QS Energy Inc (QSEP)

[As I See It]

Armour65 has asked:

AISI if I remember correctly you did a sort of calculation linking flow improvement and revenues. Can you be so kind to post it again based on the latest revised numbers? Thanks.

There are a lot of ways to look at the equation. Obviously, there are still a bunch of unknowns.

Here is one simple way to evaluate the value of an AOT.
Assume that the TransCanada Pipeline has a maximum daily flow rate of 500,000 bpd without the AOT (it will be higher, but we will be conservative). An increase in the flow rate of 10% means that an extra 50,000 bpd can be moved through the line using our technology. Using a tolling rate of $4 per barrel (just a guess) that would mean increased revenues to the operator (TransCanada) of $4 x 50,000 or $200,000 per day. $200,000 x 365 days = $73,000,000 annually. The question then becomes what is a pipeline operator willing to pay for that extra revenue and what is the durability of the equipment? If STWA and TransCanada strike a bargain with the extra TransCanada revenues paying off their investment (AOTs) in 3 years, then the price tag to buy would be 73,000,000 x 3 = $219,000,000.

The TransCanada Pipeline is approx. 2100 miles long. If there is a pumping station every 50 miles, that would mean a total of 42 pumping stations along the line. One skid of 4 AOTs per pumping station equals 42 skids. $219,000,000 divided by 42 equals $5.2 million per skid.

By changing your assumptions just a little, the price of a skid can vary widely. If the volume gain is 15% instead of 10% then the value jumps to $7.8 million per skid. How many skids are actually needed? Is pay back of investment in 3 years the right number? etc. etc. etc.

If one skid of four AOTs costs $1,200,000 to manufacture (approx. number from the 10k, economies of scale should drive that lower), with a selling price of $5,200,000, then gross profit per skid would be $4,000,000. 42 skids times $4 million equals gross profit of $168 million. Temple gets a royalty off the top of revenues. I have no idea what sg&a will be. Maybe we will net $140 million under this scenario.

This is just one very rough way to try to get a handle on this. I hope it helps. By the way, I have heard numbers that make these look very small. Let's just keep it real, for now. These numbers will make us all very happy.