BIG Picture

Hammer Time?
I've been a proponent of Wavefront's (WEE.V)
Powerwave process for some time. It's been a
wild ride for Wavefront shareholders but there
was some major news released yesterday
that points to why I've been such a supporter
of this company (full disclosure, WEE.V is my
largest personal shareholding and I purchased
more shares yesterday morning).
While I'm a big believer in technical analysis,
Wavefront has been a situation where technology
trumped the share price and I've
been taking a longer term view. However,
yesterday gave us the best of both worlds,
additional verification of the Powerwave
process and a nice hammer candlestick pattern*.
I’ve been researching EOR related opportunities
for several months and the one thing that
strikes me is the defeatist attitude of some of
the Canadian commentators and researchers
in the field. The litany of negatives usually
boils down to the following:
1. An absence of incentives for the oil industry
to capture and transport CO2 to eligible
reservoirs. Denbury Resources makes
a good living transporting CO2 from a
natural source reservoir to old fields in Mississippi
and they are now tying up industrial
CO2 sources.
2. The patchwork nature of land ownership
and difficulties in forming units because a
producer that injects something into a
reservoir may create a benefit for adjacent
producers. Powerwave can be deployed
on a single 40 acre pattern for
$3000/month.
Here is a great case study as to the value of
Wavefront's technology:
• On June 26, 2007 Wavefront Energy and
Environmental Services announced that
Encana would be installing 3 Powerwave
tools in one of their Alberta oilfields that was
under active waterflood.
• On October 7, 2007 Wavefront announced
that the tools were installed.
• On January 15, 2008 Wavefront announced
that Encana was seeing a direct pressure
response in the reservoir, often with increases
in fluid production rates, increased
casing head pressures or fluid levels in wells,
and in a number of cases increased oil cuts
and/or oil production rate.
• Yesterday, Wavefront announced that oil
production from the three patterns increased
by 57 barrels of oil per day (bopd)
(11 cubic metres per day) from 132 bopd
(21 cubic metres per day) to 189 bopd (31
cubic metres per day). The increased oil
recovery is apportioned to 15 producing
wells in three production patterns where the
technology is actively deployed and further
upside potential may be realized by increasing
gross fluid production.
Wavefront leases the Powerwave process for
$3000/month per installed tool so Encana's
costs to produce an extra ~1700 barrels of oil
per month is $9000. Would you spend $9000
to make an extra ~1700 barrels (a greater
than 40% increase) of oil per month?
Let's take this a step further, if you were a
shareholder in a company with an active waterflood
project, would you not be demanding
that they evaluate using the Powerwave
THE BIG PICTURE SPECULATOR VOLUME VI ISSUE II MAY 21, 2008 PAGE 2
process? Big picture thinkers will be looking at
the impact implementing Powerwave will
have on the reserve evaluation reports of old
properties.
At Wavefront's last AGM they presented a
"hypothetical opportunity"
An oilfield with 3000 injection sites at a 40%
penetration rate = 1200 Powerwave systems
• Revenue potential of $3.6 million/month, or
$43.2 million/annum
• Gross profit potential of $3.2 million/month,
or $38.9 million/annum
• Payback on tool capitalization within 2 to 6
months
The pool that the Powerwave Dragonfly tools
were deployed has 200 injectors. More importantly,
there are 167,000 water injection wells
in the United States. If Wavefront can convert
their "hypothetical opportunity" which is
backed by solid verifiable field data, they will
soon be a billion dollar company.
*The Hammer is a bullish reversal pattern that
f o rms a f t e r a d e c l i n e . Ch e c k o u t
Stockcharts.com for more information.
We would also like to point out that Greentree
Gas and Oil (GGO.V) has been applying
Powerwave to the Rodney South field in
Southern Ontario and results from that installation
are pending (I am a shareholder and
investor relations consultant to GGO.V).
TV Interview
An enhanced oil recovery feature by Energy
TV’s Shayna Nackoney is set to air Saturday at
11am on Global TV across the country.
Disclosure