NXT Energy Solutions Inc. (NSFDF)

[investor15]

Taylor MacDonald Unearths Profit-Makers in the Oil and Gas Service Sector

Source: Zig Lambo of The Energy Report (9/20/12)

Everyone agrees that high energy prices are here to stay, so most companies should perform well in the long run. But what about near-term opportunities? Taylor MacDonald, associate portfolio manager at Pathfinder Asset Management, is looking to service companies for industry outperformance. In this exclusive interview with The Energy Report, he describes why proprietary niche service companies virtually own the markets they are establishing.

Section of article:

TER: With regard to profit margins, how sensitive to oil prices are most companies at this point, relative to future exploration activities and the profits that they are making right now?

TM: Cost inflation is something that every single business space is currently experiencing, not just oil and gas. Companies must do whatever they can to become more efficient and save on exploration, development and production costs, etc. One company we are very keen on is Calgary-based NXT Energy Solutions (SFD:TSX.V; NSFDF:OTCBB), which has a disruptive, patented and patent-pending airborne survey technology for oil and gas exploration called Stress Field Detection (SFD).

SFD is a little difficult to explain, but it's essentially a jet with a passive sensor array on board that flies a grid over large swaths of land looking for drops in the gravity stress field. Surveys can be completed in one-tenth of the time and cost of 2-D and 3-D seismic surveys. This doesn't replace seismic, but rather pinpoints where to shoot the seismic. It allows companies to survey hard-to-reach areas with virtually zero environmental impact. The technology is fully proven and can be used onshore, offshore, and in mountainous terrain. It's been used and verified by Pacific Rubiales Energy Corp. (PRE:TSX; PREC:BVC), Pengrowth Corp (PGH:NYSE), Pemex (PEMEX:MSX), BP Colombia (NYSE:BP) and Ecopetrol (Colombia's national oil company).

To envision the process, imagine a river with a rock in the middle. As the river, an analogue for the stress field, reaches the rock, it will wrap around it. This means that the river, or again, the stress field, will have to change direction, which shows up in the gravity field, where the SFD can detect it. It's based on quantum physics. Flying a grid pattern, the SFD equipment measures and detects orientation changes in that stress. A trapped reservoir, for example, will affect the SFD, and allows delineation of prospective areas. The fluid could be oil, gas and/or water. The resulting data shows exactly where to shoot your 2-D and 3-D seismic.

This technology slashes permitting time, lessens environmental impact, and can literally save a company up to 90% on seismic acquisition costs. The technology only requires a flight plan, not exploration permits, which allows NXT to mobilize quickly instead of waiting up to three years just for the seismic permit. SFD also improves the success rate dramatically on wildcat exploration wells in frontier areas. NXT Energy has a growing revenue base and client list, with a rapidly increasing acceptance of the technology. It's also profitable on an earnings-per-share (EPS) basis over the last two quarters, and is a well-held and well-structured company. We think the company's future is very bright.

TER: Is this somewhat similar to airborne geophysical surveys for mineral deposits?

TM: Yes. But I would say this is much more precise in that it can tell you exactly where to find million-barrel fields. There's also the ability to locate water aquifers. Who knows where it could lead? This is one of the most interesting technologies I've seen in the business in my years in the industry.

TER: That's definitely a revolutionary technology. What else do you like in the services?

Continued ...
http://www.theenergyreport.com/pub/na/14393