I think the markets are missing a lot of the energy stories that are now emerging. This time of year so much focus can shift away from your portfolio to what are the plans over the holidays. This may be one of those unique moments to see what's coming to life in a sector you like or maybe even something totally new to your investment strategy.
Since I grew up in Alberta I tend to always keep a close eye on energy companies I feel are under valued and may present the biggest returns short term and long term. In the news we always read about indicators that the oil patch is slowing or accelerating but not all of us use that data to our advantage when making investment decisions. I subscribe to the pick and shovel principle of buying the supporting companies around a particular sector since the price fluctuation on oil prices don't effect these guys short term. Another thing I look for is the next big thing in energy. This is somewhat radical thinking since we only know of so many ways to get an energy source to the market and some new ideas in solar and wind have failed to meet the mark due to the costs of production.
I have spent some time looking over the bio fuel sector in the US and Canada and found that some traditional oil & gas companies are now thinking of adding bio fuel to their mix of products. Partly to prepare for possible grants that may step up in case the new energy source is not as viable and also to meet the growing social demands for cleaner fuels. In particular I liked this news release on a new development in oil seed production from a partnership with PGF Biofuels and Agrisoma Biosciences Inc. Follow the link to the Dec2, 2013 news release on RSB certification. http://agrisoma.com/
Working together to commercialize carinata oil that can be refined into fuel and used in existing engines as a 100% petroleum substitute. They are also working to engage local farmers to maximize production to meet the growing demand. This will ensure current and future demands for renewable aviation fuel and biofuel are met.
Calyx Bio-Ventures Inc.owns approximately 50% of Agrisoma Biosciences Inc. Calyx also owns a proprietary suite of intellectual property and patents related to plant genetics and biotechnology. This intellectual property has been licensed to Agrisoma, and is being used to further the development of carinata.
On October 29, 2012 the Nation Research Council of Canada successfully completed the world's first flight segment on 100% renewable, drop-in biofuel. The fuel was produced from carinata seed and the results showed a 50% reduction in aerosol emissions, 25% reduction in particles, a 49% reduction in black carbon and a 15% improvement in fuel usage which could mean significant savings to the aviation industry. After the flight Popular Science Magazine named it one of the Top 25 Most Important Scientific Events of 2012. http://www.popsci.com/science/article/2012-12/big-science-stories-2012-interactive-graphic.
Follow this link to watch the historic flight on The Discovery Channel. http://watch.discoverychannel.ca/#clip899251
Alternative energy sources have always been hampered by costs to produce over the abundance of fossil fuels readily available. This facade of stockpiles in fuel storage has played a key role in resistance to switching fuels since most companies that heavily rely on fuel have it factored in to their costs and constantly monitor consumption. In the not so distant future however, fuel costs combined with government incentives to switch will turn the tables on fuel sources in my opinion. This switch will creep in while some position themselves for a move they feel has already started.
The growing concerns over global warming didn't disappear as some predicted. Instead governments find themselves dealing head on with social and environmental groups who are asking what will be left for the next generation after we have used up all the oil. Unfortunately this social pressure alone has strengthened the resolve of some politicians. Some feel this is an issue to leave for the next administration to deal with. The next move may be the governments allocation of funding to support research and a tax incentive for purchasing biofuels. The demand is building and what airline wouldn't want to stand in front of the media and say they just cut their carbon emissions while saving the company money as well.
The driving force for biofuel is that it is being mandated as a sustainable petroleum replacement around the world:
- In Canada, the federal government required diesel to contain 2 percent renewable fuels as of July 1st, 2011.
- In the United States, the expanded Renewable Fuels Standard (RFS2) stipulates a minimum of 21 billion gallons of biofuel from non-food crops by 2022.
- The ASTM International has globally approved biojet fuel from vegetable oil for up to 50 percent blend rates, opening the door to 58 billion gallons of aviation biofuels.
Delivering Benefits Across the Value Chain
For growers, Agrisoma Carinata is a vigorous, competitive crop uniquely suited to semi-arid crop production that delivers high yields and utilizes established Brassica spp. (napus, juncea) infrastructure.
For biofuel manufacturers, Agrisoma Carinata provides a lower cost, uniform, long chain mono-unsaturated fatty acid profile that enables additional efficiencies and returns from biofuel manufacturing processes
Agrisoma Carinata will set a new standard for energy feedstock crops, creating a step-change in economics for growers and biofuel manufacturers.
ETL Carinata - Projected from oil percentage increases noted in field trials conducted by Agrisoma 2008 & 2009 evaluation feedstock genes stacked with ETL technology
When I recently met with the CEO of Calyx Bio-Ventures Don Konantz it was refreshing to hear from someone so passionate for their own product and business plan. If you sit back and think about it, here is a company that can produce an oil from a unique energy feedstock crop and refine it into a drop in ready to use fuel with the existing infrastructure that's already in place. Once the seed is crushed the bi-product is used to feed farm animals so there is no waste. It almost sounds too good to be true.
Some key milestones are now within reach and this could be the launch point investors have been waiting for from this company and in the sector as a whole. Times are changing and social and environmental factors may make this a top bet in the energy sector in 2014.
Check out some of their key partners: http://www.calyxbio.com/partners
Disclosure: I am invested in Calyx Bio-Ventures CYX.V