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 Company Profile:
Eurocontrol Technics Inc. through
its wholly owned subsidiary Global Fluids International S.A. ("GFI") is one
of the world's pioneers in developing and implementing innovative molecular
marking systems for the oil industry. Through its proprietary Petromark(TM)
integral system, GFI has developed a 4-part solution consisting of molecular
markers, injection, monitoring and control components. Oil industry cost
realities along with GFI's 5-year R&D efforts to create its industry-leading
marking solutions, combined with access to capital provided by Eurocontrol
Technics Inc. allows management to pursue numerous anticipated oil marking
opportunities in fiscal 2008 and in years to come.
W. Bruce Rowlands
President, CEO & Director
W. Bruce Rowlands brings an extensive background in new and emerging
technologies, international capital markets, investment banking, and
executive communications to his role as President, CEO and Director of
Eurocontrol. Mr. Rowlands has served in senior executive positions in both
emerging public market companies, taking them through key corporate
milestones and within the Canadian investment industry.
Education:
Bachelor of Science in Accounting, cum laude, from the University of Denver
in June, 1977.
Other:
In 2007, received the President’s Volunteer Service Award from President
Bush and the Governor’s Corporate Volunteer Award for the State of New
Mexico. In May, 2001, was named the Financial Services Advocate of the year
for the state of New Mexico, by the U.S. Small Business Administration.
Granted the designation of Certified Public Accountant by the state of
Colorado in January, 1979.
W. Bruce Rowlandsm
President & Chief Executive Officer
Interview conducted by:
Lynn Fosse, Senior Editor,
CEOCFOinterviews.com -
Published – May 2, 2008
CEOCFO: Mr. Rowlands, what is your vision
for Eurocontrol Technics?
Mr. Rowlands: “The vision of Eurocontrol
is to deploy the world’s leading energy security technology in the field of
tag and trace technology for marking hydrocarbons. There are a variety of
reasons why hydrocarbons need to be marked, and we believe we have the
emerging global standard for the identification of hydrocarbons in transit
and for the purpose of setting a fuel’s fiscal status.”
CEOCFO:
What are you marking and why are you marking it?
Mr. Rowlands: “Our technology called
Petromark™ was developed for the purpose of combating the financing of
terrorism and organized crime amongst other things. The illicit trade of oil
and gas, which is a problem that results in losses between 100 and $200
billion a year, to oil companies and governments, is also one of the primary
sources of funding for terrorism. Many oil companies are becoming much more
proactive on the subject of protecting their brands. Certainly, nobody
wishes to be seen as complacent about terrorism and the financing of
organized crime. This is a novel technology, significantly better than what
is available from others. There are three important distinguishing factors
to our technology, firstly we do not have to take the fuel sample to a lab,
we take the lab to the fuel. Which is to say, we have a mobile laboratory,
that is an ISO accredited laboratory, 17025 accredited, which is the highest
lab accreditation you can receive.
Why is it important to take the lab to the fuel and not the fuel to the lab?
It is important for two reasons, if you have to take samples to a lab by the
time you get the results, the underlying evidence has usually been pumped
out and sold, so you have no evidence in court. The other problem you have
when you get into court is you have a chain of custody argument. Lawyers
love to challenge people on the subject of where the sample goes, how long
was it in transit, how many miles did it travel, how many different people
handled it and so forth. They are ultimately making the argument that the
adulteration of the underlying sample occurred somewhere other than where
the sample was taken. Those are two major problems that we avoid because we
can go right to the location where the fuel sits. We get the final result
right there in the field. We have a mobile detector that is ISO 17025
accredited, and on top of that, we give you a quantifiable result. If we are
marking a fuel line for you at four parts per million (PPM), I should be
able to go anywhere downstream from the marking site and find our marker at
four PPM. If I only find it at two PPM then I know that half of what we just
measured is an adulterant that was added to the fuel after the fuel was
marked.”
CEOCFO:
What do you actually measure?
Mr. Rowlands: “We are measuring the
presence of our marker. We are imbedding our marker at (PPM) so I should be
able to find it anywhere downstream from the marking site at the prescribed
concentration. If we find it in a lesser concentration then we know that the
underlying fuel has been diluted. All sorts of things are used from water to
used motor oil, urine, and so forth; anything that is less valuable than the
hydrocarbons that you are diluting. The criminal element are always cutting
it with less valuable material. There are three primary activities in the
illicit trade of oil and gas. The first one is the fiscal misuse of fuel
based on the fuel’s fiscal status, for example, it could be fuel that is
destined for export out of a particular country that is actually kept inside
the country and sold at the fully taxed price making the spread for
themselves. It could be farm gas, what farmers pay for a liter of fuel is
something entirely different from what we pay on the highway.
With the older technologies in this industry the marker is a visible
colorant added to the fuel. The problem is of course, that the criminal
element can visibly see that the fuel has been marked. The idea is, you take
the “washed” fuel out on the highway, sell it at the fully taxed price, and
make the spread for themselves. The second problem is the physical
adulteration of fuels; you start out with a thousand gallons of 91-octane
gasoline, you pour in 400 gallons of used motor oil, or solvents or water or
whatever and now you have 1,400 gallons of 91-octane gasoline as far as what
you are going to pump out and sell. The third big area, which is exclusively
ours from a security point of view, is the theft of crude oil in transit in
pipelines and ships. We have the only technology available today in
Petromark™, which is applicable to crude oil.”
CEOCFO: Who
is using your services today?
Mr. Rowlands: “We are just entering the
commercialization phase of our business now. We have just recently won a
government tender in Uganda where we displaced an incumbent competitor, who
quite frankly have inferior technology. That is why we won the tender. We
have two contracts with a leading European-based multinational that have $6
billion of revenue in twelve countries with six thousand employees. I
anticipate that there will be additional contracts coming from them in the
future.”
CEOCFO: Is
the oil industry looking for better solutions or do you need to convince
them they should have it?
Mr. Rowlands: “The oil industry is
looking for better solutions, more robust solutions that provide you with
quantitative results, discreet technologies that will withstand the forensic
review of a court of law. From our point of view, anything that is a visible
marker either a colorant or florescent dye, anything like that is of no use
because the criminal element can see it. Why that is important is the
criminal element can then also be assured when they have successfully
removed the colorant from the fuel, which quite frankly is easy to do. It is
easy to remove colored dyes and florescent dyes from fuel, it is also quite
frankly easy to go and build imitation dyes, anybody with a modest
background in chemistry can go to a chemistry library and put together
colored dyes, it is not difficult. It is the last century’s technology. Our
technology has the advantage that it is entirely discreet; there is no way
for you to know that the fuel is being marked unless you are told so. We are
marking these fuel lines at very low concentrations of our markers. You
would not be able to go into the fuel and find our marker unless you knew
what it was you were looking for and had the proper technology calibrated in
the right way to look for it. The actual production of the liquid chemical
marker is done by a large international chemical company under contract with
us. Our mobile x-ray florescent detectors are also built for us by a
contract manufacturer.”
CEOCFO: Do
you have offices or distributors worldwide?
Mr. Rowlands: “We do not have
distributors. At the end of the day, this is sort of the Gillette business
model. What I mean by that is that it is a razor/razorblade solution. The
razor in our case being the x-ray florescent detectors. The razorblades
being the liquid chemical marker that we sell into the marking programs we
implement. We inject the marker into fuel, when the fuel is burned, the
marker is destroyed. These are ongoing projects. Once you set up and we are
starting to mark particular lines of fuel on behalf of whoever it might be,
that is an ongoing process. That particular brand of fuel will always be
marked with this marker at the prescribed concentration. At the end of the
day, the business that we are in is selling the liquid chemical marker,
which is where the margin is, we are approaching 80% gross margin into the
marking programs. The detection equipment, we have built for us and we
supply to the customer, but we are not in the detection and monitoring
business. Some customers use the equipment themselves internally, they have
the know-how and the staff to be able to do the monitoring, others will use
our logistical partner which is a company called Inspectorate International;
Inspectorate International is one of the large global inspection companies,
they operate in 130 countries and at every loading, discharge and
ship-to-ship terminal in the world. Most if not all, of the major oil
companies on the planet would be customers of Inspectorate. International
currently.
The inspection industry really plays anywhere large quantities of
commodities, be it steel, petrochemicals, agricultural commodities, whatever
it is, are traveling long distances between seller and buyer. The buyer
wants to know upon receiving the shipment that it is in fact what they
contracted to buy, from the point of view of quality and so forth. That is
where the inspection industry steps in. Inspectorate International, our
logistical partner, were introduced to us by the European Oil company for
whom we are working right now. That is the business model. We just recently
struck a joint venture agreement with a group out of Europe and that joint
venture is for China, Russia, India, South Korea, Libya, and Algeria. This
particular group are significant investors in exploration and production
companies in these territories, as well as, in the pipeline systems in these
territories. They have joined us in a joint venture to help us market the
technology in these areas.”
CEOCFO:
What is the financial picture of the company?
Mr. Rowlands: “We just reported our
first financial numbers that include revenue, which was on the last day of
February. That was our fiscal third quarter which ended at the end of
December. The revenue from that quarter was $340,000 approximately. We are
tracking towards a number similar to that in this current quarter. We have
the company on an annualized revenue run-rate at the moment of about
US$1.5M. There are a variety of other opportunities; I expect that we will
have the company on a run-rate of about ten million by the end of 2008. Most
of that revenue is from the sale of markers. Our revenue breaks down to
about two-thirds to three-quarters from the sale of our liquid chemical
marker with a gross margin of seventy to eighty percent and the balance of
the revenue will be from the sale of detectors, spare parts and service
contracts that we have in terms of setting up marking sites and so forth. We
are in a good position; we have about a million dollars of working capital
currently. We are burning about a $100,000 a month so we are in a stable
position and do not anticipate having to go back to the market in order to
fulfill what we are going to be doing this year.”
CEOCFO: Why
should potential investors be interested and what might they miss that they
really need to understand about the company?
Mr. Rowlands: “Well I think that the
important thing is to understand that this technology is addressing an old
problem which has been addressed historically with old technology. Our
technology is the cutting-edge in these kinds of marking programs. The
industry that I categorize Eurocontrol as being a part of is the
authentication industry. In 2005, the global authentication industry was
thought to have revenue of about $500 million, a very small emerging
industry. Why is it important? Well it’s important because we are moving
towards a time where nobody will be allowed to sell anything to anybody
unless they can determine at the point of sale that what they are purchasing
is the real thing and not a counterfeit. There has been a huge explosion in
counterfeit goods. That is not the business that we are currently in but
certainly the authentication and the verification of hydrocarbons is a
subset it is one of the silos within the emerging authentication industry.
It is a very interesting industry. There are other technologies that apply
in the security printing space, also in radio frequency ID. What we are
seeing today is governments and legislators are pushing industry to put
these kinds of systems on their supply chains right down to the point of
sale. This is because of the explosion in counterfeit goods, which has been
a direct result of the war on terror and specifically the initiatives that
have been taken to restrict the movement of illicit cash. It is no longer as
easy to move cash around, so organized crime and others, instead of moving
cash around they are moving counterfeit goods around. They find a large
supply chain, they arrange to place their goods in that supply chain and
take payment for their counterfeit goods in the location where they wish to
have the money. That is the broader picture of authentication that we are
looking at for future acquisitions.”
CEOCFO:
What should readers remember about your story?
Mr. Rowlands:
“It is a compelling business model. It is a razor/razorblade model, which is
attractive to investors. The contracts we get tend to be three or four years
at a minimum with recurring sales quarter to quarter on a very high-margin
item being the liquid chemical marker.”
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Energy
Security
(EUO-TSX:V)
Eurocontrol Technics Inc.
Suite 825, 65 Queen Street West
Toronto ON Canada M5H 2M5
Phone: 416-861-5883
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