/THIS PRESS RELEASE IS NOT FOR DISSEMINATION IN UNITED STATES OR TO ANY UNITED STATES NEWS SERVICES/
CALGARY, May 26 /CNW/ - IROC Energy Services Corp. ("IROC" or the "Corporation") (TSXV: ISC) announces an operational update and guidance with respect to revenues and EBITDAS for the first quarter of 2011. This update is being provided as a result of the significant increase in activity in our business in the first quarter of 2011 as compared to the prior year and prior quarter.
Eagle Well Servicing
- Eagle Well Servicing rig utilization, as measured by IROC's internal
methodology, was 78% for the first quarter of 2011, with 25,391 rig
hours being recorded and 36 service rigs in service during the
- Subsequent to the end of the first quarter 2011, in May, 2011, the
Corporation has placed one additional rig into service for a total
operational service rig fleet of 37 rigs. In addition, five new
service rigs are being built with delivery expected in the third and
fourth quarters of 2011.
- The trend toward increased oil related activity continues to provide
benefit for our service rig division. Current activity levels are
estimated to be in excess of 75% levered to oil, with completion,
work over and abandonment activity all providing continued strong
demand for our services in the foreseeable future.
- Eagle Well Servicing was able to fully crew its assets through the
first quarter of 2011, despite a very tight labour market across the
- Activity levels continue to be strong given robust demand driven by
oil activity, the expansion of horizontal drilling technology
applications to new areas in Western Canada, ongoing abandonment work
and an increasing base of active wells requiring ongoing maintenance.
AERO Rental Services
- With the increase in drilling and field service activity over the
past three quarters, IROC's rental services division, AERO Rental
Services, remains strong and continues to grow. Growth in AERO's
business is driven by increased horizontal and SAGD drilling activity
in Western Canada. With the acquisition of the rental assets of Trust
Energy Services in the third quarter of 2010, AERO's fracturing and
coil tubing related business has also become an important part of our
- AERO currently expects to add $7 million worth of rental inventory in
2011, the majority of which will be purchased by the end of the
2011 First Quarter Revenue and EBITDAS Guidance
As a result of the increased activity IROC forecasts revenue of $26.7 million and EBITDAS of $8.3 million for the three months ended March 31, 2011.
IROC's interim unaudited financial statements and management's discussion and analysis ("MD&A") for the three months ended March 31, 2011 are scheduled to be released in June, 2011. This is later than normal due to the adoption of International Financial Reporting Standards. Given the length of time until the formal regulatory release of this information, the Corporation is selectively releasing certain operating information and guidance with respect to revenues and EBITDAS for the first quarter of 2011. The reader is cautioned that certain information contained in this release is forward looking and subject to adjustment due to the use of estimates and assumptions and additional information which may come to light prior to the release of the interim unaudited financial statements. See "Cautionary Statement Regarding Forward Looking Information and Statements" and "Non-GAAP Financial Measures".
2011 Capital Expenditure Budget
IROC's 2011 capital expenditure budget has been increased to $26.2 million from the previously announced $17.2 million. The increase being for the construction of 3 more service rigs and the purchase of an additional $2 million of rental equipment. It is expected that the entire capital budget will funded by 2011 cash flows. The 2011 capital budget is now comprised of the following:
- $12.6 million - for construction of six new service rigs in the Eagle
Well Servicing division, with one rig being delivered during May, and
one rig to be delivered in each of June, July, September, October and
November, 2011. These rigs are utilizing in excess of $1.4 million of
new fixed assets which were being held in inventory, for a total
build cost of $14.0 million.
- $7 million - for expansion of rental inventory assets in the Aero
- $5.6 million - for construction of three coil tubing units with
- $1 million for maintenance and infrastructure expenditures.
In addition, there continues to be numerous growth opportunities for IROC and, accordingly additional capital expenditures may be undertaken later in 2011 should opportunities for accretive additions and / or acquisitions continue to develop.
It is expected that the capital budget will funded by 2011 cash flows.
Renewal of Credit Facilities
IROC also announced the renewal of its existing credit facilities with a syndicate of three Canadian financial institutions (the "Credit Agreement") including the National Bank of Canada, Alberta Treasury Branches and Canadian Western Bank. The Credit Agreement provides the Corporation with a $35 million extendible revolving term facility (the "Facility"). The Facility has an accordion feature which provides the Corporation with an ability to increase the maximum borrowings under the Facility to up to $55 million, subject to the approval of the lenders. The Facility matures on May 31, 2012 (the "term-out date") and no principal payments are required under the Facility until the term-out date. Upon maturity the Facility may be extended for a further 364 day period upon approval of the lenders. If the Facility is not renewed beyond the term-out date, the principal balance shall be repaid in twenty four equal monthly installments of one-thirty sixth of the balance outstanding, with the remaining balance payable on May 30, 2014. Interest is payable monthly.
About IROC Energy Services Corporation
IROC Energy Services Corp. is an Alberta oilfield services company that, through the IROC Energy Services Partnership, provides a diverse range of products, services and equipment to the oil and gas industry that are among the newest and most innovative in the WCSB. IROC Energy Services Partnership operates under the business names of Eagle Well Servicing, Aero Rental Services, Canada Tech, and Helix Coil Services. IROC combines cutting-edge technology with depth of experience to deliver a product and services offering in the following core areas: Well Servicing & Equipment, Rental Services, Downhole Temperature & Pressure Monitoring Tools, and Coiled Tubing Services & Equipment. For more information on IROC Energy Services Corp. visit our website at www.iroccorp.com.
Cautionary Statement Regarding Forward Looking Information and Statements
Certain information contained in this news release, including information related to the Corporation's level of service rig utilization, expected revenues, expected EBITDAS, timing of release of 2011 first quarter financial results, future capital expenditures, anticipated equipment counts and information or statements that contain words such as "forecasts", "could", "should", "can", "anticipate", "expect", "believe", "will", "may", "likely", "estimate", "predict", "potential", "continue", "maintain", "retain", "grow", and similar expressions and statements relating to matters that are not historical facts, and / or are under columns labelled "guidance", constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. This information or these statements are based on certain assumptions and analysis made by the Corporation in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances, and the statements contained in this news release speak only as of the date hereof.
Whether actual results, performance or achievements will conform to the Corporation's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from the Corporation's expectations. Such risks and uncertainties include, but are not limited to: fluctuations in the price and demand for oil and natural gas; fluctuations in the level of oil and natural gas exploration and development actives; fluctuations in the demand for well servicing and ancillary oilfield services; capital market liquidity available to fund oil and gas exploration and development programs; the effects of seasonal and weather conditions on operations and facilities; the highly competitive operating environment inherent in well servicing and ancillary oilfield services; general economic, market or business conditions; changes in laws or regulations; the availability of qualified operational and management personnel; currency exchange and interest rate fluctuations; uncertainties associated with regulatory approvals; uncertainty of government policy changes; uncertainties associated with credit facilities and counterparty credit risk; changes in income tax laws or changes in tax laws, crown royalty rates and incentive programs relating to the oil and gas industry; risks associated with government regulations and environmental health and safety matters; differences between Canadian GAPP and IFRS; and other unforeseen conditions which could impact the use of equipment and services supplied by IROC.
Consequently, all of the forward-looking information and statements made in this news release are qualified by this cautionary statement and there can be no assurance that the actual results will be realized. Except as may be required by law, the Corporation assumes no obligation to update publicly any such forward-looking information and statements, whether as a result of new information, future events, or otherwise.
Non-GAAP Financial Measures
The financial statements, when released, will be prepared in accordance with GAAP. Certain supplementary information and measures not recognized under GAAP are provided where Management believes they assist the reader in understanding IROC's results.
EBITDAS is defined as earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, foreign exchange gains and losses, goodwill impairment, note receivable impairment, and gains or losses on disposal of property and equipment. EBITDAS are not recognized measures under GAAP. The Corporation believes that EBITDAS provides a measure of operating performance without reference to financing decisions, income tax impacts and non-cash expenses, which are not controlled at the operating management level. Accordingly, the Corporation believes EBITDAS is a useful measure for prospective investors in evaluating the financial performance of the Corporation, and specifically, the ability of the Corporation to service the interest on its indebtedness and generate cash for re-investment. Investors should be cautioned that EBITDAS should not be construed as an alternative to net income determined in accordance with GAAP as an indicator of the Corporation's performance. IROC's method of calculating EBITDAS may differ from those of other companies, and accordingly, EBITDAS may not be directly comparable to measures used by other companies.
The Corporation is not providing net income guidance at this time and is therefore unable to reconcile EBITDAS guidance provided to net income.
This press release is not for dissemination in United States or to any United States news services. The Common Shares of IROC have not and will not be registered on the United States Securities Act of 1933, as amended (the "United States Securities Act") or any state securities laws and are not offered or sold in the United States or to any US person except in certain transactions exempt from the registration requirements of the United States Securities Act and applicable state securities laws.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE IROC Energy Services Corp.
For further information: IROC Energy Services Corp., Mr. Thomas M. Alford, President and CEO, Telephone: (403) 263-1110, Email: email@example.com