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Executives

Karen Gallagher – SVP and Principal Financial Officer

Gary Roth – President and CEO

Jeff Bigger – SVP, Business Development

Ron Stinebaugh – SVP, Finance and Acquisitions

Analysts

Gary Rumple [ph]

Jack Atwell [ph]

Robert Strassman – Art Boulevard

Ron O’Donnelly [ph] – Geometric Industries

Grant Goodnel [ph]

Charlie Serbath [ph]

John Anderson [ph]

John Smith [ph]

Louis Navarre [ph]

David Henry [ph]

Miro Paz [ph]

Azra Burn [ph]

Rod Adamwith [ph] – Geometric Industries

Mark Rugger [ph]

Joel Stanton [ph]

William Bryan [ph]

Lloyd Cameron [ph]

Greg Jackson [ph]

Chris Neeble [ph]

Eric Sedar [ph]

Syntroleum Corporation (SYNM) Q1 2010 Earnings Call Transcript May 11, 2010 11:00 AM ET

Operator

Welcome to the Syntroleum Corporation first quarter conference call. My name is Mitch and I will be your operator for today’s conference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I would now like to turn the call over to Karen Gallagher. Ms Gallagher, you may begin.

Karen Gallagher

Good morning, and thank you for joining us today. Remarks for today’s call will be presented by Syntroleum’s President and Chief Executive Officer, Gary Roth; followed by Jeff Bigger, Senior Vice President of Business Development, who will provide an update on our Dynamic Fuels Geismar Plant; and Karen Gallagher, Senior Vice President and Principal Financial Officer who will report the financial results for the quarter ended March 31, 2010.

Before I turn the call over to Gary, I would like to remind everyone that during this call, we will make certain forward-looking statements as well as use historical information. Words such as believe, estimate, expect, intend, plan, anticipate, could or should are intended to identify forward-looking statements. Although Syntroleum believes that expectations reflected in these forward-looking statements are reasonable, these statements involve risks and uncertainties. Future results may differ materially from those projected in these forward-looking statements. You are encouraged to refer to our SEC filings, including our most recent Annual Report on Form 10-K for a full disclosure of these risks and uncertainties.

I will now turn the call over to Gary Roth for opening remarks.

Gary Roth

Thank you Karen. Let me summarize the results over the first quarter, and provide you with an update of activities at Dynamic Fuels, our joint venture with Tyson Foods.

The first plant under our venture is projected for mechanical completion to occur in June of this year. We expect full rate production in the late third quarter. Essentially all plant piping is now installed and critical path to completion has moved to the quality control process. Jeff Bigger will provide details in his update on Dynamic Fuels.

We expect the total cost of the Geismar project to be $170 million as reported during our last conference call. We will fund the remaining commitment of $15 million as needed in the second and third quarters from cash on hand. We received $2.75 million during the first quarter from Sinopec from the relocation of the Catoosa Demonstration Facility to China. The remaining $250,000 in the Sinopec contract has been invoiced as equipment has cleared customs in China. With the receipt of this payment, we will have received the full $20 million contract value.

We began training of Sinopec personnel on our Fischer-Tropsch process during March of this year. Our contract requires Sinopec to re-erect the CDF in China and this process is underway. We anticipate production starting during the fourth quarter of 2010, which will further demonstrate Syntroleum’s FT technology on coal-derived syngas.

We continue to focus on deployment of our engineering resources to cover our operating cost. Operating activities generated a net cash flow of $1.8 million for the first quarter. Finally the company had a cash balance of $26.8 million as of quarter end compared to $25 million at year-end 2009. In addition, we received the final equity investment of $3 million on April 20 this year from Fletcher International resulting in a cash balance of $29.8 million at the end of April.

For the remainder of 2010, our strategic objectives are in our Bio-Synfining business, we plan to complete the Geismar Plant, we have allocated a majority of our resources. Further we plan to pursue business development and financing activities on a second Bio-Synfining plant, and finally, we will actively engage in securing next generation renewable feedstocks.

In our Fischer-Tropsch technology business, we plan to assist Sinopec in the restart of the CDF facility in China, deploy FT technology sales and licensing opportunities, and advance a liquid renewable fuels effort. We believe the operations at the Geismar facility will give us significant inside both domestically and internationally into the products markets for second and third generation renewable fuels.

Finally, we will continue to add to our IP portfolio 51 patents. We have been granted 27 patents in the last five years and currently have 40 patents pending.

I will now turn the call over to Jeff Bigger to update you on the status of the Dynamic Fuels venture.

Jeff Bigger

Thank you Gary. Today I will update you on the status of the Geismar facility. As previously reported, engineering and procurement are essentially complete, therefore we will focus on the construction status.

We tracked the following areas as related to overall mechanical completion. Number one is mechanical works, which includes piping and structural steel; number two, the electrical work; three, the instrumentation; four, installation; and five is the quality assurance and quality control, which is now the critical path on the project.

As related to the mechanical works, structural, steel and piping installation is 99% plus percent complete. For the electrical work, we have achieved mechanical completion and have started demobilization of the electrical subcontractor from the site. Instrumentation is 90% complete. The balance of the instrumentation work is primarily dependent on completion of the quality control activities. Installation is 69% complete and is also executed concurrent with quality control activities.

Instrumentation and installation are not the critical paths. The critical path on the project is completion of the quality control activities required to finalize and confirm adherence to the engineering design and industry standards. The general contractor is responsible for these activities in his lump sum contract. The Dynamic Fuels project team inspects and approves this work. The amended construction agreement with the general contractor requires that overall mechanical completion be achieved by May 5, 2010 and if not met, the general contractor is subject to a $60,000 per day delay payment of up to $1.8 million.

The general contractor is currently subject to the delay payment as overall mechanical completion was not achieved on the required date. Further if final completion is not achieved by June 5, the general contractor is subject to an additional delay payment of $25,806 a day up to $800,000 total for delayed payments that totaled up to $2.6 million. At this time, we have been advised by the general contractor he expects to achieve final completion in mid to late June.

Those systems that are mechanical complete are moving through the punch list in operational acceptance process. We have a total of 27 systems to turn over in the overall mechanical completion process, and currently we have 8 systems turned over to Dynamic Fuels or 30% of the plant. The operations and maintenance staff of 44 persons is in place and training is 97% complete, and will be concluded this week. We have all necessary permits to operate the plant, and we expect full rate production in the third quarter.

We continue to monitor the renewal of the dollar per gallon tax credit for renewable diesel and the $0.50 per gallon tax credit on naphtha and LPG. According to an article dated May 6 in the CongressDailyAM, the current expectation is that Congress will re-enact these tax subsidies by the end of May retroactive to January 1.

Dynamic Fuels is negotiating with off-takers for our fuel products. Recently Dynamic Fuels signed terms for over 50% of the renewable diesel for the Geismar plant. Dynamic Fuels expects that the terms will be finalized into buying these sales agreements by the end of June. As we near completion of the Geismar plant, we will host a plant tour for the investment community on Saturday, May 22, from 10 am till noon. If you are interested, please contact Joanna Tucker at jtucker@ syntroleum.com. Spaces for these tours will be limited and conditions will apply but we welcome you to come.

I will now turn the call over to Karen.

Karen Gallagher

Thanks Jeff. We generated $1.8 million in cash flow from our operating activities for the first quarter ended March 31, 2010 compared to $7.5 million for the same period last year. Our cash balance was $26.8 million compared to a cash balance of $25 million at year-end 2009.

For the quarter ended March 31, 2010 the company reported net income of $403,000 compared to a net income of an $11.2 million for the same period last year. Total revenue was $4.2 million with operating expenses of $2.7 million in the first quarter of 2010 compared to $20.2 million of revenue and operating expenses of $6.8 million for the same period last year.

At March 31, 2010 we recorded a loss of $746,000 from our 50% investment in Dynamic Fuels. Expenses incurred include overheads and financing costs, which include marking the interest rate swap to market. We incurred $398,000 non-cash loss from foreign currency translation adjustments from our license with the Commonwealth of Australia, which is denominated in Australian dollars.

We remain focused on the completion of Dynamic Fuels plant in the current year. The generation of significant cash flows from operating activities and investments has allowed the company to satisfy our financial investment in Dynamic Fuels. The work of our staff and business development team continues to generate recurring revenues and cash flows that support the operations of the company.

Thank you for your attendance today. We will now open up the call for questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator instructions) Our first question comes from Gary Rumple a private investor, please go ahead.

Gary Rumple

Just a small complaint I guess for a lot of the investment community and individuals out there, would you guys fold the plant to China the announcement was not made for about two to three months later and you said it was going to be at the end of the year and you did not make the statement I believe until late February and March of that year, and this year we have been running blind. On November, you said everything was still on time and to open up at the beginning of the year, and then we have gone virtually about four months with almost blinders and ear plugs on, I was just wondering if you guys can work on – we are part owners of the company, give us a more timely fashion or heads up on what is going on, I mean it makes it tough as an investor when we are lagging two to three months behind on any relevant moves, and I just wanted to pass something that you guys can start concentrating on.

Gary Roth

I am not sure we agree with your statement, this is Gary Roth. Sinopec was announced within four days of a binding agreement. We told you we do not announce non-binding MOUs. As far as Geismar, we announced it as soon as we had the numbers from the general contractor and we announced the change in the contract amendment within four days of when we signed it.

We now know the status of the project. The contract is somewhere between two and three weeks behind on final completion and we reported that today. So as soon as we have binding agreements, we announce them or if we have material term sheets, which we announced today, in terms of the off-take agreement.

Operator

Thank you. Our next question comes from Jack Atwell, a private investor. Please go ahead.

Jack Atwell

Has there been a projection made to determine the price of oil on a breakeven with the new plant yet?

Gary Roth

This is Gary Roth, we have economics that we published. Our economics generally do not tie to oil price but tie to the margins, the differentials between fat prices and oil prices, and we show those historical margins on our Web site as well as projected economics.

Operator

Thank you. (Operator instructions) We have a question from Robert Strassman from Art Boulevard, please go ahead.

Robert Strassman – Art Boulevard

Yes, I tuned in late. I just tuned in to the conference call and I just wanted to know when the construction is going to be finished in the plant. Is it finished or is it going to be finished soon?

Gary Roth

Construction is finished and we expect mechanical our final completion in late June.

Robert Strassman – Art Boulevard

Okay, so there is no more construction that is finished, now you just need to test it for the next couple of months?

Gary Roth

We need to test it for about the next three to four weeks and then there is a documentation process and a process associated with loading catalysts and commissioning equipment.

Robert Strassman – Art Boulevard

How long does that take the documentation part?

Gary Roth

Documentation takes approximately two weeks.

Robert Strassman – Art Boulevard

So then we are talking four to six weeks before, maybe six weeks before some fuel starts running out, the back end of the –

Gary Roth

Four to six weeks before final completion and then we go through a commissioning process that takes about three months to get to where we are at full rate somewhere at the end of the third quarter.

Operator

Our next question comes from Ron O’Donnelly [ph] from Geometric Industries. Please go ahead.

Ron O’Donnelly – Geometric Industries

Yes, how are you guys? It sounds like everything is getting here and you will be producing pretty soon and that is wonderful. My question is based on the future, is there any progress with future plans with Tyson or any other companies building any other plants, whether it is producing diesel or synthetic jet fuel?

Gary Roth

Yes there are plans. We have gone through the process of reviewing the site selection, that process is over now and we are finishing this plant and then we expect to begin the business development activities later this year for the second plant.

Operator

Our next question comes from Grant Goodnel [ph] a private investor. Please go ahead.

Grant Goodnel

Yes sir, I was wondering if you had an estimated profit margin based on current feedstock and oil prices with and without the $1 per gallon tax credit.

Gary Roth

Ron, do you want to take that question?

Ron Stinebaugh

With the dollar tax credit, it is about $0.60 per gallon is the margin and without the tax credit, we would be less than that, it would be slightly negative. We also look at the margins on a (inaudible) basis where that margin is approximately $1 per gallon currently.

Operator

Our next question comes from Charlie Serbath [ph] private investor. Please go ahead.

Charlie Serbath

Gary, ground breaking for plant number 2, do you have a target?

Gary Roth

The ground breaking has already – the plant that we do now, I wish we did have a target for it but we are working at this year. Part of the product off-taking process has led to some of the business development activities for the second plant.

Operator

Our next question comes from John Anderson, private investor. Please go ahead.

John Anderson

Thank you for all your efforts and I believe this question is going to be aimed at Jeff Bigger, I am curious about if you can give us any insight into the off-take agreements. Are you seeing the premium for the fuel prices that you see in the soybean oil and is it kind of consistent with what you are expecting, and as a related question, what you just alluded to, how has the off-take agreements affected the business case for the second plant?

Jeff Bigger

Thank you for the question and yes, we have been in contact with quite a few potential off-takers and since our diesel fuel is a drop in replacement for petroleum diesel, the off-takers are excited about it, it allows them to displace the procurement of biodiesel. So I see you have strong interest in it and good margins for the product, and as we have looked at those potential off-takers, and where and how they would use the fuel, we are addressing that with the business case in the second plant in terms of how we would configure it, and where we would anticipate sending this product, but we are not ready at this point to disclose the details of that. Thank you.

Operator

Our next question comes from John Smith, private investor. Please go ahead.

John Smith

Yes, my question concerns the RIND [ph], in the last conference call you said that the RIND was valued at right around $0.30. In your earlier speech about the margins, does that include the RIND or in case the dollar tax (inaudible) does not get passed, do you expect the RIND to be accretive?

Ron Stinebaugh

This is Ron Stinebaugh, the numbers I quoted earlier does not include the RIND. If dollar per gallon tax credit does not get passed, we would expect that the value of the RIND would increase to supplant that or if that still requires that 650 gallons of biomass base, these will be produced this year and therefore the RIND value should increase, and recently we have seen the RIND value increase to about $0.40. So we are hopeful that that would continue if the dollar were to be eliminated.

Operator

Our next question comes from Louis Navarre [ph] private investor. Please go ahead.

Louis Navarre

Good morning gentlemen and Ms Gallagher, I have a question regarding GTL, what are the obstacles that are in your way for you to bring to market a facility to convert natural gas to fuel? And how does the NAT Gas Act and the Cary Grant Renewable Energies Bill in the Senate affect that business?

Gary Roth

This is Gary Roth. There are probably three things that impacted GTL facility. One is you need long term agreements for natural gas supply, they are just not feasible in the US. So you continue to look internationally but internationally people are typically going to LNG. Now with reduction in LNG prices, we are seeing more interest in GTL.

The second issue related to the GTL is again the technology risk and with the demonstration of the Geismar, which demonstrates the back end of the second half of our technology, that leaves us a smaller piece of technology with Fischer-Tropsch to demonstrate the larger commercial scales. So we think the introduction of the – the start up of the Geismar plant will significantly reduce the risk.

But finally these still are large capital plants, they are multi-billion dollar plants and therefore the restart of the CDF and the endorsement by Sinopec as a technology, we believe will go a long way to support the financing of the GTL or CTL facility. So all that is coming together year end, in the first half of next year and we think that combines nicely the demonstration of the back of the technology, the Sinopec endorsement will lead us to commercializing the FT balance of our technology.

Operator

Our next question comes from David Henry, private investor. Please go ahead.

David Henry

Good morning team. I was just curious as to the outlook say five years from now as to the numbers of plants that you are expecting to have around?

Gary Roth

This is Gary Roth. I think we have always said on Bio-Synfining technology, we think this is a three to five plant business in the US, and then it goes from there internationally. Tyson has also said this is a multi-plant joint venture and what we are focusing now is getting this first plant built and it is just said in our marketing of the products we have got some guidance from clients on things we should do to improve the value of the end product and we are working on those now.

Operator

Our next question comes from Miro Paz [ph], private investor. Please go ahead.

Miro Paz

Hi, in reference to the dollar types credit, you have come to the tail end of – where you are looking at $0.60 profit margin, would that be your $0.40 negative and if so how much do you hinge on that tax credit being passed or if it is to be profitable?

Ron Stinebaugh

This is Ron Stinebaugh, as I said earlier, if the dollar tax credit is not available, we would expect that the RIND value would increase to offset that because there are mandates that are in place for a certain amount of production of renewable fuel. So clearly alternative fuels require some form of government support at this stage of its development whether it be mandates or whether it be tax subsidies, and we think that with both regimes in place in the US that even without the dollar, we believe things should work out to favor our economics.

Operator

Our next question comes from Azra Burn [ph], private investor. Please go ahead.

Azra Burn

Yes, you are talking about multiple plants, how do you intend to raise capital to build the second and thereafter?

Ron Stinebaugh

This is Ron Stinebaugh, there are loan programs in place currently with the US government, whether it be US DOE for loan guarantees, there are still opportunities there for us and beyond that we would seek to raise equity in the capital markets to fund our share of any new plant.

Operator

(Operator instructions) We have a question from Rod Adamwith [ph] from Geometric Industries. Please go ahead.

Rod Adamwith – Geometric Industries

Yes guys, how are you? (inaudible) I missed the earlier conversation about investors visiting and commissioning phase, you guys have any plans for anybody high up in the government to visit on commissioning day or is there going to be a commissioning day?

Gary Roth

Jeff, do you want to answer that?

Jeff Bigger

We will have a dedication ceremony in the fall and we are in the process of extending invitations to dignitaries to attend that and when we get that nailed down Ron, we will let everybody know.

Operator

Our next question comes from Mark Rugger [ph], private investor. Please go ahead.

Mark Rugger

Hi guys, can you explain the plans for the involvement of the United States Air Force in the use of your product? Thank you.

Gary Roth

This is Gary Roth. We continue to do research and deliver fuels to the Air Force and other branches of the military on our fuel, both FT fuels and renewable fuels. However, when we look at commercial processes, we do not find the margins on jet fuels that we find on diesel. We have talked to the Military, we continue to entertain commercial opportunities with the military, but those processes have to compete with the non-military or the civilian market on margin and right now they do not. So when we do see those opportunities, and we think they are there, we will commit the plant to them, but right now we do not see them.

Operator

Next question comes from Joel Stanton [ph], private investor. Please go ahead.

Joel Stanton

Good morning gentlemen. My question is dealing with the off-take agreements, I understand you have signed agreements for approximately 50%, maybe a little bit more, what is the overall feel for additional products and being able to get firm commitments on that?

Gary Roth

Jeff, do you want to take that question?

Jeff Bigger

Yes, I would be happy to. There is a lot of interest in fuel and the real question is how do we maximize the value to Dynamic Fuels for the off-take of the fuels. So we will continue to have discussions and negotiations with a variety of potential off-takers with the intent of how do we maximize that return to us.

Operator

Our next question comes from Azra Burn, private investor. Please go ahead.

Azra Burn

There is a lot of chatter and talk about America’s natural gas potential. Do you have anything in the short and long term for Syntroleum with gas to liquids?

Gary Roth

We continue to pursue gas to liquid opportunities both domestically and internationally. Once again, those projects typically take long-term supply agreements at fixed prices and we have not seen those agreements to date.

Operator

(Operator instructions) We have a question from Ron O’Donnelly, Geometric Industries. Please go ahead.

Ron O’Donnelly – Geometric Industries

Hi guys, I have a question, I hope you do not feel offended by this, there is a lot of mutual funds and everything else invested in your company, but why is there no phone calls from any of these investors or funds asking questions, why is there only private investors that are calling you guys? I just do not understand that.

Gary Roth

Ron, do you want to answer that?

Ron Stinebaugh

Ron, I do not have a great answer for you. Obviously they are invested in the company and if they wanted information from this call, they could ask on this call or they can call me directly. I definitely at times talk to institutional investors and they ask questions then.

Operator

Our next question comes from Louis Navarre, private investor.

Louis Navarre

Good morning again guys. Have you guys looked into the agreements of natural gas that could become an indicator [ph] in the Gulf of Mexico in the Golden Pass and the Serbian Pass along with (inaudible)?

Gary Roth

This is Gary Roth, we have looked at LNG imports and that regasification facilities for long-term GTL facilities where they would be co-located, but today we have not been able to identify long-term fixed price gas contracts coming into the US that would support a long-term GTL construction project.

Operator

Our next question comes form Azra Burn, private investor. Please go ahead.

Azra Burn

Yes, with this horrific (inaudible) right in your back yard and this oil spill, what do you feel – how is this going to affect alternative energy and your professional view?

Gary Roth

We do not see that affecting alternative energy either positively or negative. These alternative energy projects are long-term, fairly large in capital projects and they cannot move with the short-term events. So we look at things that are steady and long term, and today we have not seen any impact on this long term, the events in the Gulf of Mexico long term to our business.

Operator

Our next question comes from Joel Stanton, private investor. Please go ahead.

Joel Stanton

Good morning gentlemen. Regarding the feedstock for your next couple of plants, I understand the current plant is primarily geared towards animal waste not products, feedstock. What are you looking at within the second and the third plants? Are you looking at algae or what other kind of feedstock?

Gary Roth

This is Gary Roth. With Tyson, we continue to look to Tyson to supply it but we also as you know, we tested algae oil, see weed oil, and a number of other alternative oils and they convert very well. One of the issues we have learnt about and it has been reinforced as we look for off-take agreements is this issue of renewability and what is a renewable feedstock. So based on the inputs from some of the clients, we are reviewing our feedstock procurement process. It has not materially changed, but it has opened some other opportunities for us.

Operator

Our next question comes from Mark Rugger, private investor. Please go ahead.

Mark Rugger

Over the past two or three months, we watched the share price erode and that has made a lot of people uncomfortable, and then of course HSBC decided to down grade the stock. For those of us who have invested in a long-term basis, see passed some of the nonsense that goes lightly, what is your view of a share price at December 31, 2010?

Ron Stinebaugh

It is Ron Stinebaugh, we do not give indications of what we think the share price should be worth. Our philosophy is that if we continue to execute on delivering a plant that the share price will take care of itself and that is what we focus on.

Operator

(Operator instructions) We have a question from John Anderson, private investor. Please go ahead.

John Anderson

The Dynamic Fuels venture, which we were pricing, my impression was that that would be primarily feedstock from pricing. Is my understanding incorrect that you would use that same joint venture with pricing for other feedstocks that may or may not come from pricing?

Gary Roth

That is correct. Pricing’s primary role is to supply the feedstocks whether that is internal to their own company or external but it is to supply the lowest cost feedstock to the plant. So we have always been open to various feedstocks, it is the question of maximizing the margin in the plant.

Operator

Next question comes from Louis Navarre, private investor. Please go ahead.

Louis Navarre

Mr. Roth, what would you say the cubic feet of natural gas is required to even think about starting a natural gas liquid plant?

Gary Roth

I am not too sure I understand the question but typically you need trillions of cubic feet of natural gas to justify and support a GTL facility.

Operator

Our next question comes from William Bryan, private investor. Please go ahead.

William Bryan

Good morning Ms. Gallagher and gentlemen, thank you for an excellent presentation. My question relates to current production capabilities. You mentioned that you are supplying small quantities of fuel for testing purposes. What facility is producing net fuel, and who owns that facility?

Gary Roth

We use a number of third-party commercially available facilities to produce the fuel. The capacity varies by facility and we do that by using our technology, and our catalyst and our processes methods in those third-party facilities.

Operator

Our next question comes from Lloyd Cameron , private investor. Please go ahead.

Lloyd Cameron

Yes, I am sorry, I missed the first part of the presentation because I had the incorrect phone number however I would like – maybe it is a redundant question but have you specifically targeted the military for any contracts for their jet fuel or diesel needs?

Gary Roth

We have investigated the off-take agreements with the US Military, our conclusion is that the margins are better currently outside of the US Military. We would suspect that the military would be a better off-taker once the plant is up and running and it has demonstrated its production.

Operator

Our next question comes from Mark Rugger, private investor. Please go ahead.

Mark Rugger

You had indicated that approximately 50% of the production rise has been spoken for. Can you indicate approximately what percentage Tyson itself might be using of your annual production?

Jeff Bigger

At the current time, Tyson is not an off-taker from the plant.

Operator

Our next question comes from Greg Jackson, private investor. Please go ahead.

Greg Jackson

Yes, good morning everybody. I think it has been a great conference call. Did I hear you correctly that the stock collection had to be completed for the second plant? Is that what I heard?

Gary Roth

We have finished the process of going through selecting a site for the second plant. We have done it, we have looked at it, we have looked at the tax regimes, the employment regimes, the support regimes, and we have ranked locations for the second plant.

Operator

(Operator instructions) We have a question from John Smith, private investor. Please go ahead.

John Smith

Have the off-take agreements become final, will you guys be announcing those in some kind of a press release?

Ron Stinebaugh

This is Ron Stinebaugh. These types of agreements typically have confidentiality provisions and whatever we announce will be with the approval of –

Ron Stinebaugh

The caller is still there?

John Smith

Yes, Gary I am sorry, I lost you for a minute.

Ron Stinebaugh

Yes, I was just – I got interrupted by the conference operator, I apologize, I was just saying that the contract, any contract we sign typically has confidentiality provisions. So we will disclose what we can disclose.

John Smith

Okay, I understand it and I appreciate it. Thank you.

Operator

The next question comes from Chris Neeble, private investor. Please go ahead.

Chris Neeble

Hi guys, I pursued all your efforts, just curious, you guys do not sound really excited , I am just wondering if you would verbalize your excitement a little bit. And secondly what can we expect from the shareholders meeting today?

Gary Roth

Now you know you get a room full of engineers and not much excites them, so what can we tell you. From the shareholders meeting today, we will review what we have done in the past. We will take you through a visual of the Geismar plant, all the equipment piping and associated processes are in place, so we are going to walk you through that, and then we will take any questions.

Operator

Our next question comes from Mark Rugger, private investor. Please go ahead.

Mark Rugger

Thank you. I seem to remember a while ago that the DOE application was rejected and the stocks were not re-applied for a variety of reasons. Is you intention to jump back in to re-apply for DOE money in the future?

Gary Roth

Yes, this is Gary Roth, each one of those applications is about $0.5 million. From our previous application we learned about five items that the DOE wanted addressed. At that time, one of them was off-take agreements. Now, we have what we feel is a pretty good handle now on what off-take agreements are going to look like in this business, and we are currently reviewing whether we go back to the DOE given the cost and the effort it takes to make those applications. But we are reviewing our current application process now.

Operator

Our next question comes from Eric Sedar, private investor.

Eric Sedar

Hi guys, how are you doing today? Quick question for you, how do companies find out about Dynamic Fuels and the benefits of your fuel and not to sound like a wise guy but are you calling companies and saying this is who we are and this is the type of fuels that we have, how does that process work?

Gary Roth

You could find out about of Dynamic Fuel by going to their Web site, but one of the things that I will tell you is that when the off-takers want products that looked like the products they have been using for the last 100 years, when one introduces new products, this is a long drawn out and very expensive process, so one of the things we focus on is how our product is just like diesel and our specification, our quality is just like diesel and that is the biggest selling point that we have on the product. So typically the clients are very sophisticated, they have been in the oil and gas business and know the oil and gas product, and once we get in front of them with the product specifications it sells itself.

Operator

I am showing no further questions at this time.

Gary Roth

Great. Thank you very much for joining us in today’s conference call. If you have any additional questions, please call Ron Stinebaugh at 918 764 3406. We appreciate your interest in Syntroleum. Thank you.

Operator

Thank you ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.

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Source: Syntroleum Corporation Q1 2010 Earnings Call Transcript
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