SANTA BARBARA, CA -- (Marketwired) -- 10/17/16 -- QS Energy, Inc. (OTCQB: QSEP) The following is a shareholder update from Greggory M. Bigger, Chief Executive Officer, QS Energy, Inc.
As we enter the final quarter of what has been a year of re-alignment for the global energy sector, I'd like to provide an update on how our business strategies have evolved to capitalize on this unique period of transformation and opportunity.
It gives me great pleasure to confirm that we are engaged in AOT provisioning discussions under Non-Disclosure Agreements with multiple crude oil producers and pipeline operators here in the U.S., Canada, and the Middle East. Thanks to the tireless efforts of our project manager John Valenti, QS Energy has expanded our engineering capabilities in response to requests for detailed technical AOT deployment proposals and to meet the growing scope of potential applications for our technology.
From the onset of the value engineering of AOT and continuing today in our ongoing design process to further optimize its performance, along with myself and our engineering team, John is currently managing our collaboration with Temple University, our supply chain system fabricators, and current industry partners in North America and the Middle East. I can state without hesitation that there is no one else as exceptionally qualified as John to manage these complex and intensely detail-oriented projects and for that reason he continues to have the fullest confidence of the Board and myself.
Although the AOT technology is now nearly fully engineered and it has become less important to staff engineering support internally, we continue to benefit greatly from these in-house resources and industry partnerships. Based on what we are currently working on with industry partners, both domestic and international, I've never been more optimistic about our technology, our industry, and our relationship with Temple University and the interrelated role they are playing in the commercialization of the AOT system.
We're especially appreciative of the outstanding laboratory testing and R&D capabilities of Temple University's Department of Physics and Dr. Tao's team. Since my tenure as Chief Executive Officer began, our focus on intensely managing expenses while maximizing the fiscal and human capital resources available to us has been integral to positioning our solutions for today's new energy industry landscape and will continue to be central to QS Energy's path forward in developing and commercializing the AOT system. The present supply chain can handle 20 unit orders at a time, however additional facilities are available for larger orders.
As you are aware, in the first quarter of this year the Company embarked on an acquisitions strategy targeting undervalued assets. Over the past six months we have issued four Letters of Intent to a select group of crude oil and natural gas producers that met our stringent criteria. One of these letters was issued to the U.S. Federal Bankruptcy Court in Houston. While QS Energy is not abandoning this strategy, we are paying very close attention to crude oil pricing to gauge the most opportune time when conditions are optimally favorable to exercise a buy-side acquisition of cash flow positive entities.
It goes without saying that few industries are as prone to the "boom and bust" cycle of expansion and contraction as the oil and gas industry. Not unexpectedly, following the steep drop in oil spot prices in Q4 of 2014 the industry has been forced to recalibrate. Currently domestic and foreign markets appear to be slowly emerging from the price trough which triggered a widespread retrenchment and consolidation. While the U.S. rig count is gradually recovering, the tens of thousands of jobs lost will only return when spot prices recover more fully.
However, as we've documented previously, our experience has been that interest in AOT continues to grow as a result of this down cycle as producers and transporters adjust their operations to trim costs, remain solvent and survive until prices inevitably recover. By offering laboratory viscosity reduction tests of crude oil samples supplied by prospective customers, we've uniformly been able to predict efficiencies that can be gained in their pipeline infrastructures. In performing hydraulic analysis based on the specific crude oil being transported and the physical properties and operational metrics of the targeted pipeline, we are providing highly specific economic models of the bottom line benefits AOT can be expected to deliver.
We believe these factors explain why oil producers in many of the world's highest production regions are requesting proposals documenting how AOT can assist in their plans to increase crude oil flow volume and improve their ability to move hydrocarbons to market. Furthermore, as we have now definitively confirmed through commercial pipeline installations and the SCADA (Supervisory Control and Data Acquisition) records we have collected as well as crude oil samples we have analyzed in the Temple laboratory, the value engineered AOT has documented efficacy across the full spectrum of grades of crude oil, from super heavy bitumen to super lightweight and ultralight condensates.
Our ongoing deployment of a customized AOT system on a condensate line and the well-documented efficiencies it is bringing to the movement of ultralight feedstock, a category of crude oil that is currently just under 18% of all U.S. output, is evidence of the versatility of our technology.
From our perspective, two overarching market influencers explain this heightened awareness of AOT and the measurable benefits it can potentially provide. Both of these trends are responsible for redrawing the map of oil and gas markets over the past two years and a third, the increasing focus on reducing emissions in the production and transport of hydrocarbons, holds the promise to deeply affect the oil sector in the coming years.
First, and perhaps most significantly, U.S. and foreign producers have now endured nearly nine quarters of depressed oil prices. Last week's uptick to just over $50, the first time that barrier has been eclipsed since July 2015, may portend a slow return to previous highs which could improve margins and re-ignite E&P activity. However, even a surge to the $60s or $70s would not alter some of the new realities facing the industry. The shakeout and re-alignment that began last year has resulted in a leaner and more efficient industry, a mindset that will persist for the foreseeable future. As a result, we continue to see an increased focus among pipeline operators on lowering Opex and squeezing out higher flow volume and stronger tariff income, all of which make a case for AOT deployment.
Secondly, the bright side of the continuation of OPEC's intransigent production policies has been an intense focus on infrastructure by virtually all members of the consortium. Many of these nations are almost entirely dependent on oil revenue and have been driven to near insolvency due to the global supply glut and downward pressure on prices. In response, member nations Saudi Arabia, Iraq, Iran, and Venezuela, and petro-states such as Colombia, Brazil, and Ecuador have embarked on ambitious and capital-intensive modernization programs, much of this aimed at harnessing efficiency-centric technologies which provide innumerable of opportunities for AOT and Joule Heat.
Throughout the year we have documented how these efforts to expand existing infrastructure and improve delivery to markets may offer a broad range of potential applications for AOT technology. For example, in an Update on AOT Opportunities in the Middle East and South America and an August 15 2016 news release we discussed that we have issued a Letter of Intent to a national oil company in Western Asia and have produced an AOT Case Study for a sole and separate operator in the Middle East based on hydraulic analysis using crude oil samples and pipeline data provided by this prospective customer.
Thirdly, as international markets gear up to develop economically viable alternative and renewable energy sources to supplement fossil fuel, political leadership here and overseas seems poised to resurrect the idea of incentives to reduce CO2 emissions and other forms of greenhouse gas. What's changed in the equation is that some of the talk about carbon tax credits and the ability to buy and sell them on an open market is now coming from within the energy industry. For example, ExxonMobil has been lobbying Washington to develop carbon tax credit legislation and foreign energy giants which include BP Plc, Royal Dutch Shell Plc, Total SA, Statoil ASA, and others, are calling for incentive programs they believe will remove uncertainty from the investment markets and bring order and transparency to the global push to reduce emissions.
Although we have long considered the "clean tech" aspects of our patent-protected industrial hardware worth noting as seen in this August 15 2014 news release, it has yet to prove prudent as a business development strategy in the absence of sufficient and tangible customer benefit. However, should a carbon tax credit incentive pass into law we believe it may offer significant opportunities for QS Energy's technologies. During my tenure as Chief Executive Officer I have had countless discussions about the role our solutions could play in achieving the twin goals of reducing CO2 output and our customers securing financial advantages through research funding and tax credits.
More often than not the topic of carbon credits has been brought up as an ancillary benefit of AOT or Joule Heat by our prospective customers. Even though such incentives were at the time purely speculative, executives at midstream companies, technologists at engineering firms, and elected officials in regulatory and economic development agencies in Utah and Louisiana made clear their interest in investigating this intently. To fully explore carbon tax credit offset benefits AOT and Joule Heat could potentially offer to producers, transporters, and operators of offloading facilities and refineries, QS Energy commissioned a Carbon Markets research paper by Loyola Marymount University. Completed in December 2014, the study documents the emerging markets for the buying and selling of carbon emission allowances or permits ("carbon trading") and the fiscal benefits that may be gained by our customers through U.S. and international tax credits.
It is also worth noting that we have just wrapped up a reengineering of our patented Joule Heat System. As a result of the testing of a new prototype, we are in the process of further refining the performance of this innovative direct heat technology. While our patents remain in force with our intellectual property attorneys Jones Walker LLP, the Company is amending and resubmitting designs and additional patentable engineering characteristics for this energy-efficient upstream heating product.
Now that the value engineering of AOT and Joule Heat are nearing completion, we are reviewing Company-owned technology, patents, and other assets related to ELEKTRA, a clean tech hardware system designed to increase fuel efficiency and improve performance of diesel engines. According to multiple industry and government studies there is potentially a strong and growing demand for technology able to mitigate CO2 and other pollutants produced by the millions of diesel engines in use today in electric plants, marine vessels, and Class I locomotives in the U.S. We will be developing additional ELEKTRA design drawings and engineering schematics for the second quarter of 2017.
As our extensive protocols of controlled loop and commercial pipeline testing has borne out, AOT can be effectively customized for virtually any crude oil viscosity reduction and flow volume improvement application producers or transporters anywhere in the world can envision. An excellent example of this can be seen in a recent request for a modified system required for a high volume offloading facility. In response to this need we are currently developing the AOT XL, a vertically mounted, multi-vessel, modular unit designed for offshore applications.
We thank our shareholders for their loyalty and support, and our industry partners and supply chain suppliers for their collaboration. As noted throughout the year in our previous Shareholder Updates, news releases and SEC filings, we remain steadfast in our belief that AOT and Joule Heat have the potential to optimize the world's massive pipeline infrastructure at a time when operational efficiency, bottom line performance, and competitive advantages are paramount objectives of the industry.
Best regards,
Greggory M. Bigger Chief Executive Officer QS Energy, Inc. Toll-Free: +1-877-872-7892 Main: +1-805-845-3581
Safe Harbor Statement: Some of the statements in this letter may constitute forward-looking statements under federal securities laws. Please visit the following link for our complete cautionary forward-looking statement: http://www.qsenergy.com/site-info/disclaimer
ABSOLUTELY FALSE. FURTHER EVIDENCE the PROVEN AOT will be going to the MIDDLE EAST as per the FACTS below. The big players in the oil industry want the PROVEN AOT as per the EVIDENCE below. This is about the PRESENT, NOW & the FUTURE, not what happened 15 years ago.
QS Energy's AOT Crude Oil Pipeline Optimization Technology Under Consideration by Largest Producers in Middle East
SANTA BARBARA, CA -- (Marketwired) -- 08/15/16 -- QS Energy, Inc. (the "Company") (OTCQB: QSEP), a developer of integrated technology solutions for the energy industry, today announced it is engaged in discussions with two of the world's largest crude oil producing nations in the Middle East to provide deployment strategies for the Company's AOT Viscosity/Pressure Drop Reduction technology. Under a non-disclosure agreement with one of these entities, QS Energy will be testing customer-provided crude oil samples at Temple University's Department of Physics laboratory and performing feasibility studies to determine the potential benefits of AOT installations on a specific number of pumping stations on several pipeline systems.
"There are a number of large infrastructure modernization programs underway in the Middle East to increase crude oil output and significantly expand the pipeline systems that transport upstream production to refineries and marine offloading facilities," stated Greggory M. Bigger, Chairman and CEO of QS Energy. "Due to the efforts of our distributor Energy Tech Premier Group and our own business development activities, we have provided a non-binding Letter of Intent (LOI) to the second of these entities which is now going through Arabic translation and is under review by their leadership. Our objective is to forecast how the use of AOT technology might improve the efficiencies and Opex performance of their respective pipeline systems."
Mr. Bigger added that the opportunities stem from upstream projects undertaken by two of the Middle East's most prominent oil producers to step up production and improve delivery to market. Recently, several oil-producing nations including OPEC members Saudi Arabia, Iran, and Iraq have announced ambitious plans to increase output and streamline their ability to transport production to refineries and seaports for delivery to foreign markets.
In July OPEC's second largest producer Iraq announced their intention to increase crude oil production by 250,000 to 350,000 barrels per day by 2017, up from its current level of 4.6 million bpd. As of last month the output of Middle East nations reached record levels of over 31 million barrels a day during each of the past three months, according to data from the International Energy Administration. Overall, Middle Eastern global market share has now grown to 35%, the highest since the late 1970s.
During the first and second quarters of 2015, crude oil samples from a major Middle East oil producer were provided to Temple University for laboratory testing to simulate the potential benefits of AOT on a commercial pipeline. The test results demonstrated viscosity reductions of 20% to 35% using AOT technology. As a result of these performance benchmarks, we have moved to discussions with this Middle East entity regarding a project-specific AOT Viscosity/Pressure Drop Reduction system. QS Energy has also provided a detailed benefit analysis case study for their review and provided recommendations for outfitting a certain pipeline with the AOT equipment.
Following similar laboratory testing with another top-tier Middle East oil producer, in May 2016 QS Energy executed a non-disclosure agreement in consideration and evaluation of potential transactions and joint development activities.
"Based on our continuing interactions with these organizations, we believe that they are dedicated to implementing strategic, multi-pronged engineering programs to improve the existing pipeline infrastructure and deliver hydrocarbons more efficiently and cost-effectively to global markets," Mr. Bigger stated. "Our feasibility testing and AOT Case Study proposals will focus on the projected measurable performance efficiencies we believe we can bring to the extensive pipeline systems of these nations and how AOT may increase flow rates and reduce pipeline pressure drop, thereby minimizing delivery delays and bottlenecks."
Safe Harbor Statement: Some of the statements in this release may constitute forward-looking statements under federal securities laws. Please visit the following link for our complete cautionary forward-looking statement: http://www.qsenergy.com/site-info/disclaimer
About AOT™ (Applied Oil Technology) Developed in partnership with scientists at Temple University in Philadelphia, AOT (Applied Oil Technology) is the energy industry's first crude oil pipeline flow improvement solution using an electrical charge to coalesce microscopic particles native to unrefined oil, thereby reducing viscosity. Over the past four years AOT has been rigorously prepared for commercial use with the collaboration of over 30 engineering teams at 19 independent oil production and transportation entities interested in harnessing its demonstrated efficacy to increase pipeline performance and flow, drive up committed and uncommitted toll rates for pipeline operators, and reduce pipeline operating costs. Although AOT originally attracted the attention of pipeline operators motivated to improving their takeaway capacity during an historic surge in upstream output resulting from enhanced oil recovery techniques, the technology now represents the premiere solution for improving the profit margins of producers and transporters during today's economically challenging period of low spot prices and supply surplus.
About QS Energy, Inc. QS Energy, Inc.(OTCQB: QSEP), provides the global energy industry with patent-protected industrial equipment designed to deliver measurable performance improvements to crude oil pipelines. Developed in partnership with leading crude oil production and transportation entities, QS Energy's high-value solutions address the enormous capacity inadequacies of domestic and overseas pipeline infrastructures that were designed and constructed prior to the current worldwide surge in oil production. In support of our clients' commitment to the responsible sourcing of energy and environmental stewardship, QS Energy combines scientific research with inventive problem solving to provide energy efficiency 'clean tech' solutions to bring new efficiencies and lower operational costs to the upstream, midstream and gathering sectors. More information is available at: www.QSEnergy.com
Kind of curious where that number comes from...I am in finance and we have it at a -64 factoring in a few unknows...Liabilities on the minimum office space,salaries accounts payable that we know of....
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