Acceleware® Ltd. (“Acceleware” or the “Company”) (TSX-V: AXE), a
leading developer of technologies targeting low-cost and clean
extraction of heavy oil and bitumen, today announced its financial
and operating results for the three months ended March 31, 2021
(all figures are in Canadian dollars unless otherwise noted).
Acceleware’s first quarter results reflect contributions from the
Company’s two business units, comprised of radio frequency heating
technology (“RF Heating”), which supports a cost-effective and
environmentally friendly alternative to steam assisted gravity
drainage (“SAGD”) for the extraction of heavy oil and bitumen
through its proprietary RF XL heating technology, along with
high-performance scientific computing applications (“HPC”). This
news release should be read in conjunction with the Company’s
unaudited interim condensed financial statements and the
accompanying notes for the three months ended March 31, 2021, and
management’s discussion and analysis (“MD&A”) thereto, together
with the audited financial statements for the year ended December
31, 2020, 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.
OPERATING SUMMARY
HIGHLIGHTS
Acceleware continued to advance the development
of its patented RF heating technology through the first quarter of
2021. This progress builds on the Company’s previously announced
2020 key accomplishments which include:
- the partnership with Broadview Energy to host the
commercial-scale testing of its RF heating technology at a site in
the Cold Lake Oil Sands region near the town of Marwayne, Alberta
(the “Pilot”);
- a successful full-power test of two modules, or 500 kW, of the
Clean Tech Inverter (“CTI”) prototype;
- receipt of all required regulatory approvals from the Alberta
Energy Regulator for the Pilot;
- grant of a key RF XL patent in the United States;
- confirmation from the first major oil sands producer of ongoing
support for RF XL Pilot;
- second major oil sands producer committed to support RF XL
Pilot; and
- established Acceleware | Kisâstwêw, a limited partnership with
Saa Dene Group.
The Company’s most notable achievements during
the three months ended March 31, 2021 include:
- $5 million of new funding
from Alberta Innovates for RF XL Pilot: The Company
entered into an investment agreement (the “Agreement”) with Alberta
Innovates, the province of Alberta’s largest research and
innovation agency. Under the terms of the Agreement, Alberta
Innovates agreed to provide Acceleware with a contribution of up to
$5 million for the Pilot. The funding is provided in accordance
with the Alberta Innovates mandate and the mandate of the TIER
Economic Recovery Program. During the three months ended March 31,
2021 $2 million was received, with the remaining funds to be
distributed at designated milestones over the course of the
Pilot.
- Jim Boucher nominated to
stand for election to Acceleware’s board of directors: A
highly respected Indigenous leader, executive and philanthropist,
Jim Boucher is a champion for sustainable and environmentally
responsible development, social prosperity, and economic inclusion
for Indigenous peoples. In 2020, he cofounded the Saa Dene Group of
Companies. In his role as President, Jim is working with a variety
of partners to pursue opportunities in multiple sectors with one
clear vision: to increase diversity and inclusive opportunity
through meaningful economic and social participation in the global
economy.
The Pilot is fully funded based on current costs estimates,
which range between $16 and $20 million. A total of approximately
$19.5 million of direct funding has been raised to date including
$5 million from Alberta Innovates, $5.5 million from Sustainable
Development Technology Canada (“SDTC”), $5 million from Emissions
Reduction Alberta (“ERA”), and $4 million provided by two major oil
sands producers. During the three months ended March 31, 2021, the
Company received an additional payment of $262,500 from SDTC in
response to ongoing challenges arising from the global pandemic,
increasing their total commitment up to approximately $5.5 million
from $5.25 million.
With respect to progress on the Pilot, the Marwayne site was
cleared in early 2021, while both industry-standard and proprietary
well completion materials were ordered. These materials have either
been received and are ready for deployment or are in the final
stages of manufacturing and testing protocols. Surface equipment
and facilities have been ordered and have either been received or
are being constructed or manufactured at suppliers’ facilities. The
majority of service company partners have been selected and
contracted. Once all well completion materials have been
manufactured, tested, and received, the next step for the Pilot is
to drill and complete the wells, followed immediately by surface
facility and equipment installation at site, and finally energizing
the RF XL system. Although construction and manufacturing
activities are for the most part on-track, Acceleware has
experienced some supply-chain disruption resulting in minor delays
in the receipt of materials and equipment from international
suppliers. While the Company has largely mitigated these delays,
management now expects, barring further delays, construction at the
site to be complete in Q3 2021, with power up and heating following
shortly thereafter. Although the initial heating phase is
anticipated to run for approximately six months, this period may be
extended to allow Acceleware to capture additional information on
the efficiency and operation of the technology.
There are 7 patents granted or allowed to protect various
proprietary technologies related to Acceleware’s RF Heating
research and development (“R&D”), and 30 patent applications
pending or under development. The Company continues to work closely
with the patent offices and its intellectual property advisors.
Acceleware also continues to focus on driving external awareness
of the Company and on positioning its RF Heating technology more
prominently within both the oil and gas and clean-tech communities.
Several new blog posts and videos have been released via social
media recently which feature discussions on the RF Heating
technology by Acceleware’s engineering team. The collection of
videos is available for viewing here: Acceleware Vlog Posts.
FINANCIAL SUMMARY
HIGHLIGHTS
In addition to securing additional Pilot funding
in Q1 2021 from Alberta Innovates as noted above, the Company
continued to complete engineering de-risking, lab testing and
procurement, manufacturing and construction of materials and
equipment for the Pilot, all of which contributed to an increased
level of R&D spending in the period. Cumulative Pilot expenses
as at March 31, 2021 were approximately $9.3 million (December 31,
2020 - $7.6 million). The remaining cash committed but not yet
received from SDTC, ERA and Alberta Innovates, including holdbacks
receivable is approximately $7.2 million (December 31, 2020 –
approximately $4.2 million) and amounts committed but not yet
received from two major oil-sands producers is approximately $2.2
million (December 31, 2020 – approximately $3.2 million).
Acceleware has undertaken rapid and effective
response measures to protect against the impacts of COVID-19
following government restrictions that were imposed to control the
spread of the virus. Since the onset of the pandemic, the Company’s
priority has remained the health and safety of its staff, clients,
partners and other stakeholders. Acceleware implemented modified
work practices, staggered work hours as needed, and introduced
physical distancing and work-from-home protocols to meet all
appropriate health and safety standards. The Company is pleased to
report that transitioning its workforce to remote working
environments has resulted in minimal productivity disruption.
Acceleware meets eligibility criteria for the Canada Emergency Wage
Subsidy (“CEWS”) and the Canada Emergency Rent Subsidy and had
received cumulative payments of approximately $311,000 as at March
31, 2021.
QUARTER IN REVIEW
Revenue of approximately $0.3 million was
generated in Q1 2021 compared to approximately $0.1 million in the
three months ended March 31, 2020 (“Q1 2020”). Revenue of
approximately $0.1 million was generated in the previous quarter
ended December 31, 2020 (“Q4 2020”). Revenue in all three periods
is attributable to software and maintenance sales. The increase in
Q1 2021 is attributable to increasing activity in the oil and gas
industry as commodity prices improved, which compares to the
depressed results in 2020 due to the COVID-19 pandemic.
Total comprehensive loss for Q1 2021 was
approximately $0.5 million compared to a comprehensive loss of
approximately $0.5 million for Q1 2020 and a comprehensive loss of
approximately $1.0 million for Q4 2020. The lower comprehensive
loss in Q1 2021 and in Q1 2020 is due to lower payroll and payroll
related costs.
Gross R&D expenses incurred in Q1 2021 were
approximately $1.6 million compared to gross R&D expenses in
both Q1 2020 and Q4 2020 of approximately $0.8 million each due to
an increased level of activity on the Pilot. Federal and provincial
government assistance of approximately $1.3 million was recognized
in Q1 2021 compared to approximately $0.4 million in Q1 2020 and
approximately $0.5 million in Q4 2020 offsetting gross research and
development costs.
General and administrative (“G&A”) expenses
incurred in Q1 2021 were approximately $0.4 million compared to
approximately $0.5 million in Q1 2020 and approximately $0.7
million in Q4 2020 due to lower payroll costs. The Company
continues to prioritize cost control given uncertain economic
conditions.
As at March 31, 2021, Acceleware had working
capital of approximately $0.5 million (December 31, 2020 –
approximately $0.03 million) including cash and cash equivalents of
approximately $3.8 million (December 31, 2020 – approximately $1.9
million). The increase in working capital and cash is attributable
to timing of receipt of funding and R&D spending for the
Pilot.
In the interests of matching cash requirements
with a combination of cash generated from operations, external
funding, and capital raising activities, the Company actively
manages its cash flow and investments in new products. Acceleware
intends to maximize cash generated from operations through several
initiatives which include continuing to focus on higher gross
margin software products that are marketed through a combination of
direct and reseller models; minimizing operating expenses where
possible; and limiting capital expenditures. As the Company
continues to develop its RF Heating technology, new R&D
investments will be financed through a combination of internal cash
flow from the HPC business, project funding agreements, government
assistance and external financing, when available.1*
* This paragraph contains forward looking
information. Please refer to “Forward Looking Statements” and “Risk
Factors and Uncertainties” for a discussion of the risks and
uncertainties related to such information
RF XL HEATING BUSINESS SEGMENT
SUMMARY
RF XL is Acceleware’s patented and
patent-pending RF Heating technology, designed to improve the
extraction of heavy oil and bitumen, with a cost effective and
environmentally friendly alternative to steam assisted gravity
drainage (“SAGD”). When applied, RF XL has the potential to reduce
both capital and operating costs, while offering significant
environmental benefits, including:
- immediate GHG emission
reductions;
- a substantial decrease in land
use;
- the elimination of external water
use;
- no requirement for solvents;
and
- no need for water treatment
facilities or tailings ponds.
The Company believes that its RF XL heating
technology, as an electrically-driven process, can provide a clear
pathway to zero-GHG production of heavy oil and oil sands and
provide optimal alignment with industry and government goals to
recognize innovation as a meaningful solution in the oil and gas
industry’s overall emission reduction plans.
Q1 2021 RF XL Results
Summary
- RF
Heating revenue increased to $85,000 in the three months ended
March 31, 2021 from nil in each of Q1 2020 and Q4 2020 due to a
sale of AxHeat in connection with a data revenue agreement to a
major oil sands producer in Q1 2021. Since 2018, the Company has
been successful selling data revenue agreements to major oil sands
producers which provide the customer with the right to access and
use data obtained from the Pilot. Under IFRS 15 Revenue from
Contracts with Customers, these contracts do not meet all
requirements for revenue recognition over-time, therefore revenue
recognition defaults to the end of the contract. As at March 31,
2021, deferred revenue of $1,650,000 (December 31, 2020 - $750,000)
has been recorded under these contracts for amounts that have been
received in cash, and will be recognized as revenue once heating is
complete or the contract is terminated, whichever is earlier.
- RF
Heating expenses for the three months ended March 31, 2021 were
$618,521 or 7% higher than $578,654 recorded in Q1 2020 and 22%
lower than $797,804 recorded in Q4 2020. G&A expenses were
lower compared to both Q1 2020 and Q4 2020 due to lower payroll and
payroll related expenses. R&D expenses were higher compared to
both Q1 2020 and Q4 2020 due to higher contractor and materials
costs related to the activity for the Pilot.
HIGH-PERFORMANCE COMPUTING BUSINESS
SEGMENT SUMMARY
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. While the Company is focusing on energy markets, it
continues to develop and sell its electro-magnetic (“EM”)
simulation software FDTD (or finite difference time domain)
solution, AxFDTD, to end users primarily through independent
software vendors that have integrated Acceleware’s solution into
their software architecture.
Q1 2021 HPC Results Summary
- HPC revenue increased to $186,106
in Q1 2021 from $83,003 in Q1 2020 and $74,348 in Q4 2020 due
mainly to the increased activity in the oil and gas industry
compared to the lower activity in 2020 resulting from the negative
impact of COVID-19.
- HPC expenses for the three months
ended March 31, 2021 were $143,825 or 33% lower than Q1 2020 and
36% lower than Q4 2020. Cost of sales are related to software sales
in Q1 2021 with no similar sales in either Q1 2020 or Q4 2020.
G&A expenses were lower compared to both Q1 2020 and Q4 2020
due to lower payroll and payroll related expenses. R&D expenses
were nil in Q1 2021 and therefore lower than both Q1 2020 and Q4
2020 as the Company is focussing all R&D on the Pilot.
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, its patented and
patent-pending low-cost, low-carbon production technology for heavy
oil and oil sands that is materially different from any heavy oil
recovery technique used today. Acceleware's vision is that
electrification of heavy oil and oil sands production can be made
possible through RF XL, supporting a transition to much cleaner
energy production that can quickly bend the emissions curve
downward. Further, Acceleware’s RF XL technology could be a key
component of an end-to-end integrated carbon management system that
can eliminate greenhouse gas (GHG) emissions associated with heavy
oil and oil sands production, whether for fossil fuels, or for
future clean bitumen by-products such as petrochemicals, carbon
fibre, and blue or green hydrogen production. RF XL uses no water,
requires no solvent, has a small physical footprint, can be
redeployed from site to site, and can be applied to a multitude of
reservoir types. In shallow oil sands implementations, no tailings
ponds will be required.
Acceleware has partnered with Saa Dene
Group (co-founded by Jim Boucher) to create
Acceleware | Kisâstwêw to raise the profile, adoption,
and value of Acceleware technologies. The shared vision of the
partnership is to improve the environmental and economic
performance of the energy sector
by supporting ideals that are important to Indigenous
peoples, including respect for land, water, and clean
air.
The Company’s 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 listed 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
the expected cost of the RF XL pilot at
Marwayne, the timing of the execution of
the Pilot, and the anticipated benefits of the RF XL
technology. Acceleware assumes that current cost estimates are
accurate, current timelines will not be delayed by either internal
or external causes, 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.
For more information:Geoff ClarkTel: +1 (403)
249-9099geoff.clark@acceleware.com
Acceleware Ltd.435 10th Avenue SECalgary, AB,
T2G 0W3CanadaTel: +1 (403) 249-9099www.acceleware.com
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