Hyduke Energy Services Inc. announces a 36% increase in revenue for the three months ended March 31, 2008 over the previous quarter
EDMONTON, May 15 /CNW/ - Hyduke Energy Services Inc. (HYD - TSX),
announced operating results for the three months ended March 31, 2008. A
summary of those results is as follows:
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Selected Income Statement Information Three Months Ended
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March 31 March 31 December 31
($000's, except per share data) 2008 2007 2007
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Revenue 11,813 20,320 8,706
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Gross margin(1) 1,515 3,719 1,180
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Gross margin (%) 12.8% 18.3% 13.6%
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EBITDAS(1) 30 2,431 (450)
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Net income (loss) (336) 1,236 (722)
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Earnings (loss) per share - basic ($) (0.015) 0.056 (0.033)
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Earnings (loss) per share - diluted ($) (0.015) 0.056 (0.033)
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Selected Balance Sheet Information As At
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($000's, except ratios) March 31 December 31, December 31,
2008 2007 2006
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Total assets 50,545 48,552 57,802
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Total long-term debt 2,381 2,414 2,933
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Total shareholders' equity 36,013 36,266 33,757
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Current ratio (current assets
divided by current liabilities) 2.86 to 3.39 to 2.01 to
1.00 1.00 1.00
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Debt to equity ratio (long-term debt 0.06 to 0.07 to 0.09 to
divided by shareholders' equity) 1.00 1.00 1.00
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(1) The Company uses certain non-GAAP measures as indicators of financial
performance and believes that these non-GAAP measures provide useful
supplemental information to investors. EBITDAS and gross margin are
measures used by the Company that do not have a standardized meaning
prescribed by GAAP. The Company's method of calculating EBITDAS and
gross margin may differ from other companies and may not be
comparable to similar measures presented by other companies.
EBITDAS is defined as earnings before interest, taxes, depreciation
and amortization, gain or loss on sale of property, plant and
equipment, gain or loss on foreign exchange, and stock-based
compensation. Management believes that in addition to net income,
EBITDAS is a useful supplemental measure as it provides an indication
of the operating cash flow generated by the Company's principal
business activities. EBITDAS is not intended to represent an
alternative to net income determined in accordance with GAAP as an
indicator of the Company's performance.
Gross margin is defined as revenue less cost of sales. Cost of sales
include direct materials, direct labor, variable and fixed
manufacturing overhead, and other costs closely associated with the
manufacture of goods and the provision of services.
The decline in revenue experienced in late 2007 resulting from the
extensive slowdown in new capital equipment expenditures by drilling and well
service contractors working in Western Canada continued in the first three
months of 2008. This slowdown in new equipment investment in the industry has
significantly decreased the amount of Turn-Key Equipment projects
domestically. Additionally, continued weakness in drilling and well service
activity in Western Canada has negatively impacted revenue in Life Cycle
Management businesses. Revenues of $11.8 million for the three months ended
March 31, 2008 represents a decrease of 42% or $8.5 million over the same
period in 2007. However, the continuing success of Hyduke's international
market development has mitigated this domestic downturn and accordingly,
revenue for the three months ended March 31, 2008 increased 36% or
$3.1 million over the previous quarter (i.e. three months ended December 31,
2007).
Reduced gross margins are due primarily to reduced revenue levels and
continued competitive pricing during the Western Canadian slowdown. Gross
margin of $1.5 million for the three months ended March 31, 2008 represents a
decrease of $2.2 million or 59% over the same period in 2007. Gross margin for
the three months ended March 31, 2008 increased 28% or $0.3 million over the
previous quarter (i.e. three months ended December 31, 2007). Gross margin
percentage of 12.8% for the three months ended March 31, 2008 represents a
decrease of 30% over the gross margin percentage of 18.3% for the same period
in 2007.
EBITDAS of $30 thousand for the three months ended March 31, 2008
represents a decline of 99% or $2.4 million over EBITDAS for the same period
in 2007 and is due primarily to a 42% reduction in revenue and a 30% reduction
in gross margin percentage over the comparable period. EBITDAS for the three
months ended March 31, 2008 increased $480 thousand over the previous quarter
(i.e. three months ended December 31, 2007).
Net loss of $0.3 million ($0.015 per share) for the three months ended
March 31, 2008 represents an improvement in results of 53% over the previous
quarter (i.e. three months ended December 31, 2007). Net loss for the three
months ended March 31, 2008 was reduced by $386 thousand over the previous
quarter (i.e. three months ended December 31, 2007).
Hyduke continues to remain in a very strong financial position. The
Company's current ratio is a healthy 2.86 to 1.00 and debt to equity ratio is
negligible at 0.06 to 1.00. This balance sheet strength will allow Hyduke to
not only weather the short-term storm of reduced Western Canadian activity, it
will allow Hyduke to capitalize on acquisition and growth opportunities as
they arise.
OUTLOOK
Industry expectations for 2008 continue to reflect a reduction in overall
activity in Western Canada as measured by the number of wells drilled. The
Canadian Association of Oilwell Drilling Contractors (CAODC) have forecast the
number of wells drilled (on a completion basis) for 2008 to be 13,735 and an
average rig utilization of 34% for the year. The Petroleum Services
Association of Canada (PSAC) have forecast the number of wells drilled (on rig
released basis) to be 14,500 which represents a 22% decrease over 2007
activity.
While it is expected that new rig builds for use in Western Canada during
2008 will be limited, management believes that continued success and
penetration into international markets will help to offset the domestic
Turn-Key Equipment slowdown. Hyduke continues to actively market its products
and services to international markets in the Russian Federation, India, South
America, North Africa, Middle East, Asia-Pacific and Latin America. While the
project decision making cycle is longer on international work, active quoting
continues on a significant number of international opportunities. Over the
past three years, Hyduke's international revenues have approximated 20% of
total revenue and it is expected that the volume and proportion of
international revenue will increase as additional international opportunities
are secured.
The reduced levels of industry activity forecast for 2008 are also
anticipated to impact Hyduke's Life Cycle Management businesses such as repair
and maintenance, inspections and certification, and consumables. These
activity-based businesses comprise approximately 50% of overall Hyduke
revenue, are less reliant on capital spending and business activity levels
generally trend along with drilling and well service activity. There is a
continued focus on increasing market share through marketing Hyduke's Life
Cycle Management and Single Source Supplier platforms to customers. These
platforms benefit customers by offering continued support throughout the
useful life of their equipment and by offering a wide array of consistent,
reliable services from a single source.
Management is prepared for challenging conditions in 2008. We are very
actively developing markets outside of Western Canada and expect to build upon
our historical successes. Operationally, we continue to focus on cost control,
realizing on vertical integration opportunities and prudent cash management
and investment. Hyduke's strong financial position will be a factor is
protecting the Company from a prolonged downturn as well as allow the Company
to capitalize on growth opportunities as they arise.
Hyduke continues to be confident that its strategic plan considers
current and expected market conditions and that strategic growth will continue
to be achieved through increased products and services and increased
penetration into international markets.
Forward-Looking Statements
This report contains certain forward-looking statements relating, but not
limited to, operations, anticipated financial performance, business prospects
and strategies of Hyduke. Forward-looking information typically contains
statements with words such as "anticipate", "believe", "estimate", "expect",
"plan", "intend" or similar words suggesting future outcomes or outlooks on,
without limitation, estimates of business activity, supply and demand for the
Company's products, the estimated amounts and timing of capital expenditures,
anticipated future debt levels, or other expectations, beliefs, plans,
objectives, assumptions or statements about future events or performance.
Readers are cautioned not to place undue reliance on forward-looking
information. By its nature, forward-looking information involves numerous
assumptions, inherent risks and uncertainties both general and specific that
may cause actual future results to differ materially from those contemplated
and contribute to the possibility that the predictions, forecasts, projections
and other forward-looking statements will not occur. These factors may affect
anticipated earnings or assets and include, but are not limited to: industry
activity levels, market liquidity, customer credit risk, competition, oil and
gas prices, product liability, fixed price contracts, development of new
products, uninsured and underinsured losses, access to additional financing,
source of supply of raw material and third party components, availability of
key personnel, agreements and contracts, government regulations, foreign
exchange exposure, interest rate risk, international scope of operations,
environmental health and safety regulations and Hyduke's anticipation of and
success in managing the risks implied by the foregoing. The Company cautions
that the foregoing list of important factors is not exhaustive. Hyduke
undertakes no obligation to update publicly or otherwise revise any
forward-looking information, whether as a result of new information, future
events or otherwise, except as required pursuant to applicable securities
legislation.
About Hyduke
Hyduke is an integrated oilfield services company with over thirty years
experience in the manufacture, repair and distribution of oilfield equipment
and supplies in Canada and worldwide. Hyduke specializes in providing
customized, integrated solutions to the drilling and well service industries
including:
- Turn-Key Equipment - drilling rig and service rig packages including
in-house design, engineering and drafting, major component
procurement and overall project management;
- Life Cycle Management - inspection, certification, service, repair
and supply services throughout the operating life of the drilling or
well service rig; and
- Single Source Supply - providing new capital equipment, repair and
maintenance on existing capital equipment and supply of operating
consumables.
Hyduke is headquartered in Nisku, Alberta and has facilities in Edmonton,
Calgary, Nisku, Leduc, Red Deer and Lloydminster, Alberta.
Hyduke operates in three operating segments. The Drilling Equipment
segment includes manufacture and repair of land based drilling rigs and
drilling rig structures, supply and repair of drilling rig equipment,
procurement and distribution of drilling supplies, supply and service of
pneumatic controls, engineering and design of drilling rigs and inspection and
certification of drilling rig equipment. The Well Service Equipment segment
includes manufacture and repair of well service rigs, mobile and skid mounted
pump units and other well service equipment, procurement and distribution of
well servicing supplies, supply and service of pneumatic controls, engineering
and design of well service rigs and inspection and certification of well
service equipment. The Other Oilfield Services segment includes manufacture
and distribution of cased hole and overburden drill bits and drilling systems,
custom and production machining services, distribution and repair of
truck-mounted equipment including cranes, winches and dump boxes and
industrial sandblasting, painting and collision repair.
The TSX has not reviewed and does not accept responsibility for the
adequacy or accuracy of this News Release.
For further information: Gordon R. McCormack, President and Chief
Executive Officer, (780) 955-0355; Veronica Dutchak, Chief Financial Officer,
(780) 955-0355
