“Secret Discovery in Utah Puts OPEC On Notice” Oxford Club

This one is all about the coming electricity crisis, and the coming “post oil” era when new energy sources will be in high demand. The teaser is for the Oxford Club, which is a newsletter service to which I know quite a few Gumshoe readers subscribe.

They have a special report for you: “Drilling for the ‘New Oil’: One Company Who’s Single-Handedly Solving the Energy Crisis” — and they’d be happy to send you that report if you sign up for their lifetime membership.

The Gumshoe, of course, requires neither a lifetime membership nor even a modest contribution (though he happily accepts them) to snoop out the name of the company teased. He only asks for a few moments of your time, and a bit of patience as he chews through the clues.

The Oxford Club has a good, compelling story for us:

“Unfortunately, the oil’s running out, and the good times are coming to an abrupt end… unless something can be done immediately. By 2050 – at present rates – China alone will consume all of the world’s oil.

Cars and trucks will stop… Trains will sit idle… This country – and the rest of the world – will screech to a halt. Business will suffer, and the economy will come to a standstill.

But the ‘new oil’ – the fuel for the growth of the new millennium – is right here in the U.S. where there’s more of it than anyplace else in the world. Few companies are tapping this virtually endless source of energy, but all that’s about to change. “

And there’s more! How ever did they find such a fabulous idea?

“It all started when a fellow Oxford Club member approached Investment Director Alex Green at one of our recent chapter meetings.

He told Alex he was a major investor in a little-known, Utah-based energy company… and he described an opportunity that was so incredible, Alex felt he had to call me to get my opinion.

I couldn’t believe my ears… I can’t remember another opportunity in the history of The Oxford Club that was as potentially as explosive – and lucrative – as this one.

Time was of the essence, however, as the company’s huge revenue stream hadn’t yet started, but was about to begin.”

So how about some specific clues?

Well, first of all, they do at least make clear … eventually … that this “new oil” is geothermal energy. In essence, instead of drilling for oil they believe we’ll be drilling for hot water to spin turbines.

We’ve seen lots of geothermal teaser companies in the past year, one or two of which have done well, so this is, at least, no shot out of the blue … but there aren’t all that many companies active in this business in the U.S., so it shouldn’t be too hard to do our figgerin’ here.

Here’s what the Oxford guys say about geothermal in general:

“You see, there are large volumes of hot rock accessible in most parts of the United States… more than anywhere else in the world… and it’s just waiting to be tapped.

“Geothermal plants are cheap… $32 million… and can be built in as little as 12-18 months.

“Dozens of companies are scrambling to get in on geothermal… but there’s one that has millions of acres of land, and will be generating power (and healthy returns for early investors) in just a few short months.

“Industry growth is ‘the most aggressive we’ve seen in 25 years,’ says Louis Capuano Jr., chief executive of ThermaSource, LLC.”

OK, so we’re all on the same page … hot magma powers turbines, supplies electricity, is cheap and environmentally friendly … the company, please?

Should be just a few more paragraphs now, hang on!

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“THIS COMPANY HAS BEEN QUIETLY BUYING THE GEOTHERMAL SITES NO ONE ELSE WANTS… NOW IT’S ABOUT TO PAYOFF IN SPADES … With all the attention – and money – flowing to the ‘hot steam’ geothermal sites, little attention has been paid to warm-water geothermal fields… thought to be useless for generating power.

“But the CEO of this company – armed with USGS field data, and the technology from his engineers and scientists – is acquiring all the warm water sites he can get his hands on. Many of these agreements are off-the-radar, private deals, negotiated directly with the landowners.

“And now it’s paying off in spades: the company has access to over 3 million acres available for geothermal project development… and the technology to make it all happen.

“But time is of the essence on this opportunity. Already, long-term power purchase agreements have been inked – and more are being negotiated – with customers who are lining up to snap up all the power this company can produce.”

So … warm water geothermal technology, in Utah, 3 million acres? The Thinkolator tells us that this must be …

Raser Technologies (RZ)

No, they don’t make those little scooters. This is a company that has focused on both geothermal power and on electric motors, which are linked by some kind of new generator motor technology whosywhatsit.

I’ve written about this company before, back in February for a teaser from a different newsletter, and it seems to me to be pehraps more of a gamble than the best-performing traditional geothermal company we’ve seen so far, US Geothermal (which is also far from profitability — but it had a huge run to near $5, got listed on the AMEX with the new ticker HTM, and fell back down to under $3), or even than the now-out-of-bankruptcy Calpine, which uses geothermal for some of their power generation in California.

Raser has lots of stuff going on — they’ve apparently been ordering more geothermal plant equipment from United Technologies, licensing their technology, they tell us, and designing new plug-in hybrid engines, but they are primarily being pushed as a developer of geothermal plants in a few states, from Utah to Oregon. They do have leases for lots of land, partly because each plant requires a pretty large underground footprint to be effective (neighboring plants that are too close would siphon each others’ heat). Most of the plants that are currently on “fast track” developments are teensy, compared to any conventional power plant (in the neighborhood of 10MW).

I’m not sure how their technology works — something about small, modular plants and use of innovative materials and/or generators that can work with water that is just barely above the boiling point (they’re drilling now on several sites and finding temperatures in the mid-200 degree area that they think will be effective, which is much lower than the 400+ degrees that most geothermal generators would prefer).

If you’re interested in reading further, the company has been pretty well covered — here’s a recent interview with the CEO that includes a good basic overview of the company, and the most recent earnings call transcript. The most compelling negative case I’ve seen about the company comes from the 10Q Detective, a fellow sleuth who does a great job digging deep into the filings of the companies he covers. I commend his site to you even if you don’t care for his take on Raser.

Personally, I’d feel more comfortable with more traditional geothermal projects that have been proven for many years … but even most of the new developers in that area aren’t making money yet, so I’d probably think first about the big ones like Calpine (CPA — just came out of bankruptcy, don’t give too much weight to that trailing PE of 3), and second perhaps about the plant builders like Ormat (ORA — really expensive, but at least profitable) or the generator makers like United Technologies (UTX — though geothermal is a teensy part of their infrastructure businesses). But maybe I’m just being a wimp.

This is not a recommendation to buy any of those companies, of course, just a little window into my thinking on the sector, right or wrong. I don’t own any company mentioned here.
So what do you think? I know there are plenty of geothermal fans in Gumshoedom … does this get you all hotted up, or do you feel a bit of a chill?