Plexus Holdings PLC (AIM:POS) shares jumped 10% then fell into the red after it announced a new, expanded IP licence agreement with SLB (previously Schlumberger) replacing the previous surface production wellhead licence agreement with Cameron (an SLB company) for a cash consideration of US$5.2 million.
The fact that the new licence agreement is royalty-free may have led to the swing in the shares, but broker Cavendish pointed out that Plexus had moved its focus away from the larger-volume, lower-cost surface production wellhead market.
Plexus retains the ability to operate within this sub-sector, so it can offer a full package solution to customers.
"With such a significant endorsement of Plexus’ proprietary POS-GRIP method of engineering technology, POS-GRIP’s leak prevention led wellhead solutions could become a mainstream worldwide industry standard," Cavendish said.
The broker said the licence deal allows Plexus to concentrate on other market sectors and applications, including subsea, connectors (such as metal sealing HP/HT tie-back applications), hydrogen, geothermal, and non-wellhead applications such as maintenance solutions, plug & abandonment (P&A), special applications, and all non-oil and gas applications.
"Plexus is also focused on growing its exploration wellhead rental business, where it has a long-established reputation in jack-up exploration drilling and mudline suspension systems (and specialist knowledge of numerous legacy wells around the world, especially in the North Sea, relevant to decommissioning opportunities)."
Last year's £8 million special project order for its POS-GRIP wellhead equipment and sealing technology was "another strong endorsement of Plexus’s proprietary technology and engineering capabilities [and] has positioned it well for further such specialist work, with well P&A work also likely to grow further in coming periods".
Cavendish upgraded its 2024 forecasts following this agreement with SLB, with revenue increased 29.6% to £14 million, with EBITDA up 152.4% to £5.3 million and reported PBT up 466.7% to £1.7 million.
Estimated FY24 closing cash is £5.5 million with net cash of around £3.8 million.