16th Jun 2015 07:47
LONDON (Alliance News) - Enteq Upstream PLC Tuesday said that losses widened in its last financial year as the non-cash impairment charge for goodwill and intangible assets it had warned about amounted to USD39.5 million.
Enteq, which supplies drilling equipment and parts to the oil and gas market, made a USD47.1 million pretax loss in the year ended March 31, compared with the USD11.5 million pretax loss booked in the prior financial year.
"During the second half, the oil price collapse and subsequent severe rig count reduction in North America drove material cost savings and re-focusing in order to preserve cash and underlying operating profitability. Overall the trading was in line with expectations," Chief Executive Martin Perry said in a statement.
Perry said that Enteq's cash balance, which fell to USD14.1 million from USD18.8 million over the last financial year, was strong, which along with tight management of costs and competitive technology leaves the company "well positioned" to benefit from any market recovery.
Finance Director David Steel offered more detail around the company's reason for taking the impairment charge. He said that management reviews the carrying value of goodwill and other intangible assets at the end of each financial year.
"This process involves 'impairment testing' in which the carrying value of all intangible assets is compared to the net present value of the expected future cashflows which derive from these assets. The board has concluded that these tests demonstrate that due to the impact the oil price reduction has had on our customer base, combined with the uncertainty over how long this level of oil price is likely to last, the carrying value of both the intangible assets and goodwill need to be fully impaired," Steel said.
The company has been cutting costs to protect its future profitability and cash position until there is more stability in its key drilling market, with its workforce falling to 56 at the end of March from 94 a year earlier.
The slump in oil prices since the middle of 2014 has had far-reaching implications across the oil and gas industry, driving mergers at the very top, namely Royal Dutch Shell PLC's deal to buy BG Group PLC for GBP47.0 billion. The strain on Enteq's own customers' cash flows meant that Enteq's results included a bad debt provision of USD835,000.
Enteq shares were down 7.9% at 17.50 pence on Tuesday morning.
By Samuel Agini; [email protected]; @samuelagini
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