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Syntroleum Corporation (SYNM)

Q1 2010 Earnings Call Transcript

May 11, 2010 11:00 am ET


Karen Gallagher – SVP and Principal Financial Officer

Gary Roth – President and CEO

Jeff Bigger – SVP, Business Development

Ron Stinebaugh – SVP, Finance and Acquisitions


Gary Rumple [ph]

Jack Atwell [ph]

Robert Strassman – Art Boulevard

Ron O’Donnelly [ph] – Geometric Industries

Grant Goodnel [ph]

Charlie Serbath [ph]

John Anderson [ph]

John Smith [ph]

Louis Navarre [ph]

David Henry [ph]

Miro Paz [ph]

Azra Burn [ph]

Rod Adamwith [ph] – Geometric Industries

Mark Rugger [ph]

Joel Stanton [ph]

William Bryan [ph]

Lloyd Cameron [ph]

Greg Jackson [ph]

Chris Neeble [ph]

Eric Sedar [ph]



Welcome to the Syntroleum Corporation first quarter conference call. My name is Mitch and I will be your operator for today’s conference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I would now like to turn the call over to Karen Gallagher. Ms Gallagher, you may begin.

Karen Gallagher

Good morning, and thank you for joining us today. Remarks for today’s call will be presented by Syntroleum’s President and Chief Executive Officer, Gary Roth; followed by Jeff Bigger, Senior Vice President of Business Development, who will provide an update on our Dynamic Fuels Geismar Plant; and Karen Gallagher, Senior Vice President and Principal Financial Officer who will report the financial results for the quarter ended March 31, 2010.

Before I turn the call over to Gary, I would like to remind everyone that during this call, we will make certain forward-looking statements as well as use historical information. Words such as believe, estimate, expect, intend, plan, anticipate, could or should are intended to identify forward-looking statements. Although Syntroleum believes that expectations reflected in these forward-looking statements are reasonable, these statements involve risks and uncertainties. Future results may differ materially from those projected in these forward-looking statements. You are encouraged to refer to our SEC filings, including our most recent Annual Report on Form 10-K for a full disclosure of these risks and uncertainties.

I will now turn the call over to Gary Roth for opening remarks.

Gary Roth

Thank you Karen. Let me summarize the results over the first quarter, and provide you with an update of activities at Dynamic Fuels, our joint venture with Tyson Foods.

The first plant under our venture is projected for mechanical completion to occur in June of this year. We expect full rate production in the late third quarter. Essentially all plant piping is now installed and critical path to completion has moved to the quality control process. Jeff Bigger will provide details in his update on Dynamic Fuels.

We expect the total cost of the Geismar project to be $170 million as reported during our last conference call. We will fund the remaining commitment of $15 million as needed in the second and third quarters from cash on hand. We received $2.75 million during the first quarter from Sinopec from the relocation of the Catoosa Demonstration Facility to China. The remaining $250,000 in the Sinopec contract has been invoiced as equipment has cleared customs in China. With the receipt of this payment, we will have received the full $20 million contract value.

We began training of Sinopec personnel on our Fischer-Tropsch process during March of this year. Our contract requires Sinopec to re-erect the CDF in China and this process is underway. We anticipate production starting during the fourth quarter of 2010, which will further demonstrate Syntroleum’s FT technology on coal-derived syngas.

We continue to focus on deployment of our engineering resources to cover our operating cost. Operating activities generated a net cash flow of $1.8 million for the first quarter. Finally the company had a cash balance of $26.8 million as of quarter end compared to $25 million at year-end 2009. In addition, we received the final equity investment of $3 million on April 20 this year from Fletcher International resulting in a cash balance of $29.8 million at the end of April.

For the remainder of 2010, our strategic objectives are in our Bio-Synfining business, we plan to complete the Geismar Plant, we have allocated a majority of our resources. Further we plan to pursue business development and financing activities on a second Bio-Synfining plant, and finally, we will actively engage in securing next generation renewable feedstocks.

In our Fischer-Tropsch technology business, we plan to assist Sinopec in the restart of the CDF facility in China, deploy FT technology sales and licensing opportunities, and advance a liquid renewable fuels effort. We believe the operations at the Geismar facility will give us significant inside both domestically and internationally into the products markets for second and third generation renewable fuels.

Finally, we will continue to add to our IP portfolio 51 patents. We have been granted 27 patents in the last five years and currently have 40 patents pending.

I will now turn the call over to Jeff Bigger to update you on the status of the Dynamic Fuels venture.

Jeff Bigger

Thank you Gary. Today I will update you on the status of the Geismar facility. As previously reported, engineering and procurement are essentially complete, therefore we will focus on the construction status.

We tracked the following areas as related to overall mechanical completion. Number one is mechanical works, which includes piping and structural steel; number two, the electrical work; three, the instrumentation; four, installation; and five is the quality assurance and quality control, which is now the critical path on the project.

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