In my opinion I think this is a very good development. I imagine Lord Moynihan had some influence in this latest signing. For a country like the UK with declining oil production and poor energy security, and of course ruinous green policies*, companies like Hydrodec should get much better attention and financial incentives... as do certain industries that have no track record of viability, unlike Hydrodec. Contacts within governmental circles are always helpful, if you haven't connected the name Archer yet, I'm pretty sure she is the wife of another famous Archer... I've seen her make her own TV appearances and with her Husband. *to be clear, I'm not against 'green', which is actually better served with words like sustainable, but the implementation of said green policies.
RE: Not good maths
Hi Ups1de, I will try to answer, in a general sense rather than with specific calculations, which I used to do a lot some years ago, but without reliable inhouse data, leaves too much room for error. Firstly, if the crude price heads north, it doesn't automatically mean that the Superfine sale price increases and therefore margins. It doesn't work like that, at least with respect to the rerefining industry. A very crude (no pun intended) measure is WTI benchmark vs No2 Diesel oil for price performance. Over the years HYR have fought the battle to improve the resale perception of their product, which was hampered by the industry discount for 'recycled' goods... which Superfine is not, it's a different process producing a superior (over virgin) product. The evidence is that this battle was being won, added to additional production improvements, scale etc, margins were improving slowly, even through periods of unfavorable feedstock costs. Your right that margins are small, that's why the rerefining industry has been consolidating, i.e. between collectors and refineries. e.g the deal with G&S. The deal is key for both parties to gain market share, improved margins and more stable costs. The calcs aren't quite right and you can't compare the two in that manor. The cost to produce 1 barrel of oil varies wildly, anything from $40 > $100. Many newer plays will be under water with prices around $80, hence why Saudi Arabia is allowing the price fall. (hits Russia and specifically the US) In Hydrodec's case, as long as the feedstock channel can on average cope with the fluctuating price, and as the move to higher quality oils continues, margins should 'on average' be no worse than they are. Again, I point to the G&S deal, in the past it wasn't margins per se that were the problem, but getting enough feedstock to ramp up production. Lastly, before the fire, from around Sept moving into Dec, the company achieved an important and historic milestone, a positive EBITDA run rate. Now this doesn't tell you the whole story, but is a good indicator as to the current business model.
Not good maths
Did a bit of digging: are my maths correct: 1US oil barrel=159l; so fresh oil production cost per litre:50cents($80/US brl);HYR revenue per litre>$1 /Gross margin :30cents.Surely the recycled oil 'premium' would have to close the gap vs new oil..Cannot see how HYR can make real money if this oil price holds& if production cost for recycled remains around 70 c a litre.YesBusiness model gearing works if oil price heads North but with declining global demand/US shake supply/current Saudi lassez faire attitude to new norm then it doesn't look good for when HYR bring production back in stream. One to watch closely
16 Oct '14
Impact of crude oil price decline?
Does anyone on bb know,,,As crude oil price tanks to ~$80/ brl:more than 20% decline...what happens to demand/ economics for reprocessed oil?Surely it hurts HYR hard?
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