Management Discussion Throughout fiscal 2021 and continuing into the first quarter fiscal 2022, COVID-19 and the Omicron variant impacted numerous end-users or E&P’s directly in that their office facilities and/or oilfields had limited access or were closed for extended periods of time. This impacted Wavefront in that announced and anticipated Powerwave® stimulations could not be completed and thus, revenues were not recognized. Additionally, various end-users or E&Ps were indirectly impacted by COVID-19 in that their supply chains (i.e., acid manufacturing and availability, coiled tubing and rig parts and availability, etc.) were and continue to be impacted, thereby also delaying Powerwave® stimulation work and indirectly impacting Wavefront’s business. To frame the impact on Wavefront, one new client who was to commence stimulation work in January 2021 has yet to begin operations – an entire year of delay. Currently, all announced Powerwave® stimulation packages and purchase orders remain valid, and continued stimulation work may represent in excess of a threefold increase in fiscal 2021 USA Powerwave® revenues when completed and recognized. Multiple United States’ E&P clients have indicated that stimulations may commence in the near future; however, a commencement date, at this time is not assured due to direct and indirect implications of COVID-19. Subject to the commencement and continued quality of Powerwave® service to these existing and new clients, the Company anticipates further awards of Powerwave® well stimulation packages throughout fiscal 2022.
In the Kingdom of Saudi Arabia (“Saudi Arabia”), the National Oil Company (“NOC”) throughout fiscal 2021 and into fiscal 2022 has been subject to various government-mandated COVID-19 restrictions. While Saudi Arabia has just recently been progressing towards re-opening business operations and allowing travel for most foreign visitors, the COVID-19 restrictions has hampered the Company’s Distributor in its ability to market Powerwave related technology. During the reporting period, the Company was pleased it was able to attend a trade show in Saudi Arabia.
Despite the slow opening of Saudi Arabia, and due to poor local marketing performance, the Company changed Distributors in Saudi Arabia. In addition, and to support the Global Distribution Agreement, as announced September 1, 2021, the Company hired an additional engineer in Saudi Arabia. As a result, the Company saw an increase in general and administrative expenses.
Like Saudi Arabia, the State of Kuwait (“Kuwait”), throughout fiscal 2021 and into fiscal 2022 has been subject to various government-mandated COVID-19 restrictions hampering the Company’s Distributor in its ability to market Powerwave related technology. However, due to the Company’s efforts, subsequent to the reporting period, the Company announced that it has been placed on a shortlist of vendors to supply technology and equipment for a pilot waterflood. While water is injected by the NOC for disposal and reservoir pressure support, active waterflooding in a traditional pattern configuration has not been implemented to date.
Wavefront’s proprietary technology bundle includes fluid-driven tools for removing detritus materials often occurring in oil and gas production or injection wells. Globally, such devices have been successfully used in traditional oil and gas operations thousands of times. While geothermal wells have temperatures up to 325oC (617oF) several scale types are prevalent and often found in oil and gas wells. The Company’s proprietary tools are currently designed to withstand such elevated temperatures; therefore, they can be immediately used under such conditions. Wavefront and its global OFS distributor are currently evaluating opportunities to deploy Wavefront tools in Europe and North America geothermal operations. Given Wavefront’s successful track record in wellbore cleaning, the Company is very confident of success in this potential new market.
Wavefront continues to train its Global Distributor’s personnel on the Powerwave technologies for marketing purposes and well site candidate selection, most notably in Colombia, Mexico, Brunei, and broadly across Europe.
Subsequent to the reporting period, the Company agreed to amend the General Services Agreement (“GSA”) with a United States E&P client, as announced October 13, 2021, such that the commencement date of the GSA will be postponed and commence effective January 1, 2022. All other terms, inclusive of the five-year term and minimum aggregate amounts will remain the same.