Enteq Technologies - Sale of XXT and Year-end Trading Update

Enteq Technologies

12/04/2023 07:00

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RNS Number : 8897V  Enteq Technologies PLC  12 April 2023

Enteq Technologies plc

 

("Enteq" or the "Company")

 

Sale of XXT and Year-end Trading Update

 

Enteq Technologies plc (AIM: NTQ.L) the energy services technology and
equipment supplier, is pleased to announce the sale of the XXT MWD
(measurement while drilling) intellectual property and the associated assets
("XXT"). In addition, the Company provides 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 (the "Assets" and the "Disposal").

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 EBITDA(1) 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.

 

For further information, please contact:

 

Enteq Technologies
plc
+44 (0)20 8087 2202

www.enteq.com (http://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)

 

 

About SABER

SABER (Steer-At-Bit Enteq Rotary Tool) is an evolution of traditional rotary
steerable systems (RSS). SABER directional drilling technology is based on
intellectual property licenced from Shell and subsequent Enteq developments.
SABER will widen Enteq's addressable market, accessing the large rotary
steerable drilling market, where the SABER tool can offer a differentiated and
cost-effective alternative to the traditional technology. SABER utilises
internal hydraulic pressure differentials to create side force at the drill
bit for geo-steering, rather than pushing against the borehole wall (pads and
pistons) to change direction. The advantage of internalising the steering
mechanism is expected increased reliability and reduced downtime. The Company
is bringing SABER to commercialisation. For additional information please
visit www.enteq.com/products/rotary-steerable-system-srss/
(https://www.enteq.com/products/rotary-steerable-system-srss/)

 

The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.

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