Recon Technology, Ltd. (NASDAQ: RCON) is having an overwhelmingly strong start to the trading session this morning after the company announced that it has entered into an agreement to provide chemical compound agents and relevant services to yet another oilfield company. Of course, this led to excitement among investors, sending the stock screaming for the top. As is almost always the case, our partners at Trade Ideas were the first to alert us to the gains. At the moment (9:54), RCON is trading at $2.25 per share after a gain of $0.55 per share or 32.35% thus far today.
RCON Gains On $2 Million Deal
As mentioned above, Recon Technology is having an overwhelmingly strong start to the trading session this morning after the company announced that it has entered into an agreement to provide proprietary chemical compound agents, microbiological treatment agents, and relevant services surrounding oily sewage treatments. The agreement was entered into with Qinghai Oilfield Company, a subsidiary of PetroChina Co., Ltd. It is expected that the agreement will drive around RMB 13.11 million, which works out to approximately $2 million over the course of 1 year. Of course, the amount of money generated will depend on the amount of products actually used by Qinghai Oilfield.
In the press release, RCON said that it is expecting to begin recording revenue under the project in the current quarter. Not to mention that the shear size and scope of the project represents a significant increase when compared to the company’s previous wastewater treatment agreements.
All goods that will be provided under the agreement will be developed and rendered by RCON. Also, Recon Technology is currently in the process of applying for patents for its own bio-stimulants, which are microbiliogical treatment agents needed for this particular project. So far, the company has been granted several patents for the invention of oily wastewater treatment devices.
In a statement, Yin Shenping, CEO at RCON, had the following to offer:
“This is a major progression in our partnership with Qinghai Oilfield, and an indication of the upside potential of Recon in the oilfield environmental protection market…Our oilfield waste water treatment business has continued to expand rapidly, as agreements have continued to grow in terms of size and number. In fiscal 2017, we grew our revenue in this business by over 371%.
The market potential in wastewater represents a significant opportunity for Recon in the coming quarters, as many of the investments made by our Company during the downturn in oil prices have begun to materialize into increasing orders in the past six months. The principal driver of growth in this market is increased regulatory requirements amidst the need for greater environmental protection, which is creating a need for our large-oilfield clients to utilize our products and services to improve their waste services.We have leveraged experience, data analysis, and research to develop solutions for these large-scale oilfield companies in China, many of which we have had relationships with for over a decade. The increasing amounts of agreements represents more than simply what the amounts themselves represent, as the overall perception of Recon is changing from merely an oilfield service company to a hi-tech company in our marketplace.”
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on RCON. In particular, we’re interested in watching as the company continues to drive more contracts with a larger revenue potential as well as following the company through the expansion of its intellectual property portfolio. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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