The long and winding road for investors in fuel technology play Quadrise Fuels (QFI:AIM) continues.
After rising sharply in early 2018 on hopes of progress on a trial involving its proprietary MSAR fuel in Saudi Arabia it shares sink 35% to 3.56 today as alongside first half results it reveals a likely delay and possible cancellation of the project, with ‘significant implications’ for the company.
The business is launching a strategic review. It has already reduced costs, but it remains loss making and the £3.4m it has in the bank is just less than the cash outflow seen in the 12 months to 31 December 2017.
The Quadrise example shows even if you have a seemingly good idea or technology, there is no guarantee it will make money.
Notably it is very hard to gain traction with new tech in the relatively conservative industries being targeted by Quadrise for its fuel such as shipping and oil and gas.
Its destiny is also in the hands of much larger partners who operate much slower than the company or its investors would like. Notably another trial with shipping giant Maersk was dogged by delays before eventually being cancelled.
WHAT DOES QUADRISE DO?
Quadrise’s technology converts heavy oil residues into a patented low-emission ‘emulsion fuel’ dubbed MSAR. This product is an alternative to heavy fuel oil (HFO) - used in marine transportation and for internal power generation within refineries.
In a conventional refinery HFO is manufactured, like MSAR, from residues but these have to be combined with more valuable distillates such as diesel.
This penalises the refinery because diesel can typically be sold at a premium to crude oil prices while HFO usually sells at a discount.
MSAR is produced by combining water with a small dose of speciality chemicals and this translates into enhanced margin per barrel of oil which can in theory be shared between the refiner, Quadrise and the end user.
