Business Context and Reporting Period
This Form 8-K was filed by Blast Energy Services, Inc. on December 5, 2008. The filing reports the entry into a Material Definitive Agreement with Resource Energy Technologies, LLC ("RET") regarding the application of the Company's abrasive fluid jetting ("AFJ") technology.
Key Financial Metrics
The filing does not provide standard financial metrics such as revenue, profit, cash flow, margins, debt, or liquidity. The document focuses exclusively on the terms of a new service contract.
- Phase I Reimbursement: RET agreed to reimburse the Company $50,000, payable ratably over a period not to exceed 120 days from the end of Phase I.
- Phase II Revenue Model: If exercised, the Company will provide services at zero cost in exchange for a 40% share of net revenues from increased production.
Material Changes and Contract Terms
The Company entered into a Master Service Contract effective December 5, 2008, which governs work performed for RET. The contract is cancellable by either party with 10 days' prior written notice. No work has commenced as of the filing date.
Phase I: Test Phase
- RET will define three well locations on its lease acreage in the Park City area of Kentucky.
- The Company will bear the costs of building 4 ½ inch deflection shoes, down-hole equipment, mobilization/demobilization of jetting equipment, and living costs for operating personnel.
- RET will reimburse the Company $50,000 upon completion of Phase I.
Phase II: Maximum 100 Well Program
- RET holds a 60-day option to exercise an exclusive program to stimulate up to 100 wells, expiring 60 days after Phase I completion.
- If exercised, the program is scheduled to begin in the spring of 2009.
- Compensation is a 40% share of net revenues from increased production; the Company bears mobilization costs from its previous location to Kentucky.
Outlook, Risks, and Management Commentary
The Company is awaiting further guidance from RET regarding the timing for Phase I. Consequently, no work has begun under the contract. The execution of Phase II is contingent upon RET's satisfaction with the documented results of Phase I.
Investor Verification Checklist
- Verify the status of the Phase I test program and whether the $50,000 reimbursement has been received.
- Confirm if RET has exercised the option to proceed with the Phase II 100-well program.
- Monitor the Company's cash flow given that it is currently bearing all upfront costs for Phase I equipment and mobilization.
- Review the definition of "net revenues" in the contract to understand the revenue share calculation for Phase II.