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, 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.
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Wavefront Technology Solutions Inc.
President and CEO
Wavefront Technology Solutions Inc.
D. Brad Paterson