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Wavefront Energy and
Environmental Services is focused on their Pressure Pulsing Technology (PPT) designed to increase ultimate oil recovery from existing and
abandoned fields
Technology
Energy/Environment
(WEE-TSX: V)
Wavefront Energy and Environmental Services, Inc.
Suite 104, 11430-168 Street
Edmonton, Alberta Canada T5M 3T9
Tel. (780) 486-2222
D. Brad Patterson
Chief Financial Officer
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
March 24, 2005
BIO:
D. Brad Paterson, Chief Financial Officer
Mr. Paterson has 10 years experience acting as a senior officer and director of public
companies. Mr. Paterson brings to Wavefront experience in management accounting, financial
statements, statistics, cash planning, and corporate governance functions. Mr. Paterson
has also worked as a senior financial analyst for a private equity and mezzanine-financing
firm. In addition, Mr. Paterson has achieved CMA candidate status, holds a BA (Economics),
and has completed the Canadian Securities Course.
Company Profile:
Wavefront develops, markets, and licenses proprietary technologies in the energy and
environmental sectors. The Company’s Pressure Pulse Technology for fluid
flow optimization has been demonstrated to increase oil recovery. Within the
environmental sector, PPT accelerates contaminant recovery and improves in-ground
treatment of groundwater contaminants thereby reducing liabilities and restoring the site
to its natural state more rapidly.
CEOCFOinterviews: Mr. Patterson, will you tell us about your
background with Wavefront?
Mr. Patterson: “My background is in management of the
corporation’s financial assets and helping with the strategic planning. I have been
with the company since 2002, when it became a public reporting entity.”
CEOCFOinterviews: What
was your vision when you started with Wavefront and how has that played out?Mr. Patterson: “Wavefront has a unique technology, Pressure
Pulsing, which we feel is very timely in the today’s current market in that it is
proven to extract more oil out of the ground at increased production rates. It is one of
the few companies that I have been exposed to that has a technology that is globally
applicable and far-reaching that can be used in other sectors such as in groundwater
remediation.”
CEOCFOinterviews: How
can you get it out of the ground faster and how is the cost of doing this compared to the
expanded methods now?
Mr. Patterson: “In layman's terms what governs the flow
of fluids in the ground is the size of the pore spaces within rocks and soils and how well
those pore spaces are interconnected. There are other factors but I do not want to get to
technical. The greatest obstacle to overall oil recovery is related to pore space size and
how efficient fluids flow in the interconnected pore pathways. These characteristics
are termed "permeability". If pore space size and pore
interconnectivity govern fluid flow when extracting a liquid such as the case in oil
production then those same characteristics also govern how well a fluid can be injected
and distributed into the ground. Hence, "permeability" controls both fluid
extraction and fluid injection. Let us assume we are going to inject a liquid such as
water into the ground for secondary recovery by constant pressure. This is referred to as
"static water injection". Nature has set up a system of pores and pore
interconnectivity. This can be somewhat altered by processes such as fracturing or
tectonic activity (earthquakes) but all things being equal we have a pre-determined
system. Flow rate and the distribution of the liquid injected into the
rock or soil is going to be dominated by that pre-determined system. The easiest
explanation is the path of least resistance. It is difficult to alter the path of least
resistance simply by increasing the pressure by which the liquid is injected. Furthermore,
it is almost technically impractical for that water to be distributed outside the path of
least resistance. The term used in the oil referring to the efficacy of how injected
liquid is distributed is "sweep efficiency" or "displacement
efficiency". Why does the path of least resistance dominate? The answer is quite
simple. Pore space size and pore interconnectivity are constant variables. There sizes
remain the same throughout the entire process. Let us now assume we are going to inject a
liquid such water into the ground for secondary oil recovery using constant pressure but
superimposing an intermittent dynamic force or shock to the process. We
term this "dynamic enhancement" or "dynamic flow". The magnitude and
duration of the dynamic force is calculable for every given rock or soil. Let us also
assume we can intermittently change both the size of the pore space and pore
interconnectivity through this dynamic force. How is this accomplished? PPT relies
on the elastic properties of rocks and soils. When a pulse is applied through the
inject liquid we are "dilating" the pore space through an elastic response. This
in turn causes not only the pre-determined pore network to increase in size and
interconnectivity but also opens up additional pore spaces as well as overall connectivity
of those pores to flow. Hence, we are governing how flow is occurring because we have
overcome the path of least resistance. We are not relying on natures pre-determined system
of flow. The result is greater "sweep or displacement efficiency". In the oil
this represents greater overall productivity gains during secondary oil recovery processes
or when treatment liquids such as acids and surfactants are used on single wells.”
CEOCFOinterviews: Where
are you in the development and usage stage?
Mr. Patterson: “The Company has utilized PPT numerous
times in the oil sector in both field scale applications (>6 months) and in single well
applications which are on the order of 12-48 hours. Additionally, the Company has used PPT
quite successfully in the environmental sector. At present, we have an option agreement to
obtain mineral rights to operate our own field to implement the technology. Furthermore,
we are working closely with Halliburton Company (NYSE: HAL) to commercialize PPT on a
global basis.”
CEOCFOinterviews: Will
you describe the service?
Mr. Patterson: “Wavefront’s technology is a
patented process and we offer a fee for service to oil producers. We capitalize all of the
equipment required to successfully implement the process in an oil reservoir. Ultimately
the benefits to oil producers is increasing both production rates and the total amount of
oil producible from any one reservoir.”
CEOCFOinterviews: How
are you facilitating market penetration in addition to partnering with Halliburton?
Mr. Patterson: “We have three initiatives outside of the
Halliburton licensing agreement. The first initiative is to acquire our own field. We have
made progress in doing so and anticipate being in the production mode in the near term.
The second initiative is to earn an equity interest in a production field with an
independent. In this case, the filed is likely to be under-producing and we would install
our systems in exchange for the equity interest. These initiatives accomplish two things;
they provide a marketing tool in which other oil companies can come and see the
technology; see it working, and analyze the data. It also allows the Company to increase
its revenue and asset base as it continues to grow. The third initiative is providing a
fee-for-service to major mid-tier companies to have PPT implemented.”
CEOCFOinterviews: Do you
have patent protection and are there competing technologies?
Mr. Patterson: “Pressure Pulse Technology is the subject
of various patents. We have two United States and one Great Britain patent with additional
patents soon to be issued in Canada and the United States. We also have several other
conditional patents under consideration. In addition to these patents, we have proprietary
modeling software that allows us to predict what the specific requirements for each oil
reservoir is, allowing us to optimize the process. With respect to competition, though
there exist other reservoir stimulation techniques there is no competitive technology that
is specifically aimed at dynamically enhancing fluid injection. The status quo remains our
competitor.”
CEOCFOinterviews: Will
you tell us about your financial picture?
Mr. Patterson: “To implement PPT correctly, we have
measure both the frequency and amplitude of the wave-form we are creating. In doing this
the Company has a secondary product line called downhole monitoring. This product
line encompasses pressure transducers or temperature gauges. In providing that choice to
an internal customer, we also provide it to the major oil companies principally in western
Canada and to a much lesser degree in Venezuela. This approach has provided a revenue
base, which helps provide the infrastructure to allow for the commercialization of PPT.”
CEOCFOinterviews: You
are in a good position!
Mr. Patterson: “We are looking to grow quite rapidly as
Pressure Pulsing becomes more adapted on a larger scale.”
CEOCFOinterviews: How do
you make that happen?
Mr. Patterson: “We make it happen by continuing to prove
the significant benefits of PPT. Our greatest challenge is getting broad market awareness.
The way the industry is structured, the challenge to us is getting out to as many of the
oil producers as possible. We need to have them not only aware of the technology, but also
understand its implications and how it works.”
CEOCFOinterviews: Why is
it a good time to invest in Wavefront, and what should potential investors know that
perhaps they don’t realize when they first look at the company?
Mr. Patterson: “There are two things. It is timely in
that there are a number of articles being written on how oil production companies are
going to have to use new and innovative technology to get more oil out of the ground. In
December, there was an article in the Wall Street Journal noting that by implementing new
technology in the Permian Basin in Texas and New Mexico, they estimate they can get 50
billion barrels of additional oil out. To be part of a company where it creates that type
of value proposition to the global economy, I think is phenomenal. Additionally, you have
oil companies having to reach proved reserves, which just supports that premise as well as
where current oil prices are.”
CEOCFOinterviews: In
closing, how will investors know you are staying on-track?
Mr. Patterson: “They will know we are staying on-track
by seeing us implement PPT more and more, applying the technology to our own sites, or
having fee-for-service agreements with intermediate, national, and global oil producers.”
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