CALGARY, May 29, 2019 /CNW/ - Acceleware® Ltd.
("Acceleware" or the "Company") (TSX-V: AXE), a leading developer
of radio frequency (RF) heating technology to facilitate
cost-effective and environmentally-friendly extraction of heavy oil
and bitumen, as well as high-performance seismic imaging
applications, today announced its financial and operating results
for the three months ended March 31,
2019 (all figures are in Canadian dollars unless otherwise
noted). This news release should be read in conjunction with the
Company's unaudited interim condensed financial statements, the
accompanying notes for the three months ended March 31, 2019, and management's discussion and
analysis ("MD&A") thereto, together with the audited financial
statements for the year ended December 31,
2018, notes and MD&A thereto, all of which are available
on Acceleware's website at www.acceleware.com or on SEDAR at
www.sedar.com.
Q1 2019 FINANCIAL SUMMARY AND OPERATING HIGHLIGHTS
In the three months ended March 31,
2019 ("Q1 2019"), Acceleware recorded its second highest
quarterly revenue in the past six years, reflecting performance
that was significantly better than the comparable period in 2018
("Q1 2018"), and second only to the most recent quarter ended
December 31, 2018 ("Q4 2018"). The
increase is due to new sales of software licenses for seismic
imaging, a result of the deployment of innovative new licensing
models. The Company has discontinued its reseller model for seismic
software and is now selling software direct to oil and gas
customers. As a result of the increase in revenue, the Company
recorded its second consecutive quarter of both positive total
comprehensive income and positive cash flow from operating
activities.
- During Q1 2019, Acceleware recognized revenue of $888,733 - 422% higher than the $170,259 recognized during Q1 2018. The increase
is primarily the result of a significant increase in seismic
software and maintenance revenue, offset by a more modest decline
in services revenue. Revenue in Q1 2019 fell 75% compared to the
$3,533,026 recorded in Q4 2018. The
Company experienced higher revenue in Q4 2018 due to the
substantial completion of a consulting services agreement with
Advanced Micro Devices, Inc. ("AMD") which saw the Company's custom
software team transition to become employees of AMD, and the
provision of other consulting services.
- As a result of higher revenue, income from operations rose
significantly in Q1 2019 to $126,916
compared to an operating loss in Q1, 2018 of $833,879. Income from operations was $2,358,164 in Q4 2018 attributable to the AMD
contract.
- The Company had total comprehensive income of $67,498, a substantial increase compared to a
total comprehensive loss of $839,377
for Q1 2018. The higher total comprehensive income is
principally a result of higher revenue, and lower research and
development ("R&D") expense, net of government assistance.
Total comprehensive income decreased 97% in Q1 2019 to $67,498 compared to $2,437,958 in Q4 2018, due to lower revenue.
- At March 31, 2019, Acceleware had
$2,245,521 (December 31, 2018 - $2,051,577) in working capital, including
$4,450,464 (December 31, 2018 - $3,225,126) in cash and cash equivalents, and
$280,129 (December 31, 2018 - $189,012) in combined short-term and long-term
debt in the form of lease obligations. The increase in short-term
and long-term lease obligations reflects the adoption of IFRS 16 on
January 1, 2019. The increase in cash
(and consequently working capital) is attributable to the AMD
agreement noted above and government assistance for the RF heating
R&D.
- On a segmented basis, revenue from the Company's
high-performance computing ("HPC") segment increased 421% to
$886,508 in Q1 2019 compared to
$170,259 in Q1 2018 on higher seismic
software and seismic maintenance revenue. HPC revenue fell 75% from
the $3,490,542 recorded in Q4 2018
due to the absence of the AMD contract revenue.
RF HEATING BUSINESS SEGMENT
RF XL is Acceleware's patented and patent-pending RF heating
technology, designed to improve the extraction of heavy oil and
bitumen, and has the potential to save billions of dollars in oil
sands production costs. When applied, the technology is designed to
reduce both capital and operating costs, while offering significant
environmental benefits, including immediate greenhouse gas ("GHG")
emission reductions, a substantial decrease in land use, the
elimination of external water or solvent needs and no requirement
for tailings ponds. As an electrically-driven process,
Acceleware also believes that RF XL technology can provide a clear
pathway to zero-GHG production of heavy oil and oil sands and
provide optimal alignment with government goals to recognize
innovation as part of the solution in Canada's overall emission reduction plans.
Acceleware's RF heating segment represents a key driver of
future growth, and the Company successfully ramped up investment in
R&D within this segment through Q1 2019. Key activities during
the period are outlined below and include engineering, design and
prototyping work related to the Company's planned commercial-scale
test of RF XL, and filing of additional patent applications.
- The Company continued to receive milestone payments during Q1
2019 under the recently completed contribution agreements with
Sustainable Development Technology Canada ("SDTC") and Emissions
Reduction Alberta ("ERA"). The agreements will provide a
total of $10 million in non-repayable
grants, and as at March 31, 2019,
Acceleware had received a combined $1,157,843 from both SDTC and ERA. This capital
infusion enabled the Company to accelerate progress of the
commercial-scale pilot project to be completed with Prosper
Petroleum Ltd. at its Rigel property in northeast Alberta;
- The Company completed additional factory acceptance testing of
a prototype RF generator with partner GE;
- Acceleware conducted bench-top testing of the RF XL apparatus
with various oil sands core samples;
- Engineers and consultants continued to de-risk design concepts
for RF XL wells; and
- Acceleware's scientists and engineers filed three new patent
applications.
Acceleware continues to estimate that the cost to complete the
RF XL pilot will range from $16
million to $20 million.
Through a project funding agreement with a major oil sands
producer, contribution agreements with SDTC and ERA, and other
sources, the total financing raised to date for the
commercial-scale test is in excess of $16
million. Acceleware has also appointed GMP Securities L.P.
("GMP FirstEnergy") as exclusive financial advisor to assist in the
full funding of the RF XL pilot program.
- RF heating revenue rose slightly in Q1 2019 to $2,225 from $nil in Q1 2018 on increased
maintenance revenue. RF heating revenue was 95% lower in Q1 2018
compared to the $42,484 recorded in
Q4 2018 on lower software revenue.
- A loss from operations in Q1 2019 attributable to the RF
heating segment was relatively stable at $595,969 compared to $595,004 in Q1 2018. Operating loss for RF
heating was 33% lower in Q1 2019 compared to the loss of
$886,424 recorded in Q4 2018 due to
lower R&D investments, net of government assistance, and lower
G&A expenses.
HIGH-PERFORMANCE COMPUTING BUSINESS SEGMENT
Acceleware's HPC business segment helps customers meet their oil
and gas exploration needs with seismic imaging software that
provides the most accurate and advanced imaging available for oil
exploration in complex geological zones and formations. This
segment also includes electro-magnetic ("EM") simulation software.
During the fourth quarter of 2018, the Company discontinued
software development services including porting, acceleration
assessments and mentoring that do not directly support its seismic
imaging and EM software products.
Building on recent direct sales success, Acceleware will access
the oil and gas geoscience software market with innovative
licensing structures through a direct sales model that commenced in
2019. As part of the change, the Company has discontinued reseller
arrangements with seismic independent software vendors ("ISV").
The HPC segment's revenue in the fourth quarter of 2018 was
dominated by proceeds from the AMD agreement, which is
non-recurring.
- HPC revenue increased 421% to $886,508 in Q1 2019 compared to $170,259 in Q1 2018 on higher seismic software
and seismic maintenance revenue. HPC revenue fell 75% from the
$3,490,542 recorded in Q4 2018 due to
the absence of the AMD contract revenue.
- Operating income attributable to HPC increased to $722,885 in Q1 2019, compared to a loss of
$238,875 in Q1 2018 due to higher
revenue and lower expenses in all categories. HPC operating income
was lower in Q1 2019 compared to the operating income of
$3,244,588 recorded in Q4 2018 due to
the substantial completion of the AMD contract in Q4 2018, despite
lower expenses in all categories.
OUTLOOK
Acceleware and Prosper to date have provided all information
requested from the Alberta Energy Regulator, and expect to receive
regulatory approval to move forward with the test in 2019.
Acceleware continues to invest in intellectual property protection
and has several new patent applications in development, including
the investigation of applications for RF heating beyond oil sands
and heavy oil production, such as RF heating for bitumen rail cars.
For the remainder of 2019, Acceleware will continue its direct
sales model for seismic imaging software.
ABOUT ACCELEWARE:
Acceleware (www.acceleware.com) is an innovator of clean-tech
oil and gas technologies comprised of two business units: Radio
Frequency (RF) Enhanced Oil Recovery and Seismic Imaging
Software.
Acceleware is developing RF XL and Modular RF, its patented and
patent-pending low-cost, low-carbon production technologies for
heavy oil and oil sands that are materially different from any
heavy oil recovery technique used today. They will use no water,
require no solvent, have a small physical footprint, can be
redeployed from site to site, and can be adapted to a multitude of
reservoir types, while expected to greatly reduce and eventually
eliminate production greenhouse gas emissions (GHG). In shallow oil
sands implementations, no tailings ponds will be required.
Acceleware's RF heating innovation earned a Global Petroleum Show
award for Best Emerging Clean Technology.
Our seismic imaging software solutions are state of the art for
high fidelity imaging, providing the most accurate and advanced
imaging available for oil exploration in complex geologies.
Acceleware is a public company on Canada's TSX Venture Exchange under the
trading symbol "AXE".
NOTE REGARDING FORWARD-LOOKING INFORMATION AND OTHER
ADVISORIES
This news release contains "forward-looking information"
within the meaning of Canadian securities legislation.
Forward-looking information generally means information about an
issuer's business, capital, or operations that are prospective in
nature, and includes disclosure about the issuer's prospective
financial performance or financial position.
The forward-looking information in this press release can be
identified by terms such as "believes", "estimates", "plans",
"potential", and "will", and includes information about
Acceleware's plans to focus on revenue streams that offer the
highest margins, the anticipated costs of the commercial-scale test
of RF XL, Acceleware's strategy to finance the RF XL technology,
the timeline for the commercial-scale test of RF XL including
regulatory approval, and the anticipated benefits of the RF XL
technology. Acceleware assumes that the current timeline for the RF
XL pilot is achievable, that research and development effort
including the commercial-scale test plans will result in
commercial-ready products, and that future capital raising efforts
will be successful.
Actual results may vary from the forward-looking information
in this press release due to certain material risk factors. These
risk factors are described in detail in Acceleware's continuous
disclosure documents, which are filed on SEDAR at
www.sedar.com.
Acceleware assumes no obligation to update or revise the
forward-looking information in this press release, unless it is
required to do so under Canadian securities legislation.
This news release does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities described in
this release in the United States.
The securities have not been and will not be registered under the
United States Securities Act of 1933, as amended (the "U.S.
Securities Act"), or any state securities laws and may not be
offered or sold within the United
States or to U.S. persons unless registered under the U.S.
Securities Act and applicable state securities laws or an exemption
from such registration is available.
DISCLAIMER
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE Acceleware Ltd.