ClearSign Combustion (NASDAQ:CLIR) is a disruptive technology company that is focused on delivering clean burning emission systems to manufacturers. The company's primary goal is to develop a solution to air pollution without forcing manufacturers to compromise efficiency. Using their now (as of 2015) validated Duplex Technology, they are able to cultivate flames that burn at 100% efficiency which allow for 0% emissions and greater energy production.
As CEO and a fellow shareholder, I believe this is an exciting time to be an investor in ClearSign. - ClearSign Annual Letter to Shareholders
As a long-term shareholder, it's no secret there have been ups and downs. Although 2016 has been off to a rough start, maybe now is a good time to recap everything accomplished in 2015 to prepare a positive outlook for 2016.
- The company completed a $17.5 million stock offering.
- Tested and validated Duplex Technology in a full-scale trial.
- Received their first commercial order for Duplex Technology.
- Earned Technology Company of the Year by the Petroleum Economist.
These accomplishments are huge milestones for ClearSign. The company's fundraising of over $17 million has given them sustainable capital to continue research and production of Duplex Technology. With a quarterly cash burn of $1,961,000, the company can continue to make progress for another year and a half without approaching financial distress. Coupled with the added capital, the team at ClearSign has already achieved their first purchase of Duplex Technology in 2015. The company also earned the "Technology Company of the Year" award for their "... technological innovation/refinement or adaptation of existing technology pilot tested during the judging period... an innovative approach to tackling business and in-field challenges" - Petroleum Economist. This award was showcased in front of numerous potential customers like Valero (NYSE:VLO), Exxon Mobil (NYSE:XOM), Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) and more. This accomplishment provided validation for shareholders and companies actively seeking alternative emission solutions which may soon translate into revenue.
Q3 Furthering Signs of Growth
Quarter three has come to a close and the results are clear signs (no pun intended) of progression in their mission. Outside of booking their first commercial sale with their initial field demonstration customer, the company also has entered into numerous agreements with companies interested in Duplex Technology while adding new staff to increase research and development speeds.
Business Progression Highlights
Evaluation Agreement with Tesoro Refining and Marketing LLC: ClearSign has entered into an agreement with the aforementioned company to retrofit a refinery heater in the Los Angeles area. Performance criteria being evaluated includes but is not limited to levels of nitrogen oxide emissions to meet or exceed South Coast Air Quality Management Districts goal, of which is reducing NOx emissions to less than half of current levels by 2020.
The Company's Texas Market Entry: Delek US Holdings has selected ClearSign to retrofit burners within a process heater at Delek's 75,000 barrel-per-day refinery in Tyler, Texas. This trial is to determine ClearSign's ability to reduce maintenance costs and plant downtime.
Dr. Roberto Ruiz: Formerly Senior VP of Product Development, Dr. Ruiz is now ClearSign's new Chief Operating Officer. According to the company's 2016 letter to shareholders, he is in charge of opening a field engineering and sales office in Tulsa, the largest cluster of traditional industrial combustion facilities in the U.S.
This year has started off on a very volatile foot across all investment fronts, not just ClearSign's. With commodities dropping so low, we have seen companies lose value almost over night. All this means, for those who are confident in the company and they way they do business, is we have to sit tight. We have yet to finalize a sale but the CEO's tone in the letter to shareholders is optimistic and, leaving 2015, we have the record to prove they company is making strides in the right direction. I believe the biggest obstacles we will face are installation/testing time, speculation and oil prices.
Although the company has had tremendous success in the past, multiple simultaneous field tests may put additional strain on the company that it may not be ready for. Retrofitting Duplex Technology onto different units across the country can bring numerous logistical hurdles and this potential speed bump should be recognized. Hopefully, these potential growing pains will be surpassed by the company's management and development teams quickly enough to spearhead Duplex Technology sales by 2017.
The company has yet to finalize a sale which makes it all the easier for outsiders to speculate on the company's value. We may see some tremendous fluctuations across the quarters to come.
Oil prices have fallen to an all-time low which may play two roles for ClearSign. Since supply costs are so low, many of the industry leaders are finding themselves with steady demand accompanied by increased profits. This may potentially take pressure off producers to take on Duplex Technology because this extra free cash may eliminate the urgency for cost effective solutions to meet regulatory requirements. On the flip side, the more progressive manufacturers may take this as an opportunity to use increased revenues to spearhead their way into a clean emission program. Now, considering "the little guy" potential refinery customers, decreased oil costs may decrease revenue, making regulatory requirements even more cost intensive, downtime less affordable, and efficiency crucial. ClearSign may find themselves in a position for rapid growth upon further product valuation because of smaller refineries' urgency to take on a better solution to regulating emissions.
All else aside, ClearSign has agreed to test more of its technology than ever before, is expanding to new markets, finalizing 2015 purchases of Duplex Technology, and has over $16 million in assets to keep this operation going strong through 2016. It may be a rocky time, but the future seems bright for ClearSign. Industry drivers, government regulation, technology valuation, and increased awareness of Duplex Technology are all potential factors of a bright future.
Disclosure: I am/we are long CLIR.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Opinions expressed herein by the author are not an investment recommendation, any material in this article should be considered general information, and not relied on as a formal investment recommendation. Before making any investment decisions, investors should also use other sources of information, draw their own conclusions, and consider seeking advice from a broker or financial advisor. Although Short some of my position, I intend on holding majority stake for a medium term play.
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