Since we first posted on Particle Drilling (PDRT-$3.97) back in October 2006, shares in this developer of the Particle Impact Drilling (PID) System, a patented system utilizing a specially designed “fit for purpose” drill bit fitted with jetting nozzles and polycrystalline diamond compact cutting structures for penetrating hard-rock formations in the exploration of oil and gas, have risen about 42 percent.
This report will address several developments that have been positive catalysts on the stock price over the past few months.
- January 09, 2007. Particle Drilling Technologies Completes Another Successful Trial Leading To New Contract.
CEO Jim Terry stated: “During this trial, the Company (PDTI) completed the longest ever footage run with its PID technology, drilling a 120 foot interval in approximately eight hours of on-bottom drilling time.”
10Q Detective: Minimized in the excitement was that equipment failures resulted in interruptions of continuous operations, including a mechanical failure with the particle storage drum drive line, a broken valve, and debris plugging a nozzle on the new PID bit.
- January 30, 2007. Particle Drilling Technologies Announces Contract With One of North America's Largest Independent Oil & Gas Companies
Pursuant to this agreement, PDTI will provide its patented Particle Impact Drilling services in connection with the Operator's drilling program in East Texas with the initial PID operations expected to commence during the first calendar quarter of 2007.
10Q Detective: “The compensation under this agreement, if any, is based on the Company's performance pursuant to a gain-sharing formula.” As the PID System was still in the developmental phase as of April 2007, it is doubtful that PDTI recognized any revenue from this alleged deal.
Oh, “at the Operator's request, its name was withheld and additional details of the contract remained confidential.”
Shares of the oilfield services driller surged more than 14 percent, or 59 cents, to close at $4.10 on the news.
- February 12, 2007. It was subsequently revealed in this issue of Oil & Gas Journal that the undisclosed exploration concern was Denver-based Gasco Energy (GSX-$1.92), which with a market capitalization of $163.5 million is hardly “one of North America’s Largest Independent Oil & Gas Companies.”
CEO Terry also said in the interview that PDTI was expecting to have ten sets of equipment available for rental by the end of 2007 (initial costs are estimated at about $1.8 million, with an expected payback period for each unit of about eight months).
The payback period, of course, is subject to changes in day drilling rates, delays due to equipment failures or bad weather, and variable labor costs.
- During the week of March 16, 2007, the Houston Business Journal ran an article on “Hard-Rock Drilling,” which positioned the PID System as a promising, radical departure from traditional technologies. Did we forget to mention that Thomas Hardisty, senior VP of corporate development at PDTI, wrote the story?
- April 2, 2007. Particle Drilling Technologies Successfully Completes PID-System Trial In Travis Peak Formation.
This commercial trial allowed the Company to field-test several new advances to its Particle Impact Drilling system under rigorous conditions: (i) it tested a newly constructed solids-processing and particle-storage unit; (ii) for the first time used a newly designed 8.5 inch diameter bit; and (iii) the Company drilled at depths below 12,500 feet -- its deepest drilling operation to date.
The Company is now focused on completing the development of its new injector system and further improving productive-drilling-time (PDT) as the priorities for the next commercial trial.
CEO Jim Terry points out that several upcoming improvements to the PID system will help the company realize the full potential of its new technology: "Our drilling efficiency continues to improve and we will now focus on getting an operational injector replacement as soon as possible, and will proceed with the next commercial trial when that effort is complete."
On the commercialization front, Terry indicated that the Company is working with a growing number of oil and gas companies to evaluate their target applications. He expects to establish additional contracts with a group of early adopters, thus providing a solid foundation for rapid growth once the PID system is fully commercialized.
Can PDTI management’s claim of its drilling results be trusted? Their repeated promulgations of alleged commercialization have been only outmatched by the fact that the Company still has yet to earn a dollar in rig rentals.
Total revenue generated by the Company from June 9, 2003 (date of inception) to December 31, 2006: nil. Accumulated net loss = $22.6 million.
Do unfulfilled promises justify a 42 percent gain in the stock since last we met?