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$1.42 -0.13 (-8.39%)
10/7/2008 4:00 PM

Sulphco, Inc. (SUF)

CAPS Rating:
*

The Company is engaged in the business of developing and commercializing its patented and proprietary technology for the upgrading of crude oil by reducing its relative density, its viscosity, and its sulfur and nitrogen content.

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Avatar arm847 (31.87) Submitted: 10/22/07 8:13 PM : Underperform Start Price: $6.50 SUF Score: 44.20

I rode Sulphco up for the past year, (10-22-07) based on the business plan presented in summer conference calls, and the rising oil market.
At this point, I'm negative on the company based on a statement, made rather off hand, in the last conference call by Ryan, the CEO. He said that they didn't have a mass balance of where the Sulphur (S) went after the sonocracking event. Any refiner must make their business based on mass balance. If the S isn't being extracted as an effluent, its still in the oil and therefore disallows the oil "product" to be sold as a sweet crude, a crucial factor in making the business plan work. I can't believe this company went this far without understanding the mass balance- I'm degreed as a chemist, and some background in CHEn. This violates every rule a refiner would follow. I'm now in medium term puts, and had this stock picking page allowed me to correctly register the choices I've made in my personal portfolio, it would have registered a .75 point drop in the price since 10-18. I think this company could be bankrupt in 90 days to 6 months, based on the recent 9 million share offering floundering, and no product to sell to any potential customer- no convincing sales case if the mass balance doesn't work.

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Avatar BigDMan64 (99.86) Submitted: 10/23/07 7:10 PM

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I am a CPA, not a chemist...actually just barely passed chemisty. My pick to underperform was based soley on really questionable financial statements, unobtainable end points and projections and huge cash burns. I really appreciate your insight to the scientific aspect of this process. It appears based on your comments that the scientific process and "new" technology was just as overhyped and unobtainable as the laughable financial position of the company. Too bad I can't have two thumbs down. With the pain that I have endured on this pick....would really enjoy the ride down twice as much if I could double my short.

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Avatar arm847 (31.87) Submitted: 10/24/07 12:40 AM

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Well, I went back and revisited the stock prospectus from earlier this month, and find that Sulphco is not receiving any proceeds from the resale of the stock (9MM shares), so this is just facilitation of sale for some holders. If the prospects for the company are so good, why are these investors so interested in getting out? AND, this doesn't provide any cash for the company to survive past early next year.

I've also re-read their opening pitch on the web site.
"The altering of these structures can include breaking large hydrocarbon structures into smaller hydrocarbon structures potentially, which in turn can reduce the density and the viscosity of the crude oil and crude oil fractions. Carbon bonds that contain sulfur and nitrogen can also be broken in the same manner potentially, thereby allowing for easier removal of some of these compounds from the remaining hydrocarbon compounds in the crude oil through a variety of commercially available techniques."
The phrasing of this passage makes it apparent that the technology has not demonstrated that sulphur and nitrogen bonds are broken, only that they "can" be broken, POTENTIALLY. Pure hypothesis. And, extraction of the sulphur / nitrogen would still have to be done by other commercial refning techniques. The only saving here is if the already available techniques are substantially more costly than the sonocrack.

I went to puts late last week, benefited from the market drop, and closed them with a neat profit. I'm going back in this week or next for round two of long puts (hopefully the December 10's), once the hype of their restart of their testing "SulphCo®, Inc. (Amex: SUF - News; the "Company") announced today that testing will resume this week in Fujairah, United Arab Emirates on a variety of crude feedstocks. The Company also reported that it has completed the installation of a 15,000 bpd skid, been issued all necessary permits and reached agreement with its European partner authorizing the resumption of testing on October 29th." raises the price to a new plateau.

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