Enteq 'satisfied' with pivot from US shale since year-end

Energy services technology and equipment company Enteq reported a “satisfactory” trading recovery from the mid-March 2020 oil price slump and the effects of Covid-19 in a trading update on Tuesday.

The AIM-traded firm said its half-year revenue and adjusted EBITDA were likely to be in line with management expectations.

It said it continued to focus on sales opportunities outside its traditional North America onshore shale-based market.

The proportion of revenue generated outside North America in half-year was expected to be around 75%, an increase from 36% in the period ended September 2019, and 21% for the second half ended 31 March.

Enteq said the North American market remained “extremely subdued”, with the number of active drilling rigs continuing to fall from 1,025 at the start of April to the current level of 261, with resulting overcapacity of equipment in the market.

It said its rental revenue from the North America market was expected to continue at reducing levels until the current financial year-end, with limited renewals expected.

The board said the majority of international sales in the first half were into the China market, where strategic drilling for gas in challenging downhole conditions could be satisfied by Enteq equipment.

It said the $1m contract announced in May to a new customer in China was fulfilled, with the equipment successfully operated, and the customer indicating that further orders were likely.

The $0.9m contract announced in August to a new customer in Saudi Arabia had also been delivered, however the revenue would only be recognised when the equipment completes the Saudi Aramco accreditation process.

Enteq said the rotary steerable system development programme, which included elements licensed from Shell, continued to meet project milestones, with prototype deployment scheduled for 2021.

A high-speed data transmission project had also begun, with a partner based in Poland.

Cash balances had reduced from $10.2m as at 31 March to $8.8m on Tuesday, as Enteq said it was still investing in engineering projects and working capital.

“It is pleasing that Enteq continues to expand its market share and opportunities outside North America,” said chief executive officer Martin Perry.

“The significant contract awards in both China and Saudi Arabia, demonstrate that Enteq's products continue to offer new customers a proven, cost effective and reliable solution for their drilling requirements.

“Investment in new and differentiated technology will enable Enteq to address a substantially larger sector of the world market.”

The company said it planned to release its interim results for the six months ending 30 September on 12 November.