Capstone Green Energy Corp (fka CGRNQ)

[Seasound]

About that growing backlog of orders...

On the surface it would seem to be a good thing to see growing backorder numbers. We now all await DJ's explanation as to how much inventory, if any, was "on the dock" awaiting shipment to DesignLine. A year or so ago, during a CC, DJ discussed the backlog quite frankly stating that while the orders are in the que they can and do sometimes stay there for quite sometime--awaiting delivery orders from the purchasers. It would be quite another matter if this backlog was simply due production levels and necessitated running another shift to whittle it down. Unfortunately, this is not the case.

During the above mentioned CC DJ also said "what is a year or two delay to a major oil company? We have to conform to their time-lines unfortunately (or something to that effect.) What a year or two has revealed is that the decline rate of natural gas in shale gas formations and gas liquids in "tight" formations is much higher than once believed. The majors are now selling acreage as fast as possible prior to the bubble bursting, all the while drilling as fast as possible to keep the illusion alive as they shed assets. Google up "shale gas production decline rates" for the latest news of this situation and form your own opinions. At the present time the only major shale formation not in decline is the Marcellus.

In the short term the increased drilling may bode well for Capstone, in the long haul I believe the picture changes dramatically. "The very high decline rates of shale gas wells require continuous inputs of capital - estimated at $42 billion per year to drill more than 7,000 wells - in order to maintain production. In comparison, the value of shale gas produced in 2012 was just $32.5 billion." Production at a loss isn't sustainable and only a large spike in Henry Hub prices to 5 - 8 bucks per MMBU or massive exports can reverse this situation. Overinflated industry claims could pull the rug out from optimistic growth forecasts within just five years

Of course there will continue to be a need for off he grid power and I personally believe that Capstone's success lies in the penetration of Data Center, and major commercial buildings. I admit I could be completely wrong in my assessment and would certainly welcome the numbers to prove that.