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Enteq Upstream - strong balance sheet maintained

Enteq Upstream (LON:NTQ) has released a trading update for the year ending March 2020 and the outlook relating to COVID-19 and oil price declines. The company expects to report results broadly in line with market expectations for the year to March 2020, with revenues of around US$11mln, underlying adjusted EBITDA (earnings before tax interest depreciation and amortisation) of around US$3mln, and a year-end positive net cash balance of US$10mln.


For the year ahead, Enteq has suspended financial guidance. We believe this is unsurprising and we expect most companies in the oil & gas equipment sector will do likewise, as many customers have reduced or cancelled capital expenditure (capex) plans. The company will take a US$6mln non-cash write-down to its balance sheet relating to the reduced visibility.

Enteq has responded with immediate actions to reduce costs — cutting headcount in the core US operations, implementing salary reductions and switching more of the board remuneration to share-based payments.

Business mix and recovery potential

The company has indicated that it expects international markets (meaning outside North America) to show greater resilience. We believe this is likely to be the case due to North America’s production comprising higher cost extraction (e.g. shale). Some overseas markets are national strategic energy projects (Western China and some Russian projects) and others are low-cost producers (Middle East) that are likely to be more willing to sustain some of their capex projects. International markets made up 30% of Enteq’s revenues in the full-year (FY) to March 2020 (our estimate), compared with 10% in the previous year, with the increase arising from the company’s strategic initiative to broaden its revenue base. A recently announced partnership in Saudi Arabia further expands the international presence.

Enteq has also indicated that it will continue to invest in selected engineering development projects. One important programme is the Rotary Steerable Drilling system being developed under a licensing agreement with Shell. We believe that the expanded product base could enable Enteq to significantly exceed its FY Mar 2020 revenue run-rate once market conditions allow.

Quick facts: Enteq Upstream PLC

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Market: AIM
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What's in the report?

Financial results and forecasts
Growth drivers
Market conditions
Milestones & inflection points


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