|Oxford Catalysts Group
||EPS - Basic
||Market Cap (m)
|gac141: View from the top: Oxford Catalysts Group
By Julie Fisher | Fri, 6th September 2013 - 12:29
As Oxford Catalysts Group (OCG) prepares to rebrand as Velocys, Julie Fisher speaks to chief executive Roy Lipski about the fuel-processing technology company's plan to make money from the gas surplus spreading across the globe.
What is your business proposition?
Roy Lipski: We have a technology solution that allows people to manufacture synthetic transportation fuels, primarily diesel or jet fuel. Nowadays liquid hydrocarbons don't need to come from petroleum, they can be produced from anything that contains carbon. From an economic point of view this usually means natural gas or coal or increasingly agricultural or municipal waste.
Waste is probably the most interesting source, especially from an environmental point of view, because it's a truly renewable fuel.
What is that technology solution?
RL: We have developed a new design for one of the key components of the gas-to-liquids (GTL) chemical process, which allows it to be done cost-effectively for small plants. In the past it's only really been cost-effective at very large-scale plants, typically plants producing more than 35,000-40,000 barrels of oil equivalent per day (boepd) which tend to cost many billions of dollars.
So in its current form it remains a very niche play. By being able to do it cost-effectively at smaller scales, it basically opens the market up to the alternative renewable routes and to many more companies and locations, which brings it into the mainstream of the industry.
How did you develop the process?
RL: Two companies which had separately developed the two key components came together.
The first company, from Oxford University, designed the catalyst, and the reactor technology came out of one of the Pacific Northwest national laboratories in the US. These two technologies came together in 2008 and we have essentially reinvented the catalyst and the reactor for the heart of the plant, which is called the Fischer-Tropsch.
Now that it's open to the larger market, are you getting a lot of interest?
RL: Absolutely. There's a revolution taking place here in North America driven by fracking and shale gas which has caused gas and oil prices to disconnect. Gas prices are at close to historic lows and oil prices are very high, making the ability to turn gas into oil a significant economic opportunity.
We're moving into an age defined by gas surplus, so the ability to turn that gas into the fuels that we need could not be more relevant and topical.
The US is also looking at ways of exporting and liquefying gas. Does that concern you from a business perspective?
RL: No, it doesn't concern me at all, for a number of reasons. For a start liquefied natural gas (LNG) projects are huge - like large-scale GTL, they take five to eight years to put together and cost billions and billions of dollars so they will remain a niche.
Secondly, you can only export a certain amount of gas without it driving prices down. I think the gas developed and discovered in North America is going to start impacting world gas prices and world gas prices will come down.
Furthermore, there is a huge amount of gas being developed in other parts of the world, including Australia and Qatar, combined with the worldwide phenomenon of shale gas. It has been forecast that the gas market will become more interconnected globally, and that gas prices will be driven down. No amount of LNG project can be done practically that's going to turn the surplus in gas here in the US into anything other than surplus.
Additionally, both Royal Dutch Shell (RDSB) and Statoil (STO) are considering large-scale GTL projects in the US, with about 100,000 boepd of capacity. Clearly they are not concerned about the availability of gas in North America.
Where, other than the US, do you see a market for your technology?
RL: Shale development will spread across the world, changing the dynamics of gas prices and supply and creating a great opportunity for GTL.
In addition to shale gas, there are other gas-related applications including flare gas and stranded gas. Flare gas provides a great opportunity for GTL because the gas is essentially free, creating a market in Russia because it is the world's largest flarer. There are also opportunities in parts of the former Soviet Union such as Turkmenistan and Kazakhstan, where there are huge amounts of gas but simply no opportunity to get it to market, and likewise in parts of South America.
Our technology can also be used to create fuel from coal, making China significant, and from biomass and biowaste. I think Europe is probably leading the way in the latter because of its focus on renewable fuels.
Do you have any commercial projects in the pipeline?
RL: Two have already been announced; one with British Airways in the UK, and another in the US with a specialist refiner called Calumet. We also have more than 10 opportunities which are currently in various stages of engineering.
Why are you changing your name from Oxford Catalysts to Velocys [on 25 September 2013]?
RL: It's been on the cards ever since we merged with the US business [which is called Velocys - Oxford Catalysts trades as Velocys in the US]. It makes sense because it's cumbersome for a small company to have two different brands.
The name Oxford Catalysts no longer spoke to what we are as a company as it has very specific connotations and the Velocys name was much better known in our industry. We felt that now was the time to do it as we are beginning to embark upon commercial roll-out and the commercial phase of the company.
What are the risks facing the company?
RL: For a loss-making business, there's always the risk that you will run out of money. I don't ever want to be complacent about that, but to date we've got a great track record of raising capital, with some very large, able and committed shareholders including Lansdowne Partners, Neil Woodford from Invesco, other big funds like Henderson and Ruffer and Roman Abramovic.
Fundamental changes in the marketplace are also a risk, but I believe there will always be opportunities where small-scale GTL makes economic sense.
Then there's competitor risk. Again, you never want to be complacent, but the nature of this industry is such that it takes a very long time and a very large amount of money to develop new process technology. It is unlikely that there is a competitor out there that we don't know about who's going to come from left field. Based on that, we are comfortable that we can build a great business within our competitive space.
Probably the biggest risk in our market is how long it could take to become established. The way we're managing this is by trying to play a number of opportunities at the same time so that at least one of them happens in a timely manner.
While we're on the subject of competitor risk, who is your major competition?
RL: There are some competitors, including BP (BP.), Air Liquide and Axens ENI, with conventional technology which they are trying to scale down. But we only really run up against them towards the larger end of our scale [in plants producing 10,000 boepd].
In terms of small-scale GTL our main competitor is the UK company CompactGTL, and we actually believe they are infringing a number of our patents and as a consequence are currently litigating against them. We have the world's largest patent portfolio in this space with over 800 patents worldwide and so we have a very strong competitive advantage.
What are the strengths of Oxford Catalysts?
RL: Firstly, by virtue of the unique technology that we've developed and protected through our huge patent portfolio, we are the leading technology provider for small-scale GTL, with the best and probably the best-known offering in this space. We are market leaders in small-scale GTL which is a market that is set to take off due to very large significant world trends that are taking place.
In a nutshell, we are in the right place at the right time in an industry that has large barriers to entry and so it'll be very difficult for others to come in and displace us.
The world's biggest companies are born out of dislocations in the marketplace and with one happening right now between gas and oil we have an opportunity to be lifted up by this market wave of destiny and become one of tomorrow's great companies.
How much cash do you have on your balance sheet at the moment?
RL: We will release interim results at the end of September so I can only refer you back to what it was at the beginning of the year [according to the annual report, Oxford Catalysts had £33.7 million of total equity on 31 December 2012]. But I can say that we have plenty of money for the foreseeable future and are not about to do a fundraising.
Can you explain why your share price has fallen from the beginning of this year?
RL: I don't know if I'm really the right person to speak to about that. The stockmarket is very volatile and if you look from around February 2012 we are up hundreds and hundreds of percent. That big rise was basically a realisation by the marketplace that we have moved from being an interesting concept with potential to an actually viable company; a big de-risking.
In technology stocks like ours that are moving from concept to reality you are defined by these big re-rating events. There is another on the horizon, when our first customer commits to construction of a plant. That will be a big inflection point for us and it is coming although I can't predict when.
How do you view private investors?
RL: I think they are a very important part of the investor base, and tend to dictate and move the share price much more than the institutional investors. Our private investors are very active and we do communicate with them, and also work closely with private client brokers.
Do you have any message for potential investors in your company?
RL: We are clearly a high-risk stock, so this is not for everyone. People have to be prepared and understand that the proposition that we have is higher-risk but with potentially much higher returns. I think that we will be defined by these big jumps.
If investors are happy with the risk-return profile, the question for them is when to come in. I cannot predict whether the share price will drop before the next re-rating event so investors will have to make their own decisions.
Some see Oxford Catalysts as a takeover target. How would you react to this?
RL: Our approach to this is quite simple: we are running this business with the intention of building a great business, we have an opportunity to build one of tomorrow's truly great companies and that's what we're aiming for. If we are successful in our quest there will be many opportunities along the way where we will be the subject of attention from potential acquirers and at that point it will really be a decision for our shareholders.
We're not running the business in order to sell it, but I think that if we run it in order to build a real company, there will be many selling opportunities along the way.|
|gac141: This could be the month we hear about the existing agreements..any confirmation of our technology should see a big rise in share price..The volume has picked up with the price of the shares.. Maybe just maybe we are on the threshold of something big?|
|raysor: OCG written up by Redmayne Bentley in their latest edition of Share Spotlight. RB rate Oxford Catalysts Group a speculative buy at the time of writing.
Full article here
Share price was then 148.1p now 138ish|
|gac141: There is no doubt in my mind that we are right at the "Inflection Point" for the company and share price. Roy say that he expects OCG to become a major company and I believe him. They have the technology, Management and global conditions to make this a major success. I have been in a very long time and I think now is the moment.|
|sailastra: To be fair to IC "Needs commercial revenues to ramp up to justify it's £176m market value. Having trebled since our speculative buy advice a year ago, the shares rate a Hold"
That revenue will come if and when the orders come..until then OCG is a speculative situation rather than a certainty and as such day to day moves in the share price are simply technical mood music. They went on to quote Numis estimates with losses for the current year and next and profits of £12.7m in 2015.....if the orders come through as anticipted..|
|kettlety1: Just register your details (free!) with http://www.directorstalk.com/ and you can access the article:
February 25, 2013
Poweralternatives: Oxford Catalysts Group Sees Six Month Countdown To Construction Greenlight On Calumet GTL Project
By Amy McLellan
Oxford Catalysts Group had a stellar year in 2012 as its modular gas-to-liquids technology made important strides towards becoming a commercial reality. A key moment came in September when NASDAQ-quoted Calumet Specialty Product Partners awarded a contract that could be worth more than US$30 million over 20 years to the AIM group. Calument wants to use the Oxford company's proprietary solution to build a 1,000 bpd commercial GTL plant at its Karns City, Pennsylvania facility, using the synthetic fuel as feedstock for the production of ultra-high quality speciality products.
Now Oxford Catalysts, which in December raised £30.6 million through an oversubscribed placing, says that Texas-based Ventech Engineers International, its strategic engineering partner, has completed the plant design and provided a fixed price quote for the modules. Calumet, having had a third party engineering company examine the technology, has confirmed that the project economics look "strong" and that the technology "is fantastic".
Calumet now plans to progress with the more detailed engineering and market analysis for a plant of approximately 1,400 bpd. This should take around six months, at which point Calumet will make a decision whether to greenlight construction. This would appear to be just a few months adrift of the timetable set out in September 2012, which expected a decision to build in H1 2013, with a view to plant start-up in H2 2014 with Calumet Oxford will be the only commercial GTL plant in North America to move in to front end engineering, other than Sasol's project in Louisiana," said Lipski. "If it continues on its current schedule, it will be the first GTL plant to be operational in North America, and the only commercial smaller scale GTL anywhere in the world."
North America increasingly looks to be the destination for the first commercial modular GTL following the price dislocation caused by the shale gas boom. The historic arbitrage between very high oil prices and very low gas prices in the US has created an unprecedented opportunity for modular GTL projects to make it off the drawing board and into reality. For Calumet, the conversion of very low cost gas still under US$3 per MCF into high quality synthetic fuel will enable the company to reduce costs, increase security of supply and improve product quality.
Oxford Catalysts' patent-protected technology, marketed as Velocys, marries super-active catalysts, developed by Oxford University's world-class chemistry department, with microchannel chemical reactors that can significantly accelerate the chemical reaction. The end result is a technology that can do more in a fraction of the space, reducing capital costs and making the solution modular and mobile. This means the GTL plants of the future aren't restricted to coastal locations but can be sited wherever there are stranded pools of low value gas and there are lots of those around. Indeed, the company reckons its GTL solution could address an untapped market of up to 25 million barrels of fuel per day.
Texas-based Ventech certainly sees the potential. In November it formed a strategic partnership with Oxford Catalysts and subscribing to 933,687 new shares at a price of 135 pence per share, then a 44 per cent premium to the share price, raising £1.3 million for the Oxford company. Ventech has already expanded its fabrication facility near Houston to handle an expected growth in orders and has made US$200 million in capital available to co-invest in initial customer modular GTL plants. It has also committed to place an order for Oxford Catalyst FT reactors by 29 March 2013, with the reactors due for delivery 18 months later. This commitment, potentially ahead of a client order, is another vote of confidence, allowing Oxford Catalysts to "kick-start its manufacturing supply chain", said Lipski.
This could be another very interesting year for shareholders.|
|jdb2005: Oxford Catalysts Group PLC £30.6 million Share Placing
RNS Number : 2631T
Oxford Catalysts Group PLC
11 December 2012
11(th) December 2012
Oxford Catalysts Group PLC
("Oxford Catalysts" or the "Company" or the "Group")
GBP30.6 million Share Placing
Oxford Catalysts Group (OCG.L), the modular Gas-to-Liquids technology innovator, is pleased to announce the successful conditional placing of shares to raise approximately GBP30.6 million (before expenses).
-- Placing of 24,479,300 new Ordinary Shares, at a price of 125 pence per share, to raise approximately GBP30.6 million (before expenses)
o Oversubscribed placing with significant support from existing shareholders, several major new institutional investors and a new strategic investor
o Placing price represents a 14.5% premium to the 30 day average closing mid-market share price on the date of pricing
o The new Ordinary Shares are expected to be admitted to trading on AIM on 4 January 2013
-- The Directors intend that the net proceeds of the Placing will be used to consolidate the Group's leading market position and accelerate commercial roll out of its products, and in particular to:
o Enable the Group to recruit additional resources to support its expanding commercial activities
o Increase the level and reach of its marketing activities
o Scale up the Group's supply chain and customer support capabilities
-- The new funds will also strengthen the Group's balance sheet, which the Directors believe will give potential customers added comfort when considering a commitment to the Group's technology|
|nw99: This is before today's news !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
OXFORD CATALYSTS (OCG): In a significant announcement Oxford's US partner Ventech Engineers has agreed to invest £1.3m into new shares priced at 135p that's a 44% premium to the existing market price.
Ventech is Houston-based manufacturer and supplier of gas-to-liquid plants and Oxford Catalysts will be Ventech's preferred supplier of Fischer-Tropsch technology in North America.
Ventech also has $200m available to invest in new projects, and is required by the deal to place its first order for FT reactors by the end of March.
OCG anticipates revenue of approximately $8m from this order with further license and catalyst revenues thereafter. The share price is now on a rising trend and I am going to raise the buy limit to 120p and set a new 200p target. BUY UP TO 120p (Current Price: 111.5p)
From Red Hot Penny Shares|
|count chris: Looks like a dream come true for OCG. Capital raised at a massive premium, preferred supplier relationship with the market leader (who are now also a stakeholder) and guaranteed business. share price making new 12 month (and longer) highs. Surely the most significant day in OCG's history? Exciting times ahead IMO!
Purchase of 933,687 new Group shares at 135p per share by an affiliate of Ventech Engineers
44% premium to the closing mid-market share price on 16 November 2012
Raises £1.3 million for the Group
Agreements signed with Ventech:
Oxford Catalysts will be Ventech's preferred supplier of FT technology for North America
Ventech will have non-exclusive assured access to the Group's FT technology for North America
Ventech is required to place an order with the Group for FT reactors for the first commercial facility by 29 March 2013, estimated at $8 million
Ventech has several customers expected to decide on proceeding with plants in 2013
Ventech has $200 million available to co-invest in customer projects, including GTL
|piadda: I have made a few notes from the AGM. Please forgive any mistakes and omissions. It is hard to listen and take notes at the same time.
The meeting was attended by the board of directors, Laura (in charge of patents) and 5 investors both individual and institutional. Dr Pierre Jungles gave a summary of the past year and outlook for the next. The board then answered numerous questions and finally completed the official AGM business.
There has never been a better opportunity for OCG. Shale gas in the US is making no money and liquid hydrocarbons are commanding a high price. This gives a huge margin for upgrading gas. This has led to new large scale GTL and LNG plants being proposed by the oil majors. There are also coal and gas to liquid opportunities in China, Australia, Poland and Argentina.
A lot of the shale gas and natural gas producers are too small/poor to fund a GTL plant. On the other end of the spectrum the majors normally want to invest in the huge GTL plants and do not see too much benefit in small operations. Contracting companies are showing a lot of interest as they see it as a way of benefitting from the gas/liquid margins.
The smaller companies have cut back their production due to the low dry gas prices. Many are in danger of losing their concessions through under production. They will probably consider GTL options as an alternative to massive write offs.
OCG have seen some excitement/sales in the waste gas to liquid market. However this market is seen as small compared to the main GTL opportunities. These are mainly in the field of associated gas where the gas is in a remote location (e.g. Africa) or offshore (Petrobas). This is particularly true as many countries are banning flaring (e.g. Brazil). Offshore the main alternative to flaring is re-injection to the field which is wasteful and expensive.
5 reactors were sold in the last 12 months. We are in phase 2 of a competitive process to provide a 15,000 bpd (barrels of oil per day) plant in the USA. Rosneft have chosen us for their 'Flare Buster' GTL demonstration. All purchasers have compared all the available technologies and have so far always selected ours rather than the competition (mainly CompactGTL).
One of our reactors has been running for 2/3 weeks in a fully commercial environment. This had an extremely short time from sales to operation. The identity of the client is confidential.
To avoid the chicken/egg problem of manufacturing facilities we raised £21m to set up the manufacturing facilities in anticipation of future orders. This accounts for the large cash expenditure this year. Our offshore partners have also committed several million pounds towards commercialisation.
We have also created a 1 bpd reactor demonstrating unit (that shows the Steam/Methane Reforming - SMR capabilities). This can also be used for training.
The OCG technology has won many awards for its innovation and game changing potential. In fact the compact size means that we have had enquiries about systems that could be fitted to the back of a lorry (not that this is actively being pursued at the moment).
The size of the market cannot be overstated. It is multi billion in the USA alone. We protect the IP with hundreds of patents and also have substantial 'know how'. These patents have been examined in detail by our large suppliers and customers. It is unlikely that competitors can operate in countries that are not as rigorous with patent protection as we can pursue infringements anywhere in the value chain. To save money, companies are only pursued for patent infringement when they appear to be viable competition.
Large companies are currently only interested in providing sophisticated plants on a huge scale (many billions of pounds). We are unlikely to be competitive on these scales and are not aiming to be.
There are many financial models for our customers and the one chosen will depend on how much exclusivity they require, sales they generate, etc. Normally we get money from:
1. A licence fee paid up front 3 to 6 months after delivery
2. A percentage of the plant cost - paid 50% up front and 50% on delivery.
3. On-going catalyst sales
The 15,000 bpd plant has 3 phases of evaluation and then a construction phase. We are in phase 2. Phase 3 should take about 6 months. We are standardising plant designs to minimise the implementation time and we hope the construction would take 18 to 24 months which is very short for the industry.
The sales process takes a variable amount of time. Some large organisations are very slow. However all organisations are looking at the first order as being one of many. Subsequent sales to the same organisation should be much quicker.
We are no longer reporting engineering studies for plants of 1000 or 2000 bpd as these are becoming regular events.
We eventually aim to have inventory waiting and ready to go based on our standard designs. This will reduce sales to operation times even further.
OCG are not currently thinking of operating our own plants. This is because our expertise lies in catalyst/micro channel development not plant operation. We also do not have the capital as a 1,000 bpd SMR/FT plant can cost between $100m and $150m. More capital is hard to come by currently and we can leverage our profits using partners and contracting companies.
Our chief competitor is CompactGTL who we are in litigation with. We believe we have a better and more efficient product. There are many other small competing start ups. We do not think any of these is a threat.
Some of the larger producers are scaling down their large scale processes. These are not likely to be made available outside the producing company and are less mature than our product. We must not forget other ways of monetising gas. The main ones are producing electricity and LNG, both of which may be viable alternatives depending on location.
The main barrier to sales is not the competition but our process not yet being considered mainstream. As we get more operating plants and reference sites this should change quickly. We have more sales enquiries than we can currently deal with and we must prioritise the best options for our limited resources. We hope to leverage opportunities using our partners.
We are not currently considering a move to the main market even though it would allow more institutions to invest in us. The cost and admin would currently prove prohibitive. We are setting up the corporate governance as if we were a main market company. The NASDAQ might make more sense but no plans currently exist to enter this market. When we are a multi billion pound company this may change! The majority of our shares are owned by institutions who see the long term potential for OCG. They are not particularly concerned by short term share price movements often dictated by tiny trading volumes.
The cash position is difficult to predict and will depend on sales. In any event the capital raising means we are funded for at least the next 18 months. There are definitely no plans for share buy backs. For the same reason our other technologies have been put on the back burner.
Petrobas have a very limiting confidentiality agreement with OCG. We can say they insist on at least 2 bidders for any contract so we will be considered after qualifying. They have decided floating GTL is the way forward to deal with the flaring issue. We are comfortable with our position as we believe we have better more economic technology and partners (MODEC and TOYO) in place. MODEC are currently one of the largest suppliers to Petrobas. In common with most large organisations the decision process will not be quick.
SGCE (Portuguese Biomass to Liquid) have some extremely ambitious plans. We are no longer reporting progress as the deadlines have slipped and may continue to do so. BTL is currently a lower priority than GTL as it is a much smaller market.
Susan Robertson said she would consider setting up further investor events - but not with the whole board.
Roy Lipski stated that OCG would continue to develop both the catalysts and the micro channel technology. Otherwise in 5 years time we might find ourselves obsolete.
The chairman sees GTL in the same way as the introduction of mobile phones. Hopefully generating the same profits - champagne at the next AGM? (The biscuits were very good at this one.)
For my part I was glad to see that the board was more commercially minded and less academic than I feared. The potential of the technology is outstanding and I will continue to buy. The main danger is the slow take up requiring more cash and possible emergence of rival technologies.
My thanks to the other investors who I enjoyed meeting over lunch and a pint. I look forward to seeing you again next year.|
Oxford Catalysts share price data is direct from the London Stock Exchange