October 2015

There is a very real feeling of excitement in the air at Velocys. Everywhere I look within the business I see people delivering tangible results. First and foremost it is immensely gratifying to see the manufacture of catalyst and reactors for our commercial reference plant completed successfully. Elsewhere I see our past R & D efforts, our investment in new facilities and the highly-skilled business people, process engineers and scientists who work for Velocys, coming together to form a powerful team, fully capable of selling, designing, delivering and commissioning commercial gas-to-liquids (GTL) plants. Progress is accelerating to further refine our technology so that it is optimised not only for peak performance but also to meet robustly the challenges of everyday operation.

To take two specific examples; we have installed a single core reactor as a permanent resource at our Ohio technology centre. It has the same workspace conditions as a reactor in a commercial plant, and so provides a valuable facility for training employees of Velocys as well as our partners Mourik in the methods of in-situ catalyst loading and unloading. Elsewhere, at our pilot plant, we have improved upon the protocols required to run a commercial plant. For example, plant start-up protocols now enable the plant to reach target conditions more than six times faster than they did 18 months ago. As a direct result, our commercial plants will have increased availability, further improving their economics.

The low oil price continues to make a difficult market for conventional and arbitrage-driven GTL projects. But many opportunities remain where our combination of advantaged technology (high yield of higher value products) and ready deployment at smaller scales (modular facilities) can contribute to meeting a real need, whether it be reduction of gas flaring, the demand for high-performance waxes and lubricants, or sustainable fuels. We are working hard with our partners and customers to bring a number of these attractive opportunities to fruition. This focused approach suits us very well at this stage of our development. I remain excited about our business, and above all about seeing our commercial reference plant take shape.

Please get in touch if you would like more information on any of the items highlighted in this newsletter. Email...

Susan Robertson, CFO and acting CEO

What's new?

Manufacture of reactors and catalyst complete

On 2 September Velocys announced that the manufacture of the full-scale commercial Fischer-Tropsch (FT) reactors and initial catalyst charge for ENVIA Energy's Oklahoma City GTL project is complete. The catalyst meets all performance criteria for the project, with excellent alignment of test results between commercially-produced and laboratory-produced catalysts. Fabrication of the modular process units is continuing at Ventech in Pasadena, Texas. Read more...

Completed Fischer-Tropsch reactor


Module under construction at Ventech (mid 2015)



Settlement of US IP infringement case

Velocys and Johnson Matthey (JM) have come to a settlement in the intellectual property (IP) infringement case Velocys filed in the US against Catacel in 2010. JM purchased Catacel in September 2014. JM will pay Velocys an undisclosed amount in recognition of its IP, while acknowledging the validity of Velocys' patent rights and committing to respecting them. Read more…

Commenting on the settlement, Susan Robertson said, "This is a very good result for us. It gives us a positive business result with a cash payment to Velocys and clears up an outstanding, uncertain legal position."

Appointment of Non-executive Director

On 30 September the Company announced the appointment of Mark Chatterji, BSc, MBA, as a Non-executive Director. He brings valuable experience in gas monetisation and considerable banking and finance sector experience to the Board. Mr Chatterji was previously the CFO and Executive VP Commercial of Woodside Petroleum during the Front End Engineering & Design (FEED), final investment decision and construction phases of the Pluto LNG plant in Western Australia. Read more…

Interim results for the period ended 30th June 2015

The interim results for 2015 were posted on 30 September. Chairman Pierre Jungels commented "Velocys continues to lead in the emerging market of smaller scale GTL and to demonstrate the strength of the structural opportunity." Read more…

On the conference circuit

Neville Hargreaves, Business Development Director, gave the keynote speech "Smaller scale GTL: the new paradigm in the age of gas" at SMi's GTL conference in London earlier this month. In the last three months members of the business development team also presented at the World Bank Led Global Gas Flaring Reduction (GGFR) Partnership Global Forum, Khanty-Mansiysk, Russia, Genscape's Oil & Natural Gas Symposium, Houston, the Global FPSO Forum, Galveston, Texas, and the Gasification Technologies Conference in Colorado Springs. All presentations can be viewed here (in Russian as well as in English where available).

Elsewhere, Susan Robertson, presented "Smaller scale gas-to-liquids: commercial roll-out continues" at The Stock Market Show in London, an event targeted at retail investors.

Our technical team also had a busy autumn conference session; Roger Harris, our GTL Technology & Engineering Services Manager, presented "Technology considerations accompanying commercial roll-out" at the Gas-to-Market and Energy Conversion Forum organised by Energy Frontiers International, our Director of Catalysis, Heinz J. Robota presented "An initial assessment of water's potential impact in an intensified Fischer-Tropsch synthesis process based on microchannel reactors" at the European Symposium on Chemical Reaction Engineering in Munich, and Laura Barrio, Principal Chemist, gave a talk entitled "In-situ micro X-ray imaging of an active Fischer-Tropsch catalyst" at a symposium in Bath, UK.

In the press

At the end of the summer both Gas Processing and Hydrocarbon Engineering published by-lined articles written by Neville Hargreaves. The former focuses on the significance of ENVIA Energy's GTL project, while the latter outlines the Company's view of where opportunities for smaller scale GTL are still compelling, even in a low oil price world.

Commenting on the announcement that the reactors and catalyst for the Oklahoma City project were complete, Malcolm Graham-Wood wrote in Proactive Investors "…it is nice to be able to report that significant progress is being made" and, "I remain confident that Velocys is in good shape..." On the same subject, analysts Macquarie wrote "We believe this could be taken positively today as it suggests that the recent departure of the company's CEO has not had an impact on the project development."

Meanwhile, ENVIA Energy is to be awarded the highly prestigious Vanguard award at Keep Oklahoma Beautiful's 25th Environmental Excellence Awards Celebration on 30 November.

Following the announcement of the 2015 interim results, analysts Numis and Canaccord reiterated their Buy and Speculative Buy rating for Velocys respectively, though with lower price targets. Director's Talk wrote of Numis, "...the analyst believes there is a potential upside of 162.5%". Meanwhile, Macquarie upgraded their recommendation on Velocys to Outperform and commented that, "In spite of the recent management issues … Velocys' pipeline of opportunities remains strong". After the interim results were posted Susan Robertson recorded an interview with BRR Media and Biomass Magazine published a useful summary of the interims.

The settlement of the US intellectual property case with Johnson Matthey was covered by, for example, Proactive Investors, The Telegraph and IHS Chemical Week. The Financial Times wrote "Astronomical costs of intellectual property rights patently wrong" using Velocys' IP position as one example.

Company news

In addition to appointing Mark Chatterji as Non-executive Director, Jeremy Gorman, FCA, of Corporate Governance Limited is now fulfilling the role of Company Secretary, allowing Susan Robertson to concentrate on her present position as acting CEO and CFO.

Christina Rinker recently joined our Houston-based processing engineering team as Engineering Coordinator. Christina brings to the company nearly 15 years of experience in project management in the oil & gas, mining, petrochemical, polysilicon and power generation industries, in China, Peru and the USA, including for Ventech Engineering. She will support Velocys' growing engineering team in the fields of schedule management, cost control, document management, and system and procedure development.

The recent appointment of Henning Becker to our UK-based R&D team adds another technical discipline to our in-house capability; reaction engineering. Henning has just completed his PhD studies at the Institute of Chemical Process Engineering at Clausthal University of Technology where he was carrying out FT synthesis on cobalt-based catalysts with optimised pore structure. We anticipate that a rigorous reaction engineering approach will lead to further improvements in operational stability and performance.

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Velocys plc trades through its subsidiaries Velocys, Inc., 7950 Corporate Blvd, Plain City, Ohio 43064, USA (Registered in the State of Delaware, USA) and Velocys Technologies Ltd, 115e Olympic Avenue, Milton Park, Abingdon, OX14 4SA, UK (Registered in England No. 5258554). "Velocys", "Think Smaller" and the Velocys logo are trademarks of Velocys. © 2015 Velocys. All Rights Reserved.