TIDMNTQ
RNS Number : 5220G
Enteq Technologies PLC
16 November 2022
Enteq Technologies plc
("Enteq", the "Company" or the "Group")
Interim results for the six months ended 30 September 2022
and
IMC Investor Presentation
Enteq Technologies plc (AIM: NTQ.L) the energy services
technology and equipment supplier, today announces its interim
results for the six months ended 30 September 2022.
Key Highlights
-- Measurement While Drilling revenues in H1 were significantly
up on this time last year due to North American activity, albeit at
lower margins due to share of third-party equipment sales.
-- International sales were limited due to lagging international
market recovery and ongoing China shut-downs.
-- The SABER engineering project has progressed with the initial
fleet of the latest design of SABER tools being built. The
complementary MegaHop technology development has been launched.
-- All initial testing of SABER has achieved the objectives with
encouraging results. Active drilling in hard-rock environment has
been scheduled at an independent test-site in Norway and customer
trials arranged.
-- Investment in SABER has continued using existing balance
sheet resources to progress into the final engineering phase and
SABER tool-build, resulting in a cash position of US$1.8m at the
end of the period rising to US$2.5m as at the date o f this
announcement.
Financial metrics
Six months ended
30 September:
2022 2021
US$m US$m
* Revenue 4.9 2.3
* Adjusted EBITDA* 0.1 (0.6)
* Post tax loss for the period 0.8 1.2
* Loss per share (cents) 1.1 1.8
* Cash balance 1.8 5.3
Andrew Law, CEO of Enteq Technologies plc, commented:
"Enteq continues to adapt to the changing global and industry
dynamics by focusing on the higher margin potential in the
significantly larger (>US$2bn) growth market of Rotary Steerable
Drilling where SABER can offer a differentiated and cost-effective
alternative. Progress continues with the build and test of the
SABER system. Resources from the existing balance sheet are being
used to support bringing SABER to commercialisation."
Investor Presentation
Please note that Andrew Law and David Steel, Chief Financial
Officer, will be providing a live presentation relating to these
results via the Investor Meet Company platform on 22 November 2022
at 10:30am GMT.
The presentation is open to all existing and potential
shareholders. Questions can be submitted pre-event via the Investor
Meet Company dashboard up until 9.00am the day before the meeting
or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and
attend this presentation via
www.investormeetcompany.com/enteq-upstream-plc/register-investor .
Investors who already follow Enteq on the Investor Meet Company
platform will automatically be invited.
For further information, please contact:
Enteq Technologies plc +44 (0)1494 618739
www.enteq.com
Andrew Law, Chief Executive Officer
David Steel, Chief Financial Officer
finnCap Ltd (NOMAD and Broker) +44 (0)20 7220 0500
Ed Frisby, Fergus Sullivan (Corporate Finance)
Andrew Burdis, Barney Hayward (ECM)
(*) Adjusted EBITDA is reported profit before tax adjusted for
interest, depreciation, amortisation, foreign exchange movements,
performance share plan charges and exceptional items - see note
5
Interim Report
CHAIRMAN & CHIEF EXECUTIVE OFFICER'S REPORT
Overview
Enteq supplies and develops drilling and measurement technology
for the worldwide oil and gas, geothermal and methane capture
directional drilling markets. Enteq provides equipment through
rental or purchase, enabling independent and regional directional
drilling companies to operate as an alternative to major integrated
service companies. Directional drilling encompasses Rotary
Steerable Systems ("RSS") and Measurement While Drilling
("MWD").
As a step change to the original MWD business, Enteq is
commercialising the SABER (Steer At-Bit Enteq Rotary) RSS Tool, a
truly disruptive and unique alternative to both conventional RSS
and traditional directional drilling. SABER can allow Enteq to
access a considerably larger addressable market with notably fewer
active competitors compared to those in the MWD market. The SABER
Tool is an evolution of the intellectual property developed, proven
in concept and successfully tested downhole by Shell. Enteq has the
exclusive worldwide licence to the intellectual property and is now
progressing through the field-trial programme ahead of
commercialisation.
Enteq's MWD business has an established reputation for
reliability both in North America, where operations using Enteq
equipment are regularly being carried out on a significant number
of rigs, and in key international areas and in geothermal
operations.
Financial performance
The key driver of the half year revenue of US$4.9m has been the
steady increase in North American drilling activity, a continuation
of the recovery seen through the whole of the previous financial
year. This recovery has been a function of the relative stability
in the price of a barrel of West Texas Intermediate ("WTI"),
despite a weakening during the month of September itself. The
average price of WTI in the period under review was US$101, moving
from US$104 on 1 April to US$80 at the period end. This stability,
at a relatively high price, resulted in the North American onshore
active drilling rig count rising by 14%; from 673 on 1 April to 765
at the end of September.
As expected, the international markets have been slower to
respond to this price stability. The proportion of international
revenue, at 3% in this reporting period, continues the recent trend
with the international revenue of the second half of the previous
financial year at 9%, down from the 28% seen in the first half
year.
The reported gross margin of 28% in the first half of this year
compares to 35% in the six months to 31 March 2022 and 37% in the
equivalent period to 30 September 2021. This reduction is due to a
lower proportion of sales coming from the high margin rental
revenue stream (down from 23% in the first half year to 30
September 2021 to only 7% in this reporting period) combined with a
higher proportion coming from the electronic component product line
(up from 46% to 53% in same periods) within which an increasing
number of third party, lower margin, items were sold.
In the six months ended 30 September 2022, administrative
expenses before amortisation, depreciation and long-term incentive
scheme charges were US$1.3m. This is down from both the US$1.4m in
the equivalent period to 30 September 2021 and the US$1.8m in the
six months to 31 March 2022, reflecting the continuing focus on
cost control measures.
The adjusted EBITDA profit in the period was US$0.1m, a pleasing
improvement over the US$0.6m loss in the equivalent period last
year. The primary reason for the improvement was the uplift in
revenue and associated gross margin. A reconciliation between the
reported loss and the adjusted EBITDA profit is shown in note 5 to
the Financial Statements below.
Cash balance and cashflow
On 30 September 2022, the Group had a cash balance of US$1.8m
down US$3.0m on the US$4.8m reported as at 31 March 2022. As at the
date of this announcement the cash balance was US$2.5m.
The half year cash movement can be analysed as follows:
US$m
Adjusted EBITDA profit 0.1
Change in trade and other receivables (1.9)
Change in trade and other payables (0.2)
Change in inventory 0.4
Operational cashflow (1.6)
Increase in the rental fleet (0.3)
R&D expenditure (1.1)
Net cash movement (3.0)
Cash balances as at 1 April 2022 4.8
-------
Cash balances as at 30 September 2022 1.8
=======
The increase in trade receivables relates to strong revenues
towards the end of the period with the outstanding balances being
collectable in future months. The R&D expenditure was primarily
relating to the SABER Rotary Steerable System development program.
Management expects that the future cash balances are sufficient to
complete SABER's field-testing phase and to bring it to a
successful commercial launch.
Operations
Enteq's dedicated SABER technology and manufacturing centre is
now fully operational, having opened in February 2022. This
facility is located close to Cheltenham, UK, one of the global
centres of expertise for Rotary Steerable Systems with access to
specialised engineering and machining firms.
The engineering, manufacturing and distribution functions
related to the MWD division continues to operate from the Enteq
owned facility in Houston, Texas.
SABER field-testing is the priority for progression to the
commercialisation phase. The SABER project has continued to
progress according to the development plan, with the improved
latest design of SABER entering the downhole-readiness phase for
active drilling testing. This latest improved, simplified and
ruggedised design is an outcome of the successful initial downhole
passive testing, followed by an accelerated production and assembly
programme to deliver downhole-ready tools. Extensive testing at
surface has both re-validated this unique concept and refined the
design. Active downhole drilling field-testing has been booked at a
test site Norway, with follow-up active downhole drilling planned
with selected customer test partners keen to continue the move into
the commercialisation phase.
In line with the direction of the industry, chiefly the growth
market opportunity for Rotary Steerable Systems, the Company
strategy has been aligned with ensuring the technical and
commercial success of SABER. A concerted effort is in place to
utilise the assets on the balance sheet to provide financial
resources for SABER commercialisation and build-up of the rental
fleet. Following initial active drilling testing, the focus will be
on pre-production design improvements and building-up the SABER
rental-fleet as rapidly as possible, subject to any supply chain
constraints, to support deployment into the selected initial
regions.
To support SABER, there is a disciplined strategy to concentrate
the MWD business on cash-generative commercial deals. As the MWD
market is becoming increasingly commoditised, the decision has been
taken to focus on providing customers with differentiated
technologies with the potential to enhance SABER deployment to
customers. For example, our recent introduction of our MegaHop(1)
technology can allow communication from SABER to customers'
existing equipment.
Organisation
The MWD division has personnel operating from Houston and the
SABER division has personnel operating from Houston and
Cheltenham.
Outlook
The underlying macro-fundamentals for RSS show that the market
and RSS usage is increasing and that this market is in need of
additional competition. Extensive and continued industry engagement
by Enteq, including recent attendance at the ADIPEC global trade
show, has confirmed there is a high level of potential demand for
SABER in each of the key geographies where Enteq operates. In
particular, this potentially disruptive technology has a strong
product-market fit having the potential for lower cost of operation
as well as reduced risk.
Andrew Law Martin Perry
Chief Executive Chairman
Enteq Technologies plc
15 November 2022
(1)
www.enteq.com/news-media/2022/09/enteq-technologies-launches-real-time-communications-solution-for-rss-and-mwd-operations
Enteq Technologies plc
Condensed Consolidated Income
Statement
Six months Six months Year to
to 30 to 30 31 March
September September 2022
2022 2021
Unaudited Unaudited Audited
Notes US$ 000's US$ 000's US$ 000's
Revenue 4,912 2,318 7,306
Cost of Sales (3,518) (1,457) (4,677)
Gross Profit 1,394 861 2,629
Administrative expenses before
amortisation (1,866) (1,877) (3,185)
Amortisation of acquired
intangibles 10 (241) (170) (199)
Other exceptional items 6 (25) (16) (7)
Foreign exchange loss on
operating activities (34) (10) (40)
----------- ----------- ----------
Total Administrative expenses (2,166) (2,073) (3,431)
Operating loss (772) (1,212) (802)
Finance income 6 7 16
Loss before tax (766) (1,205) (786)
Tax expense 9 - - -
Loss for the period 5 (766) (1,205) (786)
=========== =========== ==========
Loss attributable to:
Owners of the parent (766) (1,205) (786)
=========== =========== ==========
Loss per share (in US cents): 8
Basic (1.1) (1.8) (1.1)
Diluted (1.1) (1.8) (1.1)
Enteq Technologies plc
Condensed Statement of Financial Position
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
Notes US$ 000's US$ 000's US$ 000's
Non-current assets
Intangible assets 10 5,051 2,517 4,143
Property, plant and equipment 2,142 2,201 2,506
Rental fleet 98 851 -
Trade and other receivables
greater than one year 54 66 -
------------- ----------
Non-current assets 7,345 5,635 6,649
------------- ------------- ----------
Current assets
Trade and other receivables 5,342 2,649 3,537
Inventories 2,006 2,856 2,410
Cash and cash equivalents 319 5,335 3,296
Bank deposits 1,500 - 1,500
------------- ------------- ----------
Current assets 9,167 10,840 10,743
------------- ------------- ----------
Total assets 16,512 16,475 17,392
============= ============= ==========
Equity and liabilities
Equity
Share capital 11 1,081 1,070 1,072
Share premium 92,038 91,884 91,919
Share based payment reserve 410 315 432
Retained earnings (78,660) (78,312) (77,894)
----------
Total equity 14,869 14,957 15,529
------------- ------------- ----------
Current Liabilities
Trade and other payables 1,643 1,518 1,863
------------- ------------- ----------
Total equity and liabilities 16,512 16,475 17,392
============= ============= ==========
Enteq Technologies
plc
Condensed Consolidated Statement of Changes
in Equity
Six months to 30 September 2022
Share
Called
up Profit based
share and loss Share payment Total
capital account premium reserve Equity
US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's
Issue of share capital 9 - 119 - 128
Share based payment
charge - - - (22) (22)
---------- ----------
Transactions with owners 9 - 119 (22) 106
---------- ---------- ---------- ---------- ----------
Loss for the period - (766) - - (766)
Total comprehensive
income (766) - - (766)
---------- ---------- ---------- ---------- ----------
Movement in period: 9 (766) 119 (22) (660)
As at 1 April 2022 (audited) 1,072 (77,894) 91,919 432 15,529
---------- ---------- ---------- ---------- ----------
As at 30 September
2022 (unaudited) 1,081 (78,660) 92,038 410 14,869
========== ========== ========== ========== ==========
Six months to 30 September 2021
Share
Called
up Profit based
share and loss Share payment Total
capital account premium reserve Equity
US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's
Issue of share capital 14 - 95 - 109
Transfer between reserves - 217 - (217) -
Share based payment
charge - - - 77 77
---------- ----------
Transactions with owners 14 217 95 (140) 186
---------- ---------- ---------- ---------- ----------
Loss for the period - (1,205) - - (1,205)
Total comprehensive
income - (1,205) - - (1,205)
---------- ---------- ---------- ---------- ----------
Movement in period: 14 (988) 95 (140) (1,019)
As at 1 April 2021 (audited) 1,056 (77,324) 91,789 455 15,976
---------- ---------- ---------- ---------- ----------
As at 30 September
2021 (unaudited) 1,070 (78,312) 91,884 315 14,957
========== ========== ========== ========== ==========
Enteq Technologies plc
Condensed Consolidated Statement of
Cash flows
Six months Six months Year
to to to
30 September 30 September 31 March
2022 2021 2022
Unaudited Unaudited Audited
US$ 000's US$ 000's US$ 000's
Cash flows from operating
activities:
Loss for the period (766) (1,205) (787)
Gain on disposal of fixed
assets - (20) (16)
Net finance income (6) (7) (30)
Share-based payment non-cash
charges (22) 75 194
Impact of foreign exchange
movement (34) (10) (40)
Depreciation, amortisation
and exceptional charges 784 525 840
(44) (642) 161
(Increase)/decrease in
inventory 404 34 478
Decrease/(increase) in
trade and other receivables (1,859) (143) (964)
(Decrease)/increase in
trade and other payables (219) (26) 320
Increase in rental fleet
assets (256) (1,128) (817)
Net cash from operating
activities (1,974) (1,905) (822)
------------------ -------------- ----------
Investing activities
Purchase of tangible fixed
assets (22) (6) (58)
Disposal proceeds of tangible
fixed assets - 20 30
Purchase of intangible
fixed assets (1,148) (959) (2,614)
Funds placed on interest
bearing deposit - - (1,500)
Interest received 6 7 16
------------------ --------------
Net cash from investing
activities (1,164) (938) (4,126)
------------------ -------------- ----------
Financing activities
Share issue 127 109 145
------------------ --------------
Net cash from financing
activities 127 109 145
------------------ -------------- ----------
Increase/(decrease) in
cash and cash equivalents (3,011) (2,734) (4,803)
Non-cash movements - foreign
exchange 34 10 40
Cash and cash equivalents
at beginning of period 3,296 8,059 8,059
Cash and cash equivalents
at end of period 319 5,335 3,296
================== ============== ==========
Cash and cash equivalents
at end of period 319 5,335 3,296
Funds placed on interest
bearing deposit 1,500 - 1,500
------------------ -------------- ----------
1,819 5,335 4,796
================== ============== ==========
ENTEQ TECHNOLOGIES PLC
NOTES TO THE FINANCIAL STATEMENTS
For the six months to 30 September 2022
1. Reporting entity
The Company is a public limited company incorporated and
domiciled in England and Wales (registration number 07590845). The
Company's registered address is The Courtyard, High Street, Ascot,
Berkshire, SL5 7HP.
The Company's ordinary shares are traded on the AIM market of
The London Stock Exchange.
Both the Company and its subsidiaries (together referred to as
the "Group") provide equipment to energy service companies for use
in the hydrocarbon and geothermal extraction sectors.
2. General information and basis of preparation
The information for the period ended 30 September 2022 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for the period
ended 31 March 2022 has been delivered to the Registrar of
Companies. The auditors have reported on these accounts; their
reports were unqualified, but did draw attention to the uncertainty
regarding the carrying value of the inventory by way of emphasis
without qualifying their report and did not contain statements
under s498(2) or (3) Companies Act 2006.
The annual financial statements of the Group are prepared in
accordance with IFRS as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting', as adopted by
the European Union.
The Group's consolidated interim financial statements are
presented in US Dollars (US$), which is also the functional
currency of the parent company. These condensed consolidated
interim financial statements (the interim financial statements)
have been approved for issue by the Board of directors on 15
November 2022.
This half-yearly financial report has not been audited and has
not been formally reviewed by auditors under the Auditing Practices
Board guidance in ISRE 2410.
3. Accounting policies
The interim financial statements have been prepared on the basis
of the accounting policies and methods of computation applicable
for the period ended 31 March 2022. These accounting policies are
consistent with those applied in the preparation of the accounts
for the period ended 31 March 2022.
4. Estimates
When preparing the interim financial statements, management
undertakes a number of judgements, estimates and assumptions about
recognition and measurement of assets, liabilities, income and
expenses. The actual results may differ from the judgements,
estimates and assumptions made by management, and will seldom equal
the estimated results. The judgements, estimates and assumptions
applied in the interim financial statements, including the key
sources of estimation uncertainty were the same as those applied in
the Group's last annual financial statements for the year ended 31
March 2022.
5. Adjusted earnings and adjusted EBITDA
The following analysis illustrates the performance of the
Group's activities, and reconciles the Group's loss, as shown in
the condensed consolidated interim income statement, to adjusted
earnings. Adjusted earnings are presented to provide a better
indication of overall financial performance and to reflect how the
business is managed and measured on a day-today basis. Adjusted
earnings before interest, taxation, depreciation and amortisation
("adjusted EBITDA") is also presented as it is a key performance
indicator used by management.
Six months Six months Year to
to 30 September to 30 September 31 March
2022 2021 2022
US$ 000's US$ 000's US$ 000's
Unaudited Unaudited Audited
Loss attributable to ordinary
shareholders (766) (1,205) (787)
Exceptional items 25 16 7
Amortisation of acquired intangible
assets 240 170 199
Foreign exchange movements 34 10 40
----------------- ----------------- --------------
Adjusted earnings (467) (1,009) (541)
Depreciation charge 543 355 643
Finance income (6) (7) (16)
PSP credit/(charge) (49) 100 220
Other 34 - -
Adjusted EBITDA 55 (561) 306
================= ================= ==============
6. Exceptional items
The exceptional items can be analysed as follows:
Six months Six months Year to
to 30 September to 30 September 31 March
2022 2021 2022
US$ 000's US$ 000's US$ 000's
Unaudited Unaudited Audited
Severance payments 20 38 37
Loss/(gain) on sale of fixed
assets 5 (20) (30)
Other - (2) -
----------------- ----------------- --------------
Exceptional items 25 16 7
================= ================= ==============
7. Segmental Reporting
For management purposes, the Group is currently organised into a
single business unit, the Drilling Division, which is based,
operationally, primarily in the USA but with a technology centre
based in the UK.
The principal activities of the Drilling Division are the
design, manufacture and selling of specialised products and
technologies for Directional Drilling and Measurement While
Drilling operations used in the energy exploration and services
sector of the oil and gas industry.
At present, there is only one operating segment and the
information presented to the Board is consistent with the
consolidated income statement and the consolidated statement of
financial position.
The net assets of the Group by geographic location
(post-consolidation adjustments) are as follows:
Net Assets 30 September 30 September 31 March
2022 2021 2022
US$ 000's US$ 000's US$ 000's
Unaudited Unaudited Audited
Europe (UK) 1,282 4,512 3,649
United States 13,587 10,445 11,880
------------- ------------- -------------
Total Net Assets 14,869 14,957 15,529
============= ============= =============
The net assets in Europe (UK) are represented, primarily, by
cash balances denominated in US$.
8. Earnings Per Share
Basic earnings per share
Basic earnings per share is calculated by dividing the loss
attributable to ordinary shareholders for the six months of
US$766,000 (September 2021: loss of US$1,205,000) by the weighted
average number of ordinary shares in issue during the period of
69,247,129 (September 2021: 68,415,563).
9. Income Tax
No tax liability arose on ordinary activities for the six months
under review.
10. Intangible Fixed Assets
Other Intangible Fixed Assets
Developed IPR&D Brand
technology technology names Total
US$ 000's US$ 000's US$ 000's US$ 000's
Cost:
As at 1 April 2022 13,237 15,267 1,240 29,744
Capitalised in period 212 937 - 1,149
------------ ------------ ---------- ----------
As at 30 September
2022 13,449 16,204 1,240 30,893
------------ ------------ ---------- ----------
Amortisation:
As at 1 April 2022 13,041 11,320 1,240 25,601
Charge for the period 241 - - 241
As at 30 September
2022 13,282 11,320 1,240 25,842
------------ ------------ ---------- ----------
Net Book Value:
------------ ------------ ---------- ----------
As at 1 April 2022 196 3,947 - 4,143
============ ============ ========== ==========
As at 30 September
2022 167 4,884 - 5,051
============ ============ ========== ==========
The main categories of Intangible Fixed Assets are as
follows:
Developed technology:
This is technology which is currently commercialised and
embedded within the current product offering.
IPR&D technology:
This is technology, which is in the final stages of field
testing, has demonstrable commercial value and is expected to be
launched in the foreseeable future.
Brand names:
The value associated with various trading names used within the
Group.
Customer relationships:
The value associated with the on-going trading relationships
with the key customers acquired.
11. Share capital
Share capital as at 30 September 2022 amounted to US$1,081,000
(31 March 2022: US$1,072,000 and 30 September 2021:
US$1,070,000).
12. Going concern
The Directors have carried out a review of the Group's financial
position and cash flow forecasts for the next 12 months by way of a
review of whether the Group satisfies the going concern tests.
These have been based on a comprehensive review of revenue,
expenditure and cash flows, taking into account specific business
risks and the current economic environment. With regards to the
Group's financial position, it had cash and cash equivalents at 30
September 2022 of US$1.8 million.
Having taken the above into consideration the Directors have
reached a conclusion that the Group is well placed to manage its
business risks in the current economic environment. Accordingly,
they continue to adopt the going concern basis in preparing the
Interim Condensed Financial Statements.
13. Principal risks and uncertainties
Further detail concerning the principal risks affecting the
business activities of the Group is detailed on pages 11 to 13 of
the Annual Report and Accounts for the period ended 31 March 2022.
Consideration has been given to whether there have been any changes
to the risks and uncertainties previously reported. None have been
identified.
14. Events after the balance sheet date
There have been no material events subsequent to the end of the
interim reporting period ended 30 September 2022.
15. Copies of the interim results
Copies of the interim results are available from the Group's
website at www.enteq.com.
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IR FFIFAIEESEFF
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