but he has also latched onto some good ideas. So how will this one end up?
Let’s make sure we can grab the company name first for you …. the last of the clues in the spiel:
“‘Shooting’ Data — All Over the World — From 10,000 Feet in the Air“That’s right – wherever they fly their specially equipped planes, they’re “shooting” the ground, building a proprietary database of information they can sell to oil and gas companies.
“Their mission: to discover all of the unexplored frontier oil on earth.
“Keep in mind, here in North America, nearly every square mile that’s even remotely prospective for oil and gas has had seismic done already.
“That’s NOT this company’s market.
“But the international frontier market IS – and it’s wide open.
“And with its spy-in-the sky system, the process of finding new frontier oil discoveries will accelerate all over the world….
“A “normal” 2D seismic shoot that costs $3.5 million will provide data coverage of roughly 115 kilometers.
“How does this new technology compare, for that same cost?
“A whopping 2,500 kilometers of data coverage – that’s 21 times more than 2D seismic.
“And what happens is – in weeks or months, rather than years – the system dramatically speeds up the seismic process AND cuts the cost by up to 95%….
“I met with the company’s founder, the man who invented the technology more than a decade ago.
“He’s one of the world’s top experts on ‘airborne gravimetric detection,’ and developed his technology specifically for oil & gas explorers.
“And here’s what makes this technology different from every other one being used today:
“It sees what nothing else can see – which is reservoirs.
“It can pinpoint precisely where the reservoir is. Not even seismic has that ability….
“they can now concentrate their investment on much smaller areas – highly prospective zones. That’s money very well spent.
“Most importantly, the technology can detect if the oil, gas or water in the reservoir is still there.
“In fact, it charts an entire map of these reservoirs – using thousands of data points – to achieve the best possible results for oil explorers.
“It’s also accurate: customers have given the technology double-blind tests—where they KNEW the answers…
“And this technology matched up 100% with their data. It detected where there were—and weren’t—live reservoirs.”
OK, so we toss all that into the Mighty, Mighty Thinkolator and learn that this is … NXT Energy Solutions (SFD in Canada, NSFDF on the pink sheets).
And it’s teensy weensy, with a market cap of just $30 million, so IT WILL ALMOST CERTAINLY BOUNCE AROUND THANKS TO SCHAEFER’S ATTENTION AND THANKS TO THIS ARTICLE ABOUT IT. These minuscule stocks are very unpredictable, NXT Energy on average only trades about $20,000 worth of shares in any given day, so even one or two readers of Schaefer (or Gumshoe) getting excited about it could easily distort the market. As, of course, can any additional attention granted to a tiny company. Thankfully the market is already closed as I’m finishing up this note, so we won’t be bringing a load of attention down on little NXT Energy in just the last few minutes of the trading day — you’ve now got plenty of time to think rationally about the stock before trading resumes in the morning.
Interestingly enough, there’s actually an analyst covering this stock — and he thinks NXT will start making a profit next year of a couple cents, which would mean it might have a forward PE of 25 or so. That’s one single analyst, probably one who works for the firm that helps NXT raise money, and the company has only a few customers so far, so take that with a big ol’ grain of salt. But they are generating revenue, with some multi-million-dollar deals in Mexico and Colombia, and they do have a big potential market.
NXT uses a quantum analysis of airborne gravitational data, collected using a customized small Cessna airplane, to pinpoint areas of stress in the earth — they call it SFD for “Stress Field Detection,” and though Schaefer pitches it as a replacement for seismic it sounds like the company itself is really selling it as a way to better target seismic and drill exploration, giving companies with massive exploration territories the ability to better pinpoint the most prospective areas before spending a lot of money. I won’t explain it in more detail here because I would quickly reveal my ignorance, but they have a good investor presentation up here that provides a nice overview. (This is apparently the presentation they gave to an investment conference last week, perhaps that’s where Schaefer spoke to management.)
The company thinks they can book $20 million in revenue this year and double that to $40 million next year (last year was about $11 million, which was double their previous best year), and I do find it interesting that they’re also being creative in making deals — one of their initial surveys a couple years ago in Canada, for example, has resulted in them getting a 1.5% royalty over the fields that they helped to identify in the Horn River Basin. That hasn’t amounted to much yet, of course, but it shows that they may well be able to create a nice business that has a big and reusable data library (ie, you can sell it to more than one person) and also share revenue and generate some long-term profits from fields their equipment pinpoints.
So … it’s certainly an interesting story, and they do have a pipeline of planned and proposed deals that totals up to about $25 million, including some work that’s apparently underway right now, but it’s also a tiny company and it’s very early days, and we’ve seen plenty of technologies fizzle in the oil patch either because they didn’t end up working well enough or just because they couldn’t break through the inertia of the tried and true methods. Their balance sheet is fine, they do have some cash and no immediate need to raise more money as far as I can tell, though expansion would obviously require some sales staff and additional equipment purchases.
I’m surely no expert, but I like the looks of what they’ve done so far. Check out the presentation, look over their financials, and let us know what you think with a comment below.