Announcement: Results for the six months ended 30 September 2016 (PDF)

Interim results for the six months ended 30 September 2016

AIM traded Enteq Upstream plc ("Enteq", the "Company" or the "Group"), the oil & gas drilling technology company, today announces its interim results for the six months ended 30 September 2016.

Despite some recent stabilisation of oil prices, followed by a small increase in North American rig count, the oil & gas drilling industry has yet to regain confidence in a near term recovery. Consequently, purchases of new or replacement Measurement While Drilling equipment, such as that supplied by Enteq, remain infrequent.

Enteq's revenues during the first half of the current financial year have been disappointing although, as a result of direct action by management to further reduce costs and preserve cash, an increase of available cash on the balance sheet is again reported.

A new contract win in Saudi Arabia and other opportunities should lead to an improved second half, albeit revenues for the full year are likely to be lower than previously expected by management.

The Board continues to review the Company's cost base whilst balancing this with the required core

skills and capabilities which should allow a recovery in a stabilised market.

• Overhead run-rate further reduced by approximately 50% since the start of the financial year

• Half-on-half revenues continued to decline reflecting rig count reduction

• Recent contract win in Saudi Arabia

• Cash balance, at 30 September 2016, increased to $15.2m ($14.5m in September 2015)

  Financial Metrics

  Six months to:
  30 Sept 2016 US$m	30 Sept 2015 US$m
  0.7	3.0
  0.7 loss	0.4 loss
  1.0	1.3
  1.5 loss	2.5 loss
  15.2	14.5

  • Revenue

  • Consolidated adjusted EBITDA1

  • Loss before tax

  • Adjusted earnings per share (cents)2

  • Cash

  Outlook

• A prolonged period of stable oil prices at current levels should encourage a recovery in North American rig count in 2017

• Spare equipment capacity in the market will continue to limit demand for Enteq products

• Projects outside North America continue to show promise

  Iain Paterson, Chairman of Enteq Upstream plc, commented:

  "In the medium term, the North American market for land drilling is expected to stabilise and Enteq is determined to maintain or increase its market share in that market. Outside North America, Enteq continues to identify and convert new customers in order to broaden the customer base. New technologies are being reviewed and developed whilst maintaining control of capital expenditure in order to protect the Group's strong cash position."

  1 Adjusted EBITDA is reported profit before tax adjusted for interest, depreciation, amortisation, foreign exchange movements, performance share plan charges and exceptional items.

  2 Adjusted earnings per share is reported profit per share adjusted for foreign exchange movements, amortisation, performance share plan charges and exceptional items.

  For further information, please contact: Enteq Upstream plc +44 (0) 1494 618741 Martin Perry, Chief Executive Officer

  David Steel, Finance Director

  Investec Bank plc (Nomad and Broker) +44 (0) 20 7597 4000 Chris Treneman, Patrick Robb, David Anderson Interim Report CHAIRMAN & CHIEF EXECUTIVE OFFICER REPORT Introduction

  Enteq Upstream is a supplier of Measurement While Drilling equipment to oil and gas directional drilling service companies, primarily those operating in North America. As a result of a global balancing of oil production from North American shale resources, the last 18 months has seen a prolonged reduction in oil prices resulting in significantly less drilling activity. The number of rigs operating in North America has fallen from approximately 2,000 to 600 during that period.

  Enteq produces specialist equipment which measures directional and other operational parameters whilst a well is being drilled. The service company customer owns a fleet of this equipment which they use to service their oil company clients. In the current market, all customers have significant over-capacity in their fleets and therefore have not been purchasing any new equipment for replacement or expansion.

  Enteq took pro-active and timely steps to adjust both overheads and production capacity to reflect the reduced market size. The business is now operating at a base level which maintains core capability for a recovery whilst conserving cash balances wherever possible.

  By maintaining the remaining business and engineering capability with a strong cash balance, Enteq is well positioned for any market recovery.

  Operational Highlights

• Overhead run-rate reduced by approximately 50% since the year end

• Half-on-half revenues continued to decline reflecting rig count reduction

• Recent contract win in Saudi Arabia

• Cash balance, at 30 September 2016, increased to US$15.2m (US$14.5m in September 2015)