Wavefront Announces
Fiscal Second Quarter 2013 Results
EDMONTON,
Alta., April 29, 2013 Wavefront Technology Solutions Inc.
(“Wavefront” or the “Company”, TSX-V: WEE; OTCQX: WFTSF) a
developer of leading-edge technology for fluid injection
optimization for improved performance and profitability in the oil
and gas and environmental sectors announces its financial results
for the second quarter ending February 28, 2013.
Wavefront is a technology company with a reputation for quality,
innovation and creativity. Wavefront is focused on global markets
and utilizes its patented technology to provide measurable
solutions when exploration and production companies (or “E&P”
companies) are faced with the challenges of optimizing oil
production, well intervention and performance drilling.
With the evolution of our core “pressure-pulse technology”
to encompass a portfolio of products, our new theme, “From Bit to
Last Drop”, encompasses the life cycle of a client’s post
exploration operations. The Company’s primary focus areas are:
performance drilling; well stimulation; and mature field
revitalization.
Innovative new Neptune designed to ensure constant water
distribution
New developments this quarter include Wavefront’s introduction
of the “Neptune”, an innovative pulsating selective
injection waterflood regulator valve. Waterflood regulator valves
are designed to inject water into a desired zone but are often
plagued by scaling issues which inhibit water injection. This type
of injection system is widely used in South America and Asia with
as many as 21 valves in a single water injection well.
Injection rates and water distribution are crucial for maximizing
overall oil recovery. The Neptune is designed to prevent scaling
thus ensuring seamless, continuous injection enabling oil producing
companies to maintain injection rates and improve water
distribution in the oil-bearing formation.
In South America there are approximately 17,000 water regulator
valves in use. Wavefront’s marketing
strategy is to sell the Neptune to clients with a target price of
US $4,500 per valve. To obtain a recurring revenue stream the
pulsating injection head on the Neptune would be replaced
approximately every two years at a target price of US $1,500 per
injection head.
Realigned marketing plan capitalizes on evolving markets and
international EOR opportunities
After a careful review of evolving market forces in the U.S. and
Canada Wavefront’s Board of Directors adopted a realignment of our
strategic plan to guide Wavefront’s operations in two key areas.
Marketing in North America will focus primarily on performance
drilling and well stimulation in 2013 and beyond, to promote the
strengths of our stimulation and performance drilling technologies
in response to the growing demand for these services throughout the
U.S. and Canada.
This demand increase presents significant and almost immediate
revenue generation potential and is the result of two key market
developments. The
first is the long term view of the price differential between the
benchmark heavy oil prices in Canada, Western Canadian Select
(“WCS”) relative to West Texas Intermediate (“WTI”) which has
ranged from approximately $20 to $40 per barrel. The Company
anticipates that prolonged high price differentials may negatively
impact Powerwave mature field revitalization revenue generated in
the Canadian market as oil producers evaluate operational
strategies to reduce operating costs to address low Netback from
production operations (Netback is
calculated by taking the price of the oil, less all costs
associated with getting the oil to a market. These costs can
include; transportation, production and disposal, refining costs,
royalty fees, taxes, and other costs).
The second market development is the focus of U.S. operators on
tight oil plays and the technology in demand for operations in
these conditions. In both cases there has been a move away from
mature field revitalization and strongly towards drilling
unconventional resources and stimulations. Wavefront’s realigned
marketing plan capitalizes on these market shifts while still
utilizing its core Powerwave technologies, high gross profit
margins and recurring revenue generating opportunities.
Wavefront will continue to market projects in Enhanced Oil Recovery
(“EOR”), primarily to high value markets in Latin and South
America, the Middle East and Asia. Within these markets there is
tremendous revenue generation opportunity for EOR, despite the long
sales cycle of approximately 9 months and two years required for
evaluation of the technology.
Wavefront’s fluid pulsing performance drilling tools were
introduced to the drilling market in October 2012 and have been
under evaluation in both Canada and the United States. The
evaluation testing phase is required to better understand the use
of the tools as well as to make necessary improvements to the
quality control/quality assurance of the tool design to maximize
tool benefits while ensuring tool integrity during operation.
During this initial tool evaluation phase clients were provided a
full discount on the day rate in exchange for data performance. The
Company has recently, subsequent to the reporting period, started
charging a daily rental rate ranging from $2,500 to $3,500 per
day.
During the evaluation phase Wavefront obtained a wide range of
results for ROP from 94% improvement to a 0% improvement.
Generally, ROP increases fell within the 5% to 30%
range.
“We are confident that Wavefront’s growing suite of technologies,
our patents, our experience and expertise and the strength of the
Powerwave brand name positions the Company well over the long term
to take advantage of the North American market opportunities
related to performance drilling, well stimulation, and mature field
revitalization,” said Wavefront President and CEO, Brett Davidson.
“At the same time, we are equally confident that our Enhanced Oil
Recovery business has tremendous potential in Latin and South
America, the Middle East and Asia.”
Financial highlights for the three months ended February 28, 2013
include;
· Total revenues were $1,027,488, a decrease of $367,514
over the comparative period in 2012 that recognized revenues of
$1,395,002. The decrease in long-term Powerwave projects related to
mature field revitalization seen in the Company’s three market
focus areas relate to the renegotiation of international contracts
(i.e., involving the changing the contract term, numbers and types
of tools involved, etc.); reduction of revenues due to expiring and
changing contract terms;
the focus of United States operators on replacing produced reserves
through drilling unconventional resources; international withholding taxes; and macroeconomic
conditions such as the heavy oil price differential in Canada.
Moving
forward the international contracts in Brazil and Colombia,
worth approximately $1.9 million, and elsewhere will drive future
long-term Powerwave mature field revitalization revenue
streams.
· The total revenue of long-term Powerwave projects
related to secondary and tertiary oil recovery mature field
revitalization involving either waterflooding or CO2 flooding
totalled $402,004 compared to $778,376 in the comparative
period.
· Powerwave revenues related to well stimulations
totalled $347,892, an increase of $184,561 compared to $163,331 in
the comparative period. Further revenue growth is anticipated as
the geographical client base and client experience with stimulation
approaches are adopted.
· Despite changes in product mix and revenues, cost of
sales remained relatively stable at $239,512 (or 23.3% of revenues)
compared to $307,409 (or 22.0% of revenues) for the comparative
reporting period.
· The Company continued its focus on cost controls with
total expenses decreasing by $232,128 or approximately 8.9% to
$2,414,869. Excluding amortization, depreciation and depletion
total expenses decreased by $317,590 or 13.7%.
· As at
February 28, 2013, the Company had total assets of $26,802,263, of
which cash and cash equivalents on hand amounted to
$12,060,937.
The above financial highlights should be read in conjunction with
the unaudited consolidated financial statements and
management discussion
and analysis of results for Wavefront for the second quarter ended
February 28, 2012, which were filed on SEDAR on April 29,
2013.
“Wavefront continues to focus on growth in all product lines,
maintaining high gross profit margins, and controlling expenses,’
said Davidson. “We’re committed to meeting the needs of the
marketplace with best-in-class technologies, knowledgeable people
and attractive business arrangements that help our clients achieve
greater profitability.”
ON BEHALF OF THE BOARD OF DIRECTORS
WAVEFRONT TECHNOLOGY SOLUTIONS INC.
“D. Brad Paterson” (signed)
D. Brad Paterson, CFO & Director
Cautionary
Disclaimer – Forward Looking Statements
Certain
statements contained herein regarding Wavefront and its operations
constitute “forward-looking statements” within the meaning of
Canadian securities laws and the United States Private Securities
Litigation Reform Act of 1995. All statements that are not
historical facts, including without limitation statements regarding
future estimates, plans, objectives, assumptions or expectations or
future performance, are “forward-looking statements”. In some
cases, forward-looking statements can be identified by terminology
such as ‘‘may’’, ‘‘will’’, ‘‘should’’, ‘‘expect’’, ‘‘plan’’,
‘‘anticipate’’, ‘‘believe’’, ‘‘estimate’’, ‘‘predict’’,
‘‘potential’’, “believe”, ‘‘continue’’ or the negative of these
terms or other comparable terminology. We caution that such
“forward-looking statements” involve known and unknown risks and
uncertainties that could cause actual results and future events to
differ materially from those anticipated in such statements. Such
factors include fluctuations in the acceptance rates of Wavefront’s
Powerwave and Primawave Processes, demand for products and
services, fluctuations in the market for oil and gas related
products and services, the ability of Wavefront to attract and
maintain key personnel, technology changes, global political and
economic conditions, and other factors that were described in
further detail in Wavefront’s continuous disclosure filings,
available on SEDAR at
www.sedar.com.
Wavefront expressly disclaims any obligation to up-date any
“forward-looking statements”, other than as required by
law.
©2013
Wavefront Technology Solutions Inc. All rights reserved. From Bit
To Last Drop™, Powerwave™ and Primawave™ are registered trademarks
of Wavefront Technology Solutions Inc.
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