Enteq Technologies plc (LON:NTQ) the energy services technology and equipment supplier, has announced the sale of the XXT MWD (measurement while drilling) intellectual property and the associated assets. In addition, the Company provided a trading update for the financial year ended 31 March 2023.
Sale of XXT
The sale is a result of a strategic focus to improve the Company’s medium term cash position to underpin investment in product line development, primarily the deployment of SABER, the rotary steerable drilling solution.
The XXT intellectual property (previously amortised over time to a book value of nil) and associated product lines and trademark, together with selected technology agreements, customer account receivable balances, and inventory have been sold for a cash consideration of c.$1.89m; further selected customer account receivables and inventory have also been sold for up to c.$1.27m to be paid in cash over a 12 month period, all sold to Rime Downhole Technologies LLC.
In the year ended 31 March 2022 the Assets achieved revenue of c.$1.35m, a loss before tax of c.$2.24m (after allocation of central costs) and were held at a total carrying value of c.$2.97m at 30 September 2022.
Following the Disposal, the Company will focus on the SABER product in addition to developing related technologies to further support SABER’s introduction to customers. The Disposal reflects Enteq’s focus on differentiated specialist MWD technologies, and the rotary steerable sector (SABER) where there is a larger addressable market. The Company will retain operations at premises in Houston, USA, and Andoversford, UK.
Trading Update
Trading reflects the focus on improving the cash position coupled with continuing investment in the SABER product line. A disciplined approach has been taken to move away from sales of lower margin products and a loss-making business to manage working capital more efficiently, resulting in decreased revenues and increasing available liquidity for the investment program. Revenue for the year ended 31 March 2023 will be in the region of $6.1m ($4.2m in the first half and approximately $1.9m in the second half of the financial year). The adjusted EBITDA1 loss for the year is expected to be $0.8m (profit of $0.1m in the first half of the year and loss of $0.9m for the second half of the financial year).
The cash balance as of 31 March 2023 (prior to receipt of the XXT sale proceeds of up to c.$3.2m) was $5.3m ($1.8m as of 30 September 2022 and $4.8m as of 31 March 2022). This increase in cash during the second half of the financial year reflects an intense effort on improving the cash position throughout the year whilst continuing investment in SABER. The completion of the disposal in March 2023 of the freehold premises in Houston, Texas realised $2.3m, after selling expenses.
SABER
The on-going investment in the SABER product line included the live drilling testing for SABER in a hard rock environment at a test-site in Norway earlier this calendar year, with final modifications now being implemented. As previously announced, the encouraging performance in Norway has given the green light to proceed to additional directional drilling testing which is scheduled in North America for summer 2023, with subsequent customer field trials.
Andrew Law, CEO of Enteq Technologies plc, commented:
“The Company’s strategic direction remains focused on commercialising SABER, supported by complementary technologies, which are being developed in-house and with partner-agreements. The XXT sale provides additional security to the cash position to underpin SABER development and expansion.”
The Company expects to announce its results for the year ended 31 March 2023 on 20 June 2023.
1 Adjusted EBITDA is reported profit before tax adjusted for interest, depreciation, amortisation, foreign exchange movements, performance share plan charges and exceptional items.
