Enteq Technologies : Interim Results to 30 September 2022

Enteq Technologies Plc

Consolidated Financial Statements

for the six months ended 30 September 2022

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

• Measurement While Drilling revenues in H1 were significantly up on this time last year due to North American activity, albeit at lower margins due to share of third-party equipment sales.
• International sales were limited due to lagging international market recovery and ongoing China shut-downs.
• The SABER engineering project has progressed with the initial fleet of the latest design of SABER tools being built. The complementary MegaHop technology development has been launched.
• All initial testing of SABER has achieved the objectives with encouraging results. Active drilling in hard-rock environment has been scheduled at an independent test-site in Norway and customer trials arranged.
• Investment in SABER has continued using existing balance sheet resources to progress into the final engineering phase and SABER tool-build, resulting in a cash position of US$1.8m at the end of the period rising to US$2.5m as at the date of this announcement.

Financial metrics

		Six months ended 30
		September:
		2022	2021
		US$m	US$m
•	Revenue	4.9	2.3
•	Adjusted EBITDA*	0.1	(0.6)
• Post tax loss for the period	0.8	1.2
• Loss per share (cents)	1.1	1.8
•	Cash balance	1.8	5.3

Outlook

"Enteq continues to adapt to the changing global and industry dynamics by focusing on the higher margin potential in the significantly larger (>US$2bn) growth market of Rotary Steerable Drilling where SABER can offer a differentiated and cost-effective alternative. Progress continues with the build and test of the SABER system. Resources from the existing balance sheet are being used to support bringing SABER to commercialisation."

*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 2022

DIRECTORS:

Chairman

Martin 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 and gas, geothermal and methane capture 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 Rotary Steerable Systems ("RSS") and Measurement While Drilling ("MWD").

As a step change to the original MWD business, Enteq is commercialising the SABER (Steer At-Bit Enteq Rotary) RSS Tool, a truly disruptive and unique alternative to both conventional RSS and traditional directional drilling. SABER can allow Enteq to access a considerably larger addressable market with notably fewer active competitors compared to those in the MWD market. The SABER Tool is an evolution of the intellectual property developed, proven in concept and successfully tested downhole by Shell. Enteq has the exclusive worldwide licence to the intellectual property and is now progressing through the field-trial programme ahead of commercialisation.

Enteq's MWD business has an established 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 key international areas and in geothermal operations.

Financial performance

The key driver of the half year revenue of US$4.9m has been the steady increase in North American drilling activity, a continuation of the recovery seen through the whole of the previous financial year. This recovery has been a function of the relative stability in the price of a barrel of West Texas Intermediate ("WTI"), despite a weakening during the month of September itself. The average price of WTI in the period under review was US$101, moving from US$104 on 1 April to US$80 at the period end. This stability, at a relatively high price, resulted in the North American onshore active drilling rig count rising by 14%; from 673 on 1 April to 765 at the end of September.

As expected, the international markets have been slower to respond to this price stability. The proportion of international revenue, at 3% in this reporting period, continues the recent trend with the international revenue of the second half of the previous financial year at 9%, down from the 28% seen in the first half year.

The reported gross margin of 28% in the first half of this year compares to 35% in the six months to 31 March 2022 and 37% in the equivalent period to 30 September 2021. This reduction is due to a lower proportion of sales coming from the high margin rental revenue stream (down from 23% in the first half year to 30 September 2021 to only 7% in this reporting period) combined with a higher proportion coming from the electronic component product line (up from 46% to 53% in same periods) within which an increasing number of third party, lower margin, items were sold.

In the six months ended 30 September 2022, administrative expenses before amortisation, depreciation and long-term incentive scheme charges were US$1.3m. This is down from both the US$1.4m in the equivalent period to 30 September 2021 and the US$1.8m in the six months to 31 March 2022, reflecting the continuing focus on cost control measures.

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