“The Google of Natural Gas, with a Game-Changing Innovation That Could Hand You a 157% Gain!”

Sean Brodrick's "Red-Hot Revolutionary Small Cap #1"

By Travis Johnson, Stock Gumshoe, February 27, 2012

A quick one for you today, as much to distract me from personal issues as to help sniff out an interesting investment idea for you.

The pitch is from Sean Brodrick for his Red-Hot Global Resources newsletter that’s published by Weiss, we’ve looked at some of his teaser picks before — most recently a bunch of mining-related picks — and this time around he’s talking about fracking, oil, and natural gas. Here’s an excerpt:

“This company is growing almost as fast as Google did in its early years, outpacing the leaders in an industry that’s growing like wildfire. And like Google, they are literally rewriting the way their industry works …

“Hydraulic fracturing — or “fracking” — is one of the new technologies I was talking about earlier and it allows miners to get at all the gas locked up in places like the Haynesville shale.

“But the process isn’t perfect.

“As you may already know, there’s been some backlash against fracking by environmental groups. And a good deal of this backlash is based on the massive amounts of water pollution that fracking currently creates.

“But this company has created a new kind of fracking technology — one that doesn’t result in a single drop of waste water!

“It’s a natural evolution to the process — and it’s something every miner, every well and every company need if they want to keep cashing in on the shale boom without drawing negative attention from the media.

“And this company has a lock on their new process. With ten patents issued and seven outstanding, this process can’t simply be copied or stolen away by a competitor.

“This isn’t some test-tube innovation, either — this company is already profitable in its first year of operation!

“They’re deploying their new fracking process in Canada and abroad.”

And Brodrick says that we’ve got a bit of a catalyst possible this year, too — always nice to see:

“And with Chevron already at the table, this company is planning to ink their first big deals in the United States this year … which is when I think their stock will start to soar.

“Heck, I figure an American fracking deal would more than double their potential revenues this year!

“So you can see why this company represents one of the greatest opportunities in natural gas today.

“I think its stock could rise 157% from current levels!”

So … who is it? Well, that’s not exactly an avalanche of clues but we take the number of patents, the water-free process, Chevron, new deals, throw that into the mighty, mighty, Thinkolator and find that this is … GasFrac (GFS in Toronto, GSFVF on the pink sheets)

GasFrac is not teensy, but it is certainly very small compared to the big oil services firms, with a market cap of just about $500 million. They are a fracking company, but with their own patents and their licensed patents for the basic process from Chevron they pretty much own the LPG fracking business (or fracing, or fraccing, or whatever you want to call it).

So what is LPG fracing? It’s basically using gelled propane (LPG) to fracture oil and gas formations instead of using water — the propane gets further into the reservoirs, fractures more of the formation, and reportedly gets much better production results than conventional hydrofracking, and without using any water.

So that’s the basic argument — it produces more energy, and it doesn’t use water or create wastewater. On the flip side, it means you’re trucking and using a lot of gelled propane, which is extremely flammable and has substantially higher up-front costs (they’ve had one bad fire accident that caused them to rethink their procedures and slowed down their development).

I’ve owned GasFrac in the past, but took taxable losses on my shares and don’t currently own the stock — this is one of those “story” stocks that has a great story, but is still new enough, even with more than 1,000 treatments under their belt, that lots of little things can derail them and it’s very hard to judge how their costs will change and how big orders or big accidents or regulatory changes (or other technological innovations) will impact their future business (to say nothing of low natural gas prices cutting into demand for projects that have high up-front costs — as far as I know GasFrac’s procedure makes sense mostly for natural gas production, in part because of their ability to recover the propane during gas production). They’ve had accidents and relatively small setbacks, they’ve had big orders (like the recent one from Husky Energy to do a lot of work in Alberta), but to me it’s still a company with a great logic behind their business but with plenty of challenges ahead.

There has been a lot of coverage of GasFrac in this space in the past, and there are a few folks who very actively follow them at SeekingAlpha, in addition to the several newsletters who’ve recommended the company in the past, so there’s plenty for you to read as you make your choices — I haven’t looked very closely at their recent deals or news, so if you’re a GasFrac shareholder or enthusiast and think they’re on the verge of a breakout, or think it’s a fad that will never get big, feel free to share your opinion with a comment below.


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25 Comments on "“The Google of Natural Gas, with a Game-Changing Innovation That Could Hand You a 157% Gain!”"

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Lloyd Moss
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Lloyd Moss
February 27, 2012 2:11 pm
I have held GasFrac a couple times in the last year. Made a lot of money the first time and gave some of it back the second time. A week ago I went back in since it really looked like the price showed a bottom and I really do think that this stock has strong potential despite the risks. I am shocked that the mainstream media has not picked up on this one since it is actually a very environmentally friendly way to frac. Though it is more expensive than hydraulic fracturing, it could benefit should hydraulic fracturing be restricted.… Read more »
Doug
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Doug
February 27, 2012 2:20 pm

Best wishes with your medical problems. dg

Jacqueline Brown
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Jacqueline Brown
February 27, 2012 3:23 pm

I’m so sorry your family is experience the terrible stress of medical problems with a loved one and will pray that you re-gain complete peace of mind when the issue is resolved. It’s tough; I know – my only brother who lives with me suffered the loss of his remaining leg last year (from Diabetes) and at 75, with serious medical issues of my own, it’s tough being his caretaker – but the truth is “He ain’t heavy; he’s my brother.”

Kevin R Coffman
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February 27, 2012 3:24 pm

Actually GasFrac’s application to oil and high liguid yield petroleum reservoir is probably even more applicable than natural gas reservoirs.

Roz R
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Roz R
February 27, 2012 3:49 pm

I wonder if there’s something that could be added to liquid propane to make it less explosive or flammable. If this company could make a “safe” liquid propane for fracking, that could make all the difference. Do you have any idea of what their seven “outstanding patents” are? If any of these are for making liquid propane safer, that could be worth a lot even without the fracking.

Roz

Venture Shadow
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Venture Shadow
February 27, 2012 4:06 pm

By the title “Google of Natural Gas” I thought you were referring to Encana, which has super vast resources and reserves of natural gas. Gasfrac stock price shot up suddenly today, but it did so before I received the Gumshoe Email, so maybe the Gummy Bull was not responsible. Lucky for me, I bought into Gasfrac last week, persuaded by the lore of very rapidly growing sales in several essays on Seeking Alpha, such as
http://seekingalpha.com/article/358551-gasfrac-energy-new-evidence-of-superior-production-results?source=yahoo

Steve H
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Steve H
February 27, 2012 4:49 pm

This one remains on my watch list. Volitile swings, I think I will wait until it gets on the big boards, market makers have too much control on the pinks. When the institutions buy, am in!

Ljohn
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Ljohn
February 27, 2012 5:19 pm
Bought in at a $6.50 dip so I am happy to see todays jump to $8.30. An increase of 27.5%. This is truly an industry changing technology that has yet to become a blockbuster. Even if it continues at the pace it’s been rising it promises to be a steady, if bumpy, rise. Can’t wait until the government shnooks find out that this company uses NO H2O. One backer in the White house should be enough exposure to send this stock soaring. Either way I like the green technology use in the oilfield and I am in for the long… Read more »
Matthew
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Matthew
February 27, 2012 6:29 pm

My sister died ten days ago. Tragic and sudden. Left husband and two young children. Still in disbelief. The worst thing besides losing my sister is, since I’m a medical provider, she could have been saved with proper medicine. There’s no price tag to be placed on good, competent medicine. I hope your medical concerns are addressed in a professional manner.

GREG
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GREG
February 28, 2012 3:23 pm

SORRY FOR YOUR LOSS.I HOPE YOU ENJOYED YOUR SISTER WHILE SHE WAS WITH US .HOPEFULLY YOULL SEE HER IN THE NEW SYSTEM TO COME GOD WILLING.YOU HAVE GOOD MEMORIES I HOPE…

Joseph
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Joseph
February 27, 2012 6:34 pm

if it wasn’t on the pinks I’d buy in…

Nawar Alsaadi
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Nawar Alsaadi
February 27, 2012 7:31 pm

I just want to make a correction in regards to this statement:

“as far as I know GasFrac’s procedure makes sense mostly for natural gas production”

The technology works perfectly well for both oil and natural gas production; as a matter of fact virtually 100% of the company business since late 2010 has been focused on crude or liquid rich gas production.

Otherwise, this was a good summary of Gasfrac.

Regards,
Nawar

farmer gene
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farmer gene
February 27, 2012 8:28 pm

one stock that Keith mentioned [ not promoted] in his e-mail was GRH- I looked at the stock &thought-what a liaison between oil and water-the oil cos. hate EPA regs so hire a water co. that works with government- i bought GRH @ 1.37. still losing on gasfrac,gene

Charlie
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Charlie
February 27, 2012 10:09 pm
The LPG fracking process was developed by Halliburton and licensed to GasFrac. GasFrac has exclusive rights to the process for a period in Canada. They have non-exclusive rights to the process in the USA. Hydrofracking a well typically uses between 3 and 10 million gallons of water. There are toxic chemicals added to the mix, which can pollute ground water, since they mostly remain in the formation. Recovery of the now toxic waste water is problematic. It cannot simply be dumped due to toxicity, and water and sewage treatment plants are not designed to detoxify the recovered mix. So, with… Read more »
Trevor
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Trevor
February 27, 2012 10:24 pm

Just a few days ago Travis brought our attention to this excellent prospect that has been gaining a lot of attention in Canada lately:
Posted on February 15, 2012 by Travis Johnson, Stock Gumshoe
Toss all that into the Thinkolator, and out comes our answer lickety-split: This is Poseidon Concepts (PSN in Canada, POOSF on the pink sheets).

frank boas
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frank boas
February 28, 2012 12:01 pm

HYSR has a process that makes natural gas using sunlight and nano particles currently testing process in Salton sea mudpots

Dave
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Dave
February 29, 2012 9:05 pm

Frank, thanks for the tip. Pretty cool process (http://www.hypersolar.com/): “Inspired by the photosynthetic processes that plants use to effortlessly harness the power of the Sun to create energy molecules, we are developing a novel solar-powered nanoparticle system that mimics photosynthesis to separate hydrogen from water. The free hydrogen can then be reacted with carbon dioxide to produce methane, the primary component in natural gas.”

alainbm
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alainbm
March 1, 2012 9:51 am

Interesting and obviously very speculative. I just looked over their financials as of Dec. 31, 2011. Considering they had cash on hand of $19,277 as of December 31, 2011, no revenue at all and their burn rate of about $60,000 to $70,000 per month they should have run out of liquidity by now. I would have expected to see some announcement about raising funds on their site but that’s not the case. I would expect massive dilution if their expenses remain as per their past history.
If the science is there it might be an interesting speculation.

John
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March 4, 2012 2:02 pm
Most recent development with GASFRAC Press Release TSX – GFS February 28, 2012 GASFRAC signs long term agreement with BlackBrush for the Eagle Ford and other Unconventional Oil Plays in South Texas CALGARY, ALBERTA – GASFRAC Energy Services, Inc (“GASFRAC”) has entered into a two year contract with BlackBrush Oil and Gas, L.P. (“BlackBrush”) for the provision of GASFRAC’s proprietary waterless LPG stimulation process in the Carrizo Springs area of the Eagle Ford formation. BlackBrush has over 900 drillable locations for Eagle Ford and other oil zones in this area. Black Brush was one of the first oil and gas… Read more »
John
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March 4, 2012 3:22 pm
Tom t
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Tom t
March 4, 2012 3:34 pm

What attracted me last year was a description of how water fracking did not work well in Montenay shale (CA) due to technical issues in the cracked rock, and the LPG was a solution.
I think this came from Byron King, I’m not for sure, but there seems to be continued evidence this LPG gel enables improved flow in other locations in addition to environmental benefits. Glad to see this latest news in Eagle Ford- no wonder this stock is moving up.

George Hunt, Wolverine Directional Sensing, Inc.
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In comment #13 Charlie says: “Hydrofracking a well typically uses between 3 and 10 million gallons of water. There are toxic chemicals added to the mix, ” so far no argument. Then he goes on to say: “which can pollute ground water, since they mostly remain in the formation.” Well yep, they remain in the formation or are pushed back out by downhole pressure and treated or put in deep underground disposal (a mile is typical where I am presently drilling in northern Oklahoma) in a well that has sucked rather than blown when it was drilled. (I’m putting this… Read more »
Dale
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March 4, 2012 6:47 pm

I would assume that GasFrac would have some application in the European market. In particular in France, where the authorities have barred the use of HydroFracing. There they have relatively shallow deposits of shale bearing hydrocarbons.

pmredmonton
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pmredmonton
March 24, 2012 3:54 pm
This is also a stock I own. It has been a bumpy ride this week with disappointing earnings due to underutilization of capacity due to 3rd party issues for a job they were doing for Huskey. In the past month they signed a licencing agreement with Blackbush in the US. They also signed a MOU with eCORP in the EU to start doing some fracs in Europe. Although revenue and earnings were disappointing this was mostly due to them showcasing the technology and some 3rd party issues that decreased utilization. Later this year they will have 10 sets going and… Read more »
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