The Most Compelling Value-Add in the Patch–NXT Energy

by Keith Schaefer on April 2, 2014

The Holy Grail–This Company Can Pinpoint Reservoirs–and Tell if They are Full

NXT ENERGY (SFD-TSXV)
 

ADVERTORIAL BY KEITH SCHAEFER

I don’t own shares in NXT Energy Solutions (SFD-TSXv) because the company has a promising technology.

I own shares in NXT Energy Solutions because it has a DISRUPTIVE technology that has already been PROVEN. It’s being used on three continents by some of the largest producers in the world now.

What NXT’s technology is offering isn’t a tweak on something that is already being done. NXT Energy Solutions technology is the kind of step change that will result in the old playbook being thrown out entirely.

This little company with a $60 million market cap has the best solution for a geophysics market that last year had global sales of $12 billion.

It can save producers up to 90%–even 95%–on their seismic costs, and months in permitting and many more months in completing the seismic. Corporately, they’ve got millions in the bank, no debt, and….

NXT is right now negotiating bigger contracts with those major oil explorers that could make 2014 the big breakthrough year for this company, its shareholders and its DISRUPTIVE technology.

I’m long personally, and I’ve put the stock in my OGIB subscriber portfolio.

The technology is called Stress Field Detection (SFD) and it is a giant leap forward for the entire industry. It detects reservoirs by strapping a set of SFD sensors to an airplane and flying over the prospective land area. SFD can’t tell if it’s oil, gas or water, but it can tell if the reservoir is full or empty (breached).  That bears repeating–SFD can pinpoint where reservoirs are, and tell if they are full.  Nobody, nor any other technology, can do that.

 

I’ve followed the company for over a year and met CEO George Liszicasz. Since then the stock has doubled as he now has some of the largest National Oil Companies (NOCs) using his technology.

In fact, these NOCs don’t just use the technology; they have even written technical papers supporting it.

The one paper that investors absolutely have to read about the SFD technology was released by the Mexican State Oil Company PEMEX last year.

Pemex put the SFD technology through a blind test where NXT flew over an area of Mexico where 64 known reservoirs held 12.04 billion barrels of 3P reserves.

The SFD found 47 of the accumulations containing 11.91 billion barrels of 3P reserves.

The technology found all of the big accumulations and 98.9% of the hydrocarbons in place. And finding the big oil accumulations is what this game is all about.

The SFD technology accomplished this:

  • At a fraction of the cost of traditional seismic work
  • In a fraction of the time that it would have taken traditional seismic
  • All from the safety of a plane flying miles above the land being examined

Cheaper, faster, safer. How much cheaper? NXT has charged $1,500 per line kilometer, versus $30,000 per line kilometer for 2D seismic and $100,000 for 3D seismic.

How does this translate into real life? A client of theirs in Colombia could survey an entire 5000 km2 with SFD vs. one, 100 km line of 2D seismic. If the SFD detects a fluid charged reservoir, the producer can do 3D seismic just over that area.

It means huge savings, and it speeds up discovery cycle–a lot.

When I first met Liszicasz, he told me the technology was best suited to frontier areas, where there is little to no seismic. This makes perfect sense–and, it’s where the big discoveries are being made.

Offshore wells can cost over $150 million. The 3D seismic bill to find that structure can be in the tens of millions of dollars. SFD can reduce 3D seismic costs by 70% or more and show if the reservoir has fluids in it.  That’s what I call a killer app.

Whenever I see a technology in the energy patch, I want to hear a simple USP—Unique Selling Proposition. NXT has that—they can save producers tens of millions of dollars and months of exploration time.

Just getting permits to do seismic work can take 1-2 years. Physically doing the seismic—with a dozen trucks and 100-200 men—can take six months. In jungles and hot deserts and politically unstable areas—it can be a nightmare.

Compare that to the SFD technology which costs a fraction of seismic, can be done within weeks because there is very limited permitting and is done from the safety of a plane high above difficult and hostile terrain.

The word DISRUPTIVE again comes to mind.

So that’s in frontier areas. But NXT Energy’s biggest contracts have recently come for business in the United States, which is largely covered with seismic and has been drilled like Swiss Cheese.

Get this: the customer Kerogen Exploration LLC, hired NXT to use their SFD in Florida and Texas. They went from ordering $1.1 million in SFD contracts to $1.4 million to $3.7 million—in just three weeks. Check the dates on the press releases.

They saw the data, believed it and became repeat customers quickly. That’s power.

Let me be clear. The SFD technology won’t completely replace seismic. The seismic data is still needed to properly develop a specific well plan.

What SFD will do is allow oil and gas companies to focus their seismic spending on the exact area where SFD has identified oil and gas to be. SFD will quickly save the global energy patch billions of dollars of money that would be wasted collecting useless seismic.

There’s a lot more I could tell you about this company. They can fly over ground so cheaply, they can (and are) collecting a large amount of proprietary data they can sell to producers for cash. Or they could go stake that land themselves and farm it out for equity, in the form of a carried interest or Gross OverRiding Royalty (GORR).

I could tell you George actually designed this technology to do something else, and this uncanny ability to pinpoint hidden reservoirs around the globe was actually a side benefit that turned into the main business.

I could tell you about how every single target they’ve told clients NOT to drill—but they did anyway—has come up dry.

I could tell you it’s a very tight stock because management owns so much stock, and a few early adopter institutions have bought most of the float. These guys are ideologues; believers. There are only 47 million shares out.

But I’m not going to do that. Instead, go to their website—www.nxtenergy.com and get comfortable with this company.

But don’t wait too long. NXT has been flying under the radar of both investors and the industry, but that’s about to change in 2014.

NXT Energy management has reviewed and sponsored this article.

DISCLAIMER: The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons.  Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom.  Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements.  No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.

Keith Schaefer is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity.  He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity.

 

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