Enteq Technologies : Prelim Announcement – 31 March 2022

Enteq Technologies plc

("Enteq" or the "Company" or the "Group")

Final results for the year ended 31 March 2022

and

IMC Investor Presentation

Enteq (AIM: NTQ.L), the energy services technology supplier, today announces its final results for the year ended 31 March 2022

Key features

• Total revenue up from $5.1m to $7.3m due to strengthening North American market, offsetting reduced activity in China:
  o North America revenue up from $1.9m to $6.2m

• 1. International revenue down from $3.2m to $1.1m
• Adjusted EBITDA2 up from $0.1m to $0.3m
• Gross profit margin down from 53% to 36% due to change in product mix from new strategic distribution partnerships
• Administrative expenses before amortisation reduced from $3.9m to $3.2m:
• 1. Underlying overheads1 reduced from $2.6m to $2.3m

1. Depreciation on rental fleet down from $0.9m to $0.5m

• 1. Depreciation on other fixed assets steady at $0.2m
• Loss attributable to shareholders reduced from $1.1m to $0.8m
• The SABER project has progressed well:
• 1. Key test objectives achieved

1. Extensive industry and customer engagement has demonstrated market potential

Financial metrics

		Years ended 31 March ($m):
		2022	2021
•	Revenue	7.3	5.1
•	Gross profit margin	36%	53%
•	Underlying overheads1	2.3	2.6
•	Adjusted EBITDA2	0.3	0.1
•	Exceptional items	-	0.1
• Total post tax loss	0.8	1.1
• Post tax loss per share (cents)	1.1	1.7
•	Cash balance3	4.8	8.1
• Investment in engineering projects	2.7	1.6

Outlook

• Continued US rig count growth gives optimism regarding US market
• Focus on international opportunities as markets recover
• Ongoing investment in the development and deployment of new market-led technologies
• Emphasis on maintaining a strong balance sheet

Andrew Law, CEO of Enteq Technologies plc, commented:

"Enteq has continued investment in the SABER RSS project development, resulting in an enhanced, simplified design with a wider range of operation and a low cost to operate. Sustained testing has confirmed the system has performed to the design criteria and met all requirements to date, thereby further reducing technical risk. Extensive industry engagement with existing and new customers both internationally and across North America, has confirmed that SABER is on-track to meeting the market requirements.

Enteq's core MWD business has benefitted from the continued growth in the US market, new customers in the US, new customers internationally and from access to selected technology distribution agreements. Additionally, the core existing customer base will be the initial target market for SABER.

As with the core MWD technology, SABER has applications in geothermal and methane capture operations as well as conventional oil and gas, giving the Board grounds for optimism for the short, medium and long term outlook."

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 8th July 2022 at 10:30am BST.

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 the following link:

https://www.investormeetcompany.com/enteq-technologies-plc/register-investor

Investors who already follow Enteq on the Investor Meet Company platform will automatically be invited.

1 The reconciliation between Underlying overheads and Administrative expenses before amortisation is follows:

	Year to 31 March 2022	Year to 31 March 2021
	$m	$m
Total underlying overheads	2.3	2.6
Depreciation - fixed assets	0.2	0.2
Depreciation - rental fleet	0.5	0.9
PSP Share charge	0.2	0.2
Administrative expenses before amortisation (including bad debt charge)	3.2	3.9

2 The reconciliation between Loss attributable to shareholders and Adjusted EBITDA is follows:

	Year to 31 March 2022	Year to 31 March 2021
	$m	$m
Loss attributable to shareholders	(0.8)	(1.1)
Exceptional items	-	0.1
Amortisation	0.2	-
Depreciation - fixed assets	0.2	0.2
Depreciation - rental fleet	0.5	0.9
PSP Share charge	0.2	0.2
Interest	-	(0.1)
Adjusted EBITDA	0.3	0.1

Both the above alternative performance measures are shown as the Board consider these to be key to the management of the business as a whole.

3 The cash balance includes:
	Year to 31 March 2022
	$m
Cash and cash equivalents	3.3
Bank deposits	1.5
Cash balance	4.8

Year to 31 March 2021 $m

8.1

-

8.1

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, Emily Watts, Tim Harper (Corporate Finance)
Andrew Burdis, Barney Hayward (ECM)

Combined Chief Executive and Chairman's report

Review of the Year

This year has been one of capturing North American market recovery coupled with a concentrated effort on the SABER development project.

In North America, Enteq has expanded the offering of innovative solutions to customers through a number of exclusive distributor agreements that were signed during the year. These agreements cover technologies such as improved signal detection; MEMS (micro-electro-mechanical systems) directional sensors; gamma logging and depth tracking.

To capture North American market growth, a VP of sales for the MWD division was recruited as a replacement for a vacant senior operational post.

The improving market conditions seen throughout the year resulted in an increasing demand for equipment. The contracts have been predominantly sale compared to rental, with the proportion of revenue from the rental fleet this year at 13% compared to the 23% seen in the year to 31 March 2021 (44% in the year to 31 March 2020). As at 31 March 2022 there were 3 kits on rental .

The international market showed signs of recovery during the latter part of the financial year, lagging the US recovery as expected. International revenue was $1.1m this financial year, with $0.6m from two new customers and entry into two new geographical markets. The market slowdown in China inevitably drove the reduction in this year's international revenue, compared to $3.2m in the year to 31 March 2021 .

The SABER development project has progressed during the year with the most important milestone being that the tool has demonstrated that this novel method of steering can generate ample steering forces during flow loop tests. Extensive customer and industry engagement about the SABER project confirmed there is a high degree of appetite for this technology. SABER remains on-track for commercialisation during 2022, with existing resources in place to complete the remaining phase of the development project.

Overall year-on-year a further $0.3m was removed from overheads through a focus of incremental cost savings rather than major reduction programs.

Staff

There was a total of 16 employees at the end of the year, up from the 15 at the previous year end. The Board would like to recognise the on-going loyalty, dedication and support of the staff as Enteq continues with its excellent reputation for the reliability of equipment and commitment to customer support.

Prospects

Enteq has continued investment in the SABER RSS project development, resulting in an enhanced, simplified design with a wider range of operation and a low cost to operate. Sustained testing has confirmed the system has performed to the design criteria and met all requirements to date, thereby further reducing technical risk. Extensive industry engagement with existing and new customers both internationally and across North America, has confirmed that SABER is on-track to meeting the market requirements.

Enteq's core MWD business has benefitted from the continued growth in the US market, new customers in the US, new customers internationally and from access to selected technology distribution agreements. Additionally, the core existing customer base will be the initial target market for SABER.

As with the core MWD technology, SABER has applications in geothermal and methane capture operations as well as conventional oil and gas, giving the Board grounds for optimism for the short, medium and long term outlook.

Financial Review

This review contains pro-forma statements which are different in presentation to the statutory format shown on the following pages.

Income Statement

Year to 31 March:	2022	2021
	$ million	$ million
Revenue	7.3	5.1
Cost of Sales	(4.7)	(2.4)
Gross profit	2.6	2.7
Overheads	(2.3)	(2.6)
Adjusted EBITDA	0.3	0.1
Depreciation & amortisation	(0.8)	(1.1)
Other charges	(0.3)	(0.1)
Ongoing operating loss	(0.8)	(1.1)
Exceptional items	-	(0.1)
Operating Loss	(0.8)	(1.2)
Interest	-	0.1
Loss before tax	(0.8)	(1.1)
Tax	-	-
Loss after tax	(0.8)	(1.1)

The North American market saw a dramatic improvement during the year with the rig count rising from 430 as at 31 March 2021 to 673 as at 31 March 2022, an increase of 243 (57%). The majority of this increase was seen in the second half of the financial year when 145 rigs were added which represented 60% of the full year additional rigs. This improvement was directly related to the price of a barrel of WTI which rose from $61 at 31 March 2021 to $104 at the end of March 2022, an increase of 71%. Again, the majority of this increase was seen in the second half of the financial year when WTI rose from $72, representing a 52% increase in this six month period. The impact of the above was that North American revenue rose to US$6.2m this year from $1.9m last year. The international market appeared to take longer to recover from the COVID impact with international revenue at $1.1m down from the $3.2m reported last year. As previously mentioned, pleasingly, US$0.6m of this revenue came from two new customers based in geographical markets where Enteq had not sold before.

The full year gross margin was 36%, down from last year's 53%, due to an increasing proportion of revenue coming from the integration of third-party components into the total product range.

Total underlying overheads, at $2.3m, was down $0.3m on last year's figure. This reflected the concentration on reducing all levels of overheads were possible without impacting the level of customer support given.

The combined depreciation and amortisation charge was significantly down on the previous year due to the reduced level of rental income this financial year. This reflected the market dynamics whereby customers were more inclined to buy rather than rent due to their increased level of activity.

The "Other charges" shown above relate, primarily, to the non-cash cost associated with the Performance Share Plan.