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Posts Tagged ‘Oil & Gas’

Half his garage was ammo; the other half was tequila. That was the first thing I noticed when I pulled up to Richard’s house in Austin.

We were slated to ride to Lubbock, Texas to present at a local event, and he was driving. What I did not know at the time was that, because he had no use of his legs, Richard drove his Chevy Suburban entirely with his hands. This would be fine, except that he also talked on his phones (yes, plural), smoked repeatedly, and… wait, how many hands do you have again? Then he’d take a corner fast and guns would come sliding out from beneath the seats to greet your feet (it’s Texas, people).

This was our VP Operations of Vortex Tools: Richard C. Haas.

As a kid, Richard was diagnosed with polio, wore leg braces, and was then wheelchair-bound almost his entire life. The son of an oil man, he followed his father’s footsteps, but his approach required more grit and determination: Oil & gas rigs do not have disabled access. This meant that Richard would leave his wheelchair off to the side and slide around using his upper body strength. A rig can be a brutal environment when you’re standing on your feet and Richard would drag his body along to get the job done.

If there was an award, he received it (he was voted Aggie of the Year at Texas A&M twice). If there was a featured role—instructor, speaker, Club President, Chairman of the Board—he got it. He received two patents and wrote several articles and White Papers. After negotiating oil & gas deals around the world (in the U.S., Mexico, and the Gambia), Richard settled back in near Austin, Texas. In 2001, he helped found Border to Border Exploration. Under his drilling guidance, BBX turned a $2.4 million investment into a billion-dollar asset value—making them one of the top independents in the U.S.

In 2011, he joined Vortex Tools to explore innovative uses of our optimization tools. In drilling, he’d complete a well in less time and for less money than other companies in the area. As an operator, he’d get more production from his wells, and that was the kind of innovation we wanted in our company. Since Richard entered the industry when oil was a mere $20 a barrel and gas a bare 10 cents an MCF, he was always looking to, as he said, “get the last squeal out of the pig.”

As a company, we believe that, despite what you may think of the oil & gas industry, it’s the key resource we have right now, so we should make it as optimal and as clean as possible. Richard’s approach fit right into that viewpoint.

He also drank repeatedly brewed iced tea that had the consistency of motor oil. First time he offered me some, my boss shook his head. I took it anyway, drank down a couple of inches, and shook wide awake until 2 AM.

And in June, Richard suffered a stroke. Three months later, he passed.

He’s survived by his wife, six adult children, several grandkids, and many friends who can tell you more about his home life, but I’ll speak to our coworker: In an industry where everyone thinks they know everything, people listened to him. In an industry where there’s so much success, he was revered.

In short: The man was a notch above.

Here’s to our friend and coworker, Ricardo.

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Colin McKay Miller is the VP of Marketing for the SpiroFlo Holdings group of companies:

SpiroFlo for residential hot water savings (delivered 35% faster with up to a 5% volume savings on every hot water outlet in the home), industrial water purification (biofilm removal), and reduced water pumping costs.

Vortex Tools for extending the life of oil and gas wells (recovering up to 10 times more NGLs, reducing flowback startup times, replacing VRUs, eliminating paraffin and freezing in winter, etc.).

Ecotech for cost-effective non-thermal drying (for coal, biosolids, sugar beets, dairy waste, etc.) and safe movement of materials (including potash and soda ash).

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Last week I noted that much of the oil & gas industry is waiting to see what President Trump will do. While consensus was that he would likely scale back regulations, the question was how fast and how consistent he’ll be. Today—essentially the second work day of the Trump administration—gave the initial answer, as President Trump signed executive actions to advance Keystone XL and Dakota Access oil pipelines. While this does not provide the permits required to build these pipelines, it essentially paves their way for approval.

Keystone Pipeline Route

Keystone Pipeline Route

If you aren’t familiar with the Keystone pipeline system, it allows for the transportation of oil & gas production between Alberta, Canada to several refineries and distribution centers in the U.S. (including Illinois, Oklahoma, and Texas). Despite protests over the XL phase of the Keystone system, many people don’t know is that the first three phases of this pipeline are already in place (phase one since 2010). The proposed XL phase of the system—which essentially duplicates the first three phases with shorter routes, while adding in oil & gas production from Montana/North Dakota—became a battleground over climate change and the value of fossil fuels in today’s world. Given the way politics works, it also became a dividing issue between democrats and republicans. Former President Obama rejected the Keystone XL phase in 2015 while President Trump, when campaigning in 2016, insisted he would approve it.

While many in the oil & gas industry view Keystone XL as key to growing U.S. prominence in the market while reducing dependency on foreign oil, the big complaint over the Keystone XL pipeline was in the environmental danger of routing over the Sandhills in Nebraska:

Boiling sands are areas where sandy soil is so thin that groundwater can bubble up through it to the surface. In Nebraska, they are found in the Sand Hills, an ecologically sensitive region of grass-covered dunes underlain by a giant freshwater aquifer, called the Ogallala, that sustains agricultural production down the centre of America.

In addition to the unforeseen environmental consequences, others argue that the route threatens the water supply of the nearby Standing Rock Sioux tribe.

The Dakota Access pipeline—an 1,172-mile-long, underground pipeline beginning in the rich Bakken oilfields of North Dakota and ending near Patoka, Illinois—has also seen protests and push-back. Although mostly completed, the current route does not have approval. Given today’s executive orders, both the Dakota Access pipeline and the Keystone XL pipeline are closer to approval than they’ve been in years.

President Trump insisted on that both projects are “subject to terms and conditions to be negotiated by us.” While it is uncertain what this means regarding environmental impact, President Trump has already given some insight about what this means for U.S. jobs, believing that U.S. pipeline should be constructed in the U.S., thereby “putting a lot of steel workers back to work.” He also believes Keystone XL will add 28,000 construction jobs. There is expected push-back from democrats and environmentalists, but without current political maneuverability, those roadblocks may be a thing of the past.

EDIT: Revised White House stance on U.S. steel: http://www.ogj.com/articles/2017/03/white-house-keystone-xl-will-not-use-us-produced-steel.html

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Colin McKay Miller is the VP of Marketing for the SpiroFlo Holdings group of companies:

SpiroFlo for residential hot water savings (delivered 35% faster with up to a 5% volume savings on every hot water outlet in the home), industrial water purification (biofilm removal), and reduced water pumping costs.

Vortex Tools for extending the life of oil and gas wells (recovering up to 10 times more NGLs, reducing flowback startup times, replacing VRUs, eliminating paraffin and freezing in winter, etc.).

Ecotech for cost-effective non-thermal drying (for coal, biosolids, sugar beets, dairy waste, etc.) and safe movement of materials (including potash and soda ash).

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SpiroFlo and Vortex Tools comment on changes in Colorado—both in the recession of oil & gas and the rise of the marijuana industry.Marijuana

Despite being the VP Marketing for multiple companies, it’s rare I do a crossover blog where I represent more than one company at a time, as the marketing reality that most people only care about stories that impact their industry or scratch their interest (duh). However, since the business landscape in Colorado has shifted over the last year, we’ve seen changes that affect different industries, so here we go. Firstly:

Oil and Gas Has Scaled Back Out of Colorado

Overall, it’s been a brutal year for oil and gas. The top four global companies scaled back 10% of their work force… and that was just the beginning. The cuts have continued and spread to smaller companies. Companies have scaled back to their core assets, selling off the rest, and for most, those core assets aren’t in Colorado. Blame asset valuations, blame stricter regulations, but week after week, formerly prominent oil and gas companies are leaving Colorado,* or filing for bankruptcy, or, at the very least, not spending money on anything.

*Usually right about here I’d link up a few stories of this happening, but there are so, so many. Right now you can Google “Denver oil and gas company” every week and pop up a negative story, but hey, gasoline prices are low, so many don’t care.

Most analysts now believe oil and gas prices will not recover until 2017. Prices have dipped again in October and November this year due to refinery maintenance season (during times of cheap oil, they’re at high capacity, so any time one goes down for a period of time, it hurts an already stressed market). In addition, many wells are currently shut in, so when prices do inch up a bit, everyone’s going to rush to take advantage of that gain, flood the market with production glut, and, you got it,  tank the price again.

This means it should be a time of improving existing production—lowering operation costs, recovering more production/valuable liquids (condensates and natural gas liquids), and avoiding environmental fines (easiest way: by not polluting)—the kinds of applications Vortex Tools enable, but many of the employees who are left are just keeping their heads down and trying not to get laid off. This should also be a time of asset expansion for smart investors (the adage of “buy low, sell high” still applies), but for many oil and gas companies, they’re not doing much of anything save staving off going out of business.

At the same time:

Marijuana is Booming in Colorado

As one of the first states to legalize recreational marijuana, a whirlwind of industry has set up around this venture, but it’s still a complicated (and energy intensive) market. Energy companies call pot one of the most energy intensive ventures. In one Colorado service area, retail marijuana makes up for ~1% of retail electricity use. Increased electricity use was one of the ways (illegal) pot growers used to get caught—turns out when your electricity bills spike several times over what they used to be, people take notice, and the assumption is you aren’t just plugging in a slew of outlet air fresheners.

In addition to high electricity use, the marijuana industry uses a lot of water, and currently, what’s going down the drain untreated shouldn’t be (lots of nitrates, fertilizers, chemicals, etc.). Most everyone involved in the industry is surprised that the law hasn’t changed yet and that it’s a matter of time until it does. However, there’s a misconception that the marijuana industry has a lot of money, but most players do not. Once laws change to get more stringent, a lot of smaller operations that hopped into this growing industry will burn out. In addition, the marijuana industry has also been sold a lot of snake oil already, so there’s a lot of skepticism for even valid solutions.

That’s where SpiroFlo comes in. With no moving parts and no additional energy source required, there are two main applications we work in: 1) Reducing the amount of water used and improving the water quality/oxygen content of what’s left: Basically improved hydroponics—growing better plants faster with fewer resources. 2) Removing contaminants from water drainage: Most people expect the laws to change on this within the next 12 months, so spinning out contaminants from water used for marijuana will become important (and will be a determining factor in which companies go out of business). Given that we’ve done similar applications in other markets, we’ve got both credibility and low operating expenses covered.

As a company, SpiroFlo sat down and discussed the moral side of it, as marijuana is in a strange place: It’s legal in certain states, but not nationally, which causes issues with banking and credit. Then investors want to play games, too. They recognize there’s money to be made here, but they don’t want the negative association. Currently the general rule is: If you touch the plant, investors can’t fund you. However, if you help the people who do touch the plant, then they can fund you.

Yeah…

Anyway, we sat down as a company and had the moral conversation on marijuana and the conclusion we came to is this: When it comes to industries you can’t work with for moral reasons, where do you draw the line? What issues are more important than others? Even in Vortex Tools’ work in oil and gas, there are people who don’t like the industry enough to acknowledge the value in our tools reducing pollution, energy, and operational costs while increasing the efficiency and revenue generators from the oil and gas production. Regardless, some issues are gimmes to avoid (hint: you don’t have to discuss them as an organization, or if you do, you’ll be doing so in prison), marijuana isn’t. Not anymore. So we looked at our company goal as SpiroFlo, which is to reduce water use and improve the quality of the water left. Regardless of what different employees thought of the marijuana industry, we agreed that while it’s here, we should do what we can to improve water use.

Colorado Business is Going to Look Different

So overall, what this means is that oil and gas in Colorado will be replaced by the marijuana industry. However, that’s not the only business sector being replaced; it’s happening all over. There is little warehouse/retail space left to lease and what is left over is high above market value. Due to the population influx, residential rents are above what they should be, too. Yet all of this could bend as laws become more stringent or more states legalize marijuana. For now, this is a common sentiment from many Coloradoans:

stop-moving-to-colorado-bumper-sticker-car-1024x768

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Colin McKay Miller is the VP of Marketing for the SpiroFlo Holdings group of companies:

SpiroFlo for residential hot water savings (delivered 35% faster with up to a 5% volume savings on every hot water outlet in the home), industrial water purification (biofilm removal), and reduced water pumping costs.

Vortex Tools for extending the life of oil and gas wells (recovering up to 10 times more NGLs, reducing flowback startup times, replacing VRUs, eliminating paraffin and freezing in winter, etc.).

Ecotech for cost-effective non-thermal drying (for coal, biosolids, sugar beets, dairy waste, etc.) and safe movement of materials (including potash and soda ash).

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Vortex Tools discusses the Northern Colorado Energy Summit (#2015EnergySummit) and an energy future based on low oil and gas prices.

Last week I spoke at the Northern Colorado Energy Summit in Loveland, Colorado (#2015EnergySummit). That’s me—second from the right—missing the suit jacket memo:

EnergySummitPic

As the Summit was titled “Drilling Down: The Economic Impact of Declining Energy Prices,” Vortex Tools was invited to speak on our applications recovering more oil condensates and reducing operational costs. We’ll be speaking on similar topics at the Rocky Mountain Energy Summit conference: August 24th-27th, 2015.

As with any trade show, the NoCo Energy Summit had booths loaded with swag (“I don’t know what this is, but I’m taking it anyway”), free meals and coffee, a fat stack of business cards exchanged, and, if you weren’t farting around on your smartphone the whole time, some great info to be gleaned from the panels. Of note:

Oil Prices Will Remain Low

I know, you get 10 speculators on stage and you’ll get 10 different opinions as to why oil and gas prices are low and if/when they’ll come back, but when you average them all out, very few think oil prices will get much above $60/barrel by year’s end. You can blame strict air quality regulations; you can blame the recent Iran deal; you can blame the downturn in the Chinese stock market (like I said, multiple speculators equals multiple opinions), but even with the small ups and downs this year, oil prices remain low overall.

Dan Kearney is the Senior Business Development Analyst with Noble Energy. When asked about whether the worst is over with low oil prices, he said, “I think we’re in between storms, and that we’ll continue to be between storms.” A recent uptick in oil prices led to producers flooding the market—hoping to grab part of that value increase along with everyone else—and this saturated the market, dropping oil prices back down again.

Another Low is Coming in 2015

Sarp Ozkan is an oil and gas Market Analyst for Ponderosa Energy. When asked the same question as above, he said that the next oil price drop will come in October or November this year. That seemed more specific than the rest, but he had good reason: That’s refinery maintenance season (and they’re currently running at 90%+ of capacity—leading to problems when they’re shut down).

$100+/Barrel Oil Wasn’t Very Realistic (Or Likely to Return Soon)

So things aren’t looking too great for 2015 oil prices and, as noted during the Summit, no OPEC country is balancing its budget at $50 oil. While some lament that $100/barrel oil is far, far away (if ever again), Ozkan ran the numbers as to where the oil and gas market can do well with lower prices. After factoring in lower commodity prices, increased regulations, and reducing operational costs to keep up, the price-per-barrel point to see good margins was $65/barrel. $60/barrel was about breakeven; below that was a loss; but $65/barrel is the marker where the industry profitability opens back up. At least that’s one analyst’s view.

The Global Middle Class is Growing and Needs Energy

Tisha Schuller was the President/CEO of the Colorado Oil and Gas Association (COGA) for five years and now serves as Project Director for Stanford University’s Natural Gas Initiative. Schuller began her career as an environmentalist, but became an oil and gas advocate for two main reasons:

  1. When comparing the total impact (energy output versus environmental imprint) of oil and gas versus alternative energy options, the numbers were heavily in favor of oil and gas; and
  2. She realized that giving access to this abundant energy resource is one of the best things you do for impoverished communities. Otherwise you are limited by daylight and what your body can do. Even in Colorado, abundant and affordable energy is valuable. For those living below the poverty line, 25% of their income is spent on energy. Schuller also noted that pesky detail that everything you’re standing on, sitting on, leaning on, texting on comes from petroleum.

As the breakfast keynote speaker, Schuller noted some reasons to be positive despite the down energy market:

  • Although it feels like the middle class in the U.S. is getting smaller, the global middle class is growing—mostly in Asia. According to Reuter’s, it will more than double in size by 2030.
  • With this growth will come great demand for energy, and 84% of it will be from oil and gas. It is currently estimated the need will be above the supply. When it comes to basic economics, you know what that does to prices.
  • Many believe that this will enable the U.S. to export oil. As someone later stated, “If Iran can, the U.S. should be able to also.” Analysts believe that the U.S. leaves $5.50/barrel of profit on the table by not exporting oil.
  • Operational costs continue to come down (hello, Vortex tools) as do emissions. Currently, CO2 emissions in the U.S. are down to 1992 levels. The U.S. is the only country to achieve this as a free market.

So the oil and gas market has reasons to be hopeful; just most of them aren’t showing up in 2015…

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Colin McKay Miller is the VP of Marketing for the SpiroFlo Holdings group of companies:

SpiroFlo for residential hot water savings (delivered 35% faster with up to a 5% volume savings on every hot water outlet in the home), industrial water purification (biofilm removal), and reduced water pumping costs.

Vortex Tools for extending the life of oil and gas wells (recovering up to 10 times more NGLs, reducing flowback startup times, replacing VRUs, eliminating paraffin and freezing in winter, etc.).

Ecotech for cost-effective non-thermal drying (for coal, biosolids, sugar beets, dairy waste, etc.) and safe movement of materials (including potash and soda ash).

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Vortex Tools covers the ongoing scaling back of the oil and gas industry in 2015—specifically: layoffs in Colorado.

I can describe the current American oil and gas experience in four words: Layoffs and low prices.

Whether it’s big companies or small companies, the story is the same: 2015 budgets were delayed then drastically reduced. From there, oil and gas companies have hemorrhaged employees (yet production continues to climb).

With being headquartered in Colorado, we’ve kept tabs on what’s happening around us. Over the last six months:

  •  Noble Energy planned to cut 220 jobs or 10% of its workforce, 80 from Colorado (and Noble is one of the main companies in the state).
  • WPX Energy cut 8% of its nationwide workforce, scaling its Denver office back from 156 people to 15 (25 Denver-based jobs were eliminated—120 were offered to relocate to Tulsa, OK).
  • Bayou Well Services decided to permanently lay off 250 Colorado employees.
  • Sabine Oil and Gas Corp. laid off 102 Denver-based employees starting in December 2014.
  • Linn Energy will shut its Denver office, cutting 52 jobs.

(Despite this, we’ve still sold Vortex DX-I tools into the Wattenberg basin [in northeastern Colorado] to increase oil recovery efficiency in horizontal applications when combined with gas lift.)

Field install of the DX-I Vortex tool

Field install of the DX-I Vortex tool

Some of this is scaling back the bloat that occurred with high oil prices, but some of it has to do with the downside of how many American companies conduct business. I can’t remember where I ran across this study, but it noted how different parts of the world formulate their business plans. Great Britain works off a five-year plan; Germany, a 10-year plan; and Japan, 15 years. The United States? Companies usually plan around whatever will increase stock prices this quarter.

You might think that 5-15 years is too long of a planning period, but planning around what can bump numbers within a 90-day period is woefully shortsighted and often hamstrings future development. However, with oil and gas, when it hurts financially, it hurts big, and when recovery comes, companies can often buy their way to solutions then. For 2015, however, even if it’s a great market to pursue oil and gas efficiency—squeezing every bit of value from the well—it’s going to be a year of engineers trying not to get fired.

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Colin McKay Miller is the VP of Marketing for the SpiroFlo Holdings group of companies:

SpiroFlo for residential hot water savings (delivered 35% faster with up to a 5% volume savings on every hot water outlet in the home), industrial water purification (biofilm removal), and reduced water pumping costs.

Vortex Tools for extending the life of oil and gas wells (recovering up to 10 times more NGLs, reducing flowback startup times, replacing VRUs, eliminating paraffin and freezing in winter, etc.).

Ecotech for cost-effective non-thermal drying (for coal, biosolids, sugar beets, dairy waste, etc.) and safe movement of materials (including potash and soda ash).

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Vortex Tools shares a graphic of the oil rig developments rising up since 2011, then rapidly declining in early 2015.

Over the last six months, I’ve shared a few posts on the impact of low oil prices (see here, here, and here).  However, since a picture is worth a thousand words, here’s the steep drop in active rigs in a graph. Yet thanks to modern efficiency, you’ll notice oil production continues to climb:

active rigs v oil production

If a picture is worth a thousand words how much is an animation worth? Head over to Bloomberg to watch an animation of the US-wide oil rig count falling by over 45% from 1,595 rigs in October 2014 to 866 rigs in March 2015.

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Colin McKay Miller is the VP of Marketing for the SpiroFlo Holdings group of companies:

SpiroFlo for residential hot water savings (delivered 35% faster with up to a 5% volume savings on every hot water outlet in the home), industrial water purification (biofilm removal), and reduced water pumping costs.

Vortex Tools for extending the life of oil and gas wells (recovering up to 10 times more NGLs, reducing flowback startup times, replacing VRUs, eliminating paraffin and freezing in winter, etc.).

Ecotech for cost-effective non-thermal drying (for coal, biosolids, sugar beets, dairy waste, etc.) and safe movement of materials (including potash and soda ash).

 

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Vortex Tools covers how low prices are shaping the budgets, workforce, and operations of oil and gas companies.

Even if you don’t know the specifics of the steep 2014 decline in oil prices, if you’re on social media, you’ve likely seen a pic or 10 of low prices at the gas pump. But there’s also a sense of wondering how long these low oil and gas prices will last. Depending on which talking head you listen to, some believe oil prices will stay low until the end of 2016, while others think oil could hit $200/barrel in the next few years.

However it goes, this is what’s currently happening in the oil and gas industry:

Large Budget Cuts: Typically budgets for the New Year are finalized by the end of January at the latest, but in 2015, many company budgets have been delayed. Right away this means that budgets are ~10% lower, as parts of January and February were put on hold expenditure-wise. Then, as budgets have come out, a lot of them are 40-50% lower than the year before (Pioneer Natural Resources’ capital expenditures dropped by 45%, Apache gutted $3.5 billion from the year previous). This means:

Layoffs: With companies losing billions in the fourth quarter of 2014, employee cuts have followed. BP laid off 300 Scottish workers in January and Halliburton plans to lay off 5,000-6,500 of their 80,000 workers. (As the VP Marketing for Vortex Tools, my inbox has seen a spike in job applications, too.) According to Fuel Fix, “Halliburton’s move brings the number of layoffs announced by the world’s four biggest oil field services in recent weeks to more than 30,000 workers around the world. That’s about 9.4 percent of their combined workforce.” Even with layoffs attempting to balance out costs and stock prices, there are still:

Equipment Cost Pains: Oil and gas prices may be down, the amount of workers may have dropped to meet the work pace, but it still costs about the same to complete a new well or work over an existing well.  In dealing with steep, hyperbolic decline shale wells—oil and gas wells that start with high, valuable production, but quickly reduce to lower rates—operators have to keep drilling to stay profitable, so there’s a lot of unavoidable cost.

These pain points mean that some companies won’t survive, whereas others are using this as an opportunity to lean up their business model and pursue a more efficient direction. One member of the Vortex team, Richard Haas, was an oil and gas operator for 36 years. He started when oil was worth $11 a barrel and gas 16 cents an MCF (adjusted prices still lower than today). In addition, gas value was not adjusted based on its BTU (or energy) equivalent—it all got valued the same no matter how much it fueled. Because of this, Richard knew how to wring every bit of oil or condensate from the production stream. Now that oil is at less than half the value of where it was eight months ago, it’s going to take that kind of efficiency thinking for companies to thrive at low oil prices.

With Vortex tools increasing production efficiency, reducing chemical/surfactant costs, and eliminating pollution fines, that type of required efficiency is available now.

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Colin McKay Miller is the VP of Marketing for the SpiroFlo Holdings group of companies:

SpiroFlo for residential hot water savings (delivered 35% faster with up to a 5% volume savings on every hot water outlet in the home), industrial water purification (biofilm removal), and reduced water pumping costs.

Vortex Tools for extending the life of oil and gas wells (recovering up to 10 times more NGLs, reducing flowback startup times, replacing VRUs, eliminating paraffin and freezing in winter, etc.).

Ecotech for cost-effective non-thermal drying (for coal, biosolids, sugar beets, dairy waste, etc.) and safe movement of materials (including potash and soda ash).

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