Sean Brodrick of Red-Hot Resources Gives the Scoop on Wavefront
Sean Brodrick publishes the Red-Hot Canadian Small Caps Newsletter and he also has a great blog called Red-Hot Resources. He recently spoke with Wavefront CFO Brad Paterson. The article also mentions Greentree Gas and Oil (GGO.V).
The Scoop on Wavefront …
Today, I talked to Brad Paterson, CFO of Wavefront Energy. I was concerned about the slow drip-drip lower in the stock price and potential share dilution. Here’s some of what he told me …
“Despite the financial markets, the company has never been in a better financial situation,” he said, adding that Wavefront’s technology is being used in pre-commercialization on projects from Albert, Canada to Alaska and the UK.
He expects these pre-commercialization projects to start yielding fruit soon. The plan is to prove that Wavefront’s technology works in pre-commercialization, then move those projects into commercial production.
Payback for the companies that use Wavefront’s technology comes in the form of more oil production. On average, Brad says, the wells just have to produce 0.4 extra barrels per day per well to make the new technology profitable for these other companies.
So why aren’t they, already?
The oil industry has been very slow to adapt new technology, Brad says, and it really slows Wavefront down that the big oil companies it works with don’t want Wavefront using their well-known names in promotions or distributing their data.
That’s why Wavefront took on its Rogers County project – to get data it could distribute to prospective clients. And it should also be able to distribute data from the Rodney South field it is co-developing with Greentree Gas & Oil.
Brad expects that data from the Greentree project will be made public in the next few weeks.
Now, we’ve seen great data on Wavefront’s technology before, and they haven’t moved the stock at all. That’s why, Brad says, the company is so focused on its pre-commercial projects.
The general licensing fee for Wavefront’s Dragonfly tool is about $3,000 per month (it varies on the depth of the well and other factors). If Wavefront can get a large international major client using the system, they’ll use it on perhaps 100 wells in a field. $3,000 x 100 is $300,000 per month revenue for Wavefront from one field. And these projects can last years.
Brad believes the company is approaching critical mass. “We’re an overnight success that’s 25 years in the making,” he says with a laugh.
The interest from big companies is snowballing and Wavefront is hiring more salespeople to deal with all the interest. Wavefront recently raised $4 million to build tools so it can build tools for rapid deployment. It may raise more cash. But the goal is to bring some of those projects into commercial production this year. Then the company will have steady cash flow and it won’t have to go back to the
Despite the pummeling this stock has received since I recommended you add it to your portfolio, I believe you should keep holding it. Let’s see if the news coming out moves it and see if the big players (I know from other sources that one is Encana) follow through on commercialization. If they do, this could pay off big time.
A bunch of stocks in your portfolio are like this – dragging along, waiting for the big break. But those breakouts will come.
I'm an investor relations consultant to Wavefront Energy and Environmental Services (WEE.V) and Greentree Gas and Oil (GGO.V).