Crossfire Energy Services announces Q3 2007 operating results



    CALGARY, Nov. 30 /CNW/ - Crossfire Energy Services Inc., ("Crossfire" or
the "Company") (TSX Venture: CFE) announced its consolidated operating and
financial results for the three and nine month periods ending September 30,
2007.
    For the three-month period ending September 30, 2007, Crossfire reported
revenues from continuing operations of $8.62 million compared with revenues of
$6.05 million for the same period last year. The net loss for the period from
continuing operations was $941 thousand or ($0.04) per share versus net income
of $732 thousand or $0.09 per share for the same period last year.
    The Company incurred a loss from discontinued operations for the three
month period ended September 30, 2007 amounting to $2.25 million or ($0.10)
compared with a gain from discontinued operations in the comparative period
amounting to $561 thousand or $0.07 per share. The Company generated an
EBITDA(1) loss from continuing operations of $81 thousand compared with
EBITDA(1) from continuing operations of $1.26 million for the same three month
period in 2006.
    For the nine-month period ending September 30, 2007, Crossfire reported
revenues from continuing operations of $21.78 million compared with revenue of
$6.05 million for the same period last year. The net loss for the period was
$2.94 million or ($0.14) loss per share versus a net income of $1.21 million
or $0.14 per share for the same period last year.
    "The loss from discontinued operations is a result of the Company's
decision to close the Calgary fabrication facility in September 2007," said
Scott Hamilton, Crossfire's Chief Financial Officer. "An overall decline in
activity associated with lower natural gas commodity prices and excess
capacity within the organization as a result of the Micoda acquisition
necessitated this closure."
    In August 2007 Crossfire acquired Micoda Process Systems Inc. ("Micoda").
Micoda houses its operations in a 107,000 square foot facility in Medicine
Hat, Alberta. Micoda previously operated in approximately 18,000 square feet
of space in Nisku, Alberta relocating its business in January 2007. The move
into the new facility and subsequent merger into Crossfire created opportunity
in terms of fabrication capacity. Unfortunately, this additional capacity,
combined with recent activity declines in domestic natural gas drilling
necessitated the decision to close the Calgary fabrication facility in
September 2007. As a result of this decision, Crossfire incurred a loss from
discontinued operations for the three month period ended September 30, 2007 of
$2.25 million. Included in this loss from discontinued operations is a
non-cash write down of goodwill and intangible assets of $1.74 million. The
goodwill and intangible assets pertain to the acquisition of Dynacorp
Fabricators Inc. which was completed in June 2006. The Company does not
foresee any additional write down of goodwill and intangible assets for the
remainder of the year.
    Management's revenue expectations were included in the Company's
financial guidance provided on August 29, 2007. Management anticipated that
revenue for the three-month period ending September 30, 2007 would approximate
$8.825 million while actual revenue generated by Crossfire was $8.625 million.
Management anticipated that EBITDA(1) would approximate $0.225 million while
actual EBITDA(1) from continuing operations was a loss of $81 thousand. While
revenue met with management's expectations, Crossfire did see an erosion of
gross margins as a result of competitive pricing pressures due to lower
industry activity levels in the Canadian oil and gas marketplace.
    "These third quarter results fell below the financial guidance provided
by Management on August 29, 2007 primarily as a result of competitive pricing
pressure on gross margins," noted Dean Bethune, Crossfire's President and CEO.
"We continue to see a softening of field activities as declines in natural gas
commodity prices depress activity levels in Western Canada."

    
    Q3 - 2007 FINANCIAL HIGHLIGHTS
    -------------------------------------------------------------------------
                                              Three Month       Nine Month
                                            Periods ending    Periods ending
                                             September 30      September 30
    Selected Financial Information
    -------------------------------------------------------------------------
    ($ thousands, except per share amounts)  2007     2006     2007     2006
    -------------------------------------------------------------------------

    Revenue
      Construction Services                 4,936    3,660   15,099    3,660
      Fabrication Services                  3,689    2,393    6,680    2,393
                                          -----------------------------------
                                            8,625    6,053   21,779    6,053
                                          -----------------------------------

                                          -----------------------------------
    EBITDA(1)                                 (81)   1,256    1,821    1,179
                                          -----------------------------------
    EBITDA(1) per share
      Basic                                 (0.00)    0.15     0.08     0.14
      Diluted                                   -     0.08     0.09     0.08

                                          -----------------------------------
    Income(loss) from continuing
     operations                              (941)     732       60      651
                                          -----------------------------------
    Income(loss) from continuing
     operations per share
      Basic                                 (0.04)    0.09     0.00     0.08
      Diluted                                   -     0.05     0.00     0.04

                                          -----------------------------------
    Income(loss) from discontinued
     operations                            (2,251)     561   (2,988)     561
                                          -----------------------------------
    Income(loss) from discontinued
     operations per share
      Basic                                 (0.10)    0.07    (0.14)    0.07
      Diluted                                   -     0.04        -     0.04

                                          -----------------------------------
    Net income (loss)                      (3,193)   1,293   (2,938)   1,212
                                          -----------------------------------
    Net income (loss) per share
      Basic                                 (0.14)    0.15    (0.14)    0.14
      Diluted                                   -     0.08        -     0.08

    Weighted average shares
     outstanding (thousands)               22,331    8,456   22,331    8,456
    Fully diluted shares outstanding
     (thousands)                           20,619   15,640   20,619   15,640

    (1) EBITDA is defined as earnings before interest, taxes, depreciation,
        amortization and stock-based compensation.

        EBITDA is not a recognized measure under Canadian Generally Accepted
        Accounting Principals
    

    Fabrication Services
    --------------------
    The Fabrication Services division generated revenue of $3.69 million
compared with revenues of $1.99 million in the second quarter of 2007. The
acquisition of Micoda was completed during the third quarter with an effective
date of August 1, 2007. Micoda contributed approximately $1.0M in additional
revenue during this period. Shortfalls in forecast revenues were realized in
the Calgary and Grande Prairie fabrication facilities. The traditional product
lines of these facilities are packages tailored to the production testing
industry which has faced negative pressure in terms of activity. Activity
declines in Calgary and Grande Prairie were partially offset by strong
activity in the Edmonton facility. Activity levels have returned as the group
continues to work on projects tailored to oil sands activity. Looking at the
balance of the year, improvements in terms of activity are expected during the
third quarter of 2007 and the first quarter of 2008 due to a conscious effort
to focus resources on the International and U.S. markets which have not seen
activity declines apparent in the Western Canadian sedimentary basin.

    Construction Services
    ---------------------
    The Construction Services division generated revenue of $4.94 million
compared with revenue of $3.66 million during the same three month period in
2006. While management is pleased with overall revenues, we have seen gross
margins eroded as a result of a number of factors. Competitive pricing
pressures created by reduced industry activity negatively impacted gross
margins realized by the group. In addition, unseasonable wet weather in the
Grande Prairie region in July and August reduced our ability to put our people
and equipment to work. Looking to the remainder of the year, we will continue
to see downward pressure on gross margins and believe that reduced activity
levels will provide a continuation to these pressures. Recent announcements by
the Alberta government regarding its intentions to raise royalties have
created uncertainty in the Canadian oil and gas industry. Given the uncertain
market, Crossfire is focusing its efforts on internal cost controls, and
revenue generation from International markets to effectively offset reduced
industry activity in Western Canada.
    The loss incurred in the third quarter of 2007, combined with the
impairment of goodwill and intangibles and the ensuing write down resulted in
the Company being in breach of a financial covenant within its credit
facility. The Company's lender has provided the Company with a waiver of the
breach for September 30, 2007. In conjunction with the grant of the waiver,
the Company has agreed to the payment of a one-time fee of $100,000 in
addition to modifications to the Company's existing credit facilities. The
operating line of credit has been reduced to a maximum of $5.2 million and the
interest rate charged on the operating line has been set at bank prime plus
2.25%. In addition, the interest rate charged on the long term debt is a
blended rate of bankprime plus 2.5% and prime plus 2.75%.

    Outlook

    Looking into the fourth quarter of 2007 and beyond, we are seeing a
strengthening to our backlog of orders in our Fabrication Services division
from both International and oil sands related markets. Our manufacturing
facility in Edmonton (Acheson) has seen an influx of work of projects targeted
at oil sands development. In addition, the Medicine Hat facility has seen an
increase of testing equipment projects targeted for the United States, the
Middle East and domestic customer applications in Western Canada.
    Weaker demand for oilfield services in Western Canada is expected to
continue throughout 2007 and into 2008. Industry associations forecast
reductions in drilling activity in Western Canada ranging from 16 - 18 percent
in 2008 compared with 2007. While not directly tied to wells drilled, these
activity declines will negatively impact demand for the Construction Services
provided by the Company. Crossfire has rationalized its operations in order to
reduce costs while retaining the ability to react to customer demands.

    
    The Company will host a conference call on Monday December 3, 2007 at
11:30 a.m. Eastern Time to discuss the third quarter financial results.

    Live Call Number      416-644-3421 or 1-800-732-9303
    

    About Crossfire Energy Services

    Crossfire Energy Services is a full-service provider of design,
fabrication, construction and installation of oilfield facilities and carries
on business under the name Crossfire Energy Services(TM). The Company's
success is achieved through a commitment to building long-term relationships
with clients, employees and investors. Crossfire trades on the TSX Venture
Exchange under the symbol "CFE".

    The TSX Venture has in no way passed upon the merits of the contents nor
    approved or disapproved the contents of this press release. The TSX
    Venture does not accept responsibility for the adequacy or accuracy of
    this release.

    %SEDAR: 00016387E




For further information:

For further information: Dean Bethune, President & CEO, Crossfire Energy
Services Inc., Suite 550, 340 - 12th Avenue SW, Calgary, AB, T2R 1L5,
dbethune@crossfireenergy.ca, www.crossfireenergy.ca; A. Scott Hamilton, Chief
Financial Officer Crossfire Energy Services Inc., Suite 550, 340 - 12th Avenue
SW, Calgary, AB, T2R 1L5, shamilton@crossfireenergy.ca,
www.crossfireenergy.ca

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CROSSFIRE ENERGY SERVICES INC.

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