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spk03: A large portion of that plant will be built in our new fabrication shop in West Houston. We're also active in waste to energy, in hydrogen, and methanol. We expect a great result in this. For our government service, we have been awarded from the Tulsa Public School a SCADA system. We are working on several other bids in this area. Our automation group is also very active with several main clients. Integration, we continue our fabrication of the trailer program. We're hiring key people and training people for this. And generally, activities looks really good for the later part of this year and continuing in 2023. Over to you. Thanks, Roger.
spk06: As you've just heard, there are many opportunities in our business that we are very excited about. I'd like to highlight some of the progress that we've made over the last 12 months or so. Through the efforts of our team, we have steadily increased our backlog from 8.4 million at the end of Q3 last year to over 19 million at the end of this quarter. That represents over 120% improvement in our backlog. At the same time, we have steadily increased our revenue over the last four quarters from $5.9 million in Q3 of last year to $6.9 million in Q4, $7.3 million in Q1, and $11.4 million this quarter. The Q2 increase over Q1 this year represents a 56% sequential increase. Our gross profit increased this quarter, as Darren mentioned, due to our ability to utilize our people more efficiently and reduced expenditures on proposals, as he mentioned. This is a testament to the quality of the people that we have attracted and retained throughout COVID and during our rebuilding process. We could not have achieved these results without our people, and I could not be more proud of our employees. As you've heard from Roger, our prospects for awards in Q3 and Q4 of this year look very good. So our outlook for the remainder of the year also is very positive. In addition to our core businesses that Roger touched on, we announced in May the acquisition of Calvert Group Belgium, which has a license for proprietary small-scale gas-to-liquids technology utilizing a gliding arc plasma and a modified Fischer-Tropsch process. This acquisition fits well within Englobal's core capabilities of engineering, design, fabrication, automation, and commissioning, but more importantly, broadens our offerings to now include a technology solution. We are currently incorporating this technology into standard GTL trains of various sizes, ranging from 25 barrels per day to 100 barrel per day, designed to process 250,000 to 1 million standard cubic feet of gas per day. We expect to complete the 25-barrel-per-day design soon and deliver one mid-next year due to lead times on major components. And we'll begin working on larger 50- and 100-barrel-per-day designs in the coming weeks. We expect these trains to sell for between $4 and $9 million per train and we expect that we could produce as much as one per week when we are in full production. Last year, over 143 billion cubic meters of gas was flared worldwide, according to the Global Gas Flaring Reduction Partnership and World Bank. One solution to reduce the amount of gas flared each year is to convert it in an economical way to synthetic fuel, diesel, or naphtha. and we believe our GTL plants will accomplish this. Our initial approach to distribution of the GTL trains is through partnerships with service companies in countries with the highest levels of gas flaring. To date, we've signed an exclusive marketing agreement with OilServe, which we announced in July, covering the countries of Iraq, Algeria, Libya, and UAE. These markets alone represent 34 billion cubic meters of gas flared per year, or roughly 1.2 trillion standard cubic feet of gas flared annually. So as you can imagine, the market for this solution is very large. I'm pleased with where we are today and with what our outlooks are for the near future and the coming years. I think we have a very strong base to build from, and we have a lot of opportunities in our pipeline. So at this point, I'd like to turn the call over to questions. Operator?
spk02: Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your telephone keypad at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please wait whilst we poll for questions. Thank you. Your first question is coming from Jeffrey Campbell of Alliance Global Partners. Jeffrey, please ask your question.
spk05: Good morning, and congratulations for the upward trend in the business. First question I wanted to ask was, how is the North Dakota location chosen for the plant that Roger described in his opening remarks?
spk03: Sorry, can you repeat that?
spk05: Yeah, I said how, maybe I should say why. I'm just wondering how or why North Dakota became the location for the plant that you described in your opening remarks, the one that you said is going to come online in the fourth quarter.
spk03: I think a combination of feedstock and that the operator owns the land.
spk08: Okay.
spk05: What's your current forecast or what's the range, if you prefer, for progressing from the first GTL plant that you've identified as happening sometime fairly early next year and the one unit per week scale manufacturing guidance? Just trying to get a sense of what kind of time you see for that rollout.
spk06: Yeah, I would say within 12 to 18 months we could be on that pace.
spk05: Okay. That's helpful, thanks. Sticking with the GTL, my impression, initial impression, was that OMON was going to be the center of activity for these new modules, but the recently announced marketing deal with AllServe certainly expands the potential footprint for their sales. I was just wondering, was this seemingly rapid expansion of interest a surprise, or was this an expectation?
spk06: No, it was an expectation. In our diligence, we met many of these players.
spk05: And then finally, we recently saw that the EPA is intensifying scrutiny of methane leaks in the Permian with an eye, supposedly with an eye for invoking penalties for infractions. I understand the logic of first focusing on the Middle East due to the high level of emissions enforcement in the area. I was just wondering, Have you had any contact with any potential future Permian customers? Is that an area of interest over time, particularly now that you're manning your presence in the area?
spk06: Yes, we have had contact with customers in the United States, not just in the Permian, but in other places. Obviously, the economics of the wells in the United States are different than the economics of the wells overseas. U.S. is number four country when it comes to flaring annually. And as you mentioned, the more scrutiny and the more regulations that get promulgated on flaring will only make this solution more attractive. But I think we're going to have to come up with a different marketing philosophy and solution for the clients here in the United States due to the well life and the gas produced on wells over their life. So we're going to have to look at that, but I do think that there is a big market here, and I think we can satisfy a significant portion of it.
spk05: And just to follow up on that, I think you just touched on it, but when you're talking about the different economics, you're talking about maybe longer lives, conventional wells in the Middle East, as opposed to the live hard and die young, unconventional wells that we have here. But if I remember correctly, there was at least schematically a mobile solution for this GTL that you're building. So is that what you mean when you say you need a different solution. You'd have to develop something with mobility as opposed to maybe units that can stay in one place for a longer time in the Middle East.
spk06: Well, the way we're designing these units is that I wouldn't call them mobile, but they're transportable. They're skid-mounted trains. I don't remember how many skids for a small 25-barrel train. I think there's 10 or 12 skids. And And so they are placed at the well site. And so they can be picked up and moved, but it's not mobile in that you can mount it on the back of an 18-wheeler and drive it from flare to flare. But what I'm talking about is more the economics of how that product is sold into the marketplace. Whether it's done, you know, as a sale or a lease or a day rate, I don't know exactly how that would be. We have to explore that.
spk05: Okay. So it's less to do with something on the hardware side and more on the marketing side. Got it. Correct. Thanks for the help. I appreciate it.
spk02: Thank you. Your next question is coming from Rob Brown of Lake Street Capital. Rob, please ask your question.
spk08: Morning. Good morning.
spk01: First question is just on the pipeline for the back half of the year and into the next year. I know you said it's improving quite a bit. Could you just give us some characterization about the opportunities you see? Is it across the border? Are there certain markets that are doing better? Maybe just a sense of how that pipeline is shaping up and what it consists of.
spk03: The strategy, if you go back to maybe mid-next year when we invested in oil, gas, and petrochemicals, was back on kind of seeing the future of the oil price. It was, as we remember, very low. And we took the opportunity to invest. So we see that simply paying off, that no mention, no forgotten egg still to Oxy, obviously investing heavily. A proof of that is just what we have talked about, but also then serving our clients, for example, setting up our West Africa, sorry, West Texas operation so we can supply an EPC solution to the XTOs, to the Oxys, to the Chevrons. But also the renewable is coming strong. So my humble view, I think the segment we selected mid last year is all, sorry, is all fiery.
spk08: Okay, great.
spk01: And then on the renewable business, you've got a number of projects. You said, what's your sense on the new energy bill? Will that accelerate these projects? Are there sort of incremental projects you see there? And maybe could you scope out the opportunity from that bill?
spk03: Absolutely. USDA have allocated, as you probably know, $3 billion. So the North Dakota project has applied for the USDA financing, which is capped to $250 million. I think the overall here, as we know, if we take sustainable airplane fuel, we're going to shift from jet to SAF roughly 30% by 2030. And if you translate that to the number of plants being built, that is many, many. We're talking well over 50 plants. The issue is that still SAF is not just like solar was in the beginning, competitive when it comes to compare with jet fuel. So I think what we see is a lot of interest, and I think we're working really hard on and really try to gauge who of those developers and operators will really do it. I think the North Dakota is a great example of somebody we believe in, would be able to award an EPC contract. But there is many others. If you talk to Halder Topsa, which is one of the technology providers, they have 120 opportunities in their pipeline, which we are close connected to. I think the but in my voice is there was a but. I don't think it would be as quick as maybe the government thinks it's going to happen. These plants are small refineries and they are quite complex, quite expensive to build. If that answered your question.
spk08: It did, absolutely. Thank you for the question. I'll turn it over.
spk02: Thank you. Your next question is coming from Alan Oakley, who is a private investor. Alan, over to you.
spk07: Great. Thank you. Hey, Mark, team, congrats on the trends on revenue margins and backlog. Great to see it. Number of employees today, if you could tell me the billable versus overhead and then the utilization on the billable.
spk06: So I think, well, we're hiring every day. So I think currently we're at about 300 employees of which I'm going to guess 260 are billable. And our utilization rate is somewhere around 90%, I would guess. But we work, we also have high value, low cost engineering centers that we work with. So not all of our revenue is generated from our employees, right? And we also work on uh fixed price work more and more of our work is fixed price work in which case we can leverage our employees greater than we can uh with just tnm work okay between revenue and employees and on the backlog at 19 million what's the target margin that um
spk07: looks like you're a little over 11 for this quarter what are you targeting on that 19 million backlog uh that we're at about 11 or 12 probably on on the backlog okay and then the on-site construction services this quarter was there any revenue from that in these numbers last quarter you I think you indicated that that would be a meaningful number this quarter. Has that been pushed back to kind of third quarter, fourth quarter?
spk06: Yeah, we haven't seen any. In this quarter, we didn't have any construction services or field services included in our numbers. And so we do expect both of those in third and fourth quarter.
spk07: And then the 100 million renewables plant that was mentioned, Did I hear that correctly, that that contract will be signed in the fourth quarter?
spk03: That is well above $100 million, yes.
spk07: Okay. So you feel certain that will be signed in the fourth quarter? Is that still subject to investment decision by the client? Absolutely. Great. Okay. Okay. And then the small gas, scale gas, looks like you bought it for $937,000. Some of that was a cash, some was stock issuance. Are you able to talk about the contract with OilServe, the financial impact of that contract?
spk06: Well, what I would focus on with OilServe is the amount of opportunity that they represent. So oil serves services currently in those four countries that I mentioned. And they have many clients within those countries that are very interested and have initiatives in place to reduce their flaring. And they're getting penalized for their flaring. And their wells are being choked in because of their because of the flaring. So in order for them to produce more, in order for them to reduce their flaring penalties, they have to have a solution. So to me, what the marketing agreement with OilServe represents is the total market availability. Now granted, we're not going to be able to service 1.2 trillion cubic feet of gas a year, but we're not going to capture all of that. OilServe isn't going to capture all of that. But there's just a huge marketplace, and we have a number of opportunities within that market already on the table. So to me, the way to look at it is, how many of these plants, how many of these trains can we build and supply to OilServe to satisfy that market?
spk07: Okay. Thank you. A couple of questions on liquidity. $14 million in cash today. When do you expect to collect the payroll tax receivable as $2 million? Is that a third quarter, fourth quarter?
spk04: We're expecting to collect on that, get that from the IRS in the third quarter.
spk07: Okay, great.
spk06: Let me add to that, Alan, that we expected to get that this quarter, and And we received one in the, was it the first quarter? First quarter. We received one in the first quarter. We expected one in the second quarter. And so that didn't come up. So to some extent, you know, we are beholden to, you know, the IRS for that payment.
spk07: Okay. That certainly would help on liquidity. Okay. And then on the revolver, it's now gone current. I think it matures May 23. As I read it, it's really somewhat restrictive. It's a boring base and so you really don't have access to the full six million. Have you had any discussions with them about potential renewal increase and maybe less restrictions? 14 million of cash in the bank there. What do you see on that?
spk04: Yes, we've had preliminary conversations with our lender about increasing that. So those are ongoing conversations, but that's something we're looking into and considering, and obviously we want to increase that availability under our revolver.
spk06: And Alan, I know that you've sent me some information uh, suggestions and observations. And I appreciate that. And, you know, obviously we're, we're looking into that.
spk07: Great. And then, uh, last question, I apologize, but the last quarter, I think your new business. Number that was in the margin was 859,000. I wrote it down, may not have written it down correctly. This core, you said you reduced that. Uh, could you confirm the eight 59 for last quarter? And then what is the number this quarter?
spk06: I'm not familiar with what you're asking Alan.
spk07: I guess in your gross margin, I guess it's the new business proposals where you're spending a lot of money making our replied RFPs. Okay. So like last quarter you referenced an 800 to $900,000 number. And, but I think you said that number was less this quarter, but I didn't hear a number.
spk04: Yeah, so the proposal this quarter, I think, was approximately $450,000. Okay. Great.
spk08: That's all I've got. Thank you very much.
spk02: Thank you. Your next question is coming from Jeffrey Campbell of Alliance Global Partners. Jeffrey, please ask your question.
spk05: Yeah, thanks for letting me ask a couple of follow-ups. First one was just regarding the backlog. What's the time length of the backlog? Is it the standard 12 months, or is there a different timing on it, and do you see that increasing over the next 12 months with all the potential projects that you're talking about?
spk06: I don't know of anything off the top of my head in our backlog that we wouldn't complete in 12 months. And so, and the answer to your second question is absolutely. We're trying to push our backlog up every month. That's a big focus for us. Bookings, you know, our booking ratio or booking to burn ratio for this year so far is over 1.4, and we really want that to increase. So that's our big focus.
spk05: Okay. And Regarding the oil-serve discussion, just not to put words in your mouth, but it sounds like the real value there is that they already have a business and they've got a lot of relationships and you don't have to reinvent the wheel in those markets, which probably would be expensive and time-consuming. But just wondering, of the countries that you've identified, is there any one in particular that you think is going to have a tendency to move on units a little bit sooner than later, or is there not really any big distinguishment between one country and another?
spk06: I think Iraq has the greatest opportunity. I mean, they're the second largest flaring country in the globe. So, you know, they have the biggest opportunity. We have some opportunities in Iraq that we're working with oil serve on right now. Excuse me. And I don't want to downplay Oman. So as you mentioned earlier, we've been working with a company in Oman to do the same thing that OilServe is doing in the other countries. And so that may actually be the first place that we put a unit.
spk05: Okay, great. Thank you.
spk02: Thank you very much. It appears we have no further questions in the queue. Reminder, if you do still want to ask a question, please press star 1 on your telephone keypad.
spk08: Okay, I will now hand back over for any closing remarks. No closing remarks from ENG.
spk04: Thank you. Thank you for your time. Thank you, operator. Thank you.
spk02: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
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