SNVFF Purchase @ $.15
SNV.cn Sonic Technology…Is this something that could actually work?
Recently, I have been interested in companies that are developing newer and more efficient technologies within the oil and gas industry. I feel that there is currently a technological revolution going on within the oil and gas industries as companies scramble to increase operating efficiency and well production. Sonic fits nicely into this category. The company is currently developing sonic technology that will (*hopefully) be able to separate light and heavy crude oils. By separating the heavier particles, companies would be left with lighter and much more profitable oil, increasing their profits. While the concept sounds extremely compelling, there are two main questions that I have. The first, is whether or not this technology could actually work. Unlike Wavefront (who I previously have written about), Sonic does not actually have a product out there selling in the marketplace. In fact, the company has no revenues to date. The company is currently testing their product through a joint venture in Albania. Their Albanian partners have agreed to fund the $1 million in start-up costs along with a refining facility where the product will be tested. They chose Albania because they have some of the heaviest crude contents of anywhere in the world, so the location makes sense. I actually view this as a positive because they will be gaining exposure in the middle east, where the company could enjoy some huge success assuming the product works. The second concern that I have is regarding the capacity of this technology. From what I have read so far, their Sonicpetro product has a relatively small refining capacity…something around 1,000 bpd (this is just an approximation and I have yet to confirm this). I was rather hoping that this technology could be adapted to larger global production and thus be targeted by larger global companies who are more willing to spend money for newer technologies. Regardless of their customers, Sonic could be a multi bagger from here just based on positive product testing results, without even making a sale. From there, depending on the technologies usefulness within the industry (which sounds like it could be a lot), the upside potential for this one is very very high. Thus, I think the risk (though it is large is capped on the downside to $.15) reward relationship here worth taking. With the addition of Richard Wadsworth, I think the chances are good that this company will succeed in developing, marketing, and ultmately selling their product. Richard has a lot of experience in the oil industry specifically in areas surrounding heavy oil. He was previously an executive at Bankers Petroleum and brings with him a lot of industry experience and respect amongst his peers.
For such a new and small company, Sonic really does have a lot going for it. In addition to their petrosonic product, they are also involved in a number of joint ventures with some very large and successful companies. This is always a positive sign for a small company like SNV. They are currently involved in creating an ash catching product for the cement and steel industry to help reduce toxic ashes released during the process. This is a joint venture in which they are being funded by Nalco. I really like Nalco as a company and wish I would have bought some shares when I wrote about it HERE. They are one of the global leaders in water treatment technologies and have a solid and diversified product portfolio and geographic dispersion. The fact that a company like Nalco is involved with Sonic is really a positive for me. They also have a joint venture in the Canadian oilsands with Shell, which for obvious reasons is another very positive thing.
Investing in this company is all about looking at the global macro environment, assessing the likelihood of this technology being adapted, whether or not the product is economical to be used, and accepting the fact that this stock could be worthless. That is why I am treating this as a call option on Sonic’s technology. Look for news on the company’s product testing results later this year. Any positive press releases could easily pop this stock above a dollar.
