8-K: Sky Quarry Inc. Reports Lower 2024 Revenue Amid Refinery Refurbishment and Nasdaq Listing Deficiency

Sky Quarry Inc. reports a 54% decrease in revenue for 2024, a net loss of $14.7 million, and receives a Nasdaq notification regarding minimum bid price compliance.

Summary

• Sky Quarry Inc. reported its financial results for the fourth quarter and fiscal year ended December 31, 2024.
• The company's revenue for the year was $23.3 million, a 54% decrease compared to $50.7 million in 2023, primarily due to lower oil prices and refinery refurbishment.
• Sky Quarry experienced a gross loss of $1.4 million, a significant drop from the $2.3 million gross profit in the previous year.
• Operating expenses increased to $6.1 million, contributing to a net loss of $14.7 million, compared to a $4.4 million loss in 2023.
• The company received a notification from Nasdaq because its stock price fell below $1.00 per share for 30 consecutive business days.
• Sky Quarry has until September 24, 2025, to regain compliance with Nasdaq's minimum bid price rule.
• The company is focusing on optimizing its asset base, expanding its national footprint through partnerships, and rolling out modular asphalt shingle recycling facilities.
• Sky Quarry anticipates completing the build-out of its first Asphalt Shingle Recycling (ASR) Facility in the 2025 fiscal year.
• The company expects to begin refining blended sustainable oil in 2025 at its Nevada-based Foreland Refinery, which has a processing capacity of up to 5,000 barrels per day.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are positive developments like the LOI with RB Residential Roofing and the appointments to the Board of Directors, the significant decline in revenue, the net loss, and the Nasdaq compliance issue weigh heavily on the overall sentiment.

Positives

• Sky Quarry signed a Letter of Intent (LOI) with RB Residential Roofing to secure a steady supply of post-consumer shingles and expand nationally.
• The company is developing modular Asphalt Shingle Recycling (ASR) facilities to generate revenue from tipping fees, recycled material sales, and byproduct recovery.
• Sky Quarry plans to begin refining blended sustainable oil at its Foreland Refinery in 2025, potentially enhancing regional fuel security.
• The company completed its 2024 capital expenditure program for its PR Spring hydrocarbon extraction site.
• Leo Womack and Todd Palin were appointed to the Board of Directors, bringing financial and operational expertise.

Negatives

• Sky Quarry's revenue decreased by 54% in 2024, primarily due to lower oil prices and refinery refurbishment.
• The company reported a net loss of $14.7 million for 2024, significantly higher than the $4.4 million loss in 2023.
• Sky Quarry experienced a gross loss of $1.4 million, compared to a gross profit of $2.3 million in the previous year.
• The company received a Nasdaq notification for failing to maintain a minimum bid price of $1.00 per share, potentially leading to delisting.

Risks

• Sky Quarry faces the risk of delisting from Nasdaq if it fails to regain compliance with the minimum bid price rule by September 24, 2025.
• The company's financial performance is subject to fluctuations in oil prices and the success of its refinery operations.
• The development and deployment of Asphalt Shingle Recycling (ASR) facilities may face operational and logistical challenges.
• The company's forward-looking statements are subject to various risks and uncertainties, including those described in its SEC filings.

Future Outlook

Sky Quarry anticipates completing the build-out of its first Asphalt Shingle Recycling (ASR) Facility in the 2025 fiscal year and expects to begin refining blended sustainable oil at its Foreland Refinery in 2025, with a processing capacity of up to 5,000 barrels per day. The company believes these initiatives will lead to meaningful revenue growth, broader market reach, and long-term value creation for shareholders.

Management Comments

• David Sealock, Chairman & Chief Executive Officer of Sky Quarry, reflected on a transformative year for the company.
• He stated that Sky Quarry achieved several key milestones in 2024, including its NASDAQ listing, continued revenue at the Foreland Refinery, and capital investments in PR Spring and Asphalt Shingle Recycling (ASR) portfolios.
• He believes that the company is positioned to grow production and increase revenues with its portfolio expansion projects.

Industry Context

Sky Quarry's focus on asphalt shingle recycling aligns with the growing emphasis on sustainable waste management and resource recovery in the construction and energy sectors. The company's efforts to expand refining capacity and secure feedstock through partnerships address the increasing demand for sustainable energy solutions and the potential for fuel supply disruptions in the Western U.S.

Comparison to Industry Standards

• While specific benchmarks for asphalt shingle recycling are still developing, companies like GAF and Owens Corning are also exploring recycling initiatives, but Sky Quarry's integrated approach to energy production and waste remediation is unique.
• Compared to traditional oil refineries, Sky Quarry's Foreland Refinery, with a capacity of 5,000 barrels per day, is relatively small, as major refineries can process hundreds of thousands of barrels per day.
• The company's financial performance lags behind larger, more established energy companies, but its focus on sustainable practices could attract investors interested in ESG (Environmental, Social, and Governance) factors.

Management Changes

Stakeholder Impact

• Shareholders face the risk of delisting from Nasdaq and potential dilution if the company undertakes a reverse stock split to regain compliance.
• Employees may be affected by the company's financial performance and strategic shifts.
• Customers could benefit from the company's sustainable energy solutions and waste management services.
• Suppliers may be impacted by changes in the company's production and procurement activities.
• Creditors face increased risk due to the company's net losses.

Next Steps

• Sky Quarry intends to monitor the bid price of its common stock and consider available options to regain compliance with Nasdaq's minimum bid price rule.
• The company plans to work towards expanding its national footprint through its recent LOI with RB Residential Roofing.
• Sky Quarry will advance the national rollout of its Asphalt Shingle Recycling (ASR) modular extraction facilities, beginning with the deployment of its first facility in the 2025 fiscal year.
• The company expects to begin refining blended sustainable oil in 2025 at its Nevada-based Foreland Refinery.

Key Dates

Keywords

Sky Quarry, Financial Results, Asphalt Shingle Recycling, NASDAQ, Revenue, Net Loss, Refinery, Oil Prices, Delisting, Compliance