Flint Energy Services Ltd. Announces Second Quarter Earnings

(TSX - FES)

CALGARY, Aug. 5 /CNW/ - Flint Energy Services Ltd. (Flint, the Company) released its second quarter results today after markets closed.

Highlights

    
    -   Revenues for the three month period ending June 30, 2010 were $459.2
        million, up $35.0 million from Q2 2009. Revenues for the six month
        period ending June 30, 2010 were $980.5, up $26.1 million from the
        comparable period last year.

    -   Net earnings for the second quarter 2010 were $8.2 million, up $4.4
        million from Q2 2009 earnings of $3.8 million. Earnings per share
        were $0.18 for the quarter compared to $0.08 in the second quarter of
        2009. For the six month period ending June 30, 2010, net earnings
        were $25.9 million, up $3.6 million from the same period in 2009.
        Fully diluted earnings per share for the six month period were $0.56,
        compared to $0.48 for the same period in 2009.

    -   EBITDA for the three month period ending June 30, 2010 was $31.7
        million, up $8.2 million from the second quarter of 2009. EBITDA
        margin for the second quarter of 2010 was 6.9%, up 1.4% from the same
        period in 2009. EBITDA for the six month period was $75.7 million, up
        $5.4 million from the comparable period in 2009. Year to date EBITDA
        margin was 7.7% compared to 7.4% for the same period last year.

    -   General and administrative ("G&A") expense for the first quarter of
        2010 was $32.7 million or 7.1% of revenue, compared to $31.9 million
        or 7.5% of revenue in the second quarter of 2009. For the first six
        months of 2010, G&A expense was $69.0 million, down $5.2 million from
        the same period in 2009. Year to date G&A margin was 7.0% compared to
        7.8% in the same period of 2009.

    -   Interest expense (net of interest income) for the second quarter 2010
        was $3.6 million, flat with the second quarter of 2009, and year to
        date interest expense was $6.9 million, down $1.9 million from the
        comparable period in 2009.

    -   Flint's cash holdings as of June 30, 2010 were $155.0 million and
        operating loans remained undrawn in the second quarter of 2010.

    -   During the quarter, Flint acquired PES Surface Inc. ("PSI"), a
        production equipment company located in central Alberta that designs
        and fabricates pressure vessels, line heaters, mini cyclones,
        combination units, and zero-emission products. The acquisition of PSI
        is expected to provide opportunities for the Company's US subsidiary
        to expand into the Canadian production equipment market through this
        established company, which Flint has branded internally at Flint
        Process Systems Ltd.
    

W. J. (Bill) Lingard, President and Chief Executive Officer of the Company said, "The second quarter represented a turning point for Flint in the recent industry down cycle. We are pleased with the increased activity we are experiencing in our Maintenance Services and Production Services segments. Our Oilfield Services and Facility Infrastructure segments were off the pace in the second quarter with two of Facility Infrastructure's major contracts winding down, while in Oilfield Services, fluid hauling activity was not as robust as it was in the second quarter of last year. The second half of 2010 looks promising for Flint, with increased activity expected in all segments with the exception of Facility Infrastructure where our focus remains on replenishing our construction backlog for 2011 and 2012."

Second Quarter

Revenue for the three months ended June 30, 2010 was $459.2 million, an increase of $35.0 million or 8.3% compared to $424.2 million for the same period in 2009. Increased revenues from the Production Services and Maintenance Services segments offset reduced revenues from the other segments. Canadian operations generated $382.9 million in revenues, up $36.3 million as a result of increased activity in Western Canada. The United States operations generated $76.3 million in revenues, down $1.3 million as a result of the negative impact of foreign exchange of $8.7 million on revenue.

Direct costs in the second quarter were $395.0 million compared to $369.1 million in the second quarter of 2009, for gross margins of 13.9% in the second quarter of 2010 compared to 13.0% in the second quarter of 2009. This increase in margins was the result of improved performance in Production Services, notably in our United States operations due to strong cost control measures put in place in Q3 of last year.

Overall, EBITDA margins increased 1.4% to 6.9% in the second quarter of 2010 from 5.5% in 2009. The Production Services segment EBITDA margin percentage was 9.3%, an increase of 6.4% from 2.9% in 2009. The increase was a direct result of higher volumes in Canada and improved margins in both Canada and the United States. The EBITDA margin in the Facility Infrastructure segment was 9.2% compared to 10.5% for 2009, a decrease of 1.3% as a result of reduced revenues as Flint substantially completed two major contracts in the quarter. EBITDA margins in the Oilfield Services segment decreased to (9.7)% compared to 1.4% for 2009, primarily as a result of lower fluid hauling activity than experienced last year. The EBITDA percentage for the Maintenance Services segment increased to 5.8% from 5.6% in 2009 due to stronger revenues as a result of increased turnaround work in the quarter.

General and administrative expenses for the quarter increased slightly by $0.8 million to $32.7 million compared to $31.9 million in the same quarter in 2009. G&A expenses as a percentage of revenue was 7.1% compared to 7.5% in the second quarter of 2009 and 7.0% in the first quarter of 2010. This area continues to be closely monitored by management.

The Company realized net earnings of $8.2 million ($0.18 per common share) during the quarter ended June 30, 2010, compared to net earnings of $3.8 million ($0.08 per common share) in 2009, for a net increase of $4.4 million. The increase in net earnings was primarily the result of increased volumes overall and improved margins in the Production Services segment.

Outlook

In the first half of 2010, approximately 5,500 wells were drilled in Canada compared to 3,800 in the same period of 2009. Industry forecasts are projecting drilling in Canada to reach 13,000 wells in 2010 compared to just 8,360 drilled last year, which would represent a 65% increase in drilling in the second half of 2010. However, unusually wet weather conditions in Alberta in June and July had dampened drilling activity, especially in the South, which could impact overall drilling volumes in the second half.

In the United States where an estimated 23,109 wells were drilled in the first half of the year compared to 17,416 in the first half of 2009, land based activity had picked up. Industry forecasts project 2010 drilling in the US to reach 49,000 wells, up 42% from last year. Second half drilling is expected to reach 26,000 wells, which would be an increase of 53% over the second half of 2009.

Management expects the second half activity in 2010 for its Production Services segment to continue to improve quarter over quarter, with Q3 activity in Canada more active than Q2 seasonally, and more active than last year due to increased drilling and field work to tie the additional wells drilled. The company has had a number of multi-year contract wins which provide improved certainty for revenues in the second half of 2010 and beyond.

Oilfield Services which includes rig moving, fluid hauling and specialty hauling activities is expected to be busier in the second half of the year with increases in seasonal activity and increased activity due to stronger well drilling. The same should hold true for the company's US operations of Production Services and Oilfield Services, where Flint's recently relocated rig moving equipment will be in operation early in the third quarter.

The Company's Facility Infrastructure segment substantially completed work on the Shell Albian Froth Treatment facility and the StatOil Leismer SAGD demonstration project near Fort McMurray at the end of Q2 2010. Work continues on the Suncor Firebag 3 contract for site wide construction and pre-commissioning work near Fort McMurray which will run through the second half of 2010 and into early 2011. The company is bidding on a number of large contracts which are expected to commence in early to mid 2011. Announcements on these contracts are not expected before the end of Q3 2010.

Flint's 50% owned company, FT Services, which is reported in Flint's Maintenance Services segment, completed a major turnaround for Royal Dutch Shell at their Scotford refining facilities East of Edmonton in Q2 2010. FT Services also commenced work on Suncor's U2 turnaround which was successfully completed in early July. Additionally, FT Services is engaged in business development activities and is bidding on a number of maintenance opportunities with new customers in the oil sands and refining areas of Alberta.

Management is optimistic that the second half of 2010 will see improving revenues in all segments with the exception of Facility Infrastructure. While Facility Infrastructure activities will decrease in the second half, the company expects contract awards late in Q3 or early Q4 which will provide better certainty for 2011 and 2012 revenues for this segment.

A summary of financial information follows. Complete copies of the Company's second quarter 2010 interim financial results are available on www.SEDAR.com and on the Company's website: www.flintenergy.com.

The following table summarizes key financial data to be read in conjunction with the audited financial statements of the Company as at and for the quarter ended June 30, 2010. Such financial statements are prepared in accordance with GAAP and are reported in Canadian dollars.

    
    -------------------------------------------------------------------------
    (For the three
     months ended               % of                % of  Increase      %
     June 30)         2010   Revenue      2009   Revenue (decrease)   Change
    -------------------------------------------------------------------------

    Revenue       $  459.2    100.0%  $  424.2    100.0%  $   35.0      8.3%
    EBITDA            31.7      6.9%      23.5      5.5%       8.2     34.9%
    Net earnings       8.2      1.8%       3.8      0.9%       4.4    115.8%
      per common
       share
       - basic    $   0.18            $   0.08            $   0.10
      per common
       share
       - diluted  $   0.18            $   0.08            $   0.10
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                             Three months ended         Six months ended
                                   June 30                   June 30
    Reconciliation of      --------------------------------------------------
     EBITDA                      2010         2009         2010         2009
    -------------------------------------------------------------------------

    Net earnings           $      8.2   $      3.8   $     25.9   $     22.3
    Amortization                 14.1         14.2         29.1         28.7
    Share based
     compensation expense         1.2          0.8          3.0          1.8
    Interest expense, net
     of interest income           3.7          3.6          6.9          8.8
    Income tax expense            4.5          1.1         10.8          8.7
    -------------------------------------------------------------------------
    EBITDA                 $     31.7   $     23.5   $     75.7   $     70.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Selected financial information for each reportable business segment for the second quarter and six month period ending June 30, 2010 is as follows:

    
    -------------------------------------------------------------------------
    (in thousands
     of Canadian
     dollars, for
     the three
     months ended                                         Increase     %
     June 30)       2010                2009             (decrease)  Change
    -------------------------------------------------------------------------
    Revenue by
     reportable
     segment
      Production
       Services   $195,206       43%  $187,116       44%  $  8,090      4.3%
      Facility
       Infra-
       structure   109,715       24%   132,071       31%   (22,356)   (16.9%)
      Oilfield
       Services     34,904        8%    38,811        9%    (3,907)   (10.1%)
      Maintenance
       Services    119,346       25%    66,240       16%    53,106     80.2%
    -------------------------------------------------------------------------
      Total       $459,171      100%  $424,238      100%  $ 34,933      8.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EBITDA by
     reportable
     segment
      Production
       Services   $ 18,126       57%  $  5,355       23%  $ 12,771    238.5%
      Facility
       Infra-
       structure    10,042       32%    13,891       59%    (3,849)   (27.7%)
      Oilfield
       Services     (3,393)     (11%)      536        2%    (3,929)  (733.0%)
      Maintenance
       Services      6,898       22%     3,722       16%     3,176     85.3%
    -------------------------------------------------------------------------
      Total       $ 31,673      100%  $ 23,504      100%  $  8,169     34.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (in thousands
     of Canadian
     dollars, for
     the six
     months ended                                         Increase     %
     June 30)       2010                2009             (decrease)  Change
    -------------------------------------------------------------------------
    Revenue by
     reportable
     segment
      Production
       Services   $409,994       42%  $442,673       46%  $(32,679)    (7.4%)
      Facility
       Infra-
        structure  250,721       26%   276,088       29%   (25,367)    (9.2%)
      Oilfield
       Services    102,314       10%   107,764       11%    (5,450)    (5.1%)
      Maintenance
       Services    217,512       22%   127,863       14%    89,649     70.1%
    -------------------------------------------------------------------------
      Total       $980,541      100%  $954,388      100%  $ 26,153      2.7%
    -------------------------------------------------------------------------

    EBITDA by
     reportable
     segment
      Production
       Services   $ 34,283       45%  $ 26,175       37%  $  8,108     31.0%
      Facility
       Infra-
        structure   28,923       38%    26,024       37%     2,899     11.1%
      Oilfield
       Services      2,925        4%     9,205       13%    (6,280)   (68.2%)
      Maintenance
       Services      9,598       13%     8,912       13%       686      7.7%
    -------------------------------------------------------------------------
      Total       $ 75,729      100%  $ 70,316      100%  $  5,413      7.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Financial Position as of June 30, 2010
    (Millions of Canadian dollars, except share data)
    -------------------------------------------------------------------------
                              June 30, December 31,   Increase
    As at                        2010         2009   (decrease)    % Change
    -------------------------------------------------------------------------

    Current assets         $    595.7   $    551.2   $     44.5         8.1%
    Current liabilities         295.0        194.4        100.6        51.7%
    Net working capital         300.7        356.8        (56.1)      (15.7%)
    -------------------------------------------------------------------------

    Long-term debt              244.0        239.1          4.9         2.0%
    -------------------------------------------------------------------------
      Current                   120.3         16.7        103.6       620.4%
      Non-current               123.7        222.4        (98.7)      (44.4%)
    -------------------------------------------------------------------------

    Total assets              1,004.8        974.7         30.1         3.1%
    Total liabilities           461.2        459.4          1.8         0.4%
    Total equity                543.6        515.3         28.3         5.5%
    -------------------------------------------------------------------------

    Days sales outstanding
     (DSO)                         74           69            5
    -------------------------------------------------------------------------
    

Flint Energy Services Ltd. is a market leader providing an expanding range of integrated products and services for the oil and gas industry including: production services; infrastructure construction; oilfield transportation; and maintenance services. Flint, with more than 10,000 employees, provides this unique breadth of products and services through over 60 strategic locations in the oil and gas producing areas of Western North America, from Inuvik in the Northwest Territories to Mission, Texas on the Mexican border. Flint is a preferred provider of infrastructure construction management, module fabrication, maintenance services for upgrading, and production facilities in Alberta's oil sands sector.

FORWARD LOOKING STATEMENTS

Certain statements in this news release are "forward-looking statements", which reflect current expectations of the management of Flint regarding future events or Flint's future performance. All statements other than statements of historical fact contained in this news release may be forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements. Flint believes that the expectations reflected in such forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. The forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements are made as of the date of this news release and Flint assumes no obligation to update or revise them to reflect new events or circumstances, except as expressly required by applicable securities law. Further information regarding risks and uncertainties relating to Flint and its securities can be found in the disclosure documents filed by Flint with the securities regulatory authorities, available at www.sedar.com.

A conference call with management to discuss the Company's second quarter 2010 results and outlook is scheduled for 10:00 AM Eastern Time on Friday, August 6, 2010. Details on how to participate in or listen to the call are available on the Company's website: www.flintenergy.com.

%SEDAR: 00017156E

SOURCE FLINT ENERGY SERVICES LTD.

For further information: For further information: Guy Cocquyt, Director of Investor Relations, Telephone: (403) 218-7195, Email: gcocquyt@flint-energy.com

Organization Profile

FLINT ENERGY SERVICES LTD.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890