Enteq Technologies plc (LON:NTQ) has announced its interim results for the six months ended 30 September 2023.
Key Highlights (FY24 year to date)
Enteq Technologies is a specialist energy services engineering and technology company with the flagship product being the SABER Tool (Steer-At-Bit Enteq Rotary Tool) for directional drilling technology.
· The SABER project, a novel and disruptive method of drilling boreholes, has progressed well with the technology operating as expected during successful field-testing in Oklahoma. SABER tools are currently in manufacture for commercial deployment.
· Investment in the SABER engineering has continued using existing balance sheet resources, with a closing cash position of $5.1m at the end of the period ($5.4m at end of March 2023) following realisation of capital from the sale of XXT IP and assets.
· Appointment of David MacNeill as an independent non-executive director, based in Dubai, UAE and bringing over 30 years’ extensive experience across drilling businesses, notably having direct exposure to rotary steerable system development and operations.
Financial metrics
| Six months ended 30 September: | |||
| 2023 | 2022 | ||
| US$m | US$m | ||
| · Revenue* | 0.0 | 4.9 | |
| · Adjusted EBITDA** | (1.6) | 0.1 | |
| · Post tax loss for the period | 0.6 | 0.8 | |
| · Loss per share (cents) | 1.0 | 1.1 | |
| · Cash balance | 5.1 | 1.8 | |
Andrew Law, CEO of Enteq Technologies plc, commented:
“Enteq continues to focus on the global Rotary Steerable market with a value of $3.6bn annually***, where SABER has the potential to deliver value to customers through a differentiated, high quality and lower operating cost alternative to the incumbent, limited, competition. A fleet of the first generation of commercial SABER tools is currently being manufactured to support a customer contract which includes a first phase of customer testing, as well as other potential opportunities. The team and resources, from the existing balance sheet, are in place for this pending commercialisation phase.”
*Revenue from continued operations only. Revenue reported in financial section relates to the recently disposed of XXT business.
**Adjusted EBITDA is reported (loss)/profit before tax adjusted for interest, depreciation, amortisation, foreign exchange movements, performance share plan charges and exceptional items – see note 5
***Source: Spears & Associates Directional Drilling Report (2023).
Interim Report
CHAIRMAN & CHIEF EXECUTIVE OFFICER’S REPORT
Overview
Enteq Technologies is a specialist energy services engineering and technology company with the flagship product being the revolutionary, field-test proven SABER Tool (Steer-At-Bit Enteq Rotary Tool) directional drilling technology.
The SABER Tool is based on a concept originally developed by Shell, where rather than using pads or pistons to create steering forces, the SABER Tool uses an internally directed fluid pressure differential system. By removing these external contact points, the SABER Tool achieves true at-bit steering for the first time and the mechanically simple design gives the potential to improve reliability and project uptime versus conventional RSS (rotary steerable system) solutions.
Enteq has the exclusive license for this novel rotary steerable technology and IP from Shell. Enteq has developed and refined the concept, generating additional protected IP. The SABER Tool is field-test proven from downhole drilling and is being readied for commercial deployment.
The global RSS market is worth approximately $3.6 billion annually according to a recent (2023) report from Spears. The SABER Tool has the potential to drive operational efficiency across the world’s directional drilling applications, including hydrocarbon production, geothermal energy, methane capture and CCS (carbon capture and storage). Enteq will provide the SABER Tool to customers through rental or purchase, enabling independent and regional directional drilling companies to compete with major integrated service companies which have to date dominated this segment.
Financial performance
There has been a strong and ongoing focus on managing the Company’s cash position to underpin investment in product line development, primarily the deployment of SABER. In April 2023, following the previous financial year end, Enteq divested of the assets and IP related to the XXT product line, for up to $3.2m, $0.9m of which has been received in cash during this period.
$0.8m has been invested in SABER between 1 April 2023 and 30 September 2023, and the first generation of commercial tools is currently being manufactured. A contract is in place to progress from customer-testing in the new calendar year, on to commercial operations.
The cash position at the end on the period was $5.1m
Cash balance and cashflow
On 30 September 2023, the Group had a cash balance of US$5.1m down US$0.2m on the US$5.4m reported as at 31 March 2023. As at the date of this announcement the cash balance is US$4.6m.
The half year cash movement can be analysed as follows:
| US$m | |
| Adjusted loss | (0.6) |
| Change in trade and other receivables | 1.1 |
| Change in trade and other payables | (1.0) |
| Change in inventory | 0.0 |
| Operational cashflow | (0.5) |
| Sale of tangible fixed assets | 1.0 |
| R&D expenditure | (0.8) |
| Net cash movement | (0.3) |
| Cash balances as at 1 April 2023 | 5.4 |
| Cash balances as at 30 September 2023 | 5.1 |
The cash inflow on trade receivables relates to ongoing deferred proceeds from the sale of the XXT business, as announced at the time of the XXT disposal. 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 has a rented operations facility in Houston (having sold a freehold property in the year ending March 2023), a technology centre in Cheltenham, UK and a support office in Aberdeen, UK. The Houston, Texas and Cheltenham, UK, facilities are all close to the main global centres of expertise for Rotary Steerable Systems, with access to highly specialised engineering and machining firms.
Organisation
The in-house product development team leads project engineering and works closely with a number of specialist contractors in Houston and in the UK as necessary. The product development team in Houston has been strengthened, with the recent addition of an Engineering Director (non-Board).
The in-house operations team (supporting field-testing and customer operations) is based in Houston and the team has been recently strengthened with the addition of a RSS reliability engineer.
International business is led by the in-house team and is supported through a network of international sales agents.
There were a total of 11 employees at the end of September 2023.
Outlook
The SABER project has been substantially de-risked after the recent successful field-testing, with a fleet of the first generation of commercial tools currently being manufactured for deployment, to a customer contract which includes a first phase of customer testing, in addition to other potential opportunities.
The global RSS sector is estimated at $3.6bn annually and needs additional competition. Extensive and continued industry engagement, including recent attendance at the ADIPEC global trade show, has confirmed a high level of potential demand for SABER across the key regions, including applications to support energy transition.
Andrew Law Martin Perry
Chief Executive Chairman
Enteq Technologies plc
15 November 2023
| Enteq Technologies plc | |||||
| Condensed Consolidated Income Statement | |||||
| Six months to 30 September 2023 | Six months to 30 September 2022 | Year to31 March 2023 | |||
| Unaudited | Unaudited | Audited | |||
| Notes | US$ 000’s | US$ 000’s | US$ 000’s | ||
| Revenue | 774 | 4,912 | 6,245 | ||
| Cost of Sales | (1,326) | (3,518) | (4,777) | ||
| Gross Profit | (552) | 1,394 | 1,467 | ||
| Administrative expenses before amortisation | (1,056) | (1,866) | (3,489) | ||
| Amortisation of acquired intangibles | 10 | – | (241) | (408) | |
| Other exceptional items | 6 | 988 | (25) | (696) | |
| Foreign exchange (loss)/gain on operating activities | (11) | (34) | 5 | ||
| Total Administrative expenses | (79) | (2,166) | (4,588) | ||
| Operating loss | (631) | (772) | (3,121) | ||
| Finance income | 37 | 6 | 37 | ||
| Loss before tax | (594) | (766) | (3,084) | ||
| Tax expense | 9 | – | – | 280 | |
| Loss for the period | 5 | (594) | (766) | (2,804) | |
| Loss attributable to: | |||||
| Owners of the parent | (594) | (766) | (2,804) | ||
| Earnings/loss per share (in US cents): | 8 | ||||
| Basic | (1.0) | (1.1) | (2.0) | ||
| Diluted | (1.0) | (1.1) | (2.0) | ||
| Enteq Technologies plc | ||||
| Condensed Statement of Financial Position | ||||
| 30 September 2023 | 30 September 2022 | 31 March 2023 | ||
| Unaudited | Unaudited | Audited | ||
| Notes | US$ 000’s | US$ 000’s | US$ 000’s | |
| Non-current assets | ||||
| Intangible assets | 10 | 7,316 | 5,051 | 6,484 |
| Property, plant and equipment | 57 | 2,142 | 63 | |
| Rental fleet | – | 98 | – | |
| Trade and other receivables greater than one year | – | 54 | – | |
| Non-current assets | 7,374 | 7,345 | 6,547 | |
| Current assets | ||||
| Trade and other receivables | 517 | 5,342 | 237 | |
| Inventories | – | 2,006 | – | |
| Cash and cash equivalents | 5,037 | 319 | 5,351 | |
| Assets held for sale | 1,229 | – | 2,184 | |
| Bank deposits | – | 1,500 | – | |
| Current assets | 6,784 | 9,167 | 7,772 | |
| Total assets | 14,158 | 16,512 | 14,319 | |
| Equity and liabilities | ||||
| Equity | ||||
| Share capital | 11 | 1,080 | 1,081 | 1,080 |
| Share premium | 92,037 | 92,038 | 92,037 | |
| Share based payment reserve | 686 | 410 | 448 | |
| Retained earnings | (80,045) | (78,660) | (80,489) | |
| Total equity | 13,757 | 14,869 | 13,076 | |
| Current Liabilities | ||||
| Trade and other payables | 400 | 1,643 | 1,243 | |
| Total equity and liabilities | 14,158 | 16,512 | 14,319 | |
| Enteq Technologies plc | |||||
| Condensed Consolidated Statement of Changes in Equity | |||||
| Six months to 30 September 2023 | |||||
| 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 | – | – | – | – | – |
| Share based payment charge | – | – | – | 238 | 238 |
| Transactions with owners | – | – | – | 238 | 238 |
| Loss for the period | – | 444 | – | – | 444 |
| Total comprehensive income | – | 444 | – | – | 444 |
| Movement in period: | – | 444 | – | 238 | 682 |
| As at 1 April 2023 (audited) | 1,080 | (80,489) | 92,037 | 448 | 13,076 |
| As at 30 September 2023 (unaudited) | 1,080 | (80,045) | 92,037 | 686 | 13,757 |
| 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 |
| Enteq Technologies plc | ||||||||
| Condensed Consolidated Statement of Cash Flows | ||||||||
| Six months to30 September 2023 | Six months to30 September 2022 | Year to31 March 2023 | ||||||
| Unaudited | Unaudited | Audited | ||||||
| US$ 000’s | US$ 000’s | US$ 000’s | ||||||
| Cash flows from operating activities: | ||||||||
| Loss for the period | (594) | (766) | (3,084) | |||||
| Gain on disposal of fixed assets | 1,000 | – | (292) | |||||
| Net finance income | 37 | (6) | (37) | |||||
| Share-based payment non-cash charges | – | (22) | 225 | |||||
| Impact of foreign exchange movement | (11) | (34) | 5 | |||||
| Depreciation, amortisation and exceptional charges | (13) | 784 | 1,162 | |||||
| 419 | (44) | (2,021) | ||||||
| (Increase)/decrease in inventory | – | 404 | 1,681 | |||||
| Tax received from continuing operations | – | – | 280 | |||||
| Decrease/(increase) in trade and other receivables | 734 | (1,859) | 1,853 | |||||
| (Decrease)/increase in trade and other payables | (663) | (219) | (617) | |||||
| Increase in rental fleet assets | – | (256) | (255) | |||||
| Net cash from operating activities | 490 | (1,974) | 921 | |||||
| Investing activities | ||||||||
| Purchase of tangible fixed assets | – | (22) | (25) | |||||
| Disposal proceeds of tangible fixed assets | – | – | 2,266 | |||||
| Purchase of intangible fixed assets | (832) | (1,148) | (2,639) | |||||
| Funds placed on interest bearing deposit | – | – | 1,500 | |||||
| Interest received | 37 | 6 | 37 | |||||
| Net cash from investing activities | (305) | (1,164) | 1,139 | |||||
| Financing activities | ||||||||
| Share issue | – | 127 | – | |||||
| Net cash from financing activities | – | 127 | – | |||||
| Increase/(decrease) in cash and cash equivalents | (305) | (3,011) | 2,060 | |||||
| Non-cash movements – foreign exchange | (8) | 34 | (5) | |||||
| Cash and cash equivalents at beginning of period | 5,351 | 3,296 | 3,296 | |||||
| Cash and cash equivalents at end of period | 5,038 | 319 | 5,351 | |||||
| Cash and cash equivalents at end of period | 5,038 | 319 | 5,351 | |||||
| Funds placed on interest bearing deposit | – | 1,500 | – | |||||
| 5,038 | 1,819 | 5,351 | ||||||
ENTEQ TECHNOLOGIES PLC
NOTES TO THE FINANCIAL STATEMENTS
For the six months to 30 September 2023
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”) provides 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 2023 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 2023 has been delivered to the Registrar of Companies
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 2023
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 ending 31 March 2024. These accounting policies are consistent with those applied in the preparation of the accounts for the period ended 31 March 2023.
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 2023.
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 to 30 September 2023 | Six months to 30 September 2022 | Year to 31 March 2023 | |
| US$ 000’s | US$ 000’s | US$ 000’s | |
| Unaudited | Unaudited | Audited | |
| Loss attributable to ordinary shareholders | (594) | (766) | (787) |
| Exceptional items | (988) | 25 | 7 |
| Amortisation of acquired intangible assets | 0 | 240 | 199 |
| Foreign exchange movements | 11 | 34 | 40 |
| Adjusted loss | (1,571) | (467) | (541) |
| Depreciation charge | 6 | 543 | 643 |
| Finance income | (37) | (6) | (16) |
| PSP credit/(charge) | – | (49) | 220 |
| Other | – | 34 | – |
| Adjusted EBITDA | (1,601) | 55 | 306 |
6. Exceptional items
The exceptional items can be analysed as follows:
| Six months to 30 September 2023 | Six months to 30 September 2022 | Year to 31 March 2023 | |
| US$ 000’s | US$ 000’s | US$ 000’s | |
| Unaudited | Unaudited | Audited | |
| Severance payments | 25 | 20 | 37 |
| Loss/(gain) on sale of fixed assets | (1,000) | 5 | (30) |
| Other | (13) | – | – |
| Exceptional items | (988) | 25 | 7 |
7. Segmental Reporting
For management purposes, the Group is currently organised into a single business unit which is based, operationally, primarily in the USA but with a support centre based in the UK.
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 2023 | 30 September 2022 | 31 March 2023 |
| US$ 000’s | US$ 000’s | US$ 000’s | |
| Unaudited | Unaudited | Audited | |
| Europe (UK) | 4,519 | 1,282 | 3,649 |
| United States | 9,238 | 13,587 | 11,880 |
| Total Net Assets | 13,757 | 14,869 | 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$594,000 (September 2022: loss of US$766,000) by the weighted average number of ordinary shares in issue during the period of 69,724,006 (September 2022: 69,247,129).
9. Income Tax
No tax liability arose on ordinary activities for the six months under review.
10. Intangible Fixed Assets
Other Intangible Fixed Assets
| Developed technology | IPR&D technology | Brand names | Total | |
| US$ 000’s | US$ 000’s | US$ 000’s | US$ 000’s | |
| Cost: | ||||
| As at 1 April 2023 | 13,339 | 17,804 | 1,240 | 32,383 |
| Capitalised in period | – | 832 | – | 1,149 |
| As at 30 September 2023 | 13,339 | 18,636 | 1,240 | 33,215 |
| Amortisation: | ||||
| As at 1 April 2023 | 13,339 | 11,320 | 1,240 | 25,899 |
| Charge for the period | – | – | – | – |
| As at 30 September 2023 | 13,339 | 11,320 | 1,240 | 25,899 |
| Net Book Value: | ||||
| As at 1 April 2023 | – | 6,484 | – | 6,484 |
| As at 30 September 2023 | – | 7,316 | – | 7,316 |
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.
11. Share capital
Share capital as at 30 September 2023 amounted to US$1,081,000 (31 March 2023: US$1,080,000 and 30 September 2022: US$1,080,000).
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 2023 of US$5.1 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 2023. 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 2023.
15. Copies of the interim results
Copies of the interim results are available from the Group’s website at www.enteq.com.
