Plexus Holdings PLC: Interim Results
Plexus Holdings plc, the AIM quoted oil and gas engineering services business and owner of the proprietary POS-GRIP® method of wellhead engineering, announces its interim results for the six months to 31 December 2018. Financial Results
Overview and Corporate Highlights
Chief Executive Ben van Bilderbeek said: “Looking back 12 months, the publication of the 2018 half year report closely followed the sale of our Jack-up exploration wellhead business to TechnipFMC (‘FMCT’) and so provided us with a timely opportunity to detail our strategy going forward: ‘focus is no longer centred on the day to day running of the Jack-up Business. The sale and Collaboration Agreement with FMCT therefore not only provide us with cash resources and an industry major as a partner, but also creates capacity to develop and monetise other products based on our ground-breaking technology which, through the Jack-up Business, has been selected above conventional equipment many times over out in the field.’ In line with this, the half year period under review saw our focus pivot towards expanding the footprint of our proprietary POS-GRIP technology, and, as the jump in our year on year H1 revenues to £1.3m from H1 2018’s £40k level demonstrates, progress is being made. “We set ourselves three initial priorities to help achieve our overall objective: support our local partner’s efforts to win a first order for POS-GRIP enabled equipment in the major Russian market; secure orders for markets outside Jack-up exploration where we already have fully developed products, such as production, abandonment and subsea; and work on developing new POS-GRIP applications for deployment in fast-growing sub-sectors, such as geothermal and renewables. Progress has been made on all three fronts, providing us with an excellent foundation with which to build on our reputation as a supplier of critical equipment that delivers a quantum leap in terms of setting higher performance and safety standards, particularly in terms of gas proof seal performance. “In Russia and the CIS, there was an outstanding development during the six months under review, and importantly a further one post period end. In September 2018, our Russian partner, Gusar, secured an initial agreement to supply supermajor Gazprom with two sets of Plexus’ Tersus – TRT Mudline Suspension System (‘MLS’) for the construction of shallow water exploration gas wells on the Kara Sea Shelf in 2019. Then post period end, earlier this month Gazprom placed a first major breakthrough contract with Gusar for POS-GRIP rental exploration equipment for use in the same location. The order covers the first year of a five year Jack-up gas exploration drilling programme and I am hopeful there will be more orders to come. Taken together, these two contracts bode well for Gusar and ourselves and we look forward to working with Gazprom in Russia, a top three producing nation, and the holder of the world’s largest gas reserves. “It is against this backdrop of supporting Gusar’s efforts to secure a first order that our February post period end buyback of 4,950,495 Ordinary Shares in Plexus beneficially held by Gusar should be seen. The buyback accelerated the completion of the sale and shipment to Russia of the two sets of wellhead equipment that Gusar had ordered from Plexus in H1 2018 for circa £1.4m to Russia which, in turn, enables Gusar to act swiftly to fulfil the Gazprom rental wellhead exploration order. Looking to the future, as our technology is proven to be superior to conventional solutions in terms of seal performance, reliability and safety, especially in high pressure / high temperature environments (‘HP/HT’) associated with gas, I am quietly confident that once Gazprom experiences first-hand the benefits of our equipment they will not look back to conventional designs, and that this new opportunity will lead to further activity within the CIS in the coming years. “In terms of markets outside Jack-up exploration, Plexus has POS-GRIP applications for production, subsea and abandonment operations; all are ready for commercial roll-out. These include “HG”™ Wellheads, which combine POS-GRIP Technology with gas tight metal sealing; the Python Subsea Wellhead; the POS-SET™ Connector for the decommissioning and abandonment market; and Tersus-PCT, an innovative HP/HT Tie-Back connector product. Our growing family of POS-GRIP products is integral to our post-FMCT sale strategy and so it is highly encouraging that, during the half year period, we were awarded a contract from Oceaneering for our POS-SET Connector for a well abandonment operation. This follows an order from Spirit Energy to supply a production wellhead in the North Sea in the Company’s last financial year, and which is being installed currently. We are working hard to build on this, and we are actively engaged in pursuing further order opportunities for all our products, particularly for the large and lucrative surface production market which, according to Rystad, is set for a surge in investment in 2019. The consultancy estimates non-shale projects representing over 45 billion barrels of oil equivalent (‘boepd’) could be sanctioned this year, a near three-fold increase on the 17.5 billion boepd in 2018. “As well as our target markets in the hydrocarbon space, we are also interested in pursuing opportunities outside the energy industry, including alternative energy sources such as geothermal. To progress these, ongoing R&D is important as is the need for Plexus to have access, when required, to machining capability to design and develop new POS-GRIP enabled applications. With this in mind, during the period we acquired a 49% interest in KMS, a precision engineering business with a blue-chip customer base. While KMS is an attractive investment in its own right, it also has the potential to provide us with access to machining capability in support of new equipment design initiatives. “Our goal has always been to establish our patent-protected, friction-grip method of engineering as an enabling technology for the wider energy industry. For a junior supplier such as Plexus to have become the dominant player in the North Sea for Jack-up exploration drilling wellheads, despite having to compete against top tier multinationals with substantial resources at their disposal, is testament to the strength of our technology. For one of these top tier players, TechnipFMC, to then acquire our Jack-up Business and sign a Collaboration Agreement with us, represents industry endorsement of the strength of our technology. Together with a recovery in oil prices to an average of US$74 per barrel in 2018, compared to 2017’s US$54, a structural shift among majors and the wider economy towards cleaner natural gas, and the growing calls for operators to use gas-proof equipment throughout the supply chain to prevent harmful methane leaks, we believe the outlook for Plexus is very positive. It has been a long time since favourable cyclical and structural drivers have coincided with significant developments at the corporate level. We now have industry partners, a cash rich balance sheet, and we are being invited to tender for large surface production projects. This is an exciting period for Plexus, and I look forward to providing further updates as we focus on capitalising on POS-GRIP’s potential to be a game-changer in terms of delivering a step-change in performance and wellhead safety standards. “Finally, I am pleased to acknowledge our recent declaration of a £1.0m interim dividend payable in April 2019, as well as the initiation of a court approval reduction of capital process by way of a cancellation of our share premium account in order to generate additional distributable reserves. The principal benefit of a reduction in capital is to increase the Company’s future flexibility, subject to the financial position and prospects of the Company, to pay dividends, to facilitate any prospective buyback of shares (including by way of tender offer) or to provide flexibility for any other general corporate purposes. These initiatives are a sign of our growing confidence in the future.” For further information please visit www.posgrip.com |
