Enteq Technologies : Interim Results to 30 September 2021

Enteq Technologies Plc

(Previously Enteq Upstream plc)

Consolidated Financial Statements

for the six months ended 30 September 2021

Contents

	Page
Key Highlights, Financial Metrics and Outlook	2
Company Information	3
Chairman and Chief Executive Officer's Report	4
Condensed Consolidated Income Statement	7
Condensed Consolidated Statement of Comprehensive Income	7
Condensed Statement of Financial Position	8
Condensed Consolidated Statement of Changes in Equity	9
Condensed Consolidated Statement of Cash flows	10
Notes to the Financial Statements	11

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Key Highlights

• SABER rotary steerable system progressed into the field trial phase in a live drilling environment. Field trial results in October demonstrated the ability of the SABER control system to function downhole in-line with the test criteria. The SABER system has proven successful in reaching the development programme milestones and validating all expectations to date.
• North American market has strengthened, with rental and sales revenues coming from new and existing customers. Post period end an order valued at US$1.4m was received.
• Despite China stagnation (6 months to 30 September 2021: US$0.1m; 6 months to 30 September 2020 US$1.8m) and a lag in international market recovery due to ongoing COVID related restrictions, equipment was delivered to new customers in two new geographies.
• Reduction in current underlying overheads of 25% compared to the same time last year, continued focus on cost and cash management.
• Investment made in SABER of US$1.0m leaving a cash balance of US$5.3m at 30 September 2021 (March 2021: US$8.1m). The cash balance as at 17 November 2021 being US$6.3m.

Financial metrics

		Six months ended 30 September:
		2021	2020
		US$m	US$m
•	Revenue	2.3	2.6
•	Adjusted EBITDA*	(0.6)	0.1
• Post tax loss for the period	1.2	0.7
• Loss per share (cents)	1.8	1.1
•	Cash balance	5.3	8.8

Outlook

• SABER progressing to North American field-trials in early 2022, where there is strong customer and partner interest and good market potential. Expected successful development of SABER will greatly expand Enteq's addressable market. Opening of UK technology and manufacturing centre to support SABER's growth and expansion.
• Further recovery of the North American market anticipated based on current oil price and ongoing increase in rig count.
• International activity, which typically lags North America, expected to start increasing.
• Two exclusive distribution agreements with third-party technology providers have been recently signed. These will enhance and complement Enteq's current product range.
• Revenues for financial year to date (1 April to 31 October) of US$3.2m, and current order book of US$2.0m, provides confidence in the Board's expectations for the full year.

*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

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Company Information

for the six months ended 30 September 2021

DIRECTORS: ChairmanMartin Perry

Executive Directors
Andrew Law	Chief Executive Officer
David Steel	Chief Finance Officer
Non-Executive Director
Neil Hartley	Chairman of the Remuneration and Audit Committees
Iain Paterson	Chairman of Nomination Committee
SECRETARY
David Steel
REGISTERED OFFICE
The Courtyard
High Street
Ascot
Berkshire
SL5 7HP

REGISTERED NUMBER

07590845 (England and Wales)

AUDITORS

BDO LLP

Registered Auditors

55 Baker St,

Marylebone, London W1U 7EU

NOMINATED ADVISER & BROKER finnCap

1 Bartholomew Close

London

EC1A 7BL

LEGAL ADVISORS

CMS Cameron McKenna Nabarro Olswang LLP

Cannon Place

78 Cannon Street

London

EC4N 6AF

REGISTRARS

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol BS99 6ZZ

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Interim Report

CHAIRMAN & CHIEF EXECUTIVE OFFICER'S REPORT

Overview

Enteq supplies and develops drilling and measurement technology for the worldwide oil, gas and geothermal 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 Measurement While Drilling ("MWD") and Rotary Steerable Systems (RSS).

Enteq continues to focus the existing MWD business on the development, manufacture and supply of equipment. MWD equipment is required on every rig which drills directional wells and over many years Enteq has established market share based on 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 addition in key international areas.

As a step change to the MWD business, Enteq is commercialising the SABER (Steer At-Bit Enteq Rotary) RSS Tool, a disruptive alternative to traditional directional drilling, which gives Enteq access to a significantly larger addressable market. The SABER Tool, launched in March this year, is an evolution of the intellectual property developed, proven in concept and tested by Shell. Enteq has the exclusive worldwide licence to the intellectual property and is now progressing through the field trial programme.

Technology Update

Development of the SABER system has progressed well, having completed initial system testing before proceeding into the field trial phase in a live operating location. The SABER system, based on Shell's initial working prototype, has been completely re-engineered to increase the operating range, performance and reliability. Testing has successfully demonstrated the ability of the SABER control system to correctly function in downhole conditions. The ongoing field trial phase consists of a systematic testing programme, with the SABER system being operated downhole in a live well environment.

The next phase, expected to be in early 2022, is to advance into field testing in North America, where there continues to be strong interest in SABER from Enteq's customer base.

Financial performance

The half year revenue of US$2.3m has been driven primarily by the steady increase in North American drilling activity. The North American market recovery has been a function of the steady increase in the price of a barrel of WTI; rising from approximately US$61 on 1 April to the current level of around US$80. The North American active drilling rig count has risen by almost 25%; from 430 on 1 April to 528 at the end of September whereas the international markets have been slower to respond. North American drilling activity typically responds quicker than international markets however this response is more pronounced than usual, with the international markets being much slower to respond, most likely relating to the impact from COVID.

Even though the international market has been challenging, there have been significant sales for two new customers in two new countries. The proportion of international revenue was 28% in this reporting period compared to 50% in the six months to 31 March 2021.

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