Solazyme's Oils Rise To The Top With $3.1 Trillion Market Potential

| About: TerraVia Holdings, (TVIA)

The following was quoted from Solazyme's (SZYM) Q4 2011 Earnings Conference Call:

Our platform technology enables the production of triglyceride oils, a class that represents all non-petroleum oils on the planet. From a scale perspective, triglyceride oils including plant oils and animal fats represent over a billion barrels of oil per year at costs far above petroleum. Our technology allows us to mimic and enhance versions of existing triglyceride oils... These oils can replace or supplement traditional petroleum, animal fat, or vegetable oils leading to a market opportunity in excess of $3.1 trillion...

- Jonathan Wolfson, CEO of Solazyme

The following statements emphasized in bold signify an overwhelming value proposition for investors capable of grasping the implications of this company's technology.

  1. "Costs far above petroleum." Skeptics are often quick to note that biofuel companies must compete with the price of oil. As a company that specializes in triglyceride oils, Solazyme actually gains the innate advantage of competing against higher-margin oils that trade with a premium to that of petroleum. Evidence of this can already be found in the company's exploration into higher margin markets such as cosmetics and food.
  2. "Mimic and enhance." Utilizing biotechnology to tweak the output of microalgae, Solazyme gains the ability to customize oil profiles. The company's ability to copy oil profiles is already more than impressive, as it gives access to countless markets. Yet the cherry on top lies in the company's capability to create new compositions for partner companies. By creating unique oil profiles yet to be seen in this world, the company opens the door for customers to innovate and develop new products and applications that can revolutionize their respective industrial playing fields.
  3. "Replace or Supplement." As a sustainable and renewable alternative to finite sources of oil, Solazyme's technology platform offers a unique sourcing solution in light of dwindling reserves. The company's technology can ultimately be used to outright replace the need for petroleum. As is, the company's product has already powered a commercial jet liner from United Airlines (NYSE:UAL) in a historic flight that utilized a 40/60 jet fuel blend. The ability to supplement petroleum products also opens wide a market for additives with a higher profit margin opportunity.
  4. "In excess of $3.1 trillion." The ultimate implication here lies in the company's ability to choose and expand into the most profitable opportunities available. The company has the unique power of choice. As it develops its first production facilities to match already proven commercial scale capabilities, Solazyme has been privileged with the ability to dive head first into industries with high profit margins including cosmetics, food, and chemicals.

With a potential market size as large as it is, an indicator of Solazyme's success should be best measured with its ability to obtain the most prime choice in terms of its partnerships. Undoubtedly, this is why we see that Solazyme's biofuels have sparked an ongoing working relationship with oil conglomerates Chevron (NYSE:CVX) and Ecopetrol S.A. (NYSE:EC). In terms of sourcing its non-food feedstock needs, Solazyme again strikes gold with one of the largest sugar refining operators in Brazil through its investor Bunge (NYSE:BG). In terms of customers with access to the largest variety of oil-based products, it's encouraging to see that Solazyme recently deepened its relationships with titans of their trade found in Unilever (NYSE:UN) and Dow Chemical (NYSE:DOW). We see, therefore, that the company is well-positioned for growth with some of the best partners available for its needs. And perhaps what's even more intriguing is how excited they are about it.

Already recognized as the #1 company in the "50 Hottest Companies in Bioenergy 2011-2012" by Biofuels Digest, Solazyme undeniably stands as the most promising advanced biofuel play on the market at present. This is especially the case as the company's public competition has recently been stumbling over itself in the pursuit to scale up their technologies. Amyris (NASDAQ:AMRS) recently made the decision to back away from making biofuels as a short-term goal in light of the road blocks it encountered. Yet to date, Solazyme has managed to meet and exceed every one of its benchmark targets. As of the time of writing this, the company's stock has increased to $14.34/sh, a 20% rise over the last week, when Solazyme reported its fiscal Q4 2011 earnings.

Disclosure: I am long (SZYM), (AMRS).