Oil Out Of Thin Air?
New hype of a technology that claims to be 10 times cleaner than petroleum oil. “They are making oil out think air!” Yes, no, maybe so. But what is it? Its being dubbed the “New Petroleum”.
So how do you get oil from the ground with out drilling?
(watch video explanation below)
It wasn't too long ago that Jim Cramer featured this stock on Mad Money, saying it had a “Competitive advantage with many patents and trade secrets”. He also said it was a speculative stock not too long after it IPOd.
What is this New Petroleum? It's Algae! If you can believe it. Solazyme's algae to be more specific.
Solazyme (SZYM) didn't make a huge impact in the market when it went public back in 2011. It did, however, manage to raise roughtly $200 million selling about 11 million shares.
For a start up, Solazyme has some heavy hitters backing. Founded in 2003 out of San Francisco, it's big initial investors include Braemar Energy Ventures, Roda Group, Lightspeed Venture Partners and well known renewable energy supporter Sir Richard Branson.
In a nutshell, SZYM is an Algae – Biofuel company. It's algae based jet fuels have been used and tested by the US Navy. Referenced here http://techcrunch.com/2010/07/19/solazyme-navy-jet-fuel/.
SZYM has working relationships with giants such as Chevron, Unilever, Dow Chemical and Qantas Airlines. More recently is its partnership with Bunge and ADM to JV on production facilities. Announcement from the latter are probably what most investors are looking forward to at this point, and could send the stock upward.
Take a look at the latest over all chart. You can see the stock took a beating from its IPO price but seems to be gaining back some ground as of late.
The US Military has made a commitment to switch to clean fuels progressively moving forward. So far its been with the help of start up companies like SZYM.
So how does it work?
This video and explanation taken directly from the Solazyme website probably says it best:
“Solazyme's proprietary biotechnology platform creates renewable oils by harnessing microalgae's prolific oil production capabilities. Through world-class molecular biology and chemical engineering capabilities, we're able to cost-effectively produce high-value tailored oils.
How the Solazyme biotechnology platform works
Most microalgae produce their own nutrients by using sunlight in a photosynthetic process. Our proprietary microalgae are heterotrophic, meaning they grow in the dark (in fermenters) by consuming sugars derived from plants that have already harnessed the sun's energy.
By using standard industrial fermentation equipment, we're able to efficiently scale and accelerate microalgae's natural oil production time to just a few days and at commercial levels. “
That's pretty cool, and sounds like the way to go for renewable fuels in the future. But before we start calling our brokers, we should note that SZYM has competition. In fact, the renewable energy sector is very competitive, and very hard on these new companies.
The mega corps like Big Oil are out spending these small companies in the renewable energy sector on a yearly basis and are partnering with similar private ventures. But that doesn't mean they have the technology yet, or the patents, such as Solazyme's.
SYZM has some direct competition like stock market loser GEVO and AMRS whose stock looks to be coming back from the dead. Between the three of them, it does look like SYZM is the better bet, but that doesn't mean it isn't speculative. This is where higher risk, higher reward comes into play.
The factor that sets Solazyme apart from the rest is how it grows and harvests its proprietary algae and its ability to turn it into oils. Clean burning oils. And oils that can be used in cosmetics. It relies heavily on sugar cane feedstock for the algae in dark tanks, not large ponds that need acreage.
SYZM is definitely one to keep an eye on with its different partners. They really aren't making oil out of thing air, more like dark murky water. One thing this sector has going for it, is the US Government's commitment to reduce foreign oil imports and focusing more heavily on alternative fueled vehicles.http://www.whitehouse.gov/the-press-office/2011/05/24/presidential-memorandum-federal-fleet-performance
Check back often as we expose investing techniques and ideas in the near future.
Additional reading on SZYM:
Additional content, CTO of Solazyme Harris Dillon on Resolving Food and Oil at Scale: