Ian Gilson, CFA
OriginOil, OOILD.OB Initiation by Zacks Small Cap Research
OriginOil is moving from a proof of concept to a full scale plant for production of oil from algae using the company's unique separation processes.
The company's strategy is to be a supplier of technology to the growers of algae so that the oil separation process is less expensive and the cost of oil from algae becomes economically feasible.
The company's goals for the next three years are the successful operation of the 300 GPM continuous harvesting system and industry validation of the SSE process.
OriginOil is currently developing technologies to help companies produce oils from algae that can replace petroleum products in various applications such as diesel, gasoline and jet fuel; plastics and solvents; cosmetics and drugs. Algae, unlike other bio-fuel feedstock such as corn and sugarcane, do not destroy vital farmlands and rainforests, disrupt global food supplies or create new environmental problems.
The Company has developed a number of processes in controlling algae growth and oil extraction, with an emphasis on dewatering and oil extraction at high speeds. On March 28, 2011, the Company stated its intention to provide other technologies and integration services to its early stage marquee customers.
The Company’s business model is based on licensing this technology to distributors, manufacturers, and engineering service firms, similar to the business model of Universal Oil Products (formed in 1914 and now known as UOP/Honeywell. UOP developed the cracking process that is the foundation of the petroleum refining industry). OriginOil is not in the business of producing and marketing oil based on algae, nor of developing sales distribution networks or engaging in volume manufacturing. This has the advantage of not needing a lot of capital for infrastructure and equipment. The company can develop licensing annuities and partnerships rather than compete with algae producers.
Order increase from MBD Energy, Ltd.
On August 12, 2011 OriginOil announced an increase in the order from MBD Energy Ltd, first announced on May 23, 2011. The total value of the order is $850,000. MBD paid OriginOil $297,500 on August 5, 2011 pursuant to a purchase order placed on July 29, 2011. The second payment of $425,000 (50% of the total) will be due within 5 days of the availability of the system and a successful inspection and power test. The final 15% will be due after completion of installation and performance acceptance.
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