Quadrise Fuels International Plc AIM:QFI the London-headquartered synthetic emulsion fuels developer, has published its final results to the end of June 2023 today (2nd October)
Despite the global push to decarbonise the transportation system, Quadrise was still in loss-making territory, reporting a GBP3.1m loss, which was up 19.2% from the same period in 2022.
The company said that widening losses was a result of a 13.3% rise in production and development costs to GBP1.7m, and GBP1.3m of administration and corporate expenses (which were down 7.1% y-o-y).
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Jason Miles, Quadrise’s CEO, whilst admitting that the opportunity for growth has become a great deal better as a result of the global push to transition from oil and gas, also claimed that it had become a great deal more expensive to operate in the sector, saying in a statement to the market this morning: “The decarbonisation of the energy sector continues to advance during a period of escalating energy costs, increasing legislation and pressure to reduce emissions and control global warming.”
Quadrise Fuels cash down despite placement
The company’s total assets at the end of June were GBP5m, down from GBP8m, this time last year and cash had significantly eroded from GBP4.4m by 70.5% to GBP1.3m, despite raising nearly GBP2m in a placement in July, where the company issued 67,573,855 shares at 1.25p.
All-in-all Quadrise has made GBP62.1m cumulative tax losses, up from GBP60m in 2020. However, the company said that this can potentially be offset against any future profits.
Quadrise opened trading at 0.845p today and had fallen to 0.778p within the first hour of trading. Quadrise has offered a -52.5% year-to-date return with a -27.1% one-year return. Shares have ranged between 0.7p and 2.8p over a 52-week period. The company has a market capitalisation of GBP13.4m.This cannot be spun any other way than being a disappointing set of results. Quadrise has had a turbulent year, and as reported the company started the year with hope, that it would move key projects in Morocco and Utah, US forward and be moving to a position 0f break-even, or even profitability by the end of the year.
By March, the veneer of positivity had still not worn off, and the company was still expecting to make commercial revenues by the year’s end.
Milles said at the time: “Quadrise remains well-positioned to deliver commercial success on a number of fronts and to play a key role in decarbonising the shipping, power and industrial sectors.”
Spanner in the works in Morocco
However, by May, as reported, a spanner had fallen into the works in Morocco, as despite starting the testing of its proprietary synthetic transportation fuels, MSAR and bioMSAR (biomass multiphase superfine atomised residue), the trial was cancelled as a result of a mechanical failure, and the synthetic fuel company had to delay whilst it tried to fix its machinery. The company, as reported, said that it was going to need more money during the year.
By August, Quadrise was ready to start its trial in Morocco again, but then the machines broke down once more due to a similar mechanical failure. Miles said: “The design issues experienced with the pumps to date were not foreseeable and are very frustrating for all concerned. We remain highly confident that once the trial resumes following the installation of an alternative pump, we will be able to demonstrate the benefits of MSAR and bioMSAR in the commercial trial for our supportive client.”
Unsympathetic regulator in Utah
With Morocco dead in the water for the foreseeable future, with an October date pencilled-in to recommence the trial run of the fuel solutions, attention turned to Quadrise’s other projects. However, things weren’t much better in Utah. In August, Quadrise received a knock-back from the State of Utah’s Board of Oil, Gas and Mining, which turned down a large-scale unitisation plan put forward by partner Valkor Technologies for the Asphalt Ridge oil sands project. Valkor and project sponsors Heavy Sweet Oil and AC Oil planned to drill 119 wells at Asphalt Ridge to produce heavy oil.
The regulator, however, denied the order on the basis that without a producing well in place, there was not yet sufficient evidence of an oil deposit to support the unitisation plan at this time. The State Board did greenlight the proposal to drill four test wells.
Subsequently, at the end of August, Quadrise and Valkor decided to press on regardless, with Miles saying: “Our pilot development project is unaffected, and our plan is to proceed with the drilling programme under the current board approvals.”
Tom Fraine, an industrial analyst for Shore Capital, which has Quadrise under coverage said: “Quadrise shares are close to an all-time low, despite assurances that a ruling in Utah would not materially impact the development plan with Valkor and the trial in Morocco being only slightly delayed due to a requirement for a newly designed pump.”
Valkor expects to conclude project financing for Utah in 4Q23. Assuming a minimum of USD15m is raised, Valkor will pay Quadrise USD1m plus a further USD0.5m, upon the delivery of an MSAR manufacturing unit.
Quadrise progress slower than expected
Miles said: “Whilst progress across each of the company’s key projects during the period has been at a slower pace than we had initially envisaged, important milestones for each are now nearing. Agreements covering our commercial vessel trial with MSC and other stakeholders are expected to be signed in 4Q23, with the trial itself planned to commence in 1Q24.”
The deal with MSC (Mediterranean Shipping Company), the world’s largest container shipping company contract, as reported, should it come off will be a game-changer for the AIM-listed company. If it goes ahead, as Fraine points out: “The opportunity in the marine sector with MSC alone could be worth a multiple of Quadrise’s current enterprise value in potential annual revenues if only small percentage of the shipping company’s overall fuel demand was switched to MSAR or bioMSAR.”
A lot is riding on the MSC trial with delays in Morocco and Utah, meaning that Quadrise has flattered to deceive. This time last year the company said it was turning a corner; it seems like the synthetic fuel company is still stuck in that bend in the road.
Expectation is building as we steam towards 1Q24.
