Wednesday, June 12, 2013

Petrosonic Energy (PSON) Brings Something Sonic to Oil

Here we go.  Tobin Smith's Next Big Thing Investor mailed me a full-color teaser promoting Petrosonic Energy (PSON).  This stock has one of the more original business models of any small-cap I've seen in a mass mailer.  Most de-asphalting technologies in crude oil refining use solvents.  Petrosonic uses - as their corporate name implies - sonic energy.  They're certainly adventurous in locating their pilot project in Albania, which has a lot of heavy crude oil to process from its on-shore fields.  For the record, I've never dated Albanian women.

The CEO has experience as an oil executive but I'm concerned about whether the rest of the team has experience in petroleum engineering.  It's not obvious from their bios as presently written.  Refining oil isn't something just any manager knows how to do.  I have no idea whether their technology actually works, so we'll have to wait for data from their downstream refinery.  Do the Petrosonic people speak the Albanian language?  Do their local partners speak English?  That would be pretty important to know if they're going to understand the results of this particular engineering process.  Albania ranks 113 out of 176 in Transparency International's 2013 corruption index.  That's very important to know for anyone who wants to do business there.

Their 10-Q for May 30, 2013 admits to going concern doubts, and they will have to continue raising capital.  They did something clever by paying for investor relations and legal services with stock that can be repurchased.  It's nice that they're willing to conserve cash that way.  I'd be even more impressed if their technology really works.  They ended their most recent quarter with almost $2.2M cash on hand and a net loss of $765K.  That means they can last the rest of 2013 before another capital raise dilutes shareholders.  Oh BTW, they used to be called Bearing Mineral Exploration.  Whatever.

Petrosonic Energy is a risky play that doesn't fit my portfolio at this time.  Let's see if they can deliver scientifically verifiable results from their test project.  Tobin Smith can tell us all how it's doing if he takes a trip down to Albania.

Full disclosure:  No position in PSON.