Thursday, September 01, 2022

Permex Petroleum (OILCF)
Well Completions Demonstrate Two-Pronged Approach to Growth

Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

 Permex announced positive results for five well recompletions of previously shut-in wells. The wells came on line at an initial rate of 50 BOE/d and stabilized at 35 BOE/d. By comparison, the company just reported production of 8,946 BOE for the fiscal nine months ended June 30, 2022 which equates to 32.8 BBL/d. Production from these five well essentially doubles production to a reported level of 71 BOE/d. Assuming net revenues double to a level near $300,000/qtr. and G&A returns to a historical level of $250,000/qtr. (last quarter was $1 million due to one-time legal, accounting, and marketing costs) then the company should be close to cash flow neutral.

Well recompletion and stimulation provide a good balance to in-fill drilling. While we are clearly focused on new drilling in the Breedlove Field in Martin County, it is worth remembering that Permex has ample opportunity to perform lower cost, lower risk, well completions and stimulation. The company has an additional 62 shut-in oil, gas, and salt water disposal wells in each of its properties remaining to be brought online. Recompletions have a high return on investment and should help fund in-fill drilling. As a reminder, we expect the company to drill one vertical and one horizontal well before yearend. The company reported $5.4 million in cash as of June 30, 2022, which should fund one if not both of the wells….

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Image Credit: Rebecca Miller (MIT)

A New Concept for Low-Cost Batteries

David L. Chandler | MIT News Office

As the world builds out ever larger installations of wind and solar power systems, the need is growing fast for economical, large-scale backup systems to provide power when the sun is down and the air is calm. Today’s lithium-ion batteries are still too expensive for most such applications, and other options such as pumped hydro require specific topography that’s not always available.

Now, researchers at MIT and elsewhere have developed a new kind of battery, made entirely from abundant and inexpensive materials, that could help to fill that gap.

The new battery architecture, which uses aluminum and sulfur as its two electrode materials, with a molten salt electrolyte in between, is described today in the journal Nature, in a paper by MIT Professor Donald Sadoway, along with 15 others at MIT and in China, Canada, Kentucky, and Tennessee.

“I wanted to invent something that was better, much better, than lithium-ion batteries for small-scale stationary storage, and ultimately for automotive [uses],” explains Sadoway, who is the John F. Elliott Professor Emeritus of Materials Chemistry.

In addition to being expensive, lithium-ion batteries contain a flammable electrolyte, making them less than ideal for transportation. So, Sadoway started studying the periodic table, looking for cheap, Earth-abundant metals that might be able to substitute for lithium. The commercially dominant metal, iron, doesn’t have the right electrochemical properties for an efficient battery, he says. But the second-most-abundant metal in the marketplace — and actually the most abundant metal on Earth — is aluminum. “So, I said, well, let’s just make that a bookend. It’s gonna be aluminum,” he says.

Then came deciding what to pair the aluminum with for the other electrode, and what kind of electrolyte to put in between to carry ions back and forth during charging and discharging. The cheapest of all the non-metals is sulfur, so that became the second electrode material. As for the electrolyte, “we were not going to use the volatile, flammable organic liquids” that have sometimes led to dangerous fires in cars and other applications of lithium-ion batteries, Sadoway says. They tried some polymers but ended up looking at a variety of molten salts that have relatively low melting points — close to the boiling point of water, as opposed to nearly 1,000 degrees Fahrenheit for many salts. “Once you get down to near body temperature, it becomes practical” to make batteries that don’t require special insulation and anticorrosion measures, he says.

The three ingredients they ended up with are cheap and readily available — aluminum, no different from the foil at the supermarket; sulfur, which is often a waste product from processes such as petroleum refining; and widely available salts. “The ingredients are cheap, and the thing is safe — it cannot burn,” Sadoway says.

In their experiments, the team
showed that the battery cells could endure hundreds of cycles at exceptionally
high charging rates, with a projected cost per cell of about one-sixth that of
comparable lithium-ion cells. They showed that the charging rate was highly dependent on the working temperature, with 110 degrees Celsius (230 degrees Fahrenheit) showing 25 times faster rates than 25 C (77 F).

Surprisingly, the molten salt the team chose as an electrolyte simply because of its low melting point turned out to have a fortuitous advantage. One of the biggest problems in battery reliability is the formation of dendrites, which are narrow spikes of metal that build up on one electrode and eventually grow across to contact the other electrode, causing a short-circuit and hampering efficiency. But this particular salt, it happens, is very good at preventing that malfunction.

The chloro-aluminate salt they chose “essentially retired these runaway dendrites, while also allowing for very rapid charging,” Sadoway says. “We did experiments at very high charging rates, charging in less than a minute, and we never lost cells due to dendrite shorting.”

“It’s funny,” he says, because the whole focus was on finding a salt with the lowest melting point, but the catenated chloro-aluminates they ended up with turned out to be resistant to the shorting problem. “If we had started off with trying to prevent dendritic shorting, I’m not sure I would’ve known how to pursue that,” Sadoway says. “I guess it was serendipity for us.”

What’s more, the battery requires no external heat source to maintain its operating temperature. The heat is naturally produced electrochemically by the charging and discharging of the battery. “As you charge, you generate heat, and that keeps the salt from freezing. And then, when you discharge, it also generates heat,” Sadoway says. In a typical installation used for load-leveling at a solar generation facility, for example, “you’d store electricity when the sun is shining, and then you’d draw electricity after dark, and you’d do this every day. And that charge-idle-discharge-idle is enough to generate enough heat to keep the thing at temperature.”

This new battery formulation, he says, would be ideal for installations of about the size needed to power a single home or small to medium business, producing on the order of a few tens of kilowatt-hours of storage capacity.

For larger installations, up to utility scale of tens to hundreds of megawatt hours, other technologies might be more effective, including the liquid metal batteries Sadoway and his students developed several years ago and which formed the basis for a spinoff company called Ambri, which hopes to deliver its first products within the next year. For that invention, Sadoway was recently awarded this year’s European Inventor Award.

The smaller scale of the aluminum-sulfur batteries would also make them practical for uses such as electric vehicle charging stations, Sadoway says. He points out that when electric vehicles become common enough on the roads that several cars want to charge up at once, as happens today with gasoline fuel pumps, “if you try to do that with batteries and you want rapid charging, the amperages are just so high that we don’t have that amount of amperage in the line that feeds the facility.” So having a battery system such as this to store power and then release it quickly when needed could eliminate the need for installing expensive new power lines to serve these chargers.

The new technology is already the basis for a new spinoff company called Avanti, which has licensed the patents to the system, co-founded by Sadoway and Luis Ortiz ’96 ScD ’00, who was also a co-founder of Ambri. “The first order of business for the company is to demonstrate that it works at scale,” Sadoway says, and then subject it to a series of stress tests, including running through hundreds of charging cycles.

Would a battery based on sulfur run the risk of producing the foul odors associated with some forms of sulfur? Not a chance, Sadoway says. “The rotten-egg smell is in the gas, hydrogen sulfide. This is elemental sulfur, and it’s going to be enclosed inside the cells.” If you were to try to open up a lithium-ion cell in your kitchen, he says (and please don’t try this at home!), “the moisture in the air would react and you’d start generating all sorts of foul gases as well. These are legitimate questions, but the battery is sealed, it’s not an open vessel. So I wouldn’t be concerned about that.”

The research team included members from Peking University, Yunnan University and the Wuhan University of Technology, in China; the University of Louisville, in Kentucky; the University of Waterloo, in Canada; Oak Ridge National Laboratory, in Tennessee; and MIT. The work was supported by the MIT Energy Initiative, the MIT Deshpande Center for Technological Innovation, and ENN Group.

Reprinted with permission from MIT News ( http://news.mit.edu/)

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Wednesday, August 31, 2022

Permex Petroleum (OILCF)
Permex reports fiscal third quarter results

Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Permex reported results for the quarter ended June 30, 2022. Given limited sales at this point in the company’s development, results are largely a function of operating costs. The company reported a large jump in auditing, legal, and marketing fees as the company prepares to begin drilling on the recently-acquired Breedlove field properties. Total operating expenses were $1,278,251 for the quarter versus $177,861 for the same period last year. Net income was ($761,303) or ($0.00) per share versus ($103,541) or ($0.00) per share. We had been looking for net income of ($191,000) or ($0.00) per share.

The shares of Permex trade on company developments not financial results. We believe the company has tremendous upside as it drills out its property. Consequently, the stock price rightfully trades on operational developments instead of financial results. Along those lines, the company reported back on August 16th that it had received approval on its permit application for drilling on the Breedlove field in Martin County. We expect the company to drill one vertical and one horizontal well in Martin County before the end of the year….

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Energy Sector’s Relative Strength Against The Market Is Looking Very Attractive

The University of Texas at Austin (UT), just a couple of hours up the road from our headquarters in San Antonio, may soon unseat Harvard as the wealthiest school in the U.S. How has it managed to do this? In a word: Oil.

At a time when large sovereign wealth funds are divesting from fossil fuels, and ESG (environmental, social and corporate goverance) investing has gone mainstream, the UT System has been the longtime owner and manager of 2.1 million acres of mineral-rich land, scattered across West Texas, that it leases out to as many as 250 producers, including ConocoPhillips.

Thanks to higher oil prices, the mineral rights to the land generate roughly $6 million every day, according to Bloomberg.

The UT System’s decision to continue participating in oil is in keeping with Texas’s close ties to the fossil fuels industry. The state produces more oil and gas (and wind power) than any other, a fact that policymakers are eager to protect. Last week, Texas moved to restrict state pension funds from investing in BlackRock, UBS Group, Credit Suisse and a number of other financial institutions that have been found to be “hostile” toward the energy sector.

But it’s more than just tradition. UT’s oil investments have been incredibly profitable and, by most accounts, will continue to be so as long as the energy crisis deepens and inflationary pressures keep prices elevated. The S&P 500 Energy Index is by far the top performing sector for the year, up nearly 50%, compared to the broader market, which is off by 12%.

A New Cycle Of Outperformance?

Looking ahead, energy stocks appear to be setting up for a new cycle of outperformance relative to the market. Take a look at the chart below, which shows the long-term ratio between the energy index and S&P 500. Technically, this may be the most attractive time to invest in energy since at least the beginning of the century.

Warren Buffett seems to agree. His company, Berkshire Hathaway, recently received regulatory approval to buy up to half of Houston-based Occidental Petroleum (OXY).

The disruptions of the past two years are believed to have triggered a readjustment in the energy market. In a just-released
report, Deloitte projects that oil and gas producers could report the highest-ever free cash flow (FCF), as much as $1.4 trillion, in 2022. The industry could also become debt-free by 2024.

Although oil prices in 2022 have been equivalent to those in 2013 and 2014, cash flows are currently three times higher thanks to capital expenditure discipline after years of underinvestment, Deloitte analysts say. U.S. shale producers, which generated negative cash flows in nine out of the last 10 years, are expected to report record FCF of $600 billion.

This comes as the U.S. is set to export a record amount of crude oil this year and next as the country captures market share away from Russia. Since Congress lifted the 40-year-old oil export ban in 2015, weekly exports have steadily risen above 4 million barrels a day, but earlier this month, exports exceeded 5 million barrels for the first time. According to Bloomberg, U.S. suppliers will likely be able to hold on to the increased market share since producers in other regions, including those in the North Sea and West Africa, have not been growing output as rapidly as American companies have.

California Bans Gas-Powered Vehicles By 2035. Will The
Infrastructure Be Ready By Then?

The backdrop to all of this, of course, is the expansion of ESG-minded investing and global financing of alternative fuels and renewable energy sources. Last week, California became the first state to approve a ban on the sale of new gas-powered vehicles by 2035 in favor of electric vehicles (EVs). This is a huge opportunity, as investment in the state’s notoriously spotty power grid will need to increase significantly.

New, more reliable EV charging stations will also need to be installed. Earlier this month, J.D. Power announced that Americans’ satisfaction in charging infrastructure is declining due to a growing number of “
inadequate”
and “non-functioning stations.” 

“This lack of progress points to the need for improvement as EVs gain wider consumer acceptance because the shortage of public charging availability is the number one reason vehicle shoppers reject EVs,” the report reads.

Airlines And Shipping Companies Seeking Alternative Fuels

The airlines and container shipping industries are also seeking ways to achieve net-zero carbon emissions by 2050. One method being used by airlines is sustainable aviation fuel (SAF), which reportedly reduces CO2 emissions by as much as 80%. The liquid fuel is normally produced from a number of sources, including waste oil and fats, municipal waste and non-food crops.

SAF is currently much more expensive to make than traditional jet fuel, but several companies and groups are leading the effort to scale up the technology. Boeing is establishing a facility in Japan to begin researching and developing SAF, while World Energy, a Boston-based low-carbon solutions provider, is planning to convert a refinery in Houston to an SAF plant. Earlier this month, Alaska Airlines announced it had finalized an agreement to buy 185 million gallons of SAF from biofuel company Gevo over five years starting in 2026. Alaska also has announced a collaboration between Microsoft and start-up firm Twelve to advance production of E-Jet, an even more sustainable fuel that’s made from carbon dioxide.

As for shipping, wind propulsion is being touted as the “most impactful emissions reduction technology.” Today, 21 large ocean-going vessels already have wind-assist systems installed, according to the International Windship Association (IWSA), and by the end of 2023, this number could jump to nearly 50. Some of the biggest names in maritime shipping are involved in investing millions of dollars into wind
propulsion technology, including Cargill, Maersk and Mitsui. The IWSA calls the 2020s the “Decade of Wind Propulsion.”

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Energy
Sector’s Relative Strength Against The Market Is Looking Very Attractive

US
Global Investors Disclaimer

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (06/30/22): ConocoPhillips, Occidental Petroleum Corp., The Boeing Group Co., Alaska Air Group Inc., AP Moller-Maersk A/S, Mitsui OSK Lines Ltd.

The S&P 500 Energy Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

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