Quarterly Report • Mar 16, 2023
Quarterly Report
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Digitizing the ocean space
| Letter from CEO……………………………………………… | 3 |
|---|---|
| Q4 Highlights ………….……………………………………… |
4 |
| Argeo at a Glance………………………………….….…….… |
5 |
| About Argeo ….…………….…………….…………………… |
6 |
| Financial Review ………………………………….….………. |
11 |
| Notes ……………………………………………………….….… |
18 |
The Argeo Searcher conversion was started in November and transit to Las Palmas commenced in late December. After arrival late January, our SeaRaptor AUV systems installations started, and the final integrated work was completed mid-February. This activity, along with the completion of the first commercial project for Argeo Argus, our new Uncrewed Surface Vessel (USV) was the primary achievement in the quarter.
Both SeaRaptors have been shipped to Las Palmas for integration with Argeo Searcher in preparation for the first deep water missions in Q1-2023.
The Hugin 6000 system has continued on contract since September 1'st working on a 6 + 6-month project in international waters.
The first project for "Argus" was to provide a highly detailed seabed map and subsurface structure in Norway for a Renewable Energy company. The entire project was completed using the remote capability of the USV and provided our client with data for their project, which is delivered through Argeo SCOPE, our digital data platform. The "Argus" is getting more attention in the market and our customers are seeing the potential for the platform, in particular for the offshore wind segment (OWS). The potential of this technology is promising, and we are in dialog with prominent customers to expand its capability to cover all data sources our clients may require for new concessions.
The first installation of the new WHISPER EM sensors will take
place in Q1 2023. The WHISPER system will first take part in a field-test program in Q1 and Q2, if the outcome of these first validation tests are as we expect, the product will be commercially offered as part of Argeo's wider tools and sensor portfolio.
We have succeeded in establishing and qualifying Argeo in our most important geomarkets. Primary commercial focus are activities in North-and South America (NSA) and Europe, Africa, and Middle East (EAME). However, we starting to see an increase in request from Asia and Pacific (APAC) with potentially large projects in the region towards the end of 2023. Our focus remains the same and is to solidify our contract backlog in 2023.
In Q3 we mentioned that we expected a contract in South America could be awarded in Q1-23, this will most likely be delayed and could potentially be pushed towards the end of Q2. Despite this we remain positive, and we are in contention for several other projects in the same period. We report improvements in Q1-2023 contributed by full utilization from the Hugin 6000 project and approximately 40% utilization for Argeo Searcher (not including rigging/docking/installations).
We reiterate our EBITDA target of NOK 50 million for 2023. However, delays in contract awards and subsequently project startup could put this target at risk.
Trond Figenschou Crantz, CEO of Argeo
Argeo is an Offshore Service company with technology to transforming the ocean space survey and inspection industry utilizing autonomous surface and underwater robotics solutions. Equipped with unique sensors and advanced digital imaging technology, the Autonomous Underwater Vehicles ("AUVs") will significantly increase efficiency and imaging quality in addition to contribute to reductions in CO2 emissions from operations for the global industry in which Argeo operates.
With the recent subsea vessel expansion adding Argeo Searcher to the fleet, Argeo is now offering an independent and complete long endurance solution to our customers. The vessel is well equipped to support IMR operations with Argeo's unique SeaRaptor AUV's and available hangar for several work-class ROV (WROV) systems. Argeo's markets are in Oil & Gas, Renewables, Marine Minerals and Offshore Installations.
Rising number of deep-water activities and a clear directive from majors to replace traditional vessel based IMR solutions with robotics and uncrewed solutions.
Increase investments in renewable sources of energy and favourable government policies.
Global demand for batteries and metals for the renewable sector is the main growth driver for this market.
The need for expertise and project de-risking for complex offshore installations is increasing with project
Revenue for Q4 2022 was NOK 10.8 million, compared to NOK 0.4 million in Q4 2021. Revenue in Q4 2022 is from the survey with Argus USV for the renewables industry in Norway and from the Hugin 6000 which started commercial work in September.
Revenue for the full year 2022 amounted to NOK 33.6 million, compared to NOK 15.8 million in 2021.
Operating cost in Q4 2022 was NOK 8.0 million, compared to NOK 5.9 million in Q4 2021. Operating cost for full year 2022 was NOK 31.3 million, compared to NOK 17.4 million in 2021.
Employee expenses for Q4 2022 was NOK 18.3 million, compared to NOK 11.7 million in Q4 2021. Employee expenses for full year 2022 amounted to NOK 62.4 million, compared to NOK 22.7 million in 2021.
Other operating expenses in Q4 2022 was NOK 5.0 million, up from NOK 2.0 million in Q4 2021. Other operating expenses for full year 2022 was NOK 18.0 million, compared to NOK 8.8 million in 2021.
The increase in operating expenses from 2021 is due to increased activity level, and a ramp up of the organisation to prepare for the activity in 2023.
Argeo capitalised NOK 8.5 million as development cost in Q4, compared to NOK 4.1 million in Q4 2021. Capitalisation for full year 2022 was NOK 26.3 million, compared to NOK 6.4 million in 2021. Capitalisation for the full year 2022 includes NOK 4 million for the Utsira Multi-client project acquired in Q2 2022.
Depreciation was NOK 5.4 million in Q4 2022, compared to NOK 0.4 million in Q4 2021. For the full year 2022, depreciation was NOK 12.5 million, compared to NOK 1.3 million in 2021. The increase from 2021 is reflecting depreciation on new assets delivered in 2022.
Net financial gain for Q4 2022 was NOK 7.4 million, of which NOK 10.8 million is unrealised currency exchange gain on debt nominated in USD. Net financial gain in Q4 2021 was NOK 0.5 million. Net financial loss for full year 2022 was NOK 5.8 million, compared to NOK 0 in 2021.
Financial gain in Q4 2022 includes a loss of NOK 2.8 million (50% share) in the JV with Multiconsult.
Net loss for Q4 2022 was NOK 5.3 million compared to a net loss of NOK 8.0 million in Q4 2021. Loss for full year 2022 was NOK 52.2 million, compared to a loss of NOK 18.1 million in 2021.
Total non-current assets at the end of the period amounted to NOK 270.9 million. This includes NOK 24.3 million in intangible assets, NOK 28.4 million in deferred tax assets and NOK 211.8 million in Property, plant and equipment. Property, plant and equipment includes two SeaRaptor AUV's, one Hugin AUV, and the Argus USV.
Total current assets amounted to NOK 104.4 million at the end of 2022. Other current assets includes NOK 35.9 million unpaid share capital from the share issue made in December 2022.
Cash and cash equivalents balance was NOK 21.3 million at the end of the quarter, compared to NOK 65.9 million at year end 2021.
Long term debt was NOK 106.5 million at the end of the quarter, compared to NOK 5.9 million at year end 2021. Long term debt decreased from NOK 121.8 million in Q3 2022. NOK 4.5 million was repayment, and NOK 10.8 million was reduction due to change in exchange rate USD/NOK.
Total liabilities at the end of the quarter were NOK 162.0 million, of which NOK 4.6 million is interest bearing.
A private placement of 30 300 000 new shares was made 20 December 2022, raising gross proceeds of NOK 50 million. The placement consisted of one tranche of 8 516 160 new shares ("Tranche 1"), and a second tranche of 21 783 840 new shares ("Tranche 2"). The Tranche 1 shares were issued 22 December 2022 pursuant to an earlier authorization granted to the board. After this issuance, Argeo had 51 096 960 shares outstanding at the end of 2022. The Tranche 2 shares were issued 3 January 2023, resulting in 72 880 800 shares outstanding.
As per 31 December 2022, a total of 1 365 434 options are outstanding in connection with the Company's share option program. 485 434 of these are formalised as warrants ("Tranche 1 Warrants"). Exercise price for these is in average NOK 1.80, and the warrants expires at various intervals from 10 February 2024 to 23 December 2025. 880 000 options were granted to Board of Directors and employees in 2021. These options will vest over 3 years and mature after 5 years. Strike price is NOK 8.20.
In connection with the private placement in April 2021, the Company's general meeting approved the issuance of 3,750,000 new warrants to the existing shareholders of the Company before the private placement ("Tranche 2 Warrants"). A total of 1,875,000 Tranche 2 Warrants can be exercised at NOK 0.10 given a demonstrated share market price appreciation of two times the Subscription Price within the next two years and the remaining 1,875,000 Tranche 2 Warrants can be exercised at NOK 0.10 given a demonstrated share market price appreciation of three times the Subscription Price within a period of 4 years. The Subscription Price in the private placement in April 2021 was NOK 8.20 per share.
A subsequent offering NOK 5.2 million was completed in February 2023. 3 124 368 new shares were issued at NOK 1.65 per share.
In February 2023, the Company issued 139 337 new shares to CEO Trond F. Crantz, related to exercise of warrants under the "Tranche 1 Warrants" plan as described above. The exercise price for each of the warrants was NOK 0.282 per share.
After the subsequent offering and warrants exercise, Argeo has 76 144 505 shares outstanding.
| Amounts in NOK 1 000 | Note | Q4-2022 (unaudited) |
Q4-2021 (unaudited) |
2022 (unaudited) |
2021 (audited) |
|---|---|---|---|---|---|
| Operating revenues: | |||||
| Sales revenue | 10 813 | 431 | 33 497 | 15 372 | |
| Governmental grants Total operating revenues |
26 10 840 |
0 431 |
86 33 583 |
470 15 842 |
|
| Operating expenses: | |||||
| Operating cost | 8 026 | 5 922 | 31 266 | 17 439 | |
| Employee expenses | 18 259 | 11 650 | 62 425 | 22 662 | |
| Other operating expenses | 5 006 | 2 023 | 17 954 | 8 755 | |
| Capitalisation of cost | -8 450 | -4 083 | -26 326 | -6 367 | |
| Depreciation | 1, 2 | 5 413 | 365 | 12 481 | 1 276 |
| Total operating expenses | 28 254 | 15 876 | 97 800 | 43 766 | |
| Operating profit/(loss) | -17 414 | -15 445 | -64 217 | -27 924 | |
| Financial income and expenses: | |||||
| Income/ (loss) equity investments | -2 796 | -276 | -3 183 | -471 | |
| Financial income | 209 | 89 | 267 | 89 | |
| Financial expenses | -260 | -168 | -703 | -433 | |
| Net foreign exchange gain (loss) | 10 285 | 804 | -2 149 | 776 | |
| Net financial items | 7 438 | 450 | -5 768 | -38 | |
| Profit/(loss) before tax | -9 976 | -14 996 | -69 985 | -27 962 | |
| Income tax (expense) | 4 641 | 7 042 | 17 764 | 9 848 | |
| Profit/ (loss) for the period | -5 334 | -7 953 | -52 220 | -18 113 |
| December 31, | December 31, | ||
|---|---|---|---|
| 2022 | 2021 | ||
| Amounts in NOK 1 000 | Note | (unaudited) | (audited) |
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 1 | 24 304 | 7 647 |
| Deferred tax asset | 28 424 | 10 259 | |
| Property, plant and | |||
| equipment | 2 | 211 840 | 3 965 |
| Shares in associated | |||
| companies | 3 | 2 295 | 5 479 |
| Multi-client library | 4 000 | 0 | |
| Total non-current assets | 270 864 | 27 350 | |
| Current assets | |||
| Trade receivables | 22 949 | 6 164 | |
| Spare parts | 15 630 | 0 | |
| Other current assets | 44 468 | 67 964 | |
| Cash and cash equivalents | 21 313 | 65 862 | |
| Total current assets | 104 360 | 139 990 | |
| Total assets | 375 224 | 167 340 | |
| EQUITY | |||
| Share capital | 5 110 | 2 744 | |
| Share premium | 279 545 | 164 558 | |
| Other equity | -71 471 | -19 251 | |
| Total equity | 213 184 | 148 051 | |
| LIABILITIES | |||
| Non-current liabilities | |||
| Long term debt | 4 | 106 482 | 5 933 |
| Total non-current liabilities | 106 482 | 5 933 | |
| Current liabilities | |||
| Trade payables | 29 151 | 6 288 | |
| Taxes payable | 0 | 100 | |
| Public duties | 3 335 | 1 879 | |
| Other current liabilities | 23 072 | 5 089 | |
| Total current liabilities | 55 558 | 13 356 | |
| Total liabilities | 162 040 | 19 289 | |
| Total equity and liabilities | 375 224 | 167 340 |
| Additional | Accumulated | |||
|---|---|---|---|---|
| Amounts in NOK 1 000 | Share capital | paid-in capital | earnings | Total equity |
| Balance as of 1.1.2022 | 2 744 | 164 558 | -19 251 | 148 051 |
| Profit/(loss) for the period | 0 | 0 | -52 220 | -52 220 |
| New equity not registered | 0 | 35 943 | 0 | 35 943 |
| Net proceeds from new equity | 2 366 | 79 045 | 0 | 81 410 |
| Balance as of 31.12.2022 | 5 110 | 279 545 | -71 471 | 213 184 |
| Balance as of 1.1.2021 | 610 | 6 781 | -1 188 | 6 203 |
| Profit/(loss) for the period | 0 | 0 | -18 113 | -18 113 |
| Effect of establish JV | 0 | 0 | 50 | 50 |
| Net proceeds from new equity | 2 134 | 157 777 | 0 | 159 911 |
| Balance as of 31.12.2021 | 2 744 | 164 558 | -19 251 | 148 051 |
| Q4-2022 | Q4-2021 | 2022 | 2021 | ||
|---|---|---|---|---|---|
| Amounts in NOK 1 000 | Note | (unaudited) | (unaudited) | (unaudited) | (audited) |
| Cash flow from operating activities | |||||
| Profit/(loss) before tax | -9 976 | -14 996 | -69 985 | -27 962 | |
| Depreciation | 5 413 | 365 | 12 481 | 1 276 | |
| Financial income | -209 | -89 | -267 | -89 | |
| Financial expense | -10 025 | 168 | 2 852 | 433 | |
| Gain/Loss equity investments | 2 796 | 276 | 3 183 | 471 | |
| Change in current assets | -77 750 | -66 126 | -8 919 | -69 420 | |
| Change current liabilities | 24 150 | 5 576 | 42 202 | -1 810 | |
| Net cash from operating activities | -65 601 | -74 826 | -18 452 | -97 101 | |
| Cash flow from investing activities | |||||
| Investment in PPE | 2 | 5 544 | 64 771 | -218 962 | -3 687 |
| Investment in intangibles | -2 578 | -2 619 | -18 052 | -4 903 | |
| Investment in Multi-client library | 0 | 0 | -4 000 | 0 | |
| Net investment in associated companies | 0 | 0 | 0 | -5 871 | |
| Sale AUV to JV associated company | 0 | 0 | 0 | 10 838 | |
| Net cash from investing activities | 2 966 | 62 152 | -241 014 | -3 624 | |
| Cash flow from financing activities | |||||
| Net proceeds from new equity | 46 995 | 0 | 117 353 | 159 911 | |
| Proceeds from new debt | 0 | 0 | 122 743 | 0 | |
| Repayment of debt | -4 531 | -340 | -25 009 | -760 | |
| Financial income | 209 | 89 | 267 | 89 | |
| Financial expense | -260 | -168 | -703 | -433 | |
| Net cash flow from financial activities | 42 414 | -419 | 214 652 | 158 807 | |
| Net change in cash and cash equivalents | -20 222 | -13 093 | -44 815 | 58 082 | |
| Cash and cash equivalents begin. of period | 42 458 | 78 955 | 65 862 | 7 780 | |
| Net currency exchange differences | -924 | 0 | 266 | 0 | |
| Cash and cash equivalents end of the period | 21 313 | 65 862 | 21 313 | 65 862 |
Argeo AS and its subsidiaries (the "Group", or "Argeo") is a publicly listed company on the Euronext Growth, with ticker symbol ARGEO. Argeo was admitted to trading on Euronext Growth 26 April 2021. Argeo is incorporated and domiciled in Norway.
These interim consolidated financial statements for the fourth quarter ended 31 December 2022 were prepared in accordance with the Norwegian Accounting Act and Norwegian generally accepted accounting principles for smaller companies. They do not include all of the information required for full annual consolidated financial statements and should be read in conjunction with consolidated financial statements of the Group as at and for the year ended 31 December 2021. These condensed consolidated interim financial statements are unaudited for 2022.
The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2021.
| Amounts in NOK 1 000 | December 31, 2022 |
December 31, 2021 |
|---|---|---|
| Cost as of 1.1 | 9 037 | 4 133 |
| Additions | 24 406 | 7 102 |
| Governmental grants | -6 354 | -2 199 |
| Cost as of 31.12 | 27 089 | 9 037 |
| Accumulated depreciation 1.1 | 1 389 | 563 |
| Depreciation | 1 395 | 827 |
| Accumulated depreciation 31.12 | 2 784 | 1 389 |
| Net book value 31.12 | 24 304 | 7 647 |
Intangible assets consist of capitalised cost related to development of a 3D Geological modelling system, Argeos "Digital Twin", various sensor solutions, and licenses. Depreciation of the 3D Geological modelling system started in 2020 and is taken over 5 years.
| December 31, | December 31, | |
|---|---|---|
| Amounts in NOK 1 000 | 2022 | 2021 |
| Cost as of 1.1 | 5 396 | 12 546 |
| Additions | 218 962 | 3 687 |
| Sale AUV to JV | 0 | -10 838 |
| Cost as of 31.12 | 224 357 | 5 396 |
| Accumulated depreciation 1.1 | 1 431 | 982 |
| Depreciation | 11 086 | 449 |
| Accumulated depreciation 31.12 | 12 517 | 1 431 |
| Net book value 31.12 | 211 840 | 3 965 |
Additions in 2022 is mainly related to delivery of the two SeaRaptor AUV, a Hugin 6000 AUV, and the Argus USV.
Expected useful life is 3 years for office equipment and 3-7 years for field equipment.
Argeo signed in January 2021 an agreement with Multiconsult for strategic cooperation to significantly improve quality for marine surveys and increase construction insight of the seabed conditions for large coastal development projects and offshore structure. As a part of the agreement, the parties have established H1000 JV AS, owned 50/50 by Argeo and Multiconsult. The Hugin AUV purchased by Argeo in 2020 was transferred to this JV in January 2021.
| Amounts in NOK | Nominal interest |
December 31, 2022 |
December 31, 2021 |
|---|---|---|---|
| Seller credits | 0 | 101 909 | 0 |
| Loans | 5.95% | 4 573 | 5 933 |
| Total long-term debt | 106 482 | 5 933 |
Argeo has NOK 101.9 million in seller credits related to purchases of AUV's. Some of the repayment is linked to the lease-back agreement with Teledyne where they rent a SeaRaptor AUV for a certain number of days during a 3-year period from delivery. Expected repayment of the seller credits is NOK 62 million in 2023, NOK 38 million in 2024 and NOK 6 million in 2025.
Argeo has two loans from Innovation Norway, bearing an interest at 5.95%. Both loans are secured with machinery and plant in Argeo Survey AS. One of the loans are also secured with the shares owned by Argeo Survey AS in its 50% ownership in H1000 JV AS, and by a parent company guarantee from Argeo AS, and is repaid over 6 years. The loans are repaid over 5.5/6 years.
Argeo was granted a new loan from Innovation Norway in December 2022. Argeo has not drawn on this loan yet.
27th April 2023: Annual Report
11th May 2023: Q1 2023 Report
8th June 2023: Annual General Meeting
24th August 2023: Q2 2023 Report
16th November 2023: Q3 2023 Report
Trond Figenschou Crantz, CEO Email: [email protected] Phone: +47 976 37 273
Argeo is an Offshore Service company with a mission to transform the ocean surveying and inspection industry by utilizing autonomous surface and underwater robotics solutions. Equipped with unique sensors and advanced digital imaging technology, the Autonomous Underwater Vehicles ("AUVs") will significantly increase efficiency and imaging quality in addition to contribute to significant reduction in CO2 emissions from operations for the global industry in which the Company operates.
The Company's highly accurate digital models and digital twin solutions are based on geophysical, hydrographic, and geological methods from shallow waters to the deepest oceans for the market segments Oil & Gas, Renewables, Marine Minerals and Offshore Installations. Argeo was established in 2017 and has offices in Asker (Oslo), Tromsø, Stockholm, Houston, and Singapore.
www.argeo.no
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