What’s the Next Big Thing in the Oil Space? (SBOW, PQEFF, MTDR, FANG, HP, SM, HAL, SLB)

The energy space is the unambiguous market leading group so far in 2022. And there’s plenty of data out there to suggest that isn’t likely to change very soon.

One of the key points helping to drive this idea home is information from the Commodity Futures Trading Commission (CFTC), which puts out a weekly report on trader and fund positioning in major futures markets each week called the Commitment of Traders report (or CoT).

The most recent report shows speculators in West Texas Intermediate crude oil (or WTI Crude) holding a net long position of less than 400k contracts, which is historically low for bull market trends in oil. Recent major tops have come with far more crowded positioning, where we see net speculator long positions well above 500k contracts.

More speculative long side positioning means a greater potential for selling to turn ugly as speculators suffer deep losses and panic. Think of long spec positions as ammunition for downside movement. Right now, there isn’t much ammo for selling, which suggests the bullish trend still has more room to run.

This is particularly bullish for energy stocks, including SilverBow Resources Inc. (NYSE:SBOW), Matador Resources Co. (NYSE:MTDR), Diamondback Energy Inc. (Nasdaq:FANG), Helmerich & Payne Inc. (NYSE:HP), SM Energy Co. (NYSE:SM), Halliburton Co. (NYSE:HAL), and Schlumberger Ltd. (NYSE:SLB).

But one smaller more speculative name might deserve a closer look in this mix given its unique strategy: Petroteq Energy Inc. (OTC US:PQEFF), an oil company focused on the development and ‎implementation of its proprietary oil-extraction and remediation technologies.

PQEFF bills itself as a clean technology company focused on the development, implementation, and licensing ‎of ‎patented, environmentally safe, and sustainable technology for the extraction and reclamation of ‎heavy oil and ‎bitumen from oil sands and mineable oil deposits. The company’s versatile technology can be ‎applied to both water-wet ‎deposits and oil-wet deposits, outputting high-quality oil and clean sand.‎

Petroteq most recently announced that Valkor has updated and completed the design for the planned 5,000 BPD day extraction plant.

According to the release, Valkor signed a Technology License Agreement with Petroteq on July 1, 2019, and has been operating at the plant in Vernal, Utah under a Service Master Agreement signed on November 1, 2018. Valkor is fully cognizant of the engineering and technical aspects needed for the process to have this update done to incorporate all additional data into the original FEED (front end engineering and design).

Petroteq’s management believes that an updated FEED design is unique to the patented Petroteq technology permitting a highly effective oil extraction process from oil-sands in an eco-friendly method and can be seen as a true green energy technology.

Following the FEED, Valkor conducted various additional design studies to prepare the final engineering plans. A primary part of this was a design study with M-I SWACO, a Schlumberger company, for the backend processes for sand separation and drying. The system is a conventional sand dryer modified for service with petrochemical solvents in a closed loop. A combined unit has been proposed as a turnkey system to handle as much as 8,000 tons of sand per day with a target of EPA Tier 1 quality for the resulting sand. Design performance, budget and schedule have been determined. M-I SWACO did a full 3D model of the design, as shown in the photograph below.

As noted in the release, other studies were conducted on optimizing an ore mixing and decanting system. Valkor advises that it is ready to implement a 5,000 BOD plant design. All necessary equipment has been verified as available on the market on lead times that result in an 18-month build. Petroteq’s management is confident the updated plant design is of the highest technical quality and will exhibit superior operating performance.

Petroteq Energy Inc. (OTC US:PQEFF) CEO and CTO, Vladimir Podlipsky, further commented, “Our advances in engineering work exemplify our intentions to continue to operate the Company toward future expansion and revenue growth, regardless of the on-going offer from Viston United Swiss AG. Management will continue to handle business as usual and make utmost efforts to enhance shareholder value.”

PQEFF is particularly interesting because the stock is sitting in a very constructive lateral range that could break out to the upside on any move above $0.44/share. We would also note that its overall strategic vision suggests the company effectively straddles the line between legitimate oil and gas player and green technology company – which is a major advantage in an oil bull market during the ESG investing era.