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Quadrise Fuels International (LSE:QFI) has been having quite a week. Today hasn’t been so bad either. At 9:00 am its share price had skyrocketed by 72.5% over yesterday’s close of 5.88 pence, and 113.6% over one week ago, when it was trading at 4.75 pence. Having reached 10.145 pence, it tapered off to 8.89 pence just before noon and has been holding at that level. That’s still a 51.2% increase over yesterday and an 87.2% increase over 15 August. Quadrise market cap has increased from £42.45 million at 01 August to £76.41 today.
Is It All Finally Coming Together?
The heart and soul of Quadrise’s business is their proprietary Multiphase Superfine Atomised Residue (MSAR®) technology. MSAR® renders heavy hydrocarbons easier to use whilst the lower viscosity of the resultant fuel is characterized by enhanced combustibility. End-users also ultimately benefit from cost savings in the millions of dollars as a result of multiple aspects of the product. End-users potentially include oil refineries, power plants, and marine fuel users. In addition to reduction in operating expenses, MSAR® installation reduces the capex normally required for converting heavy hydrocarbon residue for use.
Transforming Saudi Arabia’s Refining & Power Generation Business
The kick in the pants for the Quadrise share price today came from the announcement of the signing of a Memorandum of Agreement with M/S Rafid Group for Trading & Contracting as a precursor to anticipated contracts for the application of MSAR® technology in Saudi Arabia. Once the contracts are finalized, Quadrise and Rafid will form a joint venture that will oversee installation and operation of MSAR® technology at all refineries in Saudi Arabia. Whilst there are still details to be determined, the initial Saudi Aramco refinery for installation has been selected. All of the entities involved are currently discussing the best approach to converting Saudi based utility companies from crude or fuel oil to MSAR® technology to match planned production with local consumption.
Transforming Marine Fuel for the Shipping Industry
The first bump in Quadrise shares on the 17th of August came as the EU announced new restrictions on the shipping industry that will force companies to either fit filters into their systems to remove sulfur from their fuel oil or switch to a different type of fuel. Shipping companies are looking at capital expenditures in the billions of dollars. The price of cleaner marine diesel is prohibitively high and is in short supply in Europe. European refineries would face lengthy shutdowns and prohibitive costs to retool. A Reuters report on 17 August called MSAR® the most inexpensive option for refiners and shipping companies. Quadrise has been working with Maersk, conducting sea trials of MSAR® for over a year, and is expecting the long-awaited product to become commercially available within the next 12 months.
At the refinery level the capex to install MSAR® technology is about $50 million. At a production rate of 200,000 barrels per day, the estimated cost reduction for the refinery is about $100 million per year. That’s a six month payback on capex, which is exceptional by any standard. Plus, the installation would not require any lengthy plant shutdown. Applying the technology at a shipping company level, Quadrise estimates a $1 million per year savings per vessel.
Corporate Comments
Ian Williams, Chairman of Quadrise, commented on the Saudi developments, saying, “Saudi Arabia is a key market with enormous business potential for Quadrise, especially as the Government seeks to optimise energy resources in the Kingdom. Rafid is a proven partner for the Saudi Aramco programme, and for the many other opportunities evident in this market.”
Rafid Chairman, Abdul Aziz Al Mandil observed that “We have been convinced from the outset of our relationship with Quadrise that MSAR® technology offers great benefits for both Saudi Aramco and the Kingdom at large. The recent approval of MSAR® technology by Saudi Aramco is a major milestone. It confirms that the commercial basis has been established at the highest level to proceed together with Quadrise, and now for us jointly to secure commitments to commercial applications expediently.”
In Summary
Whilst Quadrise has lost money for five consecutive years whilst developing and marketing the MSAR® technology, it appears that it is on the verge of generating significant return on investment for those investors who have been loyal through the startup stages. Quadrise could become the company that revolutionises the industry with a process that makes crude and fuel oil easier and cheaper both to produce and use.
