TIDMPOS
RNS Number : 2330R
Plexus Holdings Plc
08 December 2016
Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil
equipment & services
8 December 2016
Plexus Holdings PLC ('Plexus' or 'the Company')
AGM Statement
Plexus Holdings PLC, the AIM quoted oil and gas engineering
services business and owner of the proprietary POS-GRIP(R)
friction-grip method of wellhead engineering, known for its safety,
time and cost saving capabilities, will hold its Annual General
Meeting ('AGM') today. At the AGM Jerome Jeffrey Thrall, Chairman,
will make the following statement:
"Plexus is an IP led oil and gas engineering company which
supplies blue chip operators such as eni, Maersk, Royal Dutch
Shell, Statoil, and Total with best in class wellhead equipment. To
date over 400 exploration wells have been successfully drilled
around the world using our equipment which, thanks to our POS-GRIP
technology, a patent protected friction-grip method of engineering,
is superior to conventional wellheads in terms of performance,
reliability and safety.
"In recent years and from a standing start, Plexus has taken
market share from larger multi-national competitors and become
established as the dominant supplier to the HP/HT market in the
North Sea. Additionally, it has won orders to supply wells
operating in some of the most inhospitable and challenging
environments, most notably Total's ultra-HPHT Solaris well,
offshore Norway, which is believed to be the highest pressure and
temperature well to have ever been drilled in the North Sea.
However, no matter how ground breaking our technology is and how
widely it has been used in the field, we can do little in the face
of the sharp retrenchment in operators' budgets that has been seen
over the last two years in response to lower oil prices. The
exceptional reduction in exploration activity to 60 year lows has
led to significantly fewer wells drilled, which has in turn
inevitably translated into lower rental orders received for our
POS-GRIP enabled wellheads.
"After the record financial performance of the previous 12
months, 2016's full year results reflected the challenging trading
conditions: a decrease in revenue to GBP11.23m (2015: GBP28.53m);
an EBITDA loss of GBP1.56m (2015: profit GBP9.53m); a loss after
tax of GBP5.79m (2015: profit GBP5.43m) and a basic loss per share
of 6.39p (2015: 6.40p profit per share). However the financial
report contained other key financial metrics which demonstrate the
decisive action we took over the course of the year to help realign
the business to the lower oil price environment resulting in: net
cash of GBP9.9m (2015: net debt GBP2.9m); 20% reduction in
personnel and infrastructure related overheads to GBP11.28m (2015:
GBP14.93m), which is expected to become a 50% plus reduction in the
year ahead, as the full effect of the restructuring programme
materialises; capital expenditure on tangible assets reduced to
GBP1.96m (2015: GBP7.02m); and the withholding of a final dividend
(2015: 1.75p per share).
"During the year, we raised capital near the prevailing share
price, boosting our net cash position to GBP9.9m and adding new
institutional investors, as well as our Russian licensing partner
Gusar, to our shareholder register, while our R&D led IP
development and inventory build-up programme, which saw circa
GBP22m invested over the last five years, is for now largely
complete. Today, Plexus owns circa 62 rental wellhead sets, which
have a long working life and, if fully utilised, are estimated to
be capable of supporting sales revenues of up to GBP40m per
annum.
"With no significant investment requirements going forward, we
have strengthened the Group's balance sheet with the intention of
being able to outlast the remainder of the cyclical downturn. How
long the downturn will last and how severe it will be of course
remains the big unknown. Already in its third year these adverse
trading conditions have lasted longer than many commentators and
leading market players had predicted and until a sustained recovery
takes hold, today's subdued levels of exploration activity and lack
of revenue visibility will likely persist. We will therefore
continue to closely monitor activity levels and update the market
accordingly. On a positive note a consensus seems to be forming
that 2017/18 will begin to see a reversal of historically low
drilling activity levels and extremely tight capex constraints by
operators.
"The link between the macro geo political backdrop and day to
day operational activity levels remains as important as ever.
Although all cyclical upswings have their fair share of false
dawns, and the current cycle is no exception the recent OPEC
meeting at the end of November offered some much needed
encouragement. It was reported that the meeting secured agreement
to reduce production by 1.2m to 32.5m barrels a day from the
beginning of January 2017 and initially for a period of six months.
This had the effect of increasing the oil price on the day by circa
8%. Whether or not the production cut agreed by members is strictly
adhered to, the major positive coming out from the group in recent
months is, in our view, the noticeable change in tone and rhetoric
compared to the previous two years. Yasser Elguindi of Medley
Global Advisors went as far as describing the cut as pulling "a
rabbit out of a hat", but cautioned that "compliance with the cuts
will be what makes or breaks the deal". The recognition by OPEC
members of the need to restore balance to markets and the need for
a higher oil price to drive investment is a major departure from
recent times and is therefore welcome news for the oil and gas
industry as a whole. This stance is further reinforced by the
option OPEC also put in place to extend the agreement to cut
production levels until the end of 2017. The level of cooperation
achieved is highlighted by the resolution of differences over
production levels between Saudi Arabia, Iraq and Iran.
"Ironically, whilst OPEC finally agrees to cut production the
International Energy Agency ('IEA') in its annual World Energy
Outlook report sees "no peak yet in sight" for demand for oil.
Furthermore for the longer term the IEA also goes on to predict
demand will continue to grow until at least 2040 thanks to
continued growth in plastics manufacturing and the increasing use
of fuel for critical modes of transport such as shipping, aviation,
and trucks where greener technologies have yet to make inroads. Tim
Gould head of the IEA's energy supply outlook division said that
unless project approvals pick up in 2017 it is looking
"increasingly unlikely that supply will be able to meet the rising
demand without rapid price increases". The view that a supply
crunch is in the making is also reinforced in a recent Barclays
research report where the bank's analysts forecast that with just
1.2m barrels per day of new supply coming on stream, 2019 could
become the "the lowest year for new capacity" added since the
1990s. Like the IEA, Barclays lays the blame on oil majors cutting
back on conventional exploration projects to preserve cash where it
was further reported that in 2015 and 2016 investment levels in
conventional oil projects hit lows not seen since the 1950's.
Together with the natural decline of existing fields and forecast
demand growth, Barclay's estimates demand could outstrip supply by
as much as 3 million barrels per day and that "2019 marks a
juncture where supply becomes a concern"
"Needless to say, like all those operating in the sector we are
keenly looking forward to when the cycle turns upwards. However in
the interim, we are doing more than just battening down the hatches
and waiting for the cycle to turn. As Plexus is IP led we are in
the advantageous position of being able to pursue the global uptake
of our POS-GRIP technology without having to invest significant
sums of capital. For example, looking at adopting a pure licensing
business model rather than an operational one, would involve us
maximising licensing royalty opportunities by selling and promoting
our patented method of engineering rather than renting our
equipment. Such a strategy would enable us to continue to diversify
our revenues away from our traditional stronghold in the North Sea
to other hydrocarbon jurisdictions.
"We are already making progress in this direction. In 2016 we
completed a licence agreement with two independent Russian oil and
gas equipment manufacturers, Gusar and Konar, covering the large
Russian Federation market and other CIS states. We also won our
first order through our Malaysian joint venture company worth an
estimated GBP0.9m with Talisman Energy following the award of a
local licence with PETRONAS, the Malaysian National Oil Company to
manufacture and supply our wellhead equipment in Malaysia. Such
developments look to replicate our historic success in the North
Sea. With this in mind, we are currently in discussions with a
number of interested parties in other parts of the world, including
the significant Middle Eastern and Indian energy markets.
"In conclusion while the downturn has undoubtedly significantly
impacted on our progress and financial performance, and continues
to do so, we are confident that once sentiment within the sector
begins to recover and operators renew their appetite for
exploration, Plexus will in turn regain the momentum that existed
before the downturn set in. Importantly, following the last OPEC
meeting three key industry drivers are now aligned - namely a
planned reduction in production levels, increasing demand for
hydrocarbons, and declining mature fields. Arguably, with a
strengthened balance sheet, a large wellhead inventory, an expanded
suite of Plexus products, partners in strategically important
territories, and a successful track record with a who's who of blue
chip operators, Plexus is in a strong position to take advantage of
and benefit from the next cyclical upswing."
**S**
For further information please visit www.posgrip.com or
contact:
Ben van Bilderbeek Plexus Holdings PLC Tel: 020 7795
6890
Graham Stevens Plexus Holdings PLC Tel: 020 7795
6890
Nick Tulloch Cenkos Securities Tel: 0131 220
PLC 9772
Derrick Lee Cenkos Securities Tel: 0131 220
PLC 9100
Frank Buhagiar St Brides Partners Tel: 020 7236
Ltd 1177
Isabel de Salis St Brides Partners Tel: 020 7236
Ltd 1177
NOTES:
Plexus Holdings PLC
Plexus Holdings PLC is an AIM traded oil and gas engineering and
services business, which supplies wellhead and mudline suspension
equipment together with associated equipment and services for
exploration and production applications. Based in Aberdeen, with a
presence in London, Cairo, Kuala Lumpur, Singapore and Texas, it
has developed and patented a friction-grip method of engineering
for oil and gas field wellheads and connectors, POS-GRIP(R), which
involves deforming one tubular member against another to effect
gripping and sealing.
To date, POS-GRIP wellhead systems have been used in over 400
oil and gas wells by numerous international companies. In
particular, the technology has advantages in High Pressure/High
Temperature (HPHT) and Extreme HPHT (X-HPHT) oil and gas
environments, for which there is growing global demand and where
Plexus is being increasingly recognised as the supplier of choice.
Plexus has recently successfully completed the supply of an X-HPHT
exploration wellhead to Total for the Solaris well which is
believed to be the deepest and highest pressure well ever drilled
in the North Sea.
Plexus is also extending its technology into an increasing
number of other applications:
-- In September 2015 it launched a prototype of the 'Python(TM)
Subsea Wellhead' developed as part of a Joint Industry Project in
collaboration with BG, Royal Dutch Shell, Wintershall, Maersk,
TOTAL, Tullow Oil, ENI, LR Senergy, Transocean and Oil States
Industries Inc.
-- It recently also completed a JIP in conjunction with Maersk
to develop a downhole HPHT Tieback connector which for the first
time allows the reconnection of production casing to HPHT
exploration and production wells.
-- It developed and qualified a new product called POS-SET
Connector(TM) which is designed to re-establish a connection onto
rough conductor casing previously cut above the seabed to
facilitate tieback or abandonment operations.
Having proven its POS-GRIP technology in the niche jack-up
exploration market Plexus is now focused on extending its
applications into the much larger multi-billion dollar land and
platform production well market as well as actively pursuing a
first time use of the new Python subsea wellhead into the important
subsea sector. Such strategic initiatives will be pursued both
organically and with trading partners and licencees.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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