Waste products are always a cause for concern. So what oil producers do with all the nasty sludge that is a byproduct of sucking crude oil from below the sea bed is a big issue. And disposing of such waste doesn't come cheaply, especially as many oil rigs operate in a hostile environment, which means that collecting and shipping waste for processing is risky, time-consuming and expensive.
- Strong demand for waste treatment services
- On-vessel processing is self-financing
- New contracts awarded
- High barriers to entry
- Uncertainty hanging over Gibraltar facility
- The shares are difficult to trade
This is where Nature Group enters the picture, providing a one-stop service with facilities in Rotterdam, Stavanger and Gibraltar. In Rotterdam, trading under the unglamorous name of Nature International Slops Disposal (NISD), the operation holds all the necessary licences to collect maritime waste using a fleet of modern barges; it also has jetties for seagoing vessels that require their tanks to be cleaned.
But Nature has gone one better than this because, in the case of drilling waste from offshore rigs, it has developed a standard 20-foot container that is simply positioned on a floating production, storage and offloading boat (FPSO) - itself usually a converted oil tanker used to store waste from the oil rig - and processes all the waste on board. Effectively, this save oil producers money because at the end of the cleaning process they will have reclaimed crude oil that they can sell.
| NATURE GROUP (NGR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 73p | MARKET VALUE: | £57m | |
| TOUCH: | 69-73p | 12-MONTH HIGH: | 98p | LOW: 45p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 34p | NET CASH: | £5.6m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 1.7 | 0.5 | 1.8 | nil |
| 2009 | 5.1 | 1.6 | 4.1 | 0.6 |
| 2010 | 6.8 | 1.5 | 3.7 | 0.7 |
| 2011* | 21.0 | 6.0 | 6.5 | 1.6 |
| 2012* | 23.5 | 7.8 | 8.3 | 2.1 |
| % change | +12 | +30 | +28 | +31 |
Normal market size: 1,000 Market makers: 9 *WH Ireland Securities (profits and EPS not comparable with historic figures) | ||||
All this has taken some years to put together, and from 2003 to 2008 Nature's share price bumped along the bottom, between 10p and 20p in a relatively illiquid market. However, winning more work helped to push the price to a peak of 98p just before there was an explosion at its processing facility in Gibraltar in May. This knocked the shares back to around 55p. Since then, the news has been reassuring. A clean-up operation has been started and, while processing remains suspended, this does not impede collection services in the port.
Nature has also won two significant contracts to process waste on an FPSO vessel employed by one of the oil majors off the coast of Brazil. The terms of the deal remain confidential, but it is known that Nature expects to process around 50,000 cubic metres of sludge, and normally an oil major would have to pay $400 per cubic metre for disposal, or $20m. So Nature will offer the customer a competitive rate while aiming to make a significant profit, which City analysts estimate could be over $2m. There are around 80 FPSOs operating around the world, and the latest contract should make it much easier for Nature to pick up additional work. The group also benefits from having all the specialised technology (developed by scientists at Stavanger University) in place, as well as the licences, vessels and port facilities - all of which provide barriers to entry to scare off competitors.
