STWA, Inc. (ZERO.OB) has a compelling technology and an achievable business plan to solve a big problem for a very large market. I worked in product development for the Company from 2008 through 2011. I am a shareholder. I am not currently employed by the Company. I was not paid to write this article.
My qualifications for the comments in this article regarding the technology are the degree I earned in Electrical and Computer Engineering at George Mason University and my subsequent work as a consultant for major Fortune 500 manufacturers of mining equipment and steam turbines. One of my areas of study was electromagnetic theory, the discipline used to design all types of devices from batteries to microwave ovens to cell phones to STWA's technology. My qualifications for my analysis of STWA's business execution are my five years as a public company CEO and my more than twenty years' experience as a corporate officer in several different industries.
First, the energy business actually uses an amazing amount of energy in the process of producing energy. In transporting crude oil, very large electrical pumps are used which consume a lot of energy. In order to reduce the energy needed for pumping and in many cases to simply make the oil flow faster to market, oil pipelines may be heated with natural gas. The heating of the oil makes it "thinner" or less viscous which makes it flow faster. Imagine a one to two hundred mile pipeline with gas burners all along the pipeline burning natural gas all day every day. That is a lot of wasted energy.
The other method for making crude oil flow faster to market is to include additives. Many pipelines use a synthetic additive called Drag Reducing Agent "DRA" or add kerosene or gasoline to the oil. In each case, additional pumping or removal and separation infrastructure is required which increases the energy and cost burden for transporting the oil.
STWA's advancement in this field is the AOT, Applied Oil Technology. I have personally worked with the co-inventor of AOT technology in the laboratory at Temple University. He is the current Chairman of the Physics Department at Temple University. When not assisting STWA, he also does research for the United States Navy and the US Department of Energy. In 2011, he gave a presentation on AOT at the 13th International Conference on Electrorheological Fluids. Electrorheology is the specific branch of physics that deals with how fluids behave in the presence of electromagnetic fields.
I was involved in building the test apparatus and have seen in person many, many tests of the AOT technology where crude oil of various different consistencies flowed faster through the AOT prototypes. Many of these test results are documented in scientific papers available on the Company's web site.
The way that AOT "thins" or reduces the viscosity of the crude oil is as follows. Crude oil passes through the AOT in a manner similar to how water might pass through a filter. Instead of filtering the crude oil, the AOT charges the particulate matter in the fluid with an electric charge. Crude oil contains both liquid and solid matter "in suspension" which means that the solids are not dissolved in the liquid. The electrical charge causes the particles in the crude oil to join together, making more room for the liquid component of the oil in a given volume of crude oil. This phenomenon "thins" the crude oil and reduces the viscosity making the oil flow faster. What is truly amazing and something I have seen first hand many times is the very small amount of electricity it takes to charge the oil and reduce the viscosity. The energy required to reduce crude oil viscosity with AOT is more than 100 times less than the energy required by heating the oil to get the equivalent reduction in viscosity.
After working with STWA and Temple University to demonstrate this capability to industry partners in the laboratory, I then worked with STWA to set up the initial field tests of the prototype unit at the Rocky Mountain Oilfield Test Center. I worked with the CEO and COO of the Company to brief the commercialization partner who built the field prototype. I have been to the RMOTC test site and seen the AOT in the oil field.
I have spoken with pipeline field engineers from major pipeline operators who know from decades of experience that electromagnetic fields improve oil flow in pipelines. Pipeline operators will often deploy magnets on pipelines to reduce waxy buildup. The AOT is a large scale commercial implementation of that same phenomenon.
On the achievability of the Company's business plan, I have also spoken to executives at major pipeline operators who have acknowledged to me that there is a need in the marketplace for a product that can reduce oil viscosity at less energy expense than current methods. I believe that the Company is executing a well thought out strategy of including major pipeline operators and equipment manufacturers in the design and commercialization of the product. I have spoken to their representatives and have seen and heard the enthusiasm for the technology.
Additionally, the Company CEO is an experienced oil and gas investor who understands this market and has made a substantial personal investment of years and money in the Company. He has built a management and administrative team that have also now invested years in commercializing this technology. Lastly, the Company is unique in that it has hundreds of individual shareholders who have supported the company, some for more than a decade. Product development often takes time and money. In my view the management team and many shareholders of STWA have demonstrated that they are deeply committed to the commercialization of this technology.
In conclusion, I have personally seen the underlying AOT technology reduce the viscosity of flowing crude oil many times on many different occasions. I have been involved in demonstrating the technology to many industry experts with decades of oil pipeline experience who have all indicated that they believe that it is completely scientifically possible to scale the technology into commercial saleable units that can be deployed on pipelines around the world. The company is currently focused on executing its business plan to complete the commercialization and market adoption of the AOT technology.
Disclosure: I am long ZERO.OB. 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: I have worked in the past as a consultant to the Company. I am not currently working with the Company.