Trading activity in Wavefront Technology Solutions, Inc. (TSX: WEE.V) has picked up substantially on Thursday as the company, which provides fluid injection technology for improved/enhanced oil recovery and groundwater restoration, announced a pair of contracts that could not only deliver impressive financial results but gain additional clients. While WEE.V later released a press release noting that one of those announcements had been made in error due to the fact it was the same contract announced back in July it still served to bring added attention to the company.
WEE.V announced that they have been awarded a 12-month contract from Petrobras to implement their Powerwave technology in the Riachuelo oil field in the State of Sergipe, Brazil. According to the press release the contract is worth approximately $1.25 million but just as important, it aligns WEE.V with the 8th largest publicly traded company in the world; and the world’s 5th largest integrated oil company.
The contract increases WEE.V’s presence in Latin America as well, adding to their contracts with Pluspetrol and Pan American Energy in Argentina; Equion Energy in Colombia; and, Weatherford de Mexico (for Pemex) in Mexico. In addition to these contracts WEE.V has also contracted with Petroleum Development Oman in Oman.
This announcement came after WEE.V inadvertently issued the press release originally distributed in July that stated “a repeat Powerwave client has identified and provided installation requirements for 28 new Powerwave-driven water injectors.” A confidentiality agreement prevented WEE.V from divulging the client’s name, terms and conditions, and field location. While not having details of the agreement may be frustrating for shareholders that frustration should be quelled by the fact that WEE.V is continuing to gain traction.
That traction could be advanced even further by the company’s recent partnership agreement with VeruTEK® Technologies Inc. (VTKT) in which WEE.V agreed to apply their chemical solutions and fluid delivery technology platforms to enhanced oil recovery (EUR) and well stimulation approaches for heavy oil as well as conventional and tight reserves.
What this does for WEE.V is open the door to even more clients as the terms of the agreement allow tehn to identify and engage prospects in a joint VeruTEK/Wavefront solution for enhanced oil recovery, well stimulation, and environmental applications. WEE.V could also gain further exposure for their technology as VeruTEK may introduce Powerwave™ and Primawave™ as highly differentiated alternatives for injection and will provide assistance to Wavefront to secure clients who use VeruTEK products and services.
To understand what kind of potential WEE.V has its important to understand what their Powerwave technology does, which is improve a producer’s oil production rates, extends field life, and maximizes asset value. This isn’t a theory. On July 31, 2012 WEE.V announced “that an independent field performance review by Gaffney-Cline and Associates, a well respected international oil and gas consulting firm, has validated Powerwave results in certain Alberta and Saskatchewan projects.” Those results showed an average EUR improvement of 2.56% for those the projects.
Improving EUR can be a massive benefit to operators as it attracts investments and delivers better performance and profitability. To put this into numbers, WEE.V’s press release stated, “A BP report noted that a 1% improvement on its original hydrocarbons equates to 2 billion barrels of additional reserves. Worldwide, a 5% increase in oil recovery would yield an additional 300-600 billion barrels.”
The fact that WEE.V’s Powerwave has been shown to increase EUR shouldn’t go unnoticed by these oil companies. As pointed out by WEE.V President and CEO Brett Davidson, “With reference to the BP report the 2.56% average EUR increase would equate to a more than 4 billion barrel improvement on BP’s original hydrocarbons. Wavefront has long maintained that Powerwave will positively affect the reservoir’s natural production decline rate, extend field life, and maximize ultimate oil recovery.”
If WEE.V can deliver positive results from their contract with Petrobras the door could be wide open for further growth. They are expected to commence installation of the Powerwave technology in the fall of 2012; investors should keep a close on the results.