Recon Technology, Ltd. (NASDAQ: RCON), a company specializes in providing software and on-site services to companies in the petroleum mining and extraction industry in China announced last week news about Beijing BHD Petroleum Technology Co., Ltd. a wholly-owned subsidiary of Recon. BHD won a major bidding contract with PetroChina Co. (NYSE:PTR) and is now a Class A Furnace Supplier to all PetroChina's oilfield companies. This recent news bodes well for an emerging growth small cap company.
With the new bidding BHD will participate in PetroChina’s furnace Procurement program, which is estimated to worth $457 million from October 2015 to September 2017. Under the Procurement program, PetroChina conducts a bidding process to secure a limited number of qualified suppliers. After the selection all purchases are obtained from the designated Class A suppliers.
The bidding process has started in October 2014, with about 130 companies competing for the role of suppliers. Only 27 companies were selected, 16 of which are PetroChina affiliates or subsidiaries, and only 8 are private companies qualified as Class A suppliers. Recon falls under this category. Mr. Shenping Yin, Chairman and CEO of Recon, stated, "This qualification and contract win is a testament to our technical strength and service quality as one of the leading independent oilfield product and service providers to PetroChina. With this qualification, Recon now can participate in all of PetroChina's furnace markets… As there are only a limited number of PetroChina approved suppliers, the competition is significantly reduced. This will allow us to increase our client base, while reducing resources devoted to building our client base, and allow us to devote more of our efforts to product improvement to better serve our clients.”
Recon Technology is the first non-state owned oil and gas field service provider that is listed on NASDAQ. Recon’s clients are China’s largest oil exploration companies, Sinopec (NYSE:SHI), China National Petroleum Corporation (CNPC), and now PetroChina as well. Recon provides services designed to increase petroleum extraction levels and reduce production costs.
Recon’s services include - efficient gathering and transportation equipment, reservoir stimulation products, and advanced real-time automated technologies that dramatically increase the efficiency of extracting petroleum products.
China’s government has increased its support for domestic oil production to rely less on foreign imports in order to economic burdens. In addition the government also supports efforts to transition from reliance on coal to natural gas as a primary energy sources in the country in order to fight air pollution. Recon’s technology seems to be part of a niche in the oil and gas sector. We will continue to cover the recent developments and if oil and gas will rebound after a tough 2015.