Potentially OT: For those interested in learning more about GTL technology in general and Rentech (RTK:AMEX) in particular, this is a good start. This post was written by Dooper from the Raging Bull RTK thread.
ragingbull.altavista.com
"GTL and Rentech Overview
For openers, here's a few words on why GTL is important and what it is .............
"Gas-to-liquids" (GTL) is important because it offers a way to make ultrapure petroleum products from low-value feedstocks in increasingly innovative and cost-effective ways. The products include diesel fuel that's not just low in sulfur, it's sulfur-free.
If you've been following the rapidly-growing worldwide initiatives to clean up diesel engine exhaust, you understand the importance of "sulfur free". Petroleum industry news sources predict that potential shortfalls in production of ultra-low sulfur diesel fuels ........ the fuels needed to meet coming mandates ........ will spell tremendous profit opportunities for the emerging gas-to-liquids (GTL) diesel fuels makers.
Tests show GTL diesel substantially reduces diesel emissions, increases mileage and will likely lengthen diesel engine life. This fuel, and a variety of other high-value ultrapure products, can be made from natural gas, coal, refinery wastes ("bottoms") and even waste gases from industrial processes.
GTL is a three-step process.......
--- 1) Syngas generation. This step produces syngas, a mixture of carbon monoxide and hydrogen, from hydrocarbon feedstocks and oxygen. There are several competing syngas generation methods and new and improved ones are being developed.
--- 2) Fischer-Tropsch (F-T) conversion. Compressed and heated syngas, in the presence of iron or cobalt catalysts, reacts to form a variety of petrochemicals including naphtha, middle distillates (diesel) and waxes. GTL competitors use a variety of catalyst formulations, F-T reactor designs and operating schemes in this step.
--- 3) Product workup. Using routine refinery processes, F-T (step 2) products are converted into whatever stream of products a plant owner wants .......... synthetic crude oil, GTL diesel, ultrapure lubricant base oils, etc.
About Rentech and its role in this emerging industry............
Rentech (ASE, symbol RTK) is a twenty year old Denver company with well-developed and demonstrated GTL capabilities. In the early 1990s, Rentech, in partnership with Public Service Company of Colorado, built and successfully operated a GTL plant in Pueblo, Colorado that ran off landfill methane and pipeline natural gas. That plant produced over 200 barrels per day (bpd) of GTL products. In addition to having technology well-suited to doing GTL with natural gas, Rentech is positioned to exploit GTL niches where they are facing no competition.
GTL plants using RTK's technology can produce a full slate of ultrapure sulfur-free and aromatic-free products including specialty chemicals and fuels. These are the fuels that are now being recognized as ideal for all current and future diesel engines as well as fuel cell installations and vehicles equipped with reformers to run off liquid fuels.
In a conference call on 8/16/2000, Rentech said they're actively pursuing 15 GTL plant opportunities around the world totaling 135,000 bpd of capacity with the largest being a 50,000 bpd prospect.
How will RTK make money off these? Wherever they own parts of plants, they'll get revenues from product sales. Where they license their technology, they'll get license fees, royalties and markups on catalyst sales. License fees are expected to be about $1000 per barrel per day of licensed plant capacity. A licensee building a 10,000 bpd plant would pay RTK a one-time fee of about $10 million. When the plant's in operation, indications are RTK would get a continuing stream of royalties and catalyst markups somewhere in the range of 50¢ to a dollar per barrel of product.
The closest GTL plant on RTK's horizon is Sand Creek Energy (SCE), a GTL plant designed to take advantage of RTK's technology in a converted methanol facility near Denver. It promises to be both a showcase for RTK's GTL technology and the first modern commercial GTL plant operating in the United States. SCE's engineering is complete (including an upgrade to approximately 1000 barrels per day), as announced 9/12.......
"Denver, Colorado- Rentech, Inc. (AMEX: RTK) announced today [9/12/00] that it has completed the basic engineering and design work required to convert the Company’s fifty percent-owned Sand Creek LLC project in Commerce City, Colorado, from a methanol plant into the United States’ first modern Fischer-Tropsch Gas-to-Liquids (GTL) facility. Rentech has begun the air emissions permitting and pre-construction process for the site. Rentech expects the permitting to take from two to six months.
Once air permits are granted, Rentech anticipates it will begin the construction to retrofit Sand Creek to an approximately 1,000 barrel-per-day GTL facility. Sand Creek will produce commercial quantities of ultra-clean products including the country’s first sulfur- and aromatic-free GTL diesel fuels. The Company foresees full-scale commercial production at Sand Creek in the first quarter of 2002."
A February 2000 research report prepared by Raytheon Engineers and Constructors for the U.S. Trade and Development Agency shows Rentech's GTL approach compares very favorably with its competitors (NTIS Report No. PB2000103258). A study conducted recently by Jacobs Engineering for Forest Oil Corporation confirms these results.
In the area of institutional and industry interest, Frost Securities initiated coverage of Rentech in May 2000 with a Buy rating. Howard, Weil, Labouisse, Friedrichs (a division of Legg Mason) initiated coverage of Rentech with a "Speculative Buy" rating on January 11, 1999 and they issued a new research report reiterating that rating on September 5, 2000. On the same day, they issued a research report on Syntroleum, the only other GTL "pure play", carrying a "Hold" rating. Some information from, and links to, those reports are given immediately below. Forest Oil Corporation (one of several companies that are actively looking at using Rentech's GTL technology) and Anschutz Investment Company acquired equity positions in Rentech in early 2000.
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Regarding the Howard Weil September 5, 2000 reports on RTK and SYNM.........
Both reports were prepared by Rebecca Followill who's in charge of "Energy Convergence, Natural Gas Integrateds & Other" at Howard Weil. In my opinion, one of the more important passages in the RTK report is the following that indicates TX has learned enough from RTK's laboratory work to make a significant investment in validating the results at close to commercial scale using an unbiased, qualified facility........
"Texaco is funding GTL tests on the DOE alternative fuels and development unit located at LaPorte, Texas, using Rentech's technology. The LaPorte facility is scheduled to begin operations during October. Our view is that Texaco wants some data from these tests before it exercises its option [to buy half of RTK's 50% share] on Sand Creek."
LaPorte will synthesize syngas, making it match the output of Texaco gasifiers, and feed it to their Fischer-Tropsch slurry bubble column reactor that incorporates Rentech's technology. This reactor is large enough to provide good data on process performance at commercial scale. It's about one-tenth the size of Rentech's early-1990's reactor thyat ran on natural gas and about ten times the size of Syntroleum's Tulsa pilot plant.
The Howard Weil reports contained their current stock price valuations for RTK and SYNM. Based on GTL activities only, using conservative evaluation groundrules and giving RTK credit for getting Sand Creek Energy up on schedule and SYNM credit for getting Sweetwater up on schedule, Howard Weil arrives at a current RTK valuation of $3.50 and a current SYNM valuation of $11.50. They note that their RTK valuation is 75% above its current price, $2.00, while "Syntroleum stock has gotten a bit ahead of itself" at $15.375.
Using a more aggressive set of evaluation groundrules, they value RTK at $11 and SYNM at $35.
In addition to the above GTL-based valuations, Howard Weil estimates an additional value of $2 per RTK share could come from two items in RTK's 10% ownership of ITN ........... slices of Global Solar and ITN's satellite division ............ that are potential IPOs.
The Howard Weil research reports can be downloaded at ......
members.aol.com
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Rentech has relationships with several organizations and is working aggressively to commercialize its technology on many fronts. Rentech's website at rentechinc.com has a wealth of information on their history, current activities and technical approach as well as summaries of their industry relationships.
RTK's excellent GTL competitive position is based on.......
--- 200+ bpd demonstrated plant performance in early 1990s
--- strategic oil and gas industry relationships,
--- high process efficiency,
--- wide feedstock diversity (solids, liquids and gases),
--- low cost slurry reactor approach,
--- "full product slate" licensing strategy,
--- spent catalyst disposal ease,
--- syngas simplification and cost reduction initiatives with multiple partners
--- competition-free niche pursuit approach, and
--- a straightforward approach for oil& gas companies to monetize stranded gas reserves efficiently and affordably
The following key items differentiate RTK from its competitors.......
--- RTK's patented and proprietary GTL technologies are in the Fischer-Tropsch (F-T) area (step 2 in GTL's 3 steps). Their F-T reactor and iron catalyst technology can accept syngas (mixtures of hydrogen and carbon monoxide) from virtually any process ....... partial oxidation, autothermal reforming, plasma arc, ceramic membrane and even low grade industrial offgases. Further, that syngas can be made from virtually any carbonaceous feedstock. In comparison, cobalt catalyst F-T reactors used by most GTL competitors are poisoned if any sulfur slips through so they are for all practical purposes limited to using syngas made from clean natural gas.
--- RTK believes GTL will become economical first as a problem solver and later as a stranded gas monetizer. Problems to be solved include idled methanol production facilities, refinery wastes, associated gas in oil fields and waste industrial gases.
--- RTK has patented tailgas recycling features that substantially enhance its process efficiency, making it fully competitive with cobalt catalyst processes.
--- RTK licensees are granted rights to produce full product slates including high value specialty chemicals.
Comparing the technologies and business plans of Rentech and its competitors clearly illustrates the extraordinary breadth of Rentech's approach. The companies that have both appropriate technology and business plans addressing the market niches are:
Solid/liquid Feedstocks:
--- Coal:
------- Rentech (with Texaco, via DOE program and possibly Australian lignite)
------- Sasol
--- Refinery bottoms:
------- Rentech (integrated with Texaco's gasification)
Industrial Offgas Feedstocks:
--- Steel mills:
------- Rentech (with Oroboros in Sweden)
Natural Gas Feedstocks:
--- Small GTL plants:
------- Rentech
--- Methanol/industrial plant retrofits:
------- Rentech (with Forest Oil, Republic and/or Jacobs) - (RTK and Republic each own half of Sand Creek Energy)
--- Medium sized GTL plants:
------- Rentech (via multiple routes including Anschutz/FST in South Africa and Worley/GTLR for floating GTL platforms),
------- Sasol
------- Syntroleum
--- Large GTL plants:
------- BP Amoco
------- Conoco
------- Exxon
------- Rentech (via Jacobs) (Rentech's technology is also being considered for a proposed 50,000 bpd GTL plant on Alaska's North Slope to be run by Mossgas for ANGTL Corp.)
------- Sasol/Chevron
------- Shell
------- Syntroleum
In summary, Rentech's GTL technology has an unmatched combination of efficiency, flexibility and affordability and they are working aggressively to commercialize it on multiple fronts.
For a thorough look at all aspects of Rentech, be sure to check their website at
rentechinc.com
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Footnote: If you have any questions about GTL in general or Rentech in particular, don't hesitate to call RTK Investor Relations ...... Mark Koenig, (303) 298-8008 ext 116 ....... or ask them here or on Yahoo or Silicon Investor. The Rentech message boards have a large group of knowledgeable posters who've followed Rentech for years and who've done a lot of "DD". Tap into it. But DON'T skip doing your own thorough DD too. Read SEC filings. Read about the GTL industry. It's in its infancy and it's too early to see clearly who the winners and losers will be. There are lots of companies proclaiming their GTL prowess, ranging from some of the world's oldest and largest energy companies to newcomers with no facilities or history that are looking for a free ride on the GTL bandwagon. I'll say it again, do your own DD." |
