Trading Update

RNS Number : 7771Z

Oxford Catalysts Group PLC

20 January 2011

 



20^th January 2011

OXFORD CATALYSTS GROUP PLC

("Oxford Catalysts" or "the Group")

Trading Update

Oxford Catalysts Group PLC, the leading technology innovator for clean synthetic fuels, is pleased to provide an update on trading.

Market conditions for smaller scale synthetic fuels production have improved considerably over the past year and the Group is enjoying high levels of interest in its technology.

The discovery and development of the vast shale gas reserves in North America, coupled with increasing demand for oil and sustained production constraints that have driven crude prices again towards $100 per barrel, have created an increasingly attractive environment for synthetic fuels production through Gas-to-Liquids ("GTL"). Long term expectations of continued lower gas prices and increasingly high oil prices mean that GTL provides a clearly quantifiable market arbitrage opportunity. Along with the growing complexity of oil exploration and production - politically, geologically and environmentally - these factors have resulted in increasing attention being given to the monetisation of gas reserves and cessation of flaring. As the majority of stranded gas fields and flare gas streams are too small for conventional technology, the opportunity for the Group's technology has now come sharply into focus.

Market conditions for Biomass-to-Liquids and Waste-to-Liquids ("BTL" and "WTL") are also very favourable as governments and industry have come to recognise the important role synthetic fuels derived from biomass and waste could play in seamlessly supplementing oil-based transportation fuels, whilst alleviating environmental pressures (it is accepted that BTL and WTL fuels can reduce carbon footprint by up to 90% compared to fossil fuels). For example, the potential of synthetic jet fuel has not escaped the attention of the aviation industry, with several WTL projects being announced of late.

The Group has recently completed engineering cost studies with a number of major prospective customers that demonstrated consistently attractive economics for its technology under a range of market scenarios and across several applications.

As a consequence of the highly favourable market conditions and the exceptional level of interest it is enjoying, the Group is actively evaluating new partnership and sales opportunities with major corporations, and expects to conclude negotiations with a number of these during the course of 2011.

Reflecting the Group's continued progress towards commercialisation, revenues are in the process of transitioning from development funding to commercial income streams. For example, 2010 revenues were impacted by a decision to slow down activities on a government funded programme in the last quarter in order to concentrate on preparations for some expected near term sales of FT reactors. The funding for this programme remains available and the work is expected to resume at planned levels in 2011 and 2012.

As such, whilst Group revenues for the financial year ended 31^st December 2010 are estimated to be moderately below 2009 figures, the Board expects that commercial sales will start having a material impact on income during the course of 2011. Year end cash remains in line with consensus forecasts.

The Group's existing commercial relationships remain strong. SGC Energia, SGPS, S.A. ("SGCE") is pleased with the progress made in 2010 and, as a consequence, has placed an order with the Group for a commercial scale Fischer-Tropsch (''FT'') reactor (announced on 20^th December 2010). SGCE has also confirmed that the Group remains on track to secure a larger order upon completion of the agreed technical milestones, including successful manufacture of the first commercial reactor. The latter remains on schedule for delivery in early March, with the core microchannel reactor and commercial catalyst batch already completed by the Group's manufacturing partners.

The Group's FT demonstration in Güssing, Austria, remains in operation, having successfully validated many of the Group's technology advantages, including process intensification and substantial operational robustness. At SGCE's request, the Group has agreed to extend the demonstration until at least the end of the first quarter (fully funded by SGCE), to enable hosting of potential customers and to provide a location for SGCE to train its operators on the Group's technology ahead of deployment in commercial plants. A decision was made not to relocate the Group's FT unit to the Wright-Patterson Air Force base near Dayton, Ohio, thus paving the way for extended operation of the Güssing pilot plant to provide ongoing support for the design and deployment of commercial facilities.

The Group previously announced the delivery of Steam Methane Reforming ("SMR") and FT reactors for its GTL demonstration in Brazil, funded and managed by Toyo Engineering Corporation and MODEC, Inc., in collaboration with Petróleo Brasileiro S.A. ("Petrobras") which is hosting the demonstration at its Fortaleza refinery in Brazil. We are pleased to announce that the demonstration plant is now fully completed, on schedule, and is expected to arrive in Brazil in the early part of 2011. Currently, the Group understands that Petrobras will be ready to start the demonstration in the summer.

Likewise, Oxford Catalysts' relationship with Thailand's national oil and gas company, PTT Public Company Limited, continues to be very positive, and its collaboration on the Group's SMR technology for land-based GTL remains on schedule.

Roy Lipski, CEO of Oxford Catalysts Group said:

"The Group made impressive commercial progress last year. The market for small scale synthetic fuels production is poised for rapid growth, and the Group remains on track to take advantage of this significant opportunity as one of the leading technology providers in the sector. 2011 looks set to be an exciting year for the Group as it begins commercial roll-out of FT."

- Ends -

For further information, please contact:

Roy Lipski, CEO, Oxford Catalysts and Velocys	[phone]
Ken Fleming / Beth McKiernan, Cenkos Securities (Nomad and Broker)	020 7397 8900 / 0131 220 6939
Billy Clegg / Alex Beagley, Financial Dynamics	020 7831 3113

Notes to Editors

Oxford Catalysts designs and develops technology for the production of clean synthetic fuels from both conventional fossil fuels and renewable sources such as bio-waste. The Group is primarily focused on the emerging market for distributed smaller scale production of synthetic fuels via Fischer-Tropsch ("FT") synthesis − a market that has the potential of producing as much as 25 million barrels of fuel a day.

The FT reaction is used when converting natural gas, coal or bio-mass into clean high-performance liquid synthetic fuels, processes known as GTL, CTL and BTL respectively. The Group is the recognised world leader in the design and development of high-activity catalysts and associated novel chemical reactors for the small scale production of synthetic fuels. (The Group's reactor technology − known as microchannel process technology − is marketed under the brand name of Velocys).

Oxford Catalysts Group PLC is listed on the AIM market of the London Stock Exchange (LSE: OCG). The Group has some 80 employees with facilities near Oxford, UK and Columbus, Ohio, USA.

www.oxfordcatalysts.com

www.velocys.com

 

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