SZYM

A summary of a great post by BrianMotleyFool on the MF Hidden Gems SZYM board, re-posted with his permission.

Saul

A number of people have been commenting about Encapso and have mistaken the market they are targeting. Just to be clear, Encapso is not a frakking fluid. It is a drilling fluid. The distinction is important.

Fracturing (frakking) fluids are basically water - around 99% by volume. The addressable market for Solazyme selling fracturing fluids is not terribly exciting.

Drilling fluids are used to lubricate the drill bit as it goes through the rock, and to balance the well fluid pressure. This has nothing to do with fracturing at all - all drilling uses drilling fluids, regardless of whether the well is conventional or unconventional, horizontal or vertical, gas or oil or geothermal or deep water wells or any number of other types. Hundreds of thousands, perhaps millions, of wells annually require drilling fluids; hydraulically fractured wells are a small percentage of this (5%? certainly no more than 10%).

Drilling fluids are critical for efficient drilling. There are a number of premium drilling fluids on the market today. Probably the leader in the high quality drilling fluid market is Shell’s Saraline series, produced for years from their Malaysian GTL facility, and now also from their new Pearl GTL plant. Prices for this fluid generally range around $300/bbl. That is the price point for the Encapso product.

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It would be interesting to see if TMFDoodlebugger is familiar with SZYM. He post on the HG Dawson board and is our resident expert on this industry. Anybody know how to contact him?

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So many products/markets/margins possibilities available to SZYM…

I have a hard time wrapping my head around how much oil they will be producing at full capacity.

It seems the biggest issue now is how much production can we get through future plant buildouts, and how soon can we get it without significant dilution…?

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