CDK Services Ltd. (CDK)
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Services emissions free chemical pump offers their customers an increase in natural
gas sales and a reduction of greenhouse gas emissions
Mr. Thomson: The Companys patented Emission Eliminator chemical pump for natural gas wells fills a timely market need and there are very real opportunities to significantly grow the sales of the pump. I also believe that sales of the chemical pump are all upside since the current market value of the company is supported by the existing businesses, which are valve and BOP Sales and Service.
CEOCFOinterviews: Will you tell us about the base business and what is happening there?
Mr. Thomson: We are located in three facilities across Alberta where we sell and service valves and Blow Out Preventors (BOPs) for the oil and natural gas industry. Sales will be around nine million dollars this year and about a million dollars EBITDA.
CEOCFOinterviews: Is that business growing?
Mr. Thomson: The average growth over the last three years has been 18% on the revenue side and higher than that on EBITDA and we are on track to exceed that rate of growth in 2004.
CEOCFOinterviews: Will you tell us about the emission eliminator?
Mr. Thomson: Gas wells often require injection of methanol to keep them from freezing. The typical chemical pumps that inject the methanol have been the same for years. They take natural gas off the wellhead and used the pressure of this gas to drive the chemical pump and then vent the natural gas to the atmosphere. When gas was $1.00 per mcf, instead of the $6.00 that it is now, the gas that was wasted was not that valuable. The other factor is that now with global warming concerns, this vented, unburned natural gas is a very potent greenhouse gas, being 23 times more potent than CO2. Our pump requires only a small pressure drop to operate and that is typically available at the wellhead. We use that pressure drop, drive the chemical pump and then the gas goes right back into the pipeline. With our pump, there are no emissions, the customers natural gas sales increase and greenhouse gas emissions are reduced.
CEOCFOinterviews: How do you get people to use this?
Mr. Thomson: We have about eighty pumps operating across Alberta. We have a sales force to start the sales process right at the field operator level and show the operating staff what the pump can do for them; how it can increase their revenue or save significant operating costs. We will install the pump and take it out at our cost if it does not meet our customers expectations. To date most of our sales have been repeat sales with three major companies.
CEOCFOinterviews: Are there government mandates as far as the standards that you play into?
Mr. Thomson: Yes and there is a new regulation called Guide 60 coming out this month in Alberta. This regulation specifies that if you are venting natural gas and if you can make a 7% rate of return before tax on an investment to stop that venting, then it is a requirement to make the investment. This low 7% rate of return would compare to a more typical industry expected return of 20% plus. This new guide has been negotiated between the industry association, environmental groups and the government. Other jurisdictions have similar regulations or are developing them.
CEOCFOinterviews: What about getting your product used outside of Alberta.
Mr. Thomson: It is
easier to operate in your own back yard and our strategy is to make sure that we have
everything right with the pump and that it is performing exactly as we expect over the
next few months. We see moving to the US likely through US divisions of some of our
customers in Canada. We currently have a demonstration pump with Encana and we will be
installing one with BP. These are the two largest natural gas producers in North America,
with a large presence in the US. We see it as a natural progression that once we show them
our product performance in Canada then we can move to the US with them and then expand to
other operators in the US.
The Companys patented Emission Eliminator chemical pump for natural gas wells fills a timely market need and there are very real opportunities to significantly grow the sales of the pump. I also believe that sales of the chemical pump are all upside since the current market value of the company is supported by the existing businesses, which are valve and BOP Sales and Service. Wayne Thomson
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