Diagnostic Imaging

ARKeX Ltd

Pine Mountain

 

 

Case Study - ARKeX Ltd

In 2002, AGI was approached by two very different companies which had an unusual financing problem in common.

One was Oxford Instruments plc, a £160 million turnover company specializing in the design and manufacture of high-technology tools and systems for industry and research. One of its core technologies was low temperature environments. Oxford’s Superconducting Division had developed, for the European Space Agency, a Superconducting Gravity Gradiometer. This is an instrument cooled to minus 269oC which is able to measure almost infinitesimally small changes in the earth’s gravitational field. A prototype for deployment in a satellite had been built, but the most significant market was judged to be for oil, gas and mineral exploration. This required an instrument small enough to be carried in a light aircraft and in a much harsher field environment.  The most lucrative opportunity was seen as a service offering rather than instrument sales. But Oxford did not have a presence in the oil service sector and sought a partner to assist with commercial exploitation.

Following a recommendation from a senior oil industry executive, Oxford approached ARK Geophysics, a small Milton Keynes-based geophysics company providing specialist services in gravity and magnetic geophysics to oil exploration companies, mining groups and government organizations.  Its services included geophysical data processing through to interpretation, as well as software development and training.

The two companies agreed a joint venture based on the spin out from Oxford of the gradiometer team with all its Intellectual Property and staff as well as the spin out from ARK Geophysics of senior management, including Managing Director Kitty Hall, and a full suite of software into a new vehicle called ARKeX Limited.

One key problem remained: Raising capital for ARKeX.  ARKeX turned to AGI. Placing the required £4 million in equity raised a number of seemingly insurmountable challenges including:

  • ARKeX was a start-up operation with no revenue; and
  • No Exploration Gravity Gradiometer (or ‘EGG’) had ever been built and the only precedent was the satellite-based research instrument.

Arguably the only person qualified to opine on the buildability of the instrument was Dr. John Lumley, who was ARKeX’s Technical Director and who therefore was unable to render an impartial judgement. As the process developed, it became clear that venture capitalists were generally reluctant:

a) to consider relatively unknown (to them) sectors such as oil exploration technology;
b) to invest in start-ups, particularly one with no working prototype product; and
c) among US venture houses, to invest in a European company.

AGI mounted an extensive placing campaign throughout Europe, North America and the UK. Emphasis was placed on the proven technology and sales capabilities of the ARKeX team and on the early support of three leading international oil firms. After making a large number of contacts, a German corporate venture house, whose parent had an oil exploration subsidiary, expressed interest followed by a leading Scottish venture firm with extensive interests in the oil sector. The syndicate was completed by two other venture firms, Oxford Instruments and a former Chairman of Oxford Instruments.

ARKeX has fast established a commanding lead in gravity gradiometry for the oil exploration sector and has built a world-class management team with vast experience in instrumentation, exploration geology and signal processing. Its next generation proprietary technology, the EGG - which will be the world’s first commercial superconducting gravity gradiometer - is currently completing lab testing at ARKeX’s headquarters and is expected to start flight trials in 2007.

 

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