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.
"reveal" emails? If not,
just click here...
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. There are still rumors of such restrictions being placed in the US on public lands. I also went back into CRR which has also apparently bottomed so I have both bases covered. CRR is a steal right now and though gas drilling in the US is dropping, it is picking up other places in the world so the global market for fracking technology is getting better not worse.
Best wishes with your medical problems. dg
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.”
Actually GasFrac’s application to oil and high liguid yield petroleum reservoir is probably even more applicable than natural gas reservoirs.
Perfectly happy to stand corrected on that, it could
Be faulty memory or a misinterpretation on my part.
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
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
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!
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 haul. Thanks Shoe.
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.
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…
if it wasn’t on the pinks I’d buy in…
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
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
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 hydrofracking you have millions of gallons that have to be trucked onsite, and millions of gallons of toxic waste that has to be dealt with through removal or on site storage. LPG fracking has neither problem. While LPG has an initial cost substantially higher, recovery of the fracking medium for reuse, reduces the differential. Results from of some of the Husky, and other wells, using LPG fracking, indicates that both initial production, and total production over 6 to 9 months may be substantially higher, therefore decreasing the amount of time to recover investment.
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).
HYSR has a process that makes natural gas using sunlight and nano particles currently testing process in Salton sea mudpots
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.”
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.
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 production companies to use GASFRAC’s stimulation technology when GASFRAC expanded into the U.S. in mid-2011. After realizing positive production results from wells employing the GASFRAC fracturing technology, BlackBrush has agreed to a longer-term partnership in order to secure GASFRAC equipment as demand for the technology grows.
“We are thrilled to enter into a partnership with a company like BlackBrush who are true innovators in the industry,” said Zeke Zeringue, Chief Executive Officer of GASFRAC. “Their commitment to deploy GASFRAC’s proprietary technology validates the superior reservoir results and environmental performance that we offer to our customers. This agreement builds our business substantially in the Eagle Ford area of Texas, a region where we see tremendous growth potential for GASFRAC.”
Phil Mezey, Co-CEO at BlackBrush, is excited to announce this new partnership with GASFRAC, as “BlackBrush looked extensively for an alternative to “water fracs” as we recognized a definite problem in formation damage contributed by introducing water in the fracing process to the formations we are actively developing. Results from our first well with GASFRAC has seen oil production at a sustainable rate weeks earlier than with the standard water frac and we are seeing huge savings on disposal of frac fluids. “
GASFRAC is in the process of opening a major operations hub in the San Antonio area to help facilitate the growth and expansion of its business in South Texas.
BlackBrush Oil & Gas, L.P. is a San Antonio-based oil and gas exploration and development company with a solid track record of value creation and is constantly acquiring quality upstream assets. An active operator in South Texas with over 130,000 acres and operating over 300 wells, two drilling rigs owned by affiliate companies, one workover rig owned by an affiliate company and operating over 80 miles of pipeline.
GASFRAC Energy Services, Inc is an oil and gas technology and service company headquartered in Calgary, Alberta and the sole provider of waterless gelled LPG fracturing technology in North America.
This press release contains certain statements that constitute forward-looking statements under applicable securities legislation. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, or the negative of these terms or other comparable terminology. These statements are only as of the date of this document and we do not undertake to publicly update these forward looking statements except in accordance with applicable securities laws. Forward-looking statements are based on current expectations, estimates, projections and assumptions, which we believe are reasonable but which may prove to be incorrect and therefore such forward-looking statements should not be unduly relied upon. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: industry activity; the general stability of the economic and political environment; effect of market conditions on demand for the Company’s products and services; the ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; the ability to operate its business in a safe, efficient and effective manner; the performance and characteristics of various business segments; the effect of current plans; the timing and costs of capital expenditures; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its products and services. Forward-looking statements are subject to a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks and uncertainties include: fluctuating prices for crude oil and natural gas; changes in drilling activity; general global economic, political and business conditions; weather conditions; regulatory changes; the successful exploitation and integration of technology; customer acceptance of technology; success in obtaining issued patents; the potential development of competing technologies by market competitors; and availability of products, qualified personnel, manufacturing capacity and raw materials. In addition, actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth under the section entitled “Business Risks” in the Company’s MD&A.
Requests for shareholder information should be directed to:
James M Hill
Chief Financial Officer
E-mail: jhill@gasfrac.com
Phone: 403-515-3387
Excellent article on Seeking Alpha
http://seekingalpha.com/article/317173-gasfrac-energy-services-fracturing-game-changer
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.
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 in layman’s terms.) Nobody I know drills a water well any deeper than a thousand feet, if that. The entire length of casing pipe run into the ground is cemented in place to the length of the well and then only certain areas of the pipe well below the water table BY LAW is perforated. Every step of the process from land lease acquisition to capping and cementing an abandoned well is documented to within and inch of its life. I know because I do some of the documenting. The whole idea of the water table being polluted when a well is done correctly is malarky, except where someone didn’t do the job of casing or cementing in a professional manner. The areas that have problems with burning tap water, for the most part had natural gas intrusion into the water table before drilling and fracing started. How do I know? I have a summer home in one of those places where oil floats on top of the first few gallons of water when I first bring up the pumps in the spring. We have natural gas all over and this was going on in 1957 when I first went there well before any drilling took place.
What makes anyone think that fracing with LPG wouldn’t also pollute the water table if it escapes up hole around a bad cement job? I’m annoyed at taking the blame for something that has been blown out of proportion by the media. (Why am I not surprised, it sells.)
Now down off my soapbox:
As for this method of fracing, I’d say it sounds like a fine idea. It makes more sense than using up a natural resource that is in short supply in places such as OK, TX, and the rest of the Southwest. And, it has the added advantage of being far more recoverable.
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.