AGM Trading Update
Corac Group plc, a group of innovative UK based engineering companies, active in energy and environmental technologies, today issues a trading update ahead of its Annual General Meeting being held in Reading today.
Trading in the year to date has been positive, with overall performance and cash position in line with expectations. The Group has continued to deliver strongly in its core sectors, and R&D activity in the upstream and renewable energy markets has continued with notable progress in the key DGC (Downhole Gas Compressor) programme.
Upstream Oil and Gas - Corac Energy Technologies ("CET")
A DGC was deployed for the first time in a producing gas well in Texas as reported on 11 April 2013. Successful early stage running was completed with more than 140 hours logged. Analysis of data, review of operational procedures and consideration of technical enhancements is underway ahead of further field trial activity.
This trial has shown that the DGC system is capable of operation at well depths greater than 6000 feet. At that depth it has encountered conditions as harsh as it is likely to meet in the intended application wells. The DGC has shown it can function at inlet temperatures approaching 100 degrees Celsius, and with condensate and other fluids in the gas stream.
The DGC programme team can now look toward future deployments knowing that compressor modules have run at high speeds in the production gas stream, the electronics module has performed controlled start, stop and speed control functions and the communications system has relayed data to the surface control systems as expected.
Through the multiple start and stop procedures within the well plus retrieval and redeployment events the system has shown itself to be resilient in day to day operation. These events have added to the team's operating experience and will be valuable in future deployments in other scenarios.
The DGC built for the field trial with Eni S.p.A. was despatched in early May to CET's unique flowloop testing facility at Spadeadam in Cumbria.
The IGC (In-pipe Gas Compressor) project with Saudi Aramco is progressing in an extended design phase which has evolved significantly. The CET engineering and commercial teams continue to work closely with their Saudi partners on this complex project.
Progress in these projects has stimulated interest from other organisations in the upstream energy sector. The design study announced in June 2012 for offshore platform compression has continued to receive partner support whilst advanced commercial discussions progress, and a further feasibility study for platform based compression was announced on 29 April with Tullow Oil.
Renewable/Waste Energy - CET
Design and development of steam expander and compressor systems are in progress and have overcome some very challenging technical issues. This work aligns with development of other CET expanders for waste energy recovery such as gas let down and Organic Rankine Cycle applications for power generation from waste heat.
Defence - Atmosphere Control International ("ACI")
The UK MoD submarine programmes continue to provide the backbone of the Group's defence activities. ACI has started further work packages on HMS Artful for commissioning of air purification equipment, and is continuing R&D on an advanced CO2 removal system for future programmes.
The company's export activity continues with milestones on the French Barracuda programme achieved ahead of schedule and opportunities arising on programmes in the Asia Pacific region.
The business enjoys significant recurring revenues from equipment support. Activity continues as planned on the ten year Holistic Equipment Support Solution (HESS) contract for which ACI is the prime contractor. The team also delivered refurbishment on schedule for HMS Vengeance, and has been short listed on three lots of another major long term support contract.
Downstream Petrochemical - Hunt Graham ("HG")
In this sector, the Group has identified the opportunity to apply Hunt Graham's core thermal engineering skills to complex systems with long term support potential in wider geographic markets. This approach will position the company better to build upon strong relationships, attract higher added-value contracts and is the basis for value and growth potential in the long term.
Early indicators in the market are positive, with increasing activity and discussion on large scale support programmes with downstream operators. To drive forward Hunt Graham's efforts in this sector the Group has made some management changes and is pleased to welcome Neville Vickery, an experienced engineering business leader from David Brown Ltd, as Managing Director.
Group Technology Development
Under a joint technical development programme, concepts developed for the defence market by ACI and refined in partnership with CET have produced demonstrable commercial systems that control smoke in contaminated spaces. Testing at the Fire Protection Association, the UK's national fire safety organisation has shown that the unit can slow down contamination and buy precious time for evacuation of public buildings. The Group is aware of significant commercial potential and further technical development and market engagement is in progress to refine this proposition.
The Board is pleased with progress on the Group's core technology programmes. Significant progress with the DGC has confirmed the ability of the technology portfolio to perform in difficult conditions. This is a solid position from which to continue development in an expanding range of applications, using the proven core technologies.
In the energy markets, there is evidence of investment to extract value from existing upstream assets through gas compression. There is also a high level of activity in energy recovery solutions that supports development projects for power generation from waste heat and other sources.
The short term outlook reflects positive sentiment in some of the Group's other key sectors. Continuity of existing submarine programmes, and increasing international activity in protection of coastal waters offers continuity of near term business and long term growth opportunities for ACI technologies.
As the Group has seen in the defence market, there is opportunity for recurring revenue through long term support agreements in the downstream petrochemical industry and Hunt Graham is well placed to develop in this area.