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 year ended December 31, 2020 (all
figures are in Canadian dollars unless otherwise noted).
Acceleware’s year end 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
audited financial statements for the year ended December 31, 2020,
and management’s discussion and analysis (“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 continues to advance the development
of its patented RF heating technology through the fourth quarter of
2020 and into early 2021. This progress builds on the Company’s
previously announced 2020 key accomplishments which include:
- the partnership with Broadview
Energy to host the Pilot at a site in the Cold Lake Oil Sands
region near the town of Marwayne, Alberta;
- 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; and
- grant of a key RF XL patent in the
United States.
The Company’s most notable achievements during
the three months ended December 31, 2020 (“Q4 2020”) include:
- Confirmation from major oil
sands producer of ongoing support for RF XL Pilot: In 2018
an oil sands producer (the “First Producer”) committed to
contribute up to $2 million of funding to support the Pilot, along
with the ongoing commitment to provide input into design and test
specifications prior to completion. In December 2020, the First
Producer reaffirmed its commitment to continue to invest in the
Pilot after reviewing key technology field test results and
simulations.
- A second major oil sands
producer committed support to RF XL Pilot: An agreement to
provide financial and technical support for the Pilot was signed
with a second major oil sands producer (the “Second Producer”). The
Second Producer will provide funding of $2 million and technical
expertise in support of the Pilot under the terms of an agreement
with Acceleware. In exchange for the funding and under similar
terms as the First Producer, the Second Producer will provide input
into designs and test specifications prior to completion, and will
receive, along with the other Pilot participants, exclusive access
to the full set of detailed technical data and test results for one
year following completion of the Pilot. Acceleware has granted the
Second Producer prioritized rights to host a subsequent test of
Acceleware’s RF XL technology, preferred pricing on pre-commercial
products, and preferred access to RF XL products over operators who
do not participate in the Pilot.
- Partnership with Saa Dene
Group: Acceleware established Acceleware | Kisâstwêw, a
limited partnership with Saa Dene Group (Partnership Website).
Acceleware | Kisâstwêw merges two great cultures to drive the
commercialization and adoption of Acceleware technologies,
including RF XL. Acceleware’s culture of innovation is ideally
aligned with Saa Dene Group’s extensive scope of experience and
collaboration, influence within the Canadian energy industry, and
desire for responsible energy resource development and
stewardship.
In addition to the key events in Q4 2020,
Acceleware announced in March 2021 that the Pilot is now fully
funded based on current costs estimates, which range between $16
and $20 million. A total of $19.25 million of direct funding has
been raised to date after securing a $5 million investment from
Alberta Innovates, the province of Alberta’s largest research and
innovation agency combined with $5.25 million from Sustainable
Development Technology Canada (“SDTC”), $5 million from Emissions
Reduction Alberta (“ERA”), and $4 million provided by two major oil
sands producers.
With respect to progress on the Pilot, the
Marwayne site was cleared in early 2021, long-lead equipment and
materials for the test have been ordered, and many service company
partners have been selected and contracted. Subject to weather or
other unforeseen delays, Acceleware anticipates construction at the
site will be complete before the end of June 2021, followed by
heating which is expected to commence in early Q3 2021. While 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 to protect various
proprietary technologies related to Acceleware’s RF heating
R&D, and 27 patent applications pending or under development.
The Company continues to work closely with the patent office and
its intellectual property advisors.
Acceleware continues to focus on driving
external awareness of the Company and on positioning its RF Heating
technology more prominently in the oil and gas and clean-tech
communities. Several new blog posts and videos were released via
social media 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 2020.
FINANCIAL SUMMARY
HIGHLIGHTS
As outlined above, by the end of 2020,
Acceleware had successfully completed many key milestones for the
Pilot including engineering de-risking, design completion, lab
testing, field testing, site selection, regulatory approval, and
ordering of long-lead materials and supplies, all of which
contributed to an increased level of R&D spending. Cumulative
Pilot expenses as at December 31, 2020 were approximately $7.7
million (December 31, 2019 - $5.1 million) and have been funded by
approximately $4.6 million from government programs (December 31,
2019 - $3.1 million), $0.8 million by milestone contributions from
major oil-sands producer (December 31, 2019 - $0.5 million), and by
funds generated internally from sales of software, maintenance and
services contracts. SDTC and ERA pay in advance for each milestone
and Acceleware has received approximately $6.0 million of the total
$10.25 million as of December 31, 2020 (December 31, 2019 –
approximately $5.7 million). Although Acceleware experienced lower
revenue in 2020 as compared to 2019 due to an intentional
allocation of resources to progressing the Pilot and the negative
impact due to the oil and gas industry of the COVID-19 pandemic,
software and maintenance revenue for FDTD and seismic software
continued to provide positive cash flows for the Pilot.
YEAR TO DATE REVIEW
Revenue of approximately $0.9 million was
generated for the year ended December 31, 2020 compared to
approximately $1.5 million for the year ended December 31, 2019
from the Company’s software, maintenance and services revenue
streams. In addition to recognized revenue, Acceleware has also
received non-refundable milestone cash payments of $0.3 million for
the year ended December 31, 2020 (December 31, 2019 - $0.2 million)
which 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 Pilot or when the data contract is terminated,
whichever is earlier. Total deferred revenue recorded on the
statement of financial position as at December 31, 2020 is $0.75
million (December 31, 2019 – $0.45 million).
Total comprehensive loss for the year ended
December 31, 2020 was approximately $2.1 million (December 31, 2019
– approximately $1.6 million) as the majority of spending focused
on R&D initiatives that (1) have a longer-term payback and (2)
are directed at increasing the Company’s profile and presence in
the clean technology segment of the energy industry.
Gross R&D expenses during the year ended
December 31, 2020 were approximately $2.5 million compared to
approximately $1.9 million incurred during the year ended December
31, 2019 due to increased R&D activity noted above as well as
the elimination of the Alberta SR&ED tax credit as of January
1, 2020. Federal and provincial government assistance of
approximately $1.5 million was recognized in 2020 (December 31,
2019 - $1.2 million), which offsets research and development costs
incurred.
General and administrative (“G&A”) expenses
incurred during the year ended December 31, 2020 were approximately
$2.1 million compared to approximately $2.3 million during the year
ended December 31, 2019 due primarily to lower share-based payment
costs, marketing costs, and professional fees partially offset by
higher payroll costs. The Company continues to prioritize cost
management in these uncertain economic times.
As at December 31, 2020, Acceleware had working
capital of approximately $0.03 million (December 31, 2019 –
approximately $1.5 million) including cash and cash equivalents of
approximately $1.9 million (December 31, 2019 – approximately $4.4
million). The decrease in working capital and cash is attributable
to 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. As noted in the
operating summary, Acceleware was successful in late 2020 and early
2021 in securing a further $7 million in funding from Alberta
Innovates and a second major oil-sands producer, the majority of
which is expected to be received in 2021 at designated milestones
over the course of the Pilot. With these new funding agreements and
based on the Pilot’s current cost estimates, Management believes it
to be fully funded.1*
QUARTER IN REVIEW
Revenue of approximately $0.1 million was
generated in Q4 2020 compared to approximately $0.2 million in the
three months ended December 31, 2019 (“Q4 2019”). Revenue of
approximately $0.1 million was generated in the previous quarter
ended September 30, 2020 (“Q3 2020”). Revenue in all three periods
is primarily attributable to software and maintenance sales.
Total comprehensive loss for Q4 2020 was
approximately $1.0 million compared to a comprehensive loss of
approximately $0.6 million for Q4 2019 and a comprehensive loss of
approximately $1.1 million for Q3 2020.
Gross R&D expenses incurred in Q4 2020 were
approximately $0.8 million compared to gross R&D expenses in Q4
2019 and Q3 2020 of approximately $0.5 million due to an increased
level of activity on the Pilot. Federal and provincial government
assistance of approximately $0.5 million was recognized in Q4 2020
compared to approximately $0.3 million in Q4 2019 and Q3 2020
offsetting gross research and development costs.
G&A expenses of approximately $0.7 million
in Q4 2020 were $0.2 million higher than in the same period in 2019
due to higher payroll costs. The Company continues to prioritize
cost control given uncertain economic conditions.
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.
2020 RF XL Results Summary
- RF
Heating revenue in the year ended December 31, 2020 decreased 100%
to $nil compared to the year ended December 31, 2019 as a result of
the Company re-focusing its efforts entirely on the Pilot and away
from efforts to generate revenue from the Company’s AxHEAT RF
heating simulation software.
- RF
Heating expenses increased 5% to $2,275,699 during the year ended
December 31, 2020 compared to the year ended December 31, 2019 due
to higher R&D expenses partially offset by lower G&A
expenses. RF Heating R&D expenses are higher due to spending on
increased activity for the Pilot. G&A expenses are lower
primarily due to lower share-based payment costs, marketing costs,
and professional fees partially offset by higher payroll
costs.
Q4 2020 RF XL Results
Summary
- RF
Heating revenue fell to $nil for Q4 2020, compared to $2,340 in Q4
2019 and $nil in Q3 2020, as a result of the Company re-focusing
its efforts entirely on the Pilot. In addition to software and
maintenance services, the Company continues to offer RF Heating
simulation and feasibility services.
- RF
Heating expenses increased to $760,804 for Q4 2020, compared to
$544,218 in Q4 2019 and $481,510 in Q3 2020. G&A expenses were
higher due to increased payroll and payroll related expenses.
R&D expenses were higher due to higher contractor and materials
costs related to the ramp-up of 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.
2020 HPC Results Summary
- HPC
revenue in the year ended December 31, 2020 decreased 37% to
$899,281 compared to the year ended December 31, 2019 due mainly to
lower maintenance revenue for contracts that ended in 2019, lower
demand for seismic imaging software in a weak oil and gas sector
and lower services revenue after discontinuing custom software
development services in 2019, the effects of which were compounded
by the global COVID-19 pandemic.
- HPC
expenses decreased 7% to $742,472 during the year ended December
31, 2020 compared to the year ended December 31, 2019 as higher
contractor costs in R&D were more than offset by lower G&A
costs.
Q4 2020 HPC Results Summary
- HPC revenue declined to $74,347 in
Q4 2020 from $152,375 in Q4 2019 and $130,218 in Q3 2020 due in
part to the impact of COVID-19 and as a result of the Company
re-focusing its efforts entirely on the Pilot. The Company ceased
to offer HPC consulting services in early 2019.
- HPC expenses increased to $223,663
in Q4 2020 from $197,149 in Q4 2019 and $150,310 in Q3 2020
primarily due to higher payroll and payroll related expenses.
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
_____________________________________
* 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.
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