I think it’s necessary to provide an update on my opinion of Origin Oil (OOIL).[ref name=”Origin Oil Inc]Origin Oil’s Website, OriginOil.com, Available: http://www.originoil.com/[/ref] This article is not a fresh recommendation—this is a followup to my previous article about Origin Oil. My intention is to provide information for readers who learned about this stock on this blog.
Investment in this stock was always speculative. While the company’s innovative product line has consistently attracted the attention of analysts and industry experts, it’s a relatively new company that until recently has focused on research and development. Although it seems to be advancing according to a solid strategy, revenue has not been sufficient to cover costs. Ongoing pressure on the company’s stock price hasn’t helped matters. However an addition to the business plan provides a glimmer of hope for the next quarter.
The company has experienced net losses and negative cash flows since its inception, and it expects this to continue into the foreseeable future. There are substantial risks heading into the next quarter. The company’s ability to continue hinges on its ability to raise capital from financing transactions and future sales. However, in 2014 product revenues were limited. In addition, capital markets and the company’s history of losses could impact the availability or cost of future financings. For the years ended December 31, 2014, and December 31, 2013, OOIL incurred net losses of $(11,138,608) and $(8,762,911). However, as things stand at this time the company projects the ability to continue operations for the next 9 months. (For a complete list of the risks assessed by the company, please see the latest 10-K.)
The Business Plan
The company’s long-term business model is centered around licensing its technology to original equipment manufacturers (OEMs), distributor resellers, service providers and other licensees. However recently OOIL has begun assembling and selling complete solutions based on EWS, (Electro Water Separation), its core technology. Besides generating short-term revenues, benefits of this strategy would include getting EWS into use ahead of the licensee adoption rate, and the subsequent potential for additional demonstrations of the process.
It seems relevant to provide a brief rundown of the company’s activities, since a recent article by an energy stocks analyst gave the false impression that these are limited to oil field servicing. Sales of pilot and demonstration equipment began in June of 2010. The company’s commercial sales, including sales by its licensees, began in 2014.
In January 2014, OOIL signed an agreement with Orca Vision Inc. a new East Asian urban farming venture. Orca Vision also purchased three demonstration systems.
The first commercial sale by an OEM licensee occurred in September 2014. Industrial Systems, inc. (IS) sold four industrial systems powered by OOIL’s EWS to Synergy Resources for produced water and oily waste treatment in Trinidad in Tabago (T&T). OOIL is receiving a royalty as well as fabricating core components for sale to the licensee.
In October of 2014, Gulf Energy SAOC of Oman agreed to purchase a CLEAN-FRAC (now OriginClear Petro) 5000 system.
OOIL is in a joint venture with Ennesys focusing on algae production to meet the European Union’s environmental regulations. In mid-2013, a prototype EWS Waste unit was installed at the Ennesys demonstration site.
In December 2014, OOIL announced that it will launch a subsidiary in Hong Kong and grant it a master license for the People’s Republic of China. The subsidiary is expected to license regional joint ventures for frack and waste water treatment.
On January 27, 2015, OOIL announced a collaboration with the Idaho National Laboratory (INL) of the U.S. Department of Energy. OOIL and INL have submitted a proposal in response to a Funding Opportunity Announcement (FOA) titled Targeted Algal Biofuels and Bioproducts (TABB). The TABB FOA seeks alternatives to overcome barriers to commercializing algal biofuels.
This is not a complete list. For detailed information please see the 10-K. [ref name=”Origin Oil’s 10-K”]Origin Oil Inc. 10-K, EdgarOnline. Available: http://b2i.api.edgar-online.com/EFX_dll/EdgarPro.dll?FetchFilingConvPDF1?SessionID=knyp6jvp9Iaoo-9&ID=10600790[/ref]
I own this stock.