Is penny stock Quadrise Fuels (LSE:QFI) a good investment?

Penny stock Quadrise Fuels International (LSE:QFI) is seeing its share price rise today as its project in Utah resumes. Should I invest?

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Quadrise Fuels International (LSE:QFI) is a penny stock with a rising share price today. Quadrise is a London-listed FTSE-AIM stock in the oil and gas sector. Its market cap is around £76m and earnings per share are negative. It doesn’t offer a dividend, and the QFI share price is volatile. But is this potential growth stock the sort of investment I should consider adding to my Stocks and Shares ISA?

QFI solves an environmental problem

Quadrise aims to solve the problem of significant oversupply of heavy fuel in the market. Producers and refiners make too much heavy oil, while demand is falling due to tighter maritime regulations. It’s also uneconomic to produce and it’s polluting. Nevertheless, there is a large market that still wants the fuel. Quadrise uses water and additives to create a fuel oil that is cleaner and cheaper to use.

Its new renewable fuel bioMSAR offers 20% to 30% reductions in CO2 emissions. This is an alternative to using Liquefied natural gas (LNG), but with less risk and lower cost.

Covid-19 slows the penny stock’s progress

The company has a few projects ongoing. It’s working with mining and chemical clients in Morocco where an industrial-scale trial is progressing to produce a fuel oil replacement. QFI will be paid £100k for the industrial trial and phase 2 study under existing agreements with the client. 

In Utah, it’s testing at the Petroteq Oil Sands Plant, for which it will be paid £150k. On successful completion, this will lead to the development of commercial production facilities capable of treating 10,000 barrels of oil per day. The QFI share price is rising today in response to news that this plant has restarted after a shutdown to allow for certain additional enhancements.

Quadrise also has projects in Ecuador and Saudi Arabia. Covid-19 has really thrown a spanner in the works when it comes to visiting and operating in these locations. But it’s hopeful the worst is now behind them.

Quadrise financials

For the six months ended 31 December 2020, the firm had £1.1m in cash reserves, down from £3.8m the year before. It raised an additional £7m in March via a share placing. This gives it the funds to progress with its projects until July 2022.

Its losses for this period amount to £2.3m, which was the same as 2019. Its assets were valued at £4.9m, down from £7.8 the year before.

There’s no doubt this is a good time for companies to be involved in renewables. Anything that helps the planet and reduces costs to industry is welcome. The key for investors is whether the company can logistically achieve what it hopes to, with the cash it’s already raised.

The Quadrise share price is up by 240% in a year. Unfortunately, penny stocks are notoriously volatile and very often must raise funds time and again. This makes it a risky investment. It’s not something I’m looking to invest in today, as I prefer to stick to the FTSE 350 stocks for my Stocks and Shares ISA. Nevertheless, I do see the potential and will keep an eye on its future progress.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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