Oxford Catalysts Group plc – Final results for the year ended 31 December 2010

13 May 2011

Oxford Catalysts Group PLC, the leading technology innovator for synthetic oil production, is pleased to announce its final audited results for the year ended 31 December 2010.

Highlights

  • Raised £21m before expenses through an oversubscribed equity placing in March 2011
  • First order received from SGCE for commercial scale FT unit and fulfilled in March 2011
  • Second order for commercial scale FT unit received post period end
  • GTL demonstration plant fully constructed and arrived in Brazil in April 2011
  • Significant industry recognition with receipt of five international awards
  • Revenue of £7.7 million (2009: £8.7 million), reflecting transition to commercial income
  • Cash* at period end of £5.7m (2009: £12.0m) before fundraising

Pierre Jungels, CBE, Chairman of Oxford Catalysts, said: "2010 has been another successful year in the Group's transition from a development company to a commercial product provider. Following the recent fundraising, Oxford Catalysts is well capitalised to continue pressing forward with commercial roll-out.

"We are receiving unprecedented levels of interest in our technology as the market environment for synthetic fuels continues improving. The Board looks forward to a period of considerable progress with growing anticipation for the future."

* Defined as cash, cash equivalents, short term investments and other financial assets.

There will be a conference call for analysts at 3:00 pm today; dial-in details can be obtained from Financial Dynamics (see below).

For further information, please contact:

Oxford Catalysts
Roy Lipski, CEO
Susan Robertson, CFO
+44 (0)20 7831 3113
+1 614 733 3300
 
Cenkos Securities (Nomad and Broker)
Ken Fleming / Beth McKiernan
+44 (0)20 7397 8900
+44 (0)131 220 9772
 
Financial Dynamics
Billy Clegg / Alex Beagley
+44 (0)20 7831 3113

Notes to Editors

Oxford Catalysts designs and develops technology for the production of synthetic oil from both conventional fossil fuels and renewable sources such as bio-waste. The Group is focused on the emerging market for distributed smaller scale production of synthetic oil via Fischer-Tropsch ("FT") synthesis − a market that has the potential of producing as much as 25 million barrels of fuel a day.

The FT reaction is used when converting natural gas, coal or bio-mass into clean high-performance synthetic oil, processes known as GTL, CTL and BTL respectively. The Group is the recognised world leader in the design and development of high-activity catalysts and associated novel chemical reactors for the smaller scale production of synthetic oil. (The Group's reactor technology − known as microchannel process technology − is marketed under the brand name of Velocys).

Oxford Catalysts Group PLC is listed on the AIM market of the London Stock Exchange (LSE: OCG). The Group has some 80 employees with facilities near Oxford, UK and Columbus, Ohio, USA.

http://www.oxfordcatalysts.com/
www.velocys.com

CHAIRMAN'S STATEMENT

Pierre Jungels, CBE

2010 was another successful year for Oxford Catalysts, continuing our transformation from a development organisation to a commercial product provider. Market conditions for synthetic fuels production, especially through smaller scale GTL, have improved considerably over the past year and the Group is enjoying high levels of interest in its technology.

The Group's existing commercial relationships remain strong; at the same time we are actively exploring additional opportunities with a number of major corporations. Our partner, SGC Energia, SGPS, S.A. ("SGCE") placed two orders with the Group for commercial scale Fischer-Tropsch (''FT'') reactors, and is completing its plans for a major commercial synthetic fuels plant. The Group's FT demonstration in Güssing, Austria, was a success, validating many of the Group's technology advantages. At SGCE's request, we agreed to extend the demonstration (fully funded by SGCE) to host potential customers and to provide a location for SGCE to train its operators on the Group's technology ahead of deployment in commercial plants.

The Group announced the delivery of Steam Methane Reforming ("SMR") and FT reactors for its Gas-to-Liquids ("GTL") demonstration which is funded and managed by Toyo Engineering Corporation and MODEC, Inc., in collaboration with Petróleo Brasileiro S.A. ("Petrobras") which is hosting the demonstration at one of its refineries in Brazil. The demonstration plant was fully constructed on schedule and arrived in Brazil in April 2011.

During the year, the Group also announced the signing of a $5 million agreement with the Thai state-owned energy company, PTT Public Company Limited ("PTT"), to support the Group's smaller scale GTL technology for land based facilities.

The Group's cash position was strengthened after an oversubscribed placing that raised £21 million before expenses in March 2011. This strong backing provides further validation of the Group's business model, its technical and commercial progress, and the significant market opportunity. I would like to take this opportunity to thank our existing shareholders for their continued support and to warmly welcome our new shareholders.

As previously announced, Group revenues for the year were £7.7 million (2009: £8.7 million), reflecting the start of a shift from development funding to commercial income streams. Year end cash* reserves at period end stood at £5.7 million (2009: £12.0 million), prior to the fundraising.

I would like to thank the team, which consists of some 80 employees, for their tireless work throughout 2010 and their considerable achievements, which were also recognised by industry on five separate occasions during the year through significant awards.

Outlook

The Group is well capitalised to continue its progress towards commercial roll-out. 2011 looks set to be another busy and exciting year, with the Group's GTL demonstration due to start up in Brazil, and with the prospect of further commercial orders and new customers and partnerships.

In 2011, the Group will focus on its existing partnerships while strengthening its commercial, manufacturing and supply chain capabilities, as well as capitalising on the advancing status and market relevance of its technology.

The Board looks forward to a period of considerable progress with growing anticipation for the future.

Chief Executive's REPORT

Roy Lipski

Introduction

Solid progress was made by the Group in 2010 and this has continued into 2011. Our first commercial order was received in December and successfully completed in March 2011, followed by a second order in May 2011. The Group has enjoyed unprecedented interest in its technology over the past year and we look forward to this trend being maintained during 2011.

Market Conditions

The increasing demand for oil and its sustained production constraints have helped drive crude prices again over $100 a barrel. This, coupled with the discovery and development of the vast shale gas reserves in North America, has created an increasingly attractive environment for synthetic oil production through GTL, especially at smaller scales, thereby bringing the opportunity for the Group's technology sharply into focus.

Market conditions for Biomass-to-Liquids and Waste-to-Liquids ("BTL" and "WTL") are also very favourable as governments and industry have come to recognise the important role synthetic fuels derived from biomass and waste could play in seamlessly supplementing oil-based transportation fuels, whilst alleviating environmental pressures.

Successful Equity Placing

In March 2011, the Group successfully raised £21 million before expenses, at the same time enhancing its already solid shareholder base with the addition of seven new blue chip institutional investors. It is the intention of the Board to use these proceeds to accelerate the Group's transition to a commercial product company and in particular to:

(a)  enable the Group to hire new staff to support its growing commercial operations;

(b)  extend its supply chain capabilities, for both reactors and catalyst; and

(c)  upgrade its technology infrastructure to better support its commercial interactions and to enhance its standing with customers.

The new funds will also bolster the Company's balance sheet which will give it added credibility and strengthen its negotiation position with respect to prospective new partners.

Commercialisation

Demonstration

The Group previously announced the delivery of SMR and FT reactors for its GTL demonstration, funded and managed by Toyo Engineering Corporation and MODEC, Inc., in collaboration with Petrobras which is hosting the demonstration at its Lubnor refinery in Fortaleza, Brazil. We are pleased to announce that the demonstration plant is now fully constructed on schedule, and has arrived in Brazil. Currently, the Group understands that Petrobras will be ready to start the demonstration around September 2011.

In August 2010, Oxford Catalysts announced that its FT pilot unit was achieving good performance in phase one of the demonstration at Güssing, Austria. Its partner SGCE was 'very pleased' with the results obtained, and on this basis placed an order for one of the Group's FT units. This represented the Group's first order for a full scale commercial reactor and catalyst, and an important opportunity to validate manufacturing and supply-chain readiness ahead of larger commercial orders. Following successful delivery of the first FT unit, SGCE placed a second order for an FT unit in May 2011, whilst confirming that they are completing plans for a major commercial synthetic fuels facility and expect to be in a position to proceed with the project in the second half of 2011.

A decision was also made during the year not to relocate the Group's FT demonstration unit to the Wright-Patterson Air Force base near Dayton, Ohio, thus paving the way for extended operation of the Güssing pilot plant to provide ongoing support for the design and deployment of future commercial facilities.

Manufacturing

Oxford Catalysts is currently collaborating with a number of manufacturers to secure reliable commercial supply of its reactors and catalysts. In February 2010, the Group announced that it is working with Kobe Steel, Ltd. (one of Japan's leading steel makers, operating worldwide under the brand name of KOBELCO), to supply reactors for its forthcoming GTL demonstration in Brazil. During the period, the Group also qualified a large US-based catalyst company for the commercial production of its FT catalyst.

In March 2011, Oxford Catalysts successfully completed the fabrication of a commercial FT unit in fulfilment of the first SGCE order placed in December, thus attaining a key technical milestone needed before SGCE progress with more aggressive commercialisation and implementation of the Group's technology. The completed full scale FT reactor was code stamped to ASME standards, thereby providing the necessary certification for commercial use. It was fully loaded with the Group's FT catalyst, produced by its US manufacturing partner, and is ready for commercial deployment.

With a nameplate capacity of some 25 bpd and core reactor dimensions of only 2ft x 2ft x 2ft, the commercial scale FT reactor exemplifies the process intensification potential of the Group's technology. Its 40,000+ microchannels also illustrate the technology's "numbering up" approach that provides both operational robustness and ease of scaling.

Other Agreements

In January 2010, Oxford Catalysts announced the signing of an agreement with PTT that provides $5 million of funding for the development and commercialisation of the Group's GTL technology for smaller scale land based facilities. The Group's relationship with PTTcontinues to be very positive and the collaboration remains on track.

Industry Recognition

In 2010, the Group won five prestigious industry awards:

  1. The Award for Excellence in the Field of Environmental Technology Commercialisation at the CleanEquity Monaco 2010 Awards;
  2. The 2010 World XTL Award, widely regarded as the most important award in the synthetic fuels industry. Runners up were ENI / IFP / Axens, Oryx GTL, Shell and Technip. Past winners are Shell, Sasol, and Statoil;
  3. The Chemical Industries Association's Innovation Award. Runners up included Johnson Matthey, Eli Lilly and Huntsman. Past winners include Dow, Solvay and Lucite;
  4. A 2010 ChemInnovations Award, sponsored by Chemical Engineering;
  5. The Institution of Chemical Engineers' 2010 Innovative Product Award. The IChemE Awards are widely recognised and attract entries from all over the world.

Intellectual Property

The Group's current intellectual property ("IP") portfolio includes over 750 active patent cases and an even larger number of invention records. During the period, the Group filed 4 new patent applications, whilst 84 existing applications were granted in jurisdictions including the US, Canada, China, Australia, Japan, Russia, South Africa, South Korea, and various European countries.

Resources

With some 80 employees, Oxford Catalysts Group has a solid foundation to maintain its leading position in the fast emerging technology market for smaller scale synthetic oil production. The funds recently raised will be used to accelerate the Group's transition to a commercial product company, including the hiring of additional staff to support its growing commercial operations.

Financial Review

Revenues during the year were £7.7 million (2009: £8.7 million), reflecting the start of a shift from development funding to commercial income streams. Revenues were also impacted by a decision to slow down activities on a government funded programme in the last quarter in order to concentrate on preparations for some expected near term sales of FT units. The funding for this programme remains available and the work is expected to resume at planned levels in 2011 and 2012.

Losses for the period were £5.5 million (2009: £3.8 million), excluding the impact of currency movements (£0.1 million gain; 2009: £0.1 million loss) and non-cash items (depreciation, amortisation and share-based payments: £1.7 million; 2009: £1.5 million). Cash* outflow in the year was £6.3 million (2009: £4.3 million). Including the impact of currency movements and non-cash items, losses for the period were £7.2 million (2009: £5.5 million)

At period end, the Group had £5.7 million of cash* (2009: £12.0 million). Post period end, the Group raised £21 million before expenses through a share placing. Management believes that this level of funds is sufficient for now, although it remains mindful of the uncertain nature of technology development and the need to preserve cash where possible without adversely impacting time to market or the long term value of the business.

* Defined as cash, cash equivalents, short term investments and other financial assets.

See RNS for full announcement.