28th Apr 2015 07:58
LONDON (Alliance News) - Velocys PLC saw its shares fall early Tuesday after it reported a wider loss for 2014 and said it faces some near-term hesitancy due to the sharp fall in oil prices, although it remains confident the longer-term outlook is brighter.
The developer of smaller scale gas-to-liquids technology reported a net loss of GBP21.0 million for 2014, compared with a loss of GBP16.9 million in 2013, as research and development costs and administrative expenses rose.
It booked its first ever commercial revenue of GBP1.7 million, though it also decided that after restructuring its supply contract for reactors it would only recognize revenue on reactor sales on final delivery. Therefore, its 2014 revenue reflects only some engineering income and part of its licence fees on the Oklahoma plant. Its revenue in 2013 was GBP4.8 million, which reflected development and milestone payments.
Despite the near-term uncertainty due to the impact of the drop in oil prices on the industry, Velocys Chief executive Roy Lipski remains positive.
"Velocys is poised to take advantage of the significant opportunities which typically surface during times of market volatility such as these, and notwithstanding some potential near term headwinds in the oil and gas industry, to establish an even stronger business and market position. Interest in smaller scale GTL remains high and I look forward to achieving the significant milestones ahead of us," he said.
The company's technology turns natural gas or biomass into liquid products such as diesel and jet fuel. It can be used in shale gas and biomass sites, and can also make conversion of stranded or flared gas economic, according to the company.
"Whilst some investment decisions are under greater scrutiny, good opportunities remain for smaller scale GTL; many local situations are likely to retain their attractiveness, even with lower gas-oil differentials at the major hubs. These projects either utilise economically-priced gas or other low- or negative-cost feed stocks, or serve a market where a premium can be realised, for example by producing high-value speciality products such as base oils or waxes, or by serving isolated areas where liquid fuel import costs are high," Lipski said.
Velocys said it had cash of GBP59.8 million at the end of 2014, up from GBP26.4 million at the end of 2013, after it raised GBP52 million before expenses in a share placing, although its cash outflow rose to GBP18.1 million, from GBP12.5 million in 2013.
Velocys shares were down 9.3% at 132.44 pence Tuesday morning, having risen strongly last week.
By Steve McGrath; [email protected]; @stevemcgrath1
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