Winalta Announces Fourth Quarter and Annual Results for 2013

CALGARY, April 4, 2014 /CNW/ - Winalta Inc. ("Winalta" or the "Company") (TSXV:WTA) announces results for the three months and year ended December 31, 2013 (the "Period"). Revenues of $19.1 million and EBITDA of $7.7 million, showed decreases of $0.8 million and $1.5 million, respectively, to revenue of $19.8 million and EBITDA of $9.2 million for the 12 months ending December 31, 2012 (the "Comparative Period"). Winalta's EBITDA for the Period adjusts to $8.2 million due to a one time, non-cash impairment of $0.5 million on a non-core land asset.

Utilization for Wellsites, Drill Camps and Dedicated Geo Labs (DGL) was up 4% over the Comparative Period. The improved asset utilization was offset by an average 17% decrease in day rates. That average includes an expected 10% decrease in Wellsite day rates with the Company's move to SAGD pad and multilateral drilling with a 20% decrease in Drill Camp and DGL day rates due to general market pressures. 

Issues related to the first deployment of Integrated Wellsite Systems (IWS), and operational issues around sub-contractor support equipment, significantly increased Winalta's direct costs, lowering EBTIDA margins from 47% in the Comparative Period to 41% for the Period. IWS deployment issues and sub-contractor support equipment have been addressed and are not expected to occur for 2014.

Year End Highlights

  • SG&A decreased 8% or $300 thousand
  • IWS revenue contributed 7% of total revenue for the Period
  • EBITDA margin of 41% compared to EBITDA margin of 47% in 2012
    • Adjusting for both gains and impairment for 2013 and 2012, EBITDA margins of 42% for the period compare favourably 43% for the Comparative Period

Selected Financial Information

Years ended December 31 (all numbers in thousands unless per share)

2013

2012


$

$

Revenue

19,059

19,833

Earnings before income taxes

1,187

3,147

Net earnings from continuing operations

887

3,620

Earnings per share - continuing operations

0.02

0.09

EBITDA (1)

7,735

9,229

EBITDA per share

0.19

0.23

Total assets

46,807

41,582

Total liabilities

22,898

17,191

Dividends paid

1,615

1,603

(1) EBITDA is defined as net earnings from continuing operations before interest and finance costs, income taxes, depreciation
and amortization.  EBITDA does not have a standardized meaning and is therefore not likely to be comparable with similar measures used by other issuers.  However, Winalta calculates EBITDA consistently from period to period.  While EBITDA is not considered an alternative to net earnings in measuring performance, it is a key measure used by the Company and its investors.  The Company believes EBITDA assists investors in assessing Winalta's performance on a consistent basis without regard to financing costs, taxes and depreciation which, can vary significantly from period to period for reasons not directly related to operations.

Revenue
Winalta's 2013 revenue decreased by 4% or $0.8 million versus the Comparative Period. This 4% decrease in revenue is attributable to decreases in day rates and sub-contractor revenue that were partially offset by increases in utilization and the addition of five IWS. 

Direct Costs
Direct operating costs increased by $100 thousand over the Comparative Period. Direct operating costs in the Period increased by $896 thousand due to additional IWS servicing costs and growth of service staff headcount. This increase was offset by decreases in sub-contractor costs of $796 thousand.

Fleet Expansion
Over the past 12 months, the Company added 30 Wellsite units and 4 DGL to its fleet.

General and Administrative
For the Period, administrative costs were $3.7 million, down from $4.0 million, for the Comparative Period.  Cost reductions were shown in professional fees and operating costs of $275 thousand.  The Company had a savings of $176 thousand from a one-time land disposal cost.  These reductions were offset by an increase of $153 thousand in stock based compensation, salaries and additional marketing expenses.

Depreciation and Amortization
Depreciation and amortization was $5.7 million for the Period as compared to $5.1 million for the Comparative Period.  The increase in depreciation and amortization expense reflects the net acquisition of $10.8 million of equipment in the trailing 12 months.

Finance Costs
Finance costs, which include interest on long-term debt and finance leases and fees paid on refinancing, were $817 thousand for the Period as compared to $1.03 million for the Comparable Period.  The decrease was the result of the Company renegotiating its financing facility with its primary lender to more favorable terms. 

Outlook
Winalta's management has a positive outlook for 2014 based on the Company's expanded rental fleet, introduction and development of the Company's IWS, and a more diversified customer base.

The Company continues to pursue other opportunities to deploy IWS and conventional Wellsites in the SAGD pad and multilateral drilling space.  A shift to deploy equipment within the pad drilling programs, instead of conventional drilling, should mitigate some of the seasonal impact on revenue in 2014.

Winalta has contracts with three major energy companies for the rental of five IWS. These agreements were a new focus for Winalta in 2013 with the first agreement commencing in June 2013. Demand for, and utilization of, Wellsite units continued to increase throughout the fourth quarter of 2013 which continued into the first quarter of 2014.  This activity is expected to continue, adjusted for seasonality, for the balance of 2014.

The strength of future expected financial results is based on previously announced new contracts, an expanded focus on marketing and higher levels of visibility of the Company's IWS fleet. Winalta's entrance into the SAGD and multi well pad drilling space is expected to create steadier revenue streams and decrease historical seasonality.

FOURTH QUARTER RESULTS

Selected Financial Information

3 Months Ending December 31, 2013 (all numbers in thousands unless per share)

  Q4

2013

  $

  Q4

2012

   $

Revenue

6,726

5,304

Earnings before income taxes

700

1,616

Net earnings from continuing operations

625

2,089

Earnings per share - continuing operations

0.01

0.05

EBITDA (1)

2,494

3,149

EBITDA per share

0.06

0.08

(1) EBITDA is defined as net earnings from continuing operations before interest and finance costs, income taxes, depreciation and amortization.  EBITDA does not have a standardized meaning and is therefore not likely to be comparable with similar measures used by other issuers.  However, Winalta calculates EBITDA consistently from period to period.  While EBITDA is not considered an alternative to net earnings in measuring performance, it is a key measure used by the Company and its investors.  The Company believes EBITDA assists investors in assessing Winalta's performance on a consistent basis without regard to financing costs, taxes and depreciation which, can vary significantly from period to period for reasons not directly related to operations.

Revenue
Revenue increased $1.4 million or 27%, for the three months ending December 31, 2013 (the "Quarter") from the quarter ended December 31, 2012 (the "Comparative Quarter"). 

The increase in revenue can be attributed to an 18% improvement in Wellsites, Drill Camps and DGL utilization, which was offset by a reduction in average day rates of 17%.

The average decrease in day rates is a result of an expected 12% decrease in Wellsite day rates with the Company's move to less seasonal SAGD pad and multilateral drilling combined with a 31% decrease in day rates for Drill Camps and DGL as a result of general market pressures.  

Direct Costs
For the Quarter, direct operating costs increased by $782 thousand over the same period in 2012.  Direct operating costs increased due to increases in IWS deployment, sub-contractor costs, wages and service operating costs.

Costs associated with the IWS initial deployment, start-up costs and sub-contractor of the IWS support equipment of $200 thousand have been addressed and are not expected in 2014.

General and Administrative
Administrative costs increased by $18 thousand for the Quarter over the Comparative Quarter. The Company saw increases of $151 thousand in marketing, salaries and advertising.   The increases in subcontractor, wage and service costs are directly related to increased revenue from operations in the fourth quarter of 2013 compared to the fourth quarter of 2012.

Forward-looking information
Certain information set forth in this press release, including management's assessment of the potential for increased cash flows, continued growth of the Company's rental fleet, demand for the Company's rental units and the Company's expectation regarding the status of the economy and its impact on the Company, may constitute forward-looking statements. By their nature, forward-looking statements involve material assumptions and are subject to numerous risks and uncertainties, including with respect to market and economic conditions and their impact on the Company's business, some of which, are beyond the Company's control. Readers are cautioned not to place undue reliance on the forward-looking statements as the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and actual results, performance or outcomes could materially differ from those expressed or implied in such forward-looking statements and accordingly, no assurance can be given that any of the events anticipated by forward looking statements will transpire or occur, or if any of them do so, what benefit Winalta will derive therefrom. The Company does not assume the obligation to revise or update this forward-looking information after the date of this release or to revise such information to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws.

SOURCE Winalta Inc.

For further information: Austin Fraser, President, Phone: (403) 826-5701; David Hopley, CFO, Phone: (780) 469-0143; winalta@winaltainc.com