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Business/Finance See other Business/Finance Articles Title: “Real Gasoline Without Oil” for 90% Returns? “Real Gasoline Without Oil” for 90% Returns? Sniffing out the "gas for $1.71 a gallon" teaser pitch from Sean Brodrick for Oxford Resource Explorer Sean Brodrick is touting a company that can create much cheaper gasoline — and, of course, he’d like you to sign up for his Oxford Resource Explorer newsletter to learn all about it. So he provides some hints and clues that serve to whet your appetite — enough to make it seem real, and to seem like you can almost touch those juicy profits. But oh, wait, first please send us your $49 (don’t worry, that’s “on sale” from $159, and is far less than the $7,995 he says his research is worth). Which leaves us no choice. We don’t like to be manipulated into buying stuff, and we don’t like secrets — so what is the stock? We’ll sift through the clues and tell you what he’s really pitching. If you want to subscribe to his newsletter after that, well, that’s up to you — but don’t do so just to find out about a secret stock. That’s like getting married just because you want to find out about whether or not your beloved sleeps with his socks on. On to the clues, then. “Real gasoline created… Without Using Oil! Works in Any Vehicle 46% Cheaper (Profitable at $1.71 a Gallon) 40% Cleaner Than Today’s Gasoline. “Early Investors Could Make 90.5%… 281.9%… And Even 1,063% in a Few Years…” The precision really adds to the believability, right? If you say something’s going to double, well, that’s a throwaway line and we know you’re guessing. But if you say it’s going to go up 90.5%, well, you must be actually doing math! Maybe you’re right! Or maybe not. That’s why he says “could” and “in a few years” — as always with a teaser pitch, there are plenty of “maybes” to protect against future complaints (and lawyers). Here are some more clues to get us going. “A little-known company is doing what should be, by all conventional logic, the impossible. “It’s creating gasoline… without using oil. “To everyone but company insiders, this may sound like science fiction.” Irregulars Quick Take Paid members get a quick summary of the stocks teased and our thoughts here. Join as a Stock Gumshoe Irregular today (already a member? log in at top right) The first thing that came to mind, even before we piled up the clues to shovel them into the Mighty, Mighty Thinkolator, was algae oil — that’s probably because the Motley Fool has been repeating their teaser ads for algae oil company Solazyme (SZYM). But no, Brodrick isn’t teasing Solazyme as a gasoline-maker (probably a good idea, SZYM is focusing first on higher value-added stuff, industrial and food chemicals, because algae oil is expensive to make — they did get their new plant opened in Brazil and the stock jumped up a bit this Spring, but it’s now back to around where it was when we covered that teaser first in December). His pitch is about using natural gas to make gasoline. No, not using natural gas instead of gasoline — that would be the pitch advanced so often for perennial disappointer Westport Innovations (WPRT) and their natural gas fuel injector technology that helps vehicles (especially heavy trucks) run well on CNG or LNG. Natural gas as a feedstock, instead of crude oil, for making gasoline. The economics are obviously good for that process if it can be at all efficient — at least for the US, where natural gas prices are so very low compared to oil, and that appears to be the crux of Brodrick’s argument. Here’s a bit more from the ad: “This company will soon create enough gasoline on American soil to fuel more than 10.3 million cars a year… and ramp up from there. “Experts at a secretive U.S. House and Energy Committee meeting recently predicted this fundamental alteration of chemistry will have a ‘substantial impact on the U.S. economy.’ “Cambridge Energy Research Associates calls it, ‘the biggest innovation in energy,’ in terms of scale and impact. “The Brookings Institution reports that this new process, ‘will account for 24% of all of the liquid gas supply in the United States by 2017.’ …. “… the origins of this story begin with technology forgotten since World War II… “These were secrets filed away for over 70 years… buried in dusty archives… only recently rediscovered…. “Today, it costs companies like Exxon Mobil an average of $77 to create a barrel of gasoline using oil. “This little-known company creates ‘gasoline without oil’ for just $36 a barrel!” OK, so that “Technology forgotten since WW II” bit probably caused a few of you to fire a few synapses in your brains… what was that company that used German technology to make gasoline? Hmmm…. The ad goes on to tease the huge profits that can be made in energy, particularly from big cost savings or new production techniques or similar breakthroughs — like the directional drilling, hydraulic fracturing and new cements that have created fortunes and built new name-brand companies like Halliburton and Baker Hughes (or, in the early days of gasoline, John Rockefeller’s Standard Oil). And Brodrick is even careful to emphasize that although this technology is still a big breatkhrough, it’s not new and it’s not as risky or “out there” as ethanol, “algae gas” or “sun gas”. It is in use now and is, apparently, scaleable and profitable … “Right now, this company is quietly producing 34,000 barrels per day in a small desert nation… far from the spotlights of Wall Street.” So you hear “natural gas” and “small desert nation” and you probably think of Qatar. Good work! Now let’s throw on the Fischer-Tropf process that was used in Germany to create diesel fuel from coal, and we’re getting tantalizingly close to revealing this “secret” stock. More clues… “Soon, it will distribute this ultra-cheap gasoline all across America… “As I write this, trucks are clearing land for a plant to come on line just months from now. “People driving by can’t imagine the scale of what’s going to go on here. “Covering 650 acres… it will rise out of a Gulf Coast bayou… With direct access to the massive natural gas fields pumping out record amounts of natural gas across Texas and the rest of the U.S.” And Brodrick says he expects natural gas prices to fall again with rising production, and crude oil prices to rise, which would just make the spread even better for this secret company. So who is it? OK, we’ll take you out of your misery — Brodrick is teasing the South African giant Sasol (SSL). Which is indeed one of the global experts on using the Fischer-Tropf process and other innovations to refine solid (coal) or gaseous (natural gas) energy sources into liquids. That’s not because they took off as global innovators who pursued this fantastic new technology, it’s because they used to be the state-controlled oil company in South Africa, and no one wanted to sell them crude oil under apartheid… so they had to come up with a way to use their abundant coal as an industrial and transportation fuel. And the story is certainly a very compelling one, at least in the big picture: The US has abundant and inexpensive natural gas and a fantastic gas distribution system, Sasol is building a huge liquefaction plant in Louisiana to refine and catalyze the gas into gasoline and other valuable chemicals, and gasoline and those chemicals are priced on the international markets so are much more valuable than the mostly-landlocked natural gas, which should create great profits. Brodrick quotes a “Pulitzer-Prize-winning journalist” as well, in calling it “one of the most improbable and important American business stories of the past decade.” That article is here, from the Wall Street Journal a couple months ago — just in case you’d like some confirmation or more background on the size of their operations. I’ve invested in Sasol in the past, back during the last oil runup in 2006-2008 or so, and haven’t looked closely at them very much since — but they are building that $20+ billion plant in Louisiana and they have built a similar plant in Qatar and have plans to expand globally. It is a more complicated firm than just these gas-to-liquids plants, though that’s part of their growth strategy — they still have huge operations at home in South Africa, and it’s a big company with a market cap approaching $40 billion. The stock is not particularly expensive, it trades at less than 11X expected 2015 earnings and pays a small dividend, and their balance sheet appears pristine — not sure where they’re getting the $20 billion to build these new plants, since they don’t currently have any net debt, but they do have the flexibility to add some debt to the balance sheet and they may have partners or government incentive smoothing the way as well. Sasol has said in the past that they need oil to be about 16X more expensive than natural gas for these plants to work (that’s presumably using the price/barrel for crude, and the NYMEX/henry hub price for natural gas per mcf, the two standard measures) — right now oil is a bit over $100 and natural gas is back down to $4 so that’s a ratio of about 25, well within their zone of profitability. Brodrick is pretty far outside the mainstream in his prediction of “90% growth in the coming weeks… 281% in the next few months… and 1,063% in the next couple of years” for this company — analysts are predicting that earnings will be pretty flat, about $5.46 for the just-ended fiscal year and $5.33 for the current year, and that the earnings will rise by less than 2% a year for the next five years. I don’t know who will be correct about that future growth (and it’s only two analysts providing those average estimates), but these are extremely long-term capital building projects, they are complicated, and Sasol does have a substantial amount of exposure to foreign currencies along the way. They have boosted revenues substantially over the past decade, but it definitely hasn’t been a straight line. So … that’s about all I can tell you in half an hour of catching up on Sasol — yes, they can make gasoline cheaper with natural gas than you can with crude oil, but that’s after this $37 billion company builds a $21 billion complex (and keeps building similar-sized operations in other areas and countries), and assuming that pricing dynamics remain friendly for the gas-to-liquids operations… it looks to me like it’s still a well-run company but not one that’s likely to see windfall profits overnight, and that it’s worth considering the risks of building these huge projects like their US plant in Louisiana and bringing them into profitable, steady operation. That’s just me and a few minutes of though and reading, though — it’s your money, so if you were to buy Sasol you’d want to understand it quite a bit better than that. So go forth, researchify for yourself, and come back and let us know: Is Sasol right for your portfolio? Do you think it’s going to return profits of 90% in “the coming weeks?” Just use the friendly little comment box below to share your thoughts. Poster Comment: paul hudek says: Siluria Technologies also claims to have an efficient process to convert natural gas to ethylene and the ethylene to gasoline and other fueis. Larry says: There is a privately held company, in part funded by Texas A&M that claims to have a process that is significantly more effective. They have a demo site in production in Robertson County Texas. Co name is Synfuels International. Don’t appear to be publicly traded. quincy adams says: About 7 years ago ExxonMobil abandoned plans for a similar plan in Qatar where gas was available for pennies. Mary says: Do you know anything about Sun Gas also an alternative to oil. Sounds interesting Oinky Bear says: Two companies, SASOL and Royal Dutch Shell, have technology proven to work on a commercial scale. PetroSA completed semi-commercial demonstrations of gas-to-liquids used by the company in 2011.[6] Royal Dutch Shell produces a diesel from natural gas in a factory in Bintulu, Malaysia. Another Shell GTL facility is the Pearl GTL plant in Qatar, the world’s largest GTL facility and there are reports that Shell is looking at the feasibility of a GTL facility in Louisiana, US.[7][8][9] SASOL has recently built the Oryx GTL facility in Ras Laffan Industrial City, Qatar and together with Uzbekneftegaz and Petronas builds the Uzbekistan GTL plant.[10][11][12] Chevron Corporation, in a joint venture with the Nigerian National Petroleum Corporation is commissioning the Escravos GTL in Nigeria, which uses Sasol technology. William F Tilson says: I think John Harris and Carbon Bigfoot each nailed it in his own way. With the successful engineering of the Tesla electric vehicle, I think we will have a middle class affordable electric car that can challenge a Mustang on Sunset Boulevard before any company can manufacture US$ 1.77 per gallon gasoline out of anything. 20 years ago, this might have been a bet, but today, thank God there are more than Republicans on the planet, and some of us actually believe in global warming – because we do not have some lobbyist paying us to not believe it, http://www.stockgumshoe.com/reviews/oxford-resource-explorer/real-gasoline-without-oil-for-90-returns/?utm_source=71714&utm_campaign=DailyUpdate&utm_medium=email Post Comment Private Reply Ignore Thread
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