New write up from Dave Pescod out.
AN INTERVIEW WITH BRETT DAVIDSON,
PRESIDENT, CEO AND DIRECTOR
WAVEFRONT ENERGY
(As of April 6, 2009)
We are here with Brett Davidson and now that oil looks like
it is on a bit of an upswing, there is interest again in the oil
patch. Of course, for someone coming up with new tech-
nology that could make the energy business more efficient,
everyone is looking for the next new toy. Or are they…
David Pescod: Brett, how does this technology, Power-
wave work?
Brett Davidson: Powerwave is an injection technology
where we are optimizing the manner in which an oil com-
pany would be injecting water or CO2 into a reservoir for
oil recovery. In the same way a heart expands and con-
tracts to circulate blood, Powerwave sends bursts of fluid
to push oil towards production wells.
D.P: I understand it’s not just for the oil and gas patch, but
for environmental problems as well.
B.D: Similar to the oil industry, the environmental sector is
plagued with injection problems where they are trying to
inject many sorts of fluid to contact and remediate ground-
water contaminants. Unfortunately, nature provides a
situation where the path of least resistance dominates flow
and what Powerwave’s equivalent in the environmental
sector, Primawave, does is allow the injected fluid to move
out of nature’s path of least resistance, gaining better dis-
tribution and therefore contacting more of the contaminate
to expedite site clean-up.
D.P: What kind of contaminates are you trying to get out of
there?
B.D: Generally speaking, contaminates can range between
fluids like diesel fuels at refineries, right through to tri-
chloroethylene that was typically used at dry cleaners or
even at places such as NASA for cleaning soot off of
launch pads after the launching of Apollo missions. So,
you have a wide range of industrial contaminates and a lot
of that business tends to be in the United States.
D.P: Now back to the oil patch. This is a relatively new
company and you’ve only been at it a little more than a
year. So first of all, how does the economics on the Pow-
erwave work and secondly, how many units do you have
out and committed?
B.D: The economics are based on the end user paying
$3000 per month to license our technology. If you look at
even $35 barrel oil, it only takes approximately 2.91 bar-
rels a day per standard injection pattern employing 1
Powerwave injector per 4 producing wells for the com-
pany using the technology to pay back or break even on
the use of our technology. That is only about 0.73 barrels
a day per producing well in a standard injection pattern
so the economics are very favorable. With our longest
running client in Alberta, their netback after about 16
months was in the order of $1.4 million. So it is very eco-
nomical to them to implement Powerwave. At this point,
we have 90 committed orders for units for the field and
88 projects pending. We can see that list growing as we
now garner further attraction from international clients as
far reaching as the Middle East, India, Indonesia, and
Australia – an extension for both sides of our technology
– the oilfield side and the environmental.
D.P: Now how long have you been working on this?
B.D: Overall, we have been working on the technology
for about 10 years when the company and the technology
were founded by two professors and myself. But from a
real full-scale commercial standpoint, we are really into
year two and a half.
D.P: So you would expect exponential growth or hoped
for it?
B.D: We would expect rapid uptake of our technology. If
one looks at our technology and compares it to the adap-
tation rate of other technology such as steam assisted
gravity drainage or coil tubing horizontal drilling, if I con-
centrate on coil tubing, it was first introduced in the
1960’s and it wasn’t until the late 1970’s/early 1980’s
where because of the forming process that the technol-
ogy started to get embraced. If I look at Canada for in-
stance, in 1988 there were about 100 coil tubing jobs per-
formed whereas in 1997, about 2000. So in that ten year
period, they went from 100 tools in 1988 to 2000 in 1997.
If you look at a Powerwave in the oil sector, in February
of 2008 we had orders for eight tools. In February of
2009 we had orders for 90 tools and 88 pending. The
growth has been quite rapid for us and that’s really
based upon the positive results that we garner.
D.P: Now the knock on the company is that we haven’t
seen that really big company come in with that really big
contract. Instead, we hear about a lot of small compa-
nies that are taking small positions and we haven’t heard
names of these companies yet.
B.D: The oil industry is very competitive and the users of
Powerwave prevent us from basically releasing the name
of their company and the location of where it’s used.
Now, if you do look back into some of our news releases,
there is one news release in general that said the com-
pany was going to start out by taking four tools, but if the
use of Powerwave deemed to show an improvement in
recovery, they have already indicated to Wavefront that
they would take 100. So even though we haven’t penned
that 100 order as yet, right now there are companies that
have already stated that they are going to take those
large quantities as things progress. We know most com-
panies have declining oil production; we know most
companies are looking for improved oil recovery; and we
also know that Powerwave works in the field, so if we can
put all those three things together as time goes on, we
will see these companies do exactly what they say and
take those 100 units.
D.P: You are hoping to see a scientific piece published
shortly?
B.D: In the next six months I believe, we are going to see
a scientific piece published by one of the end users who
is our longest running client, and who has had some sig-
nificant returns from using Powerwave (in excess of
14,000 barrels over a 16 month period). That number
may in fact be adjusted upwards to the benefit attributed
to Powerwave. They are just working on some additional
information right now, but if you look at the aggregate,
that company produced 14,000 additional barrels that it
would not have, if it wasn’t for Powerwave.
D.P: Given the market crash and everyone’s fear out
there, the first question many ask appropriately, I might
add, how much money do you have in the bank?
B.D: We have just over $17 million in the bank and we
have zero debt, so our balance sheet looks good.
D.P: Where is the break-even point?
B.D: Based on Powerwave licenses the break-even point
will be approximately 120 tools in the ground, which
equates to approximately $4 million a year. I would like
to emphasize that this break-even point does not include
additional revenue from environmental sales or sales
from our heavy oil pump division based in Lloydminster
which are both seeing growth in sales.
D.P: So you are almost there?
B.D: We are working on getting there…that is correct.
D.P: I guess the thing that has some people intrigued
was an article that was published in the Edmonton Jour-
nal, talking about the possibility of your company be-
coming a billion dollar company. Now that wasn’t actu-
ally a quote from you, was it?
B.D: That was not a quote from me. That was just some
numbers that were crunched by the reporter, looking at
the market space where in North America there are ap-
proximately 200,000 injection wells. If we look at Wave-
front’s ten-year stretch target, where it is 10% of the
200,000 wells and then look at what we charge for a
monthly license fee of our technology at $3000 a month –
that’s how that number was generated.
D.P: Needless to say in the market these days, people
are hoping for some big hits to make up for some terrible
times in the last few months. Is there something that you
could say to make a person greedy?
B.D: All I can say is that Wavefront is pursuing many
avenues of revenue growth in the oil and environmental
sectors. We have significant interest from international
companies from places like Egypt, Mexico, Indonesia,
Syria, Australia and the environmental sector – Australia,
the U.K., and again much more uptake in the United
States. So we are not just looking at the North American
markets for marketing Powerwave and Primawave, but
we have extended our tentacles to start pursuing aggres-
sively the International markets because of the opportu-
nity that exists in those oil fields and the opportunities
that exist in those countries where groundwater remedia-
tion is starting to be a larger and larger market.