Plexus : Annual Report & Accounts 2022

A N N U A L R E P O R T

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P O S-G R I P®

PROPRIETARY METHOD OF FRICTION GRIP ENGINEERING

Plexus HG® technology, is a simple scientific method of design for metal interface seals, used to permanently contain METHANE GAS in wellheads, throughout the life of a producing well.

The seal system comprises of multiple integral radiused bump rings, which interact directly with the wellhead bore, to halve the number of leak paths past the annulus, using a series of redundant gallery seals. A preload above yield is carefully delivered and recorded by the externally controlled horizontal deflection of the housing wall against solid hanger bodies, thereby equally distributing perimeter stress, in compliance with the principles of Hertzian Stress Theory (HST).

The system stays permanently rigid, guarantees life-cycle integrity and is maintenance-free, using re-usable components. By matching materials at the seal interface, bi-metallic corrosion is prevented and multiple metal seals are used to anticipate the pace of chemical degradation, throughout field-life.

POSPOS-GRIP-GRIP

"HG"Production WellheadlheadinstalledSystem offshore

POS-GRIP in OPEN Position

POS-GRIP in CLOSED Position

P L E X U S

POS-GRIP APPLICATIONS

Wellheads

Production wellheads, both surface and subsea have all benefitted from POS-GRIP. Casing and tubing hangers can be gripped, but

POS-GRIP can also be used to support wearbushings, BOP test tools and seal sleeves.

Connectors

POS-GRIP is ideal for high integrity, low fatigue connector applications. Wellhead connectors, riser connectors, subsea jumper connectors, pipeline connectors, and even vessel mooring connectors can benefit from the simplicity of POS-GRIP.

Metal-to-metal sealing

Wellheads and connectors can both benefit from the direct contact created when the POS-GRIP metal to metal HG® seal is activated.

P O S - G R I P T E C H N O L O G Y

Financial and Operational Overview Financial Summary

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Continuing operations sales revenue £2,306k (2021: £2,017k)

Adjusted EBITDA on continuing activities £2.78m loss (2021: £2.69m loss), (page 10).

Continuing operations operating loss £4,291k (2021: £4,546k)

Continuing operations loss before tax £5,556k (2021: £4,372)

Continuing operations operating loss after tax £7,457k (2021: £4,110k)

Basic loss per share from continuing activities 7.42p (2021: 4.09p loss)

Cash and cash equivalents of £5.84m (2021: £5.18m)

Bank borrowing of £3.96m (2021: £2.04m) relating to a drawn down Lombard facility

The Group has £0.1m invested in financial assets (2021: £3.04m)

Operational Overview

Revenue streams are derived from both direct sales and the licencing of the Plexus' POS-GRIP method of engineering technology to third parties, including Schlumberger. The goal is to establish the Company's proprietary and patented leak-proof wellhead systems and specialist engineering solutions across the oil and gas industry, whilst helping to meet ESG and NetZero goals by offering 'through the BOP' (Blow out Preventer) designs, and leak-proof seals capable of retaining their integrity for the life of well thereby avoiding costs associated with maintenance and well shut ins.

• June 2022 ­ secured Oceaneering order for Plug & Abandonment ("P&A") equipment and services estimated to generate revenues of circa. £500,000

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March 2022 ­ suspended activities with LLC Gusar ("Gusar"), its Russian licencee partner following the outbreak of the war in Ukraine, with little or no impact on the Company's finances during the period.

December 2021 ­ signed a contract with a leading North Sea Operator for a POS­GRIP surface production wellhead system

• December 2021 ­ expanded market reach via revised non­exclusive licence agreement terms with Cameron International Corporation ("Cameron"), Schlumberger's wellhead company enabling Cameron to:
  o Design, market and sell Plexus' POS­GRIP and HG® metal­to­metal seal method of wellhead engineering for surface production wellheads to its existing clients
  o Add additional territories to the agreement to make the licence worldwide and where higher royalty rates will apply in the range of 3% to 6% of the revenues generated from the sale, lease, or rental of surface wellheads
• August 2021 ­ re­entered the Jack­up Exploration Rental Wellhead market, through a collaboration agreement with Cameron
• July 2021 ­ received the London Stock Exchange's Green Economy Mark awarded to companies and funds where 50% or more of their revenues are attributable to environmental solutions which contribute to the global green economy, in alignment with Net Zero and ESG principles

Post period end

• October 2022 ­ raised £1,550,000 through the issue of Convertible Loan Notes ("CLNs"), which will be used for working capital and to fund the Group's activities as it seeks to capitalise on the increasing pipeline of opportunities within its target markets.

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Plexus Holdings plc Annual Report 2022

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Chief Executive Ben Van Bilderbeek said:

"During the year to 30th June 2022, the Group made a loss before tax on continuing operations of £5.56m compared to a loss in the prior year of £4.37m. The board is focussing reversing this performance and several pivotal decisions have been taken. Perhaps the most significant being the Company's re­entry into the drilling from Jack­up rigs exploration rental wellhead business. This is the sector in which Plexus initially built its name and reputation, before we elected to exit this market in 2018 following the collapse of the oil price in 2014 and 2015. During that time, capital investment in exploration activity dwindled away and, six years on, the oil and gas market has changed once again.

During the pandemic we saw a major shift in geopolitics and industry sentiment led initially by a boom in renewable energy. Followed by Russia's war against Ukraine which has subsequently led to the recognition of the need to increase and deliver energy security closer to home. This has flagged the importance of the oil and gas industry investing in exploration and production activities as, without this, as suggested by Saudi Arabia, the world could be short of approximately 30 million barrels of oil a day in eight years' time, while currently the world consumes circa 100 million barrels per day.

This change of industry circumstances is beginning to have a positive effect as evidenced by the significant increases in profits of the oil and gas operators, and it is anticipated that the oil services companies will similarly benefit. As reported by Rystad Energy, global oil and gas investments will rise 4% to US$628 billion this year from US$602 billion in 2021, while Schlumberger's CEO recently said that it is "one of the strongest outlooks for the energy services industry in recent times", and Baker Hughes head said there are "very busy years ahead" in an "accelerating multiyear upcycle". In the same vein, Shell suggested it will cost billions of dollars just to keep production flat as production from existing wells declining at circa 15% to 20% a year; this requires investment tied to older wells as well as having to discover and develop new wells to replenish portfolios.

However, it is not all plain sailing for the industry as investors, governments, and regulators are no longer tolerating the oil and gas industry's previously accepted practices as far as emission levels are concerned, which are now recognised as being too high and unsustainable. Pressure continues to build with operators required to operate more sustainably with the aim of achieving a 45% reduction in emissions by 2030 and NetZero targets by 2050. While in the past, many oil companies have focused on using/fixing old solutions and infrastructure, their hands are now being forced to invest in and utilise new technology that can help to prevent rather than cure emissions. I believe that as a result, companies like Plexus, which can offer leak proof wellheads with long term integrity for the life of a well, are well positioned to benefit from these major green initiatives, whilst also helping to significantly reduce the amount of methane gas being released into the atmosphere as a result of fugitive emissions, the polite name for leaks.

A major step forward in the journey towards a greener and more responsible oil and gas industry was the introduction of the Inflation Reduction Act ('IRA') in August this year by US President Biden. This is a US$369bn package of investment designed to tackle the climate crisis, which holds major oil and gas companies in the US to account for their operations and the amount of methane gas leaked into the atmosphere. Estimates suggest that it could cut US greenhouse gas emissions by 40% by 2030. Aside from penalising the worst polluters, the fund has set aside US$1.5bn in subsidies to help the companies affected invest in the technology to fix the leaks, as well as providing tax breaks for those that invest in green energy solutions. It is hoped that, as suggested by Jonathan Banks at the Clean Air Task Force, a similar fee "could be repeated elsewhere in the world".

I believe that Plexus can make a meaningful contribution to such emission reduction demands, particularly in relation to supplying the industry with its HG® metal­to­metal wellhead seals which can deliver leak proof performance for surface and subsea production wellheads, and specialist POS­GRIP applications such as P&A. We gained a boost in recognition of our green technology credentials in July 2021 when Plexus was recognised by the London Stock Exchange as contributing to the green economy by deriving more than 50% of revenues from environmental solutions with the Green Economy Mark accreditation.

Encouragingly, we are experiencing an increased level of interest in our Exact­EX 'through the BOP' exploration wellhead rental services, Centric­15 mudline hangers and our POS­GRIP "HG" surface production wellhead technology, for which we are positioning the Company to benefit, by way of planned investment in additional rental inventory and increased customer, industry partner and licencee engagement.

For example, in December 2021, we signed a purchase order for a POS­GRIP surface production wellhead system for a leading North Sea operator, and we are pursuing a number of other additional prospects. This is in line with our IP­led strategy to gain surface production wellheads market share in conjunction with a licence co­operation agreement signed with Cameron, a Schlumberger Group company, the scope of which was expanded in mid­December 2021.

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