8 April 2020
Enteq Upstream plc
("Enteq" or the "Company")
Year-end Trading and COVID 19 Update
Enteq, the oilfield services technology and equipment supplier, today announces an update for the financial year ended 31 March 2020.
The combined and inter-related impact of both the COVID-19 virus spreading and the recent drastic reduction in the oil price has had a significant impact on Enteq's current and future trading environment.
The health and safety of staff, their families and the broader community is our highest priority. Following advisory guidelines, our facilities in Houston have been re-organized to ensure safe working practices, together with enabling staff to work from home, where practical. All UK employees are now operating from their homes.
Enteq trading results for the year ended 31 March 2020 are anticipated to remain broadly in-line with the Board's earlier full-year expectations, with revenues in the region of $11m and Underlying Adjusted EBITDA* of around $3m. The cash balance as of 31 March 2020 was $10.2m ($11.9m as at 31 March 2019; $10.7m as at 30 September 2019) reflecting planned investments made during the year in the rental fleet, engineering projects and product development.
Due to the recent reduction in demand from the North American drilling market, combined with the future market uncertainties, Enteq intends to include a significant non-cash write down in the carrying value of both the intangible assets (capitalised research and development projects) and inventory holdings in the final reported accounts for this period. The total balance sheet (non-cash) reduction in relation to these write downs is expected to be approximately $6.9m.
Shortly after the dramatic fall in global oil price in mid-March 2020 many operators in the North American shale oil and gas sector announced measures to significantly reduce both capital expenditure and operating costs. Enteq responded by rapidly reducing its overhead cost base. The actions taken to date include:
· reducing the number of our US workforce by approximately 60%, with group wide salary reductions implemented from 1 April 2020;
· releasing all contract staff and curtailing all discretionary spend.
In addition, in order to further conserve cash, all Board members have agreed to take a significant proportion of their remuneration in new Enteq shares. Enteq is also in the process of applying for governmental assistance in the USA, where appropriate.
Enteq's secure balance sheet, combined with an adjusted cost base, will allow for continued investment in selected engineering development projects. Strong technical partnerships will also be maintained.
In the current circumstances it is not possible to give guidance as to the expected level of future trading in the medium term. Enteq's International markets, especially China, Russia and in Saudi Arabia (where a new partnership agreement has now been concluded), are expected to be more resilient than North America and Enteq continues to pursue opportunities in these areas.
The Company currently expects to report its full year results for the year ended 31 March 2020 on 17 June 2020.
For further information, please contact:
Enteq Upstream plc +44 (0)149 461 8739
Martin Perry, Chief Executive Officer
David Steel, Finance Director
Investec Bank plc (NOMAD and Broker) +44 (0)207 597 5970
Chris Treneman, Patrick Robb, David Anderson
* Underlying EBITDA is defined as operating profit before depreciation, amortisation, long term incentive charges and exceptional items.
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