Glori Energy Inc (NASDAQ:GLRI) has had a rough twelve months. It’s down more than 85% on its this-time-last-year price, and its CEO just stepped down. Voluntarily, sure, but a resignation nonetheless (and can we believe there’s nothing going on behind the scenes?) A management reshuffle might be just what the company needs, however. A host of ongoing projects are set to bear fruit over the coming twelve months, and with conditions in the current energy market as they are, Glori might be able to pull towards a rally.
The company is a Texas based energy tech outfit, which has developed a technology called AERO. It’s essentially a crossover between biotech and energy – something that has happened at the fringe of both sectors for the last three decades or so, but has repeatedly failed to gain any sort of breakthrough momentum. With energy prices low, however, and drillers suffering as a result of lost income on their comparable per barrel sales, technology that aids increased efficiency stands a better chance of gaining traction than it might have done in the past. Increased efficiency is what AERO is all about. It stimulates a reservoir’s native microorganisms to sustainably increase the amount of oil that a company can recover from its resource, which without this sort of technology, generally only amounts to one-third of the total discovery.
It’s literally a technology that allows oil companies to scrape the barrel on their reserves, and right now, that’s exactly what they need.
The man charged with grasping this opportunity is Kevin Guilbeau, who previously served as the Executive Chairman of the Board, and has now been appointed interim Chief Executive Officer and President of the Company. He’s got 35 years’ experience in the space, and is known for founding Gulf Coast Energy Resources and leading it to a merger with Talos Energy early last year.
Here’s what he said on his appointment:
I am pleased to step up my role in helping Glori Energy realize its potential. We have some exciting projects going forward, with Phase II AERO implementation at the Coke Field, our application to the Department of Energy’s Loan Programs Office and the planned acquisition and restart of abandoned oil fields we call Phoenix projects.
The loan program application he mentions is of particular note. The company just submitted the second phase of a loan application that could see them qualify for a loan of up to $150 million, which it would use to go after uncollected deposits in legacy oil fields. At present, its revenues primarily derive from third party oil companies. With the ability to capitalize its own project, the margin on its operations will improve dramatically.
That’s a big if, however, and there’s plenty of risk involved.
The company generates a net loss every quarter ($3.4 million, $27 million and $1.3 million for the three quarters to end Q1) and doesn’t look like it’s got the ability to turn this bottom line around, even with its Coke Field operation in full swing, any time soon. This, of course, means there’s potential for a capital raise. There haven’t been any obviously toxic raises recently, and this bodes well from a dilution perspective near term, but cash on hand sits at just $5 million (as of March 31, 2016) and a burn of $2 million a quarter means this won’t last long – to end Q1 2017 at a push.
The next major catalyst relates to the acceptance, or not, of its loan application. With $150 million in the bank, Glori could literally turn around over night. The CEOs departure showed us just how quick sentiment can impact this one’s valuation, so we are watching closely for any hint that the Department of Energy’s Loan Programs Office is preparing to give the funds a green light.
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Disclosure: We have no position in GLRI and have not been compensated for this article.