SinoTech Energy Limited CFO Boxun Zhang Interviews With The Wall Street Transcript
Companies:SinoTech Energy LimitedPenn West Petroleum Ltd.Transocean Ltd..Related Quotes
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On Monday April 18, 2011, 2:15 pm EDT
67 WALL STREET, New York - April 18, 2011 - The Wall Street Transcript has just published its Oil and Gas Master Limited Partnerships Report offering a timely review of the sector to serious investors and industry executives. This Oil and Gas Master Limited Partnerships Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Increasing Demand for Midstream Assets - U.S. Energy Infrastructure Build Out - Emerging Shale Plays
Companies include: Baker Hughes (BHI); MarkWest Energy (MWE); ONEOK Partners (OKS) and many more.
In the following brief excerpt from the Oil and Gas Master Limited Partnerships Report, interviewees discuss the outlook for the sector and for investors.
Boxun Zhang is a Director and the CFO of SinoTech Energy Limited. He joined the company as CFO in September 2010. Prior to that, he worked for a number of other U.S.-listed companies. Mr. Zhang earned his B.A. in auditing and accounting from Wuhan University in 1998, and he earned his MBA from Cass Business School, City University London, in 2004.
TWST: Please start with a brief history of SinoTech Energy and an overview of the company's operations today.
Mr. Zhang: SinoTech (CTE)is a relatively new company in this industry. Our company was initially established in October 2004, and from the beginning we provided traditional enhanced oil-recovery services to the oil operators in China. And starting from 2006 we gradually shifted our business strategy from traditional services to more innovative, enhanced oil-recovery service, or what we call EOR services, in China. Currently we mainly provide two types of proprietary services to the oil operators, lateral hydraulic drilling and molecular deposition film service. We have the exclusive rights to both of these services in China, so we don't have a direct competitor in our sphere.
TWST: Would you explain for our readers more about the enhanced oil-recovery services you provide?
Mr. Zhang: We have two types of services right now. The first one, lateral hydraulic drilling, is our key revenue driver of business growth. It's a cost-effective EOR technology with a patent in the U.S. Essentially, it uses a high-pressure water jet to drill horizontal holes in multiple directions from an existing vertical well, thereby creating a contact point between the oil reservoirs and the wellbore, which in turn increases the output of oil or CBM from existing vertical wells. CBM stands for coal bed methane. We have the exclusive usage rights in China for this technology for at least 10 years.
This exclusive right started in 2010, so we still have nine years to enjoy this exclusivity, and we expect to successfully renew these exclusivity rights when they expire in 2020. Basically this lateral hydraulic drilling, or LHD, technology can increase oil output by an average of 230%, and for CBM it can increase the output by an average of 900%.The other type of service that we offer is molecular deposition film, or MDF. It's a chemical-solution-based EOR technology for which we have the full patent rights in China. The MDF increases oil output in the following way:
The MDF solution is injected into the well reservoir, creating an ultra-thin film that separates the crude oil from the rock and the sand. This also increases the liquidity of the oil. MDF can increase oil output by between 17% and 36%, based on our historical statistics. This MDF technology has a wide application potential and can be used in most oil fields in China. These are in essence the two types of major innovative EOR technologies we are providing in China.
TWST: Who are your customers?
Mr. Zhang: In China the government owns and operates the E&P companies. Currently in China there are three major E&P companies, of which the CNPC, or China National Petroleum Corporation, and Sinopec are the most relevant to us. These two companies basically provide oil services in mainland China. We also have CNOOC, which is an offshore oil company, and that's mainly focused on deep-sea drilling and oil services. Our target customers are mainly the onshore E&P companies.
TWST: Are there opportunities to expand beyond China? Is the company interested?
Mr. Zhang: As our technology is highly innovative, it offers high performance, low cost, as well as benefits in terms of environmental friendliness, and we therefore believe that we have a huge potential market worldwide. We started our business in China, but we also see great potential to expand outside of China. I think that in the next one or two years we will have oil-field services in oil-producing regions outside China.
TWST: In December the company announced an agreement to buy new lateral hydraulic drilling units. Please tell us about this agreement, any other such acquisitions and the importance to the company's business.
Mr. Zhang: If you understand our business model, we are in a seller's market right now. We see huge demand from our customers, and our existing LHD unit has been running basically at top capacity. So our future revenue growth will largely come from the addition of LHD machines that allow us to have more capacity to provide services to both existing and new customers in China, as well as potentially in foreign countries.
And so in order to ensure strong visibility on our growth in the future, we secured a large equipment purchase agreement with our U.S.-based LHD machine producer.In calendar year 2011 we will purchase 10 units of LHD equipment. Actually, we already received the first two units in late March of this year, another four units are to be delivered in late July, and the remaining four units by the end of December 2011. So with this committed equipment supply pipeline we can ensure that we will be able to meet the demand from our current and potential customers for the foreseeable future.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Oil and Gas Master Limited Partnerships Report is available by calling (212) 952-7433 or via The Wall Street Transcript Online .
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
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