ABSOLUTELY FALSE according to all the GEMS & FACTS below
Highlights from the 2018 Annual Meeting
Yesterday's meeting laid out a very comprehensive path forward. Their strategy gives QSEP an excellent opportunity to showcase their product in the most efficient possible way to advance to the commercialization stage. Within the next four months or so, the data will be there for all to see, for better or worse. This is exactly what we have all be waiting for.
(1) It is expected that an AOT will be installed on the pipeline of a major energy company by the end of this month. Let that sink in. A company that was described as a "major major" energy company with world wide reach, wants to partner with us. They must believe that the science and engineering of the AOT has enough potential to warrant installation on one of their pipelines. This makes it crystal clear that past tests were not failures. Like most new technologies, the AOT has required multiple tests and engineering redesigns to reach the commercialization stage.
(2) QSEP will bear most of the costs of the installation and testing. This is important. QSEP wanted a partner not a client. This will allow QSEP to own the data and have a high level of operational control.
(3) QSEP will be given a minimum of 6 months on the pipeline. Prospective QSEP clients will be allowed to visit the demo site. QSEP will be allowed to tweak the AOT if needed. The demo site may continue for as long as 3 years. This will be invaluable in terms of marketing, but will also allowing for continuous enhancement of the technology.
(4) Third party verification will be part of the process. At least two maybe three outside entities will be used. PRCI has been approached and is a likely candidate. The energy company whose pipeline we will be testing on is a member of PRCI.
(5) Heavy crude oil with a high paraffin content is the initial target market. While the AOT has efficacy on lighter crude, it has the longest duration and most dramatic viscosity reductions in heavy crude with high paraffin content. The crude being used in the demo project fits that description. Also, most heavy crude lines are more challenging for DRA products. More on that later. It only makes sense to go after your best market prospects first. There are more than enough potential clients in this category to make QSEP a ton of money.
(6) QSEP has new pipeline modeling software to do oil testing and customer presentations in house. This will streamline the process. Temple is okay with that.
(7) QSEP has increased their supplier network with mostly companies in the Houston area.
(8) There are 25 to 30 prospective clients that QSEP has had extensive discussions with that are ready to move toward sales, if the demo generates acceptable data. We won't need to do anymore test projects, because most everything a prospect will need to know will be available at this site.
(9) Institution money is being lined up. Much like QSEP's prospective energy clients, the institutional money clients want to see positive data and a more risk certain outlook for sales. This means they will be coming in at much higher stock prices. This is less dilutive.
(10) ISNETWORLD is a web enabled system that is used to qualify vendors. QSEP has spent over a year navigating the labyrinth to get everything in place. Because it is almost a universal system with energy companies, once you've met the hurdles for one you've met the hurdles for all.
(11) An important "tell" that things are now accelerating is that a substantial outlay was made by QSEP to purchase general liability insurance to satisfy QSEP's new partner.
(12) I learned something interesting about DRAs from the presentation. Many pipelines that transport heavy crude do not allow DRAs in their systems, particularly in colder climates. DRAs do not disperse widely and tend to clump under these conditions. While there are workarounds they may not be as effective and are more expensive. The pipe our AOT is going on does not use DRAs.
(13) QSEP is still looking at two sales models, outright sales and a tolling method trademarked e-diluant. It will depend on the characteristics of the client.
(14) The company allowing us on their pipeline has indicated a desire to deploy the AOT not just to fit out the rest of this line, but to deploy system wide if the data justifies it.
(15) QSEP expects the AOT to expand rapidly in the upstream market if the data warrants it (trucks, rail, and shipping etc.).
(16) The demo site was described as local. The value of that is self explanatory.
In my humble opinion, any negative market reaction is most likely by those with a very short time horizon. The number of scientists and engineers from major energy corporations that continue to think that the AOT has a good chance of working is a very powerful reason to give the AOT this chance to move to commercialization.
This major energy company knows QSEP's history. They still think the AOT can be commercialized. If they think so, then so do I. The payoff should be worth the wait.
