16 Sep 2011
Oxford Catalysts Group PLC, the leading technology innovator for synthetic oil production, is pleased to announce its interim results for the six months ended 30 June 2011.
Highlights
· Orders received for commercial scale FT units: one for SGCE and, post period end, two for a Fortune 500 company· GTL demonstration unit arrived in Brazil and is in pre-commission phase· Selected to participate in GTL engineering study to evaluate 5,000-15,000 bpd facility in North America· Successfully ramping up manufacturing capacity to produce significant numbers of FT units from 2012 onwards· Revenue of £2.9 million (H1 2010: £4.1 million) reflecting the continuing transition to commercial income· Raised £21.0m before expenses through an oversubscribed equity placing· Cash* at period end of £21.4 million (H1 2010: £8.8 million)Pierre Jungels, CBE, Chairman of Oxford Catalysts, said: "The Group has demonstrated commercial momentum in the first half of the year and the outlook is positive, especially in the GTL market. Our partners continue to invest in progressing the Group's products, and following the successful demonstration in Austria we're now looking forward to additional achievements in Brazil."
"The Board is excited about the prospects of the Group and looks to the future with confidence."
* Defined as cash, cash equivalents, short term investments and other financial assets
For further information, please contact:
Oxford Catalysts
Roy Lipski, CEOSusan Robertson, CFO+44 20 7831 3133+1 614 733 3300Cenkos Securities (Nomad and Broker)
Ken Fleming / Beth McKiernan+44 20 7397 8900+44 131 220 9778Financial Dynamics
Billy Clegg / Alex Beagley+44 20 7831 3113Notes to Editors
Oxford Catalysts designs and develops technology for the production of synthetic oil from both conventional and renewable sources such as bio-waste. The Group is focused on the emerging market for distributed smaller scale production of synthetic oil via Fischer-Tropsch ("FT") synthesis − a market that has the potential of producing as much as 25 million barrels of fuel a day.
The FT reaction is used when converting natural gas, coal or bio-mass into clean high-performance synthetic oil, processes known as GTL, CTL and BTL respectively. The Group is the recognised world leader in the design and development of high-activity catalysts and associated novel chemical reactors for the smaller scale production of synthetic oil. (The Group's reactor technology − known as microchannel process technology − is marketed under the brand name of Velocys).
Oxford Catalysts Group PLC is listed on the AIM market of the London Stock Exchange (LSE: OCG). The Group has some 80 employees with facilities near Oxford, UK and Columbus, Ohio, USA.
CHAIRMAN'S STATEMENT
Pierre Jungels, CBEThe first half of 2011 has seen further progress for the Group as we continue our transformation from a development organisation to a commercial product company. Market conditions for the Group's smaller scale synthetic fuels technology are strong and we are experiencing high levels of interest in our products.
The Group's existing commercial relationships remain positive; at the same time we are actively exploring additional opportunities with a number of major corporations.
Our partner, SGC Energia, SGPS, S.A. ("SGCE") has successfully completed the testing of our FT pilot in Güssing, Austria. During the first half, SGCE also ordered its second commercial Fischer-Tropsch ("FT") unit and plans to have its two units operational in 2012.
Post period end, the Group also received an order for two commercial size FT units from a Fortune 500 company that forms the first instalment of reactors towards a commercial synthetic fuels plant expected to start operations in 2012. The two reactors ordered will be delivered in the fourth quarter of 2011.
In June, the Group was selected to participate in a Gas-to-Liquids ("GTL") engineering study on behalf of a $multi-billion Exploration & Production company. The study is evaluating a 5,000-15,000 bpd GTL facility in North America designed to convert shale gas into finished synthetic fuels.
The Group's cash position was strengthened after completion of an oversubscribed placing that raised £21.0 million before expenses in March 2011. This strong backing provides further validation of the Group's business model, its technical and commercial progress, and the significant market opportunity. The placing was backed by existing shareholders and a number of new blue chip institutions. I would like to thank our old and new shareholders for their support.
Group revenues for the first half were £2.9 million (2010 H1: £4.1 million) reflecting the shift from development funding to commercial income streams. Cash* at period end stood at £21.4 million (2010 H1: £8.8 million), while cash* outflow was £4.3 million, excluding the impact of the fund raising (2010 H1: £3.2 million).
The Group continues to receive awards and recognition from industry, as highlighted during the period by its winning two Rushlight Awards. These awards are well regarded and are a testament to the significant progress the Group continues to make. I would like to thank the team for their hard work and determination this year.
Finally, it is with great regret that we recently announced the passing away of Jeremy Scudamore, Non-executive Director and Chairman of the Audit Committee. Since joining the Board in March 2007, Jeremy has added significant value to the Group having performed his role with great endeavor and integrity, and with the benefit of huge experience. Jeremy will be missed by the Oxford Catalysts team. Our deepest sympathies go out to his family.
Outlook
The first half of 2011 has been highly productive and the remainder of the year looks just as exciting with the Group's GTL plant in Fortaleza, Brazil, now due to start up in the fourth quarter of the year.
We will continue to focus on our existing relationships while strengthening our customer base where appropriate. We are working closely with our manufacturing partners and suppliers, and are confident that we will be able to supply large numbers of FT units starting next year. The Board looks to the future with confidence.
Chief Executive's REPORT
Roy LipskiIntroduction
The Group made considerable progress during the first half of 2011 on its key priority of readiness for commercial roll out.
Market Conditions
The market environment for the Group's smaller scale synthetic fuels technology continues to be extremely favourable. We are enjoying high levels of interest and inquiries, which we're pursuing in a focused and selective manner.
Commercialisation
Demonstration
During the first half of the year SGCE successfully completed the demonstration of a 25 gallon / day FT reactor and catalyst of ours in Güssing, Austria.
The Group's GTL demonstration plant, incorporating its proprietary Steam Methane Reforming ("SMR") and FT technologies, arrived at its final destination of Fortaleza, Brazil in April. With the support of Toyo Engineering Corporation, MODEC, Inc. and Petrobras, the demonstration is currently in pre-commissioning. Petrobras operators are due to attend training at the Group's US facilities in September, prior to the plant's current scheduled start up date of the fourth quarter of the year. Following start up, the demonstration is expected to operate for approximately nine months.
Manufacturing
The Group made significant progress during the first half of the year with manufacturing of its FT reactors and catalyst. It is currently successfully completing the manufacture of its third full scale commercial FT reactor. Working closely with manufacturing partners and suppliers, the Group expects to accelerate manufacturing readiness and significantly increase output capacity for 2012. At the same time, the Group anticipates achieving significant manufacturing cost savings for larger orders as soon as 2012.
Sales and Prospects
During the first half of the year, the Group received an order from SGCE for its second commercial FT unit. SCGE plans to ultimately deploy the two FT units in a Biomass-to-Liquids facility, with initial operation of the units expected in the first half of 2012.
In July, the Group announced the receipt of an order for a further two commercial size FT units from a Fortune 500 company committed to distributed production of synthetic fuels. This order is expected to be followed by an order for additional reactors that together will comprise the FT section of the company's first commercial synthetic fuels plant, scheduled to start operations at a US site in 2012. This customer intends to roll out additional plants following successful completion and operation of this first commercial facility.
In May, the Group announced that it had an opportunity to bid for the supply of FT technology for a large synthetic fuels facility that SGCE was planning. SGCE currently expects to select technology for the project at the end of the year.
In June, the Group announced that it is being paid to participate in a first stage engineering study (known as an FEL1) for a GTL facility of up to 15,000 bpd in North America designed to convert shale gas into finished synthetic fuels. The study is being conducted by a major engineering firm on behalf of a $multi-billion Exploration & Production company. It is expected to be complete by the end of 2011, at which point a decision will be made whether to proceed with more detailed engineering (FEL2).
Industry Recognition
In the first half of 2011, the Group won both the Rushlight Fossil Fuels Award and the overall Rushlight award in the Energy Environmental Category. The Rushlight awards are presented to the leading energy, resource and environmental technologies and innovations from organisations throughout the UK and Ireland. The Fossil Fuels award is bestowed on the technological advancement or innovation that has made the most significant contribution to the reduction in the environmental impact of fossil fuel usage.
These two awards add to the growing collection of high profile industry recognition that the Group has been receiving since 2009.
Intellectual Property
The Group's current intellectual property portfolio includes over 750 active patent cases and an even larger number of invention records. During the period, the Group filed 3 new patent applications, while 27 existing applications were granted in jurisdictions including the US, Brazil, Canada, China, India, Japan, Norway, South Korea, and various European countries.
Resources
During the first half of 2011, the Group began recruitment of additional staff to support its growing commercial operations. It has already made a number of key appointments, including Paul Schubert in the role of Group Chief Operating Officer. Paul has 28 years of experience in the petrochemical, natural gas and synthetic fuels industries. He's held various technical and general management roles with SGS Group, Syntroleum Corporation, Catalytica, Phillips Petroleum and Engelhard Corporation. In these positions he was responsible for day-to-day operations, process development and commercialisation, plant design, and asset integrity management.
Successful Equity Placing
In March 2011, the Group successfully raised £21.0 million before expenses, at the same time enhancing its already solid shareholder base with the addition of seven new blue chip institutional investors. These proceeds are now being used to accelerate the Group's transition to a commercial product company, including the hiring of additional staff for commercial operations, extending manufacturing and supply chain capacity and readiness, and upgrading its technology infrastructure to better support commercial interactions. The new funds also bolster the Group's balance sheet giving it added credibility and strengthening its negotiating position with prospective partners.
Financial Review
Revenues during the period were £2.9 million (H1 2010: £4.1 million), reflecting the continuation of a shift from development funding to commercial income streams. Revenues were also impacted by a decision to continue the slow down of activities on a government funded programme in order to concentrate on fulfilment of orders for FT units and ramping up manufacturing capacity. The funding for this programme remains available and is expected to be received in full by the end of 2012.
Losses for the period were £3.8 million (H1 2010: £3.2 million). Cash* outflow, excluding the impact of the fund raising, in the first half was £4.3 million (H1 2010: £3.2 million).
At period end, the Group had £21.4 million of cash* (H1 2010: £8.8 million). Management is closely overseeing the Group's drive for early sales and speed to market, to ensure continued responsible stewardship of the Group's financial resources.
* Defined as cash, cash equivalents, short term investments and other financial assets.
