Trial delays hit Corac

23/04/2009 Robert Tyerman

Compressor technology hopeful Corac blames Italian field trial delays for a 52 per cent annual loss increase to £3.5 million.

The Uxbridge-based company, whose patented down-hole gas compressor is designed to increase yields from gas deposits by recovering stranded gas from them, saw losses rise from £2.3 million to £3.5 million last year on revenues down 54 per cent to £662,000. Professor Gerry Musgrave, AIM-quoted Corac’s ever-enthusiastic chairman, says the setback occurred because Italian oil and giant ENI had to delay starting crucial field trials of the compressor after the Italian authorities imposed additional safety requirements ‘above international standards’.

Corac had to go to major US oilfield services groups Halliburton and Baker Hughes for equipment to meet the Italians’ requirements. But things are now in place, says Musgrave, and the first staged payments out of the £1.5 million agreed by ENI are ‘now coming through’.

This means the compressor technology, which has been undergoing extensive trials in simulated conditions in Cumbria, is now at last ‘going into flowing wells’, which, if all goes well, should enhance its credibility. Musgrave adds that the company is negotiating field trials with other potential users of the compressor, one of whose features is its use of the gas itself as a bearing, thus speeding up the process and facilitating operations at significant depths.

Separately, Corac has struck a joint development and marketing agreement for the compressor with Baker Hughes, the third-largest oil services group in the world and a leader in electrical submersible pumps. Musgrave says Baker Hughes, which is pooling its knowledge with Corac, has enough clout to ‘get is into major oil and gas companies at a higher level’ than before.

The company is also making progress with its other product, industrial air compressors. Corac has pre-production units in operation in Taiwan, China and Austria, though Musgrave warns ‘the sector is very depressed’ at present.

Corac, which spends about £2.5 million a year on research and development and receives tax breaks worth £500,000 annually, ended 2008 with £2.6 million in cash and raised another £1 million in February with a placing at 13p. Floated at 105p eight years ago, the shares had fallen 90 per cent to 10.5p by last December, as development dragged slowly and losses persisted.

They have since trebled to 33.5p, valuing the company at nearly £32 million. The appeal is speculative, though the potential product market is huge.

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