Acceleware® Ltd. (“Acceleware” or the “Company”) (TSX-V: AXE), a
leading innovator of transformative technologies targeting the
decarbonization of industrial heating, today announced its
financial and operating results for the year ended December 31,
2023 (all figures are in Canadian dollars unless otherwise noted).
Acceleware’s year end results reflect contributions from the
Company’s two business units, radio frequency (“RF”) heating for
industrial applications using the Company’s proprietary Clean Tech
Inverter (“CTI”) including enhanced oil recovery (“RF XL”), and
high-performance computing ("HPC”) scientific software. This news
release should be read in conjunction with the Company’s audited
financial statements and the accompanying notes for the year ended
December 31, 2023 and management’s discussion and analysis (“MDA”)
thereto, all of which are available on Acceleware’s website at
www.acceleware.com or on www.sedarplus.ca.
HIGHLIGHTS
Financial highlights for the three and twelve
months ended December 31, 2023:
|
|
Three Months Ended |
Twelve Months Ended |
|
|
Dec 31, 2023 |
Dec 31, 2022 |
|
Dec 31, 2023 |
|
Dec 31, 2022 |
|
Revenue |
$ |
43,590 |
73,056 |
|
279,011 |
|
328,293 |
|
Comprehensive income/
(loss) |
|
617,748 |
(1,345,913 |
) |
(2,045,373 |
) |
(5,142,168 |
) |
Gross R&D expenditures |
|
684,437 |
1,219,553 |
|
2,872,982 |
|
5,674,180 |
|
Deferred revenue increase |
|
-- |
200,000 |
|
-- |
|
1,300,000 |
|
Government assistance |
|
2,064,434 |
900,000 |
|
2,618,242 |
|
2,229,025 |
|
|
Acceleware is piloting RF XL at its
commercial-scale RF XL pilot project at Marwayne, Alberta (the “RF
XL Pilot”). During 2023, the RF XL Pilot was shut down for
maintenance related to the RF XL heating well (the “Workover”). In
late Q3, 2023 Acceleware encountered subsurface challenges in
redeploying upgraded components during the Workover. In the three
months ended December 31, 2023 (“Q4 2023”), encouraged by positive
results to date, the Company worked closely with industry partners
to determine the most appropriate next steps in the Workover. It
was determined that the most practical path forward involves a
redeployment of all subsurface components incorporating the
multiple improvements and upgrades that Acceleware has made to the
RF XL downhole system. Acceleware is actively sourcing an
additional $5 million of funding to complete the redeployment. The
redeployment is expected to enable higher power to be distributed
in the reservoir for a sustained period in a second phase of
heating. Please refer to the RF XL PILOT UPDATE section below for
more information, and to the MDA for a complete RF XL Pilot
update.
On November 6, 2023, Acceleware announced
non-dilutive, non-repayable funding from the Clean Resource
Innovation Network (“CRIN”) of up to $3 million for the RF XL
Pilot. The funding is paid upon completion of certain milestones
and is reimbursement for costs incurred between January 1, 2022 and
March 31, 2024. This funding is intended to accelerate clean
technology development and commercialization for the oil and gas
industry. There was $2,064,434 received in Q4 2023.
Acceleware continued to invest in developing and
protecting new intellectual property with the total number of
patents issued, allowed, applied for, or in development growing
from 44 at the end of 2022 to a total of 60 now.
RF XL PILOT UPDATE
Operations at Acceleware’s RF XL Pilot began in
early March 2022, and successfully operated until July 2022. At
that time, the fibre optic distributed temperature sensing (“DTS”)
system in the heating well was damaged during a maintenance
operation. After the DTS break, RF power was reduced for safety and
a plan for the Workover was developed. The Workover commenced in
October 2022, and included numerous upgrades of critical RF XL
components. During redeployment of the system in Q1 2023 and Q3
2023 Acceleware identified degradation of some additional downhole
components due to water ingress. The Company has now determined
with our industry partners that the most practical path forward
involves a redeployment of all subsurface components.
During the successful operation of the RF XL
Pilot, performance data shows that the operation of the Clean Tech
Inverter (“CTI”) met or exceeded specifications. The CTI is the
radio frequency (“RF”) electronic ‘engine’ critical to RF XL Pilot
success. A primary objective of the RF XL Pilot was to demonstrate
the operation of the CTI and its effectiveness in transmitting RF
energy downhole to increase temperature and improve oil production.
Significant milestones achieved include:
- Acceleware drilled
and completed the first of its kind multilateral heating well and
associated production well in a previously produced heavy oil
reservoir.
- The RF XL system (including the
CTI) demonstrated unprecedented performance with the longest
continuous run (142 days) and highest power (up to 250 kW) of any
RF heating system.
- Maximum design current was
transmitted from the CTI, through the proprietary transmission
line, and radiated to the reservoir.
- Increased reservoir temperature and
oil production were observed in the RF XL Pilot.
- The temperature profile and oil
production increase matched simulated predictions given the levels
of power radiated.
Additionally, critical components of the
proprietary RF XL subsurface technology functioned as designed and
expected.
The Workover was undertaken to address the DTS
failure, during which time the engineering team took the
opportunity to examine downhole components. As the Workover
progressed, an issue was discovered with the downhole RF XL system
resulting from water ingress into the RF transmission line during
deployment and operation of the RF XL Pilot. Some moisture had been
anticipated and was initially addressed via the RF XL Pilot’s
nitrogen purge and pressurization system which is designed to
remove and prevent the return of fluids. Further analysis following
the Workover suggests that this system was not able to manage the
moisture levels encountered, resulting in degradation of some
proprietary downhole components. For clarity, the moisture ingress
issue pertained to tubing connections, not to core RF XL technology
nor RF XL electronics. Acceleware has recreated the problem in lab
tests and has designed and tested a solution. The damage is
believed to be the primary impediment to Acceleware’s ability to
achieve full power in the first phase of heating at the RF XL
Pilot. As mentioned on November 22, 2023, Acceleware planned to
develop several solutions to this challenge and proceed with the
option with the highest probability of success and the lowest risk.
The Acceleware team, in consultation with industry partners, has
developed what is believed to be a permanent, resilient solution
for the issue.
Acceleware now plans to continue a second phase
of heating after a significant subsurface upgrade plan to address
the moisture ingress issue. Subsurface components not removed
during the Workover will be removed, refurbished, or upgraded, and
then redeployed along with the components already upgraded during
the original Workover program.
QUARTER IN REVIEW
Revenue of $0.04 million was generated in the
three months ended December 31, 2023 (“Q4 2023”) compared to $0.1
million in the three months ended December 31, 2022 (“Q4 2022”) and
$0.1 million in the previous quarter ended September 30, 2023 (“Q3
2023”). Revenue was lower in Q4 2023 and Q3 2023 due to less demand
in the HPC segment for FDTD maintenance compared to Q4 2022. There
continues to be variability in the RF Heating segment for revenue
related to services in applying CTI to industrial heating. While
interest has increased in the intelligent electric heating service
offering, there was no revenue in Q4 2023 or Q3 2023. Acceleware
did not receive any data revenue payments during Q4 2023 or Q3 2023
but received $0.2 million in Q4 2022 for the RF XL Pilot. These
payments, when received, are recorded in deferred revenue. Data
revenue equal to the amount recorded in deferred revenue will be
recognized as revenue at the end of the RF XL Pilot or when the
data contracts are terminated, whichever is earlier.
Total comprehensive income for Q4 2023 was $0.6
million compared to a comprehensive loss of $1.3 million for Q4
2022 and a comprehensive loss of $1.3 million for Q3 2023.
Comprehensive income was higher in Q4 2023 due to receipt of
government assistance from CRIN relating to costs incurred from
January 1, 2022 to June 30, 2023 and lower R&D spending. These
increases are offset by higher interest costs related to current
liabilities funding the Company’s working capital. Comprehensive
income/(loss) in all periods was impacted by changes in value of
the derivative financial instruments embedded within the
convertible debenture. The changes in derivative value are driven
primarily by the fluctuation in the Company’s share price.
Gross R&D expenses incurred in Q4 2023 were
$0.7 million compared to $1.2 million in Q4 2022 and $0.8 million
in Q3 2023. R&D spending was lower in Q4 2023 compared to Q4
2022 and Q3 2023 due to a change in the nature of the Workover
activities. Most of the Workover activity in Q4 2023 was related to
lab engineering, designing and testing, data analysis, and partner
consultations. Government assistance received in Q4 2023 was $2.1
million and nil in Q4 2022 and $0.1 million in Q3 2023. While the
ERA, SDTC and Alberta Innovates grants for the RF XL Pilot were
completed in 2023, CRIN awarded up to $3 million and the Company
received approximately $2.0 million of that in the year ended
December 31, 2023.
General and administrative (“G&A”) expenses
incurred in Q4 2023 were $0.6 million compared to $0.6 million in
Q4 2022 and $0.6 million in Q3 2023. There were higher non-cash
payroll related costs incurred in Q4 2023 due to the timing of
option grants, higher professional fees and lower salaries as the
Company continues to prioritize cost control given uncertain
economic conditions.
YEAR IN REVIEW
Revenue of $0.3 million was generated from the
Company’s software, maintenance and services revenue streams for
the year ended December 31, 2023 compared to $0.3 million for the
year ended December 31, 2022. Although revenue is more diversified
in 2023 with a significant contribution from services revenue,
revenue was lower due to lower demand for HPC software and
maintenance revenue. Services revenue relates to RF simulation and
experimental studies paid by customers interested in applying CTI
for their industrial heating needs. Industries outside heavy oil
have also become interested in utilizing CTI for industrial
heating, including mining, agriculture, and hydrogen. Acceleware
did not receive any non-refundable milestone cash payments during
the year ended December 31, 2023 compared to $1.3 million received
during the year ended December 31, 2022. When received, these
payments are recorded in deferred revenue.
Total comprehensive loss for the year ended
December 31, 2023 was $2.0 million compared to $5.1 million for the
year ended December 31, 2022 due to lower R&D spending for the
RF XL Pilot and higher government grant funding. There are
fluctuations in both periods related to changes in fair value of
the derivative financial instruments embedded in the convertible
debentures and interest expense due to short- and long-term debt
financing.
Gross R&D expenses for the year ended
December 31, 2023 were $2.9 million compared to $5.7 million
incurred during the year ended December 31, 2022 due to lower cost
R&D activity on the Workover during the year ended December 31,
2023. There was a significant amount of non-recurring installation
costs for the RF XL Pilot incurred in the early part of 2022.
Federal and provincial government assistance of $2.6 million was
recognized in the year ended December 31, 2023 compared to $2.2
million for the year ended December 31, 2022. The Government of
Alberta’s Innovation Employment Grant (“IEG”) to support research
and development was effective January 1, 2021 and provides a grant
of up to 20% of eligible R&D expenses incurred in Alberta. This
new grant effectively replaced Alberta’s 10% scientific research
and experimental development refundable tax credit that was
eliminated as at December 31, 2019. The Company met the eligibility
criteria, claimed eligible R&D expenditures and received $0.4
million in Q1 2023 related to 2021 eligible expenditures and $0.1
million in Q3 2023 related to 2022 eligible expenditures and $nil
in Q4 2022. As at December 31, 2023 and 2022 there was $nil million
government assistance receivable. Government assistance offsets
gross R&D costs.
General and administrative (“G&A”) expenses
incurred during the year ended December 31, 2023 were $2.0 million
compared to $2.1 million for the year ended December 31, 2022.
While salaries were lower as the Company continues to prioritize
cost management, there were higher legal and related professional
fees for the equity offerings and higher non-cash payroll related
costs for option grants.
As at December, 2023, Acceleware had negative
working capital of $2.0 million (December 31, 2022 – negative
working capital of $0.6 million) including cash and cash
equivalents of $1.0 million (December 31, 2022 – $1.1 million). As
at December 31, 2023 there is $1.2 million included in working
capital for amounts due to management for services provided
(December 31, 2022 - $0.8 million). The negative working capital
for both periods is attributable to the timing of receipt and
recognition of government and partner funding and related R&D
spending. Not included in working capital is $2.6 million of
funding that is committed but not yet received (December 31, 2022 -
$2.4 million). Every funder, except ERA and SDTC, reimburses
Acceleware for the RF XL Pilot costs in arrears, after the spending
has occurred. The Company actively manages its cash flow
requirements with a combination of cash generated from operations,
external funding, and capital raising activities.
ABOUT ACCELEWARE:
Acceleware is an innovator of clean-tech
decarbonization technologies comprised of two business units: Radio
Frequency Heating Technology and Seismic Imaging Software.
Acceleware is piloting RF XL, its patented
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. With clean
electricity, Acceleware’s RF XL technology could eliminate
greenhouse gas (GHG) emissions associated with heavy oil and oil
sands 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. Acceleware is
also actively developing partnerships for RF heating of other
industrial applications using the Company’s proprietary CTI.
Acceleware and Saa Dene Group (co-founded by Jim
Boucher) have created 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 commercialization of RF XL, the expected cost of
the RF XL Pilot, the timing of the execution of the
RF XL Pilot and the redeployment, expected financing required
for the RF XL Pilot redeployment, and the anticipated
economic and societal 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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