Hyduke Announces Fiscal 2013 Financial Results

NISKU, AB, March 27, 2014 /CNW/ - Hyduke Energy Services Inc. (HYD - TSX), announced operating results for the three and twelve months ended December 31, 2013.  Hyduke's Financial Statements and Management's Discussion and Analysis have been filed with regulators and are available at www.hyduke.com and at www.sedar.com.

Highlights include the following:

  • Revenue for the current year of $60.4 million is down $43.2 million or 42% over the prior year.
  • Revenue from International markets of $16.2 million, down $30.6 million from 2012, represents 27% of total revenues in the current year.
  • Gross profit for the current year of $7.8 million is down $6.1 million or 44% over the prior year.
  • Gross profit percentage for the current year of 13.0% reflects a slight decline of 0.4 basis points over the prior year.
  • Loss for the current year of $5.1 million.
  • Loss per share (basic) for the current year of $0.21.
  • EBITDAS for the current year of ($1.5 million).
  • During the year the Company discontinued the operations its well service equipment manufacturing business unit based in Edmonton, Alberta.
  • The company is exiting fiscal 2013 with a positive cash position of $2.2 million.
  • Liquidity remains positive with current ratio at 1.83 to 1.00
  • Debt to equity ratio remains low at .31 to 1.00

Selected Statement of

Comprehensive Income

Information

Three Months Ended

Twelve Months Ended

($000's, except per share data)

Dec 31

2013

Sept 30

2013

Dec 31

2012*

(Restated)

Dec 31

2013

Dec 31

2012*

(Restated)







Total revenue – continuing operations

13,119

18,577

20,515

60,391

103,582

Gross profit1 – continuing operations

1,554

2,525

1,781

7,822

13,902

Gross profit (%)

11.9%

13.6%

8.7%

13.0%

13.4%

EBITDAS 1 – continuing operations

(1,604)

584

(232)

(1,495)

5,321

Profit (loss) – continuing operations

(1,970)

32

(617)

(3,100)

2,122

Profit (loss)

(3,158)

(317)

(1,263)

(5,054)

795

Profit (loss) per share – basic ($)

(0.130)

(0.013)

(0.052)

(0.21)

0.03

Profit (loss) per share – diluted ($)

(0.130)

(0.013)

(0.052)

(0.21)

0.03

*Certain amounts shown here do not correspond to the 2012 financial statements and reflect adjustments made, refer to Note 3.1 of the Financial Statements

Fiscal 2013 revenues of $60,391,134 decreased $43.2 million (42%) over the prior year which was due primarily to a significant reduction in revenues from sales orders from international customers.  Approximately 45% of the Company's revenues in 2012 were from international customers compared to 27% in the current year.

Fiscal 2013 gross profit (refer to NON-IFRS MEASURES) of $7,821,998 decreased $6.1 million (44%) over the prior year was due to decreased revenue and a decrease in gross profit percentage of 0.5% points. 

Fiscal 2013 EBITDAS (refer to NON-IFRS MEASURES) was ($1,5 million), a $6.8 million decrease from the prior year. This is a result of significantly decreased revenue without a commensurate reduction in fixed costs.    

Management is focused on reducing operating costs and infrastructure while minimizing any potential negative impact on revenue producing capability.  Management is actively monitoring anticipated activity levels to optimize the level of available human and capital resources and increase labour efficiencies where possible.

Fiscal 2013 loss from continuing operations of $3.1 million represents a decline of $5.2 million over the prior year

Selected Financial Position Information


 ($000's, except ratios)

December 31

 2013

December 31

 2012

Total assets

44,300

58,155

Total current assets

30,417

43,066

Total cash and short term deposits

2,228

1,843

Total liabilities

17,497

26,246

Total current liabilities

16,654

16,111

Total bank indebtedness

Nil

1,200

Total interest bearing debt

8,433

8,669

Total equity

26,804

31,909




Current ratio (current assets divided by

current liabilities)

1.83 to 1.00

2.67 to 1.00

Debt to equity ratio (interest bearing debt

divided by shareholders' equity)

0.31 to 1.00

0.27 to 1.00

 

At December 31, 2013 Hyduke maintained a very strong balance sheet as measured by liquidity (current ratio of 1.83 to 1.00) and debt to equity (ratio of 0.31 to 1.00)

Total assets of $44.3 million as at December 31, 2013 declined $13.9 million (23.8%) from the prior year.  Total current asset decreased by $12.6 million due to a decrease in trade and other receivables of $9.8 million and unbilled revenue of $3.2 million.

Total liabilities of $17.5 million as at December 31, 2013 represents a decrease of $8.8 million (33.3%) from the prior year.  Total current liabilities increased $0.5 million.  This change is due to a decrease in trade and other payables of $3.2 million and a decrease in unearned revenue of $2.4 million offset by the reclass of an equivalent amount of term debt from long term to current. 

OUTLOOK
The 2013 fiscal year was very challenging for Hyduke.  It was characterized by a sharp decline in international equipment sales and the subsequent significant drop in revenue versus 2012. 

Further, 2013 was not a strong year for Hyduke's main client base in Canada, contractors that build, own and operate drilling and well servicing rigs.  According to data from June-Warren Nickles Energy group, drilling rig operating days in 2013 were 102,900, the lowest since the recession of 2009.  This figure was 28,200 operating days or 22% lower than in 2011, a year when Hyduke was profitable.  The total number of wells drilled was 11,157, a slight increase over 11,124 wells in 2012 but substantially lower the total wells drilled for each of nine prior years with the exception of 2009.  Less wells drilled means less activity for well servicing rigs, a key Hyduke client group.

At the Annual General and Special Meeting of Shareholders on June 13, 2013, there was a major change in the composition of the Board of Directors of the Company. The new board undertook to engage executive management in a complete operational and strategic review of all operations with a view to improving financial performance and efficiency. This process has led to significant changes that are intended to improve efficiency and profits by reducing Hyduke's business lines, focusing on those operations with the greatest margins or potential and leading Hyduke towards a future that exploits its full potential.

This process resulted in several significant changes to the Company. A non-performing division was closed and discontinued and two other operatons have been planned for discontinuance in 2014. Fixed costs such as administration and building leases have been reduced and further reductions are anticipated. Changes were made to the Executive Management team. All aspect of Hyduke's business operations are undergoing a complete review.

Because of the unpredictability and high sales cost of international revenues, part of the go-forward focus will be on ensuring maximum participation in domestic markets.

Management is of the view that the cumulative impact of the changes that have been made and will be made will result in a Company built on a more predictable income stream leading to a return to profitability.

Hyduke is of the view that the growth in total revenue available to the end user Exploration and Production (E&P) companies in Canada will drive business for Hyduke's main clients, contractors operating drilling and well servicing rigs and associated support equipment. The recovery of the price of natural gas may help reactivate some of the smaller drilling and service rigs that have been idled in recent years. Putting suspended gas wells back on stream because they are now economic to produce will drive business for well servicing rig contractors. The base market in which Hyduke operates in Canada is robust and the board and management is taking the appropriate steps to ensure Hyduke participates.

In the short term, the significant drop in international sales and downturn in domestic activity, combined with an excessively complex corporate structure and high fixed costs, has resulted in substantial operating losses. This is reflected in Hyduke's 2013 financial results.

Management is of the view that the steps that began last summer with the strategic review executed by the new Board of Directors and the resulting and ongoing actions will lead Hyduke to a place where it is again profitable. From this foundation, Hyduke will execute a more focused and strategic growth strategy that exploits and builds upon its strong client base and the solid macro-market foundations in which its clients operate.

Forward Looking Statements
This report contains certain forward-looking statements under the heading "Outlook" and elsewhere concerning future events or the Company's 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.  The Company believes that the expectations reflected in the forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon.  The forward-looking statements in this report speak only as of the date of this report.  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.

During the year, the Company restructured its business operations into two operating segments and one corporate services segment as follows:

Hyduke Rig Equipment: the Hyduke Rig Equipment segment includes the design, manufacture and refurbishment of land-based drilling rigs, workover rigs, drilling and well service support equipment.

Hyduke Supply and Service: the Hyduke Supply and Service segment includes the procurement and distribution of spare parts, equipment components, operating supplies and pneumatic controls to the drilling and well service industries, the service and repair of drilling rig, workover rig, service rig and truck mounted equipment, and the inspection and certification of drilling rig and well service equipment. 

Corporate Services: The Corporate Services segment includes costs for management and administration, sales and marketing, accounting and finance and engineering and drafting services provided to all Hyduke operating segments.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this News Release.

SOURCE Hyduke Energy Services Inc.

For further information: John Pinsent, FCA, Chair of the Board, (780) 448-0399; Veronica Dutchak, CA, Chief Financial Officer, (780) 955-0355