Quadrise — Valkor licencing revenue timing confirmed

Quadrise (AIM: QED)

Last close As at 14/01/2025

GBP0.06

0.28 (4.78%)

Market capitalisation

GBP104m

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Research: Industrials

Quadrise — Valkor licencing revenue timing confirmed

On 15 January 2025, Quadrise announced the execution of an addendum to its Site Licence and Supply (SLS) agreement with Valkor Technologies for its Utah operations, marking the company’s first licence revenue stream. Following successful project development throughout 2024, Valkor has secured the minimum required project financing of US$15m for the Primary Project Site (PPS) development at Asphalt Ridge. The market responded positively to this development. The agreement structure provides for a total consideration of US$1.5m to be paid to Quadrise during 2025.

Written by

Harry Kilby

Analyst

Alternative energy

Spotlight — flash

15 January 2025

Price 6.14p
Market cap £103m

US$1.22/£

Price Performance
Share details
Code QED
Listing AIM

Shares in issue

1,764.7m

Net cash at end-June 2024

£3.0m

Business description

Quadrise is the innovator and global supplier of disruptive fuel blending technology that produces a synthetic, enhanced fuel oil called MSAR and a biofuel called bioMSAR. The technology provides a low-cost and cleaner energy for marine, power and industrial applications.

Bull points

  • bioMSAR produces better CO2 and NOx emissions reductions and cost savings than existing biofuels.
  • Adoption of MSAR improves economics of downstream and upstream operations, while providing lower-cost fuel for consumers.
  • Adoption of Quadrise’s technology reduces costs after operations and emissions in marine bunker, industrial and power markets.

Bear points

  • Economics of adoption dependent on oil and competing biofuel product spreads.
  • Ability to progress trials adversely affected by many factors outside Quadrise’s control.
  • Size of company limits number of projects that can be progressed at any one time.

Analysts

Harry Kilby
+44 (0)20 3077 5700
Andrew Keen
+44 (0)20 3077 5700

Quadrise is a research client of Edison Investment Research Limited

Quadrise will receive phased payments of the $1.5m from Valkor, with an initial payment of US$350,000 (due 31 January 2025), followed by a secondary payment of US$650,000 (due 1 December 2025). Equipment-related payments include US$200,000 for an interim 600bpd Multifuel Manufacturing Unit (MMU) supply due 1 December 2025 and an additional $300,000 upon delivery of full-scale 6,000bpd MMU and return of the interim unit. This will enable wider production flexibility and client volumes for trials. Furthermore, Quadrise will receive recurring quarterly payments of US$75,000 (beginning 1 April 2025) for a minimum two-year period, in consideration for comprehensive operational support, including engineering, process design, commissioning services, site operations, compliance and project development support. The agreement represents a significant milestone in Quadrise’s commercialisation strategy, providing both near-term revenue visibility and establishing a framework for longer-term recurring income streams.

The other terms of the SLS agreement remain unchanged with Quadrise granting Valkor the exclusive right and licence to use its technology at the PPS to produce MSAR and bioMSAR, as well as the non-exclusive right to market fuel production from the PPS in Utah. After receiving additional drilling approval from the state of Utah, Valkor is now expanding its drilling programme and is engineering its first mined oil sands plants, having successfully secured project finance.

The Valkor project itself uses low-carbon extraction and production methods, resulting in heavy sweet oil with a very low well-to-tank carbon intensity. MSAR produced using this oil is calculated by Quadrise to have a 15–20% lower well-to-wake carbon intensity than conventional very low sulphur fuel oil. The production of bioMSAR using renewable glycerine, or other biofuel feedstock, would further reduce fuel carbon intensity. The PPS is located in the Uinta Basin in Utah, which is estimated to have c 77 billion barrels of recoverable oil. The basin is well positioned to supply local industrial and power plant consumers, as well as marine consumers on the west and Gulf coasts of the US via rail, aligning with Quadrise’s wider strategy for decarbonising the shipping industry (see our previous note here).

Source: Quadrise, Edison Investment Research. Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Historical financials

Year end Revenue (£m) EBITDA (£m) PBT (£m) EPS (p) DPS (p) P/E (x)
6/21 17.0 (2.8) (2.8) (0.23) 0.00 N/A
6/22 75.0 (2.7) (2.8) (0.19) 0.00 N/A
6/23 0.0 (3.0) (3.1) (0.21) 0.00 N/A
6/24 0.0 (2.6) (2.8) (0.16) 0.00 N/A

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