Business

NXT Energy Solutions Inc. (NSFDF) CEO George Liszicasz on Q4 2021 Results – Earnings Call Transcript


NXT Energy Solutions Inc. (OTCQB:NSFDF) This fall 2021 Earnings Conference Call April 4, 2022 4:30 PM ET

Company Participants

George Liszicasz – President and Chief Executive Officer

Eugene Woychyshyn – Vice President-Finance and Chief Financial Officer

Rashid Tippu – Director, Geoscience Africa, Asia and Middle East

Enrique Hung – Director of GeoScience

Conference Call Participants

Michael Mork – Mork Capital Management.

Peter Mork – Mork Capital Management.

Operator

Good day, girls and gents. My identify is Patrick, and I will probably be your convention operator right now. At this time, I want to welcome everybody to the NXT Energy Solutions 2021 Fourth Quarter Operating and Financial Results Conference Call. [Operator Instructions]

I might now like to show the assembly over to Mr. George Liszicasz, President and CEO of NXT Energy Solutions. Please go forward.

George Liszicasz

Thank you, Patrick. Welcome, and thanks, everybody for becoming a member of us for NXT Energy Solutions 2021 fourth quarter and year-end monetary and working outcomes convention name. This is George Liszicasz, and becoming a member of me right now convention name is Eugene Woychyshyn, Vice President of Finance and Chief Financial Officer; Dr. Xiang Gui, Director of Research and Development; Enrique Hung, Director of Geosciences for the Americas; Mohammad Saqib, Head of interpretation and Project Engineer; and Rashi Tippu, Director of Geosciences for Africa, Asia and Middle East.

The function of right now’s name is to briefly focus on the highlights of the discharge of NXT’s 2021 fourth quarter and year-end monetary and working outcomes. Following our replace, we are going to open up the road for questions. Please be aware all statements made by the corporate and administration throughout this name are topic to reader’s advisory, relating to forward-looking data and non-GAAP measures set forth in our This fall 2021 year-end press launch and MD&A issued March 31.

All greenback quantities mentioned in right now’s convention name are in Canadian {dollars} until in any other case acknowledged. The full monetary and working outcomes and consolidated monetary statements for the 2021 fourth and year-end had been printed on March 31, and can be found on NXT’s web site, SEDAR’s web site and shortly will probably be accessible on EDGAR’s web site.

Now over to Eugene for the monetary overview.

Eugene Woychyshyn

Thank you, George. As George talked about, our 2021 fourth quarter and year-end monetary statements, administration dialogue and evaluation and annual data report had been filed on SEDAR’s web site on March 31 and can shortly be accessible on EDGAR. From a monetary perspective, the main focus remained on supporting the execution of the enterprise improvement effort and persevering with to regulate and optimize prices.

Our monetary outcomes had been as follows. Cash and short-term investments had been $2.81 million at December 31, 2021, and internet working capital was $2.82 million. Company obtained US$200,000 of funds on excellent accounts receivable in February. Operating actions offered $76,000 of money in the course of the quarter and used $1.03 million for the 12 months. Revenue for the total 12 months was $3.13 million.

For the fourth quarter, NXT recorded a internet lack of roughly $1.57 million or $0.02 per share based mostly on 65.0 million weighted common widespread shares excellent. This compares to a internet lack of $1.65 million for the fourth quarter of 2020 or $0.03 per share. For 2021, NXT recorded a internet lack of roughly $3.12 million or $0.05 per share based mostly on 64.7 million weighted common widespread shares excellent. This compares to a internet lack of $6.03 million throughout 2020 or $0.09 per share.

Total working bills for the quarter had been $1.56 million, together with survey prices. This included non-cash bills of $0.53 million associated to amortization and stock-based compensation bills. Total working bills for 2021 had been $6.03 million, together with survey prices. This included non-cash bills of $2.06 million associated to amortization and stock-based compensation bills.

G&A bills elevated roughly $50,000 or 6% within the fourth quarter of 2021 in comparison with 2020 for the next causes. Salaries, advantages and consulting prices elevated $29,000 to the phasing out of the Canada emergency wage subsidy, offset by decrease trip expense. Board skilled charges and public firm prices decreased $45,000 or 27% as a consequence of decreased skilled charges. Premises and administrative overhead prices elevated $52,000 or 36% to the corporate, benefiting absolutely from the Canada Emergency Rent Subsidy within the fourth quarter of 2020. The program resulted in early October 2021.

Business improvement prices elevated $35,000 as enterprise improvement journey resumed in December 2021. There was minimal journey in 2020 as a result of COVID-19 pandemic. And stock-based compensation bills had been decrease in 2021 versus 2020 by $22,000 as a consequence of decrease RSU and worker share buy plan bills.

G&A bills decreased $151,000 or 5% for the total 12 months 2021 in comparison with 2020 for the next causes. Salaries, advantages and consulting prices elevated $102,000 as a result of lower in Canada emergency wage subsidy price, offset by decrease trip expense, Board {and professional} charges and public firm prices decreased $200,000 as a consequence of decrease skilled charges, premises administrative overhead decreased $80,000 as a consequence of receipt of the Canada Emergency Rent Subsidy for many of 2021. Business improvement prices decreased $92,000 as journey restrictions continued as a result of COVID-19 pandemic for a lot of the 12 months. And Stock-based compensation bills had been larger in 2021 versus 2020 by $119,000 as a consequence of recognizing the RSU and the worker share buy plan bills for the total 12 months.

Summarize among the key monetary factors. We ended the quarter with $2.81 million of money and short-term investments readily available and a internet working capital stability of $2.82 million and we obtained US$200,000 in February for excellent receivables with respect to the preexisting SFD knowledge sale, with the remaining US$425,000 is anticipated to be obtained shortly. Our primary focus continues to be on the execution of NXT’s business alternatives.

I might now like at hand the decision again over to George to additional focus on our enterprise replace and ahead plans.

George Liszicasz

Thank you, Eugene. First, I need to convey my honest hope that everyone is effectively and continues to remain wholesome right now. As Eugene talked about, though there have been no survey revenues in This fall, the corporate did generate $3.13 million of income for the 12 months, which was a big enchancment from the $137,000 generated in 2020, however nonetheless beneath our expectations of what we consider this firm is able to producing, given the advantages of our know-how gives and the brand new alternatives that exist within the market right now. That being stated, the quarter remained a really productive interval for the corporate on a number of fronts.

We had been happy to announce earlier in the summertime that vitality exploration Veteran, Gerry Sheehan joined our Board of Directors. Gerry brings nearly 40 years of expertise and data working in worldwide gasoline exploration, improvement and manufacturing. For the second, Gerry arrived, he has develop into an integral a part of our staff contributing his experience to the corporate. We are positively blissful to have him aboard. Since Gerry joined the Board, he has been sharing his experience in trade community to additional our enterprise and actively concerned in our enterprise improvement alternatives. We are very grateful for that.

Regarding the oil and gasoline entrance developments, NXT had a really busy begin to 2022, pursuing quite a few strategic alternatives which supplies me quite a lot of confidence right now that our collective efforts will materialize into future success, each short-term and long-term. Business improvement efforts have considerably progressed all through the winter in our core areas of focus in Africa, Asia and South America.

As commodity costs have rebounded, we’re witnessing an elevated degree of exploration actions. NXT stays extremely assured in its strategy to comprehend near-term and long-term enterprise alternatives. With respect to the preexisting SFD knowledge gross sales, in Q2 ’21, the corporate has accomplished the sale and supply of present SFD knowledge to one in every of our prospects. NXT has obtained funds of US$1.8 million as of December 31, 2021, US$200,000 in February 2022, with the remaining anticipated to be obtained in Q2 2022.

NXT is engaged on two alternatives in Central Asia. One of those is a totally financed E&P firm with important manufacturing and land base. The different one is a junior E&P that’s at the moment securing the mandatory financing for his or her upstream program, which incorporates an SFD survey. We have submitted business bids for SFD surveys to each corporations.

With respect to our different Asian tasks, we’re in discussions with a number of enterprises for SFD survey alternatives, three of those alternatives have superior past the technical dialogue stage. Additional work is required, however suffice to say, examine progress is being made. We will proceed replace — we are going to proceed updating our shareholders as warranted.

Africa enterprise improvement. We acknowledge Africa as some of the vital continents for sustained hydrocarbon and geothermal exploration. The utilization of SFD will mitigate general exploration danger, present time and cost-effective options in an environmentally-friendly method. Pursuant to this, I’m happy that the numerous effort expanded in Nigeria is now projected to cultimate into tasks for 2022.

We consider that success in ’22 will result in additional alternatives in 2023 and 2024. I attributed this totally to the worth of the knowledge SFD delivers and the efforts of our companion the GMD of PE Energy, Mr. Daere Akobo. Nigeria’s frontier basins stay our precedence as we consider our enterprise with NOC and different worldwide exporters will proceed.

NXT is engaged in leveraging the Nigerian expertise into higher survey alternatives within the sub-Saharan nations. Underscoring our elevated degree of confidence, we are going to quickly be endeavor a brand new airborne survey. And to that finish, we’ve got accomplished an prolonged airplane upkeep program so as to meet elevated survey capability. In addition, we’ve got additionally began the suitable paperwork on plane export-import certification and are within the means of acquiring different important providers which can be required for international surveys. We will maintain you knowledgeable of our progress.

Continuing with the geothermal improvement replace. As beforehand introduced, NXT obtained advisory providers and funding from the National Research Council of Canada’s Industrial Research Assistance program which was utilized to assist the analysis and improvement of the SFD know-how for geothermal functions. We are grateful to NRC IRAP and their advisers for all their contributions to NXT as we proceed to advance our efforts towards attaining commercialization of our SFD GT know-how.

The firm has efficiently accomplished Phase 1 of the SFD GT sensor improvement program and at the moment making ready a submission of Phase II for NRC’s consideration. NXT is actively pursuing SFD GT enterprise alternatives in Canada and overseas, quite a few potential shoppers are contemplating utilizing SFD GT for potential.

Now allow us to flip our consideration to Latin America tasks. We proceed working to be a service supplier inside the portfolio of a giant Houston-based geophysical firm that holds company service contracts with NOCs all through Latin America. NXT can be in discussions with the regulatory authority of three Latin American nations with respect to authorities funded frontier export analysis applications.

SFD can be used to reinforce and/or develop geophysical knowledge banks in these areas, which might be in alignment with the acknowledged goal of accelerating exploration and manufacturing. We are optimistic the present negotiations are a step to a brand new and repeat alternatives in Latin America. With respect to Brazil, the corporate has obtained discover that its Brazilian patent utility has been granted, bringing the full variety of nations during which NXT maintain patents to 46.

Brazil is a compelling alternative for NXT. The nation has an intensive oil and gasoline contributing over 10% of its GDP. NXT believes that is a lovely market alternative for its setting of pleasant SFD know-how and with the Brazilian patent in hand, this may assist to speed up discussions with potential trade companions within the area.

In abstract, SFD hydrocarbon survey alternatives proceed to progress effectively, not solely inside the core areas of focus in Africa, Asia and South America however elsewhere. Additionally, we’ve got made progress with our SFD GT know-how and proceed to be in discussions with a number of geothermal corporations for these providers.

We perceive that the 12 months has not began as we hoped for, however we’re assured the remainder of the 12 months ought to show fruitful. We did $3 million in income, which is $3 million greater than the 12 months earlier than. Today, we see clear indicators of many suspended exploration applications being reactivated. NXT has to grab the alternatives now that’s in entrance of us. As all the time, thanks on your persistence. Thank you.

On behalf of our Board of Directors, and the whole staff at NXT, I need to thank all our shareholders for his or her continued assist. We want the most effective of well being to you and to your households. Back to you, Patrick.

Question-and-Answer Session

Operator

[Operator Instructions] The first query is from Michael Mork from Mork Capital Management. Please go forward.

Michael Mork

Hi. It’s Mike. Just wished to know if you happen to can amplify a bit of bit on the contract potential in Nigeria, the African contract — potential dimension and probably the timing as a result of it looks as if it has been pushed again a number of occasions. Just puzzled if you may get a bit of nearer there.

Rashid Tippu

Yes. Mike, that is Rashid. So, sure, we’re working in the direction of a contract like some paper work and a few approvals are on [indiscernible] inside this 12 months. And based mostly on — this 12 months challenge was based mostly on the beforehand work performed again in 2019 and in addition — in order that’s the place we’re. And based mostly on this challenge we’re working in the direction of, we’re seeing there will probably be a possible of subsequent 2 years follow-up challenge based mostly on the outcomes as a result of they — if you happen to recall, again in 2019, we surveyed two [indiscernible] and Judd, which is a big space and we made a number of suggestions. So, they’re deciding on a portion of these suggestion for this 12 months, and we’re anticipating this 12 months survey may also add worth to the prevailing knowledge. And then we’re on the lookout for subsequent couple of tasks in following years right here.

George Liszicasz

Mike, I want to add — thanks, Rashid. I want to add that NNPC desires to challenge itself as a greater company worldwide. We know the historical past. So on account of that, there are some protocols which were applied that requires NXT as a service supplier to provide way more element, the knowledge on the survey, the budgets, the breakdowns and so forth and so forth that beforehand was required. So that was the, I believe, the principle purpose. But we’ve got met now all necessities, and we’re very constructive that we’re going to get a contract going very quickly [indiscernible].

Michael Mork

Okay. That sounds good. Just one actual fast follow-on query. With oil costs over $100 a barrel, are you doing something totally different in your advertising? Or are you getting contacted by a few of your previous shoppers who — when the value was $50 a barrel, weren’t that . Now it is a $100, may be , have you ever seen any exercise with new shoppers or previous shoppers which can be extra now with the upper worth?

Enrique Hung

Mike, that is Enrique Hung. Well, I can provide you an instance for Latin America. They are bumping their exploration price range, each within the E&P unit or enterprise models and within the authorities. So Latin America appears to be like good. We have three fronts in these nations. We are additionally linking among the newest work we did in December 2021 in Asia that has sturdy relationship with the worldwide actions that may be mirrored in Latin America. So, we’re very assured. And sure, the oil worth is an enormous push for us. Some of the nations are planning to duplicate their manufacturing. So, there is a long-term and it appears to be like prefer it’s a great path for us to comply with.

Michael Mork

Okay. Thank you.

George Liszicasz

Thank you, Mike. I believe that it is in all — if you happen to take a look at it general, the scenario, there’s a revival, proper, in exploration. And we’ve got been contacted by shoppers and in addition representatives that we labored with earlier than in quite a few nations that the nationwide firm or the regulatory physique want to make the most of the know-how extensively. So, we’re very, very constructive and hopeful on that. And assured that if they arrive to us, that is an excellent signal.

Operator

[Operator Instructions] The subsequent query is from Thomas [indiscernible]. Please state your organization. Your line is open.

Unidentified Analyst

Open now, okay. Hey. This is Thomas from [indiscernible]. I’d sort of wished to play off of Mike’s query. First off, actually thrilling on the Asian and African entrance. It’s nice to listen to that stuff is transferring alongside. So, I’m actually excited for 2022. I believe I simply wished to ask a bit of bit in regards to the advertising that you just had been speaking about. And George, you talked about that you just stay actually assured within the NXT strategy. And I believe I’m coming at this pretty ignorantly, I in all probability do not know a lot about how the hydrocarbon market works, so pardon the ignorance, however I’m wondering if you happen to might simply go over sort of the advertising strategy as a result of I believe the elemental factor that I and different buyers which were concerned for 10 plus years, our feeling is that we’ve got this recreation altering IP. And I simply surprise, do folks find out about it. I’m studying articles on a regular basis about geothermal exploration. And I’m simply questioning what’s our technique there? Either geothermal or hydrocarbon to get the phrase out to show the know-how. If we’ve bought this main disruptor, why do not folks find out about it? So blissful to take the query offline. Thanks for the reply. Thanks.

George Liszicasz

Thank you very a lot, Thomas, and thanks very a lot on your assist. I might simply begin with the know-how itself. How a lot all the pieces modified when it comes to the acceptance of the know-how? We have being on a continent actually. And the shows to quite a few corporations, I believe it was like 12 corporations. Each and each one in every of them is a multibillion-dollar company and so they required a technical presentation to be given to them. Usually, our technical presentation is about 175 slides. So, we compacted it to 44. We gave the presentation, it was downloaded all through the continent. We purchase establishments, universities and so forth, and it got here again constructive. So, I believe that we’ve got reached the purpose now that the boundary of resistance is breaking down with respect to the know-how.

Also, there are a selection of applied sciences which were now printed that pertains to SFD. It’s not SFD, however a part of it associated to SFD, and it clearly reveals that the know-how may be constructed. So that is one half. The different half is that we try to get boots on the bottom in every single place wherever we consider that there’s a important alternative that exists. And that in Africa, we’ve got about 6 nations proper now the place NXT is being represented, proper? So, in Asia, there are equally the identical variety of folks, salespersons and so forth the bottom. And we do not pay anyone something till they convey the contract.

So, the subsequent step will probably be, hopefully, we’re going to get a contract happening very shortly that may embrace tremendous majors and so forth that we will work along with them. And I believe that is going to be the ultimate barrier to interrupt onshore, offshore. So, we’re very assured that I’m wanting ahead to it truly, to inform you the reality, that would be the final purpose and goal of NXT that they are going to see how effectively this know-how works.

Unidentified Analyst

Okay. Thanks, George. I recognize it.

Operator

Thank you. The subsequent query is from Peter Mork from Mork Capital Management. Please go forward.

Peter Mork

Hey, guys. Thanks for the replace once more. And, George, I simply need to follow-up a bit of bit on Thomas’ query on the advertising, however particularly associated to the geothermal. You guys have all these nice case research in your web site. You go down an excellent demonstration of how the census work over numerous hydrocarbon offers over time. I used to be questioning, are there any plans to try this on the geothermal facet? And finally, what — how are you guys viewing like a timeframe for a pack? And then you definately talked about that? And simply any insights to how they had been constructed? Thanks.

George Liszicasz

Hi, Peter. Thank you very a lot on your query. I did not perceive the primary half, I could not hear it very effectively. So, anyone can …

Eugene Woychyshyn

Marketing̣.

George Liszicasz

Not advertising, the SFD GT. Right now, we’ve got about three corporations and two nations which can be thinking about geothermal tasks utilizing — I imply tasks utilizing SFD surveys to determine excessive permeability conduits and so forth within the subsurface. At the identical time, we try to maneuver to this Phase II with IRAP, the individuals who finance the event of the know-how, that would come with universities, not all know-how fabrications and so forth and so forth. As you already know, we’re a small firm. So, it’s a requirement that we need to do and need to additional the know-how and from the prototype part.

And there are a selection of fabrication strategies that we have to overview and create a know-how that won’t solely the geothermal will profit from, but in addition the SFD know-how itself. So, our purpose is each different day, there’s one other firm who does geothermal actions that we will work with. And additionally financing corporations come to us now that they want a finance challenge or use the SFD with their present shoppers. So, I’m fairly assured that within the subsequent couple of months or by Q3, we’re going to have tasks undertaken and transfer ahead.

Operator

Thank you. The subsequent query is from David [indiscernible]. Please state your organization. Your line is open.

Unidentified Analyst

My identify is David [indiscernible]. I keep in mind I’m a shareholder. We’ve had a number of contracts that appear to get us clearly additionally that we maintain being that dangle in there. Where do you going to take the impression our shareholder worth as a result of it assumes that the cash that we’re getting is — buns up — burn hire, which may impression it? And how lengthy will that?

Eugene Woychyshyn

Thank you, David. It’s Eugene. So, we’re — we’re once more, assured on our business alternatives. And as George had defined earlier, that is the place we will be producing our money from within the short-term.

Unidentified Analyst

Okay. Nigeria was imagined to occur a very long time in the past. And I do know it was a query requested earlier, however I could not hear your reply. That’s how lengthy it takes for you guys to impress?

Eugene Woychyshyn

Was that for Brazil or — sorry, that wasn’t clear.

Unidentified Analyst

For Nigeria.

Eugene Woychyshyn

For Nigeria, we’re, as George defined within the close to short-term, however as soon as we get by way of a number of extra hurdles.

Unidentified Analyst

Okay. Thank you.

George Liszicasz

Thank you, David.

Operator

Thank you. This concludes the question-and-answer session. I want to flip the assembly again over to Mr. Liszicasz.

George Liszicasz

Thank you very a lot all people for collaborating in our Investors Conference Call. And I hope that the subsequent name goes to be enterprise. Thank you once more on your assist.

Operator

Thank you. The convention has now ended. Please disconnect your strains right now, and we thanks on your participation.



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