Petrowest Corporation announces first quarter 2016 financial results; reaffirms 2016 guidance

CALGARY, May 12, 2016 /CNW/ - Petrowest Corporation ("Petrowest") (TSX:PRW) announced today its consolidated financial results for the three months ended March 31, 2016.

Rick Quigley, Chief Executive Officer, stated that "Petrowest is on track for a strong 2016 and we are reaffirming our 2016 guidance of $45 million in Adjusted EBITDA, despite oil and gas activity remaining weak in Western Canada. Our strong 2016 outlook is driven by the startup of work on the multi-year $1.75 billion Site C dam contract (Petrowest 25% joint venture partner) and other successful non-energy infrastructure contracts. In addition, our growing non-energy infrastructure reputation positions Petrowest as a quality operator for additional, large, non-energy infrastructure projects quickly approaching in 2016. The start of 2016 has seen increased infrastructure tenders by the Company following the announcement of the Alberta Provincial government budget. Petrowest has now tendered to over $250.0 million of additional projects, with the majority of the provincial road work expected to begin in the summer or early fall of 2016."  

FINANCIAL HIGHLIGHTS

In the three months ended March 31, 2016 compared to the same quarter in 2015, the Company:

  • Reported revenue of $36.6 million, a decrease of $1.6 million compared to the same quarter in 2015,
  • Reported Adjusted EBITDA of $2.1 million compared to an Adjusted EBITDA loss of $1.2 million for the same quarter in 2015,
  • Reported Adjusted EBITDA margin percentage of 5.7% compared to a loss of 3.3% for the same quarter in 2015.
  • The impact of Peace River Hydro Partners ("PRHP") work on Site C was limited in the first quarter, and accordingly it is expected to have a greater impact starting in the second quarter

FINANCIAL RESULTS



Three months ended

March 31,

($000's)



2016

2015

Revenue



36,607

38,218

Operating expense



33,325

37,985

Gross margin(1)



3,282

233

General and administrative



1,184

1,490

Adjusted EBITDA(1)



2,098

(1,257)

Amortization of property and equipment



6,736

7,396

Amortization of intangible assets



129

170

Share based compensation



323

483

(Gain) loss on disposal of property and equipment



(1,465)

36

Foreign exchange loss (gain)



15

(82)

Operating loss



(3,640)

(9,260)

Gain from investment in partnership



(38)

-

Net finance expense



1,761

1,249

Net and comprehensive loss before income tax



(5,363)

(10,509)

Current income tax expense



22

Deferred income tax recovery



(1,422)

(2,666)

  Net and comprehensive loss



(3,963)

(7,843)






  Total assets



152,507

172,232

  Total long term liabilities(2)



62,656

68,041

  Funds from (used in) Operations(1)



503

(2,294)



(1)

Non-IFRS financial measure

(2)

The balance of long-term liabilities in 2015 includes $51,791 related to amounts shown as the "reclassification of long-term debt"

 

INDUSTRY OVERVIEW AND OUTLOOK

2016 marks the commencement of a multi-year infrastructure development build out in Western Canada. The Alberta Government has finalized its Budget 2016 five year Capital Plan which included approximately $4.6 billion for roads and bridges, of which approximately $2.0 billion dollars is budgeted to be spent in 2016 and 2017. It is unclear how the forest fire destruction in and around Fort McMurray will impact the Alberta Government's capital plan from its Budget 2016, however it is expected that there will be increased infrastructure needs than originally anticipated in the Budget 2016. Our condolences go out to the families and individuals affected by both the Fort McMurray and the Fort St. John forest fires.

Petrowest has been very active tendering to upcoming infrastructure projects, with confirmation of the tenders on major projects expected to be received by the Company in the summer or early fall of 2016. Activity levels in the energy sector across Western Canada remain significantly impacted by the slowdown in drilling activity by the oil and natural gas industry due to low commodity prices. Petrowest has maintained key relationships in the energy sector, and is strongly positioned to benefit from any increased drilling activity. The Company believes 2016 presents a number of opportunities with significantly increased infrastructure tender activity that, if successful, will strongly position the Company for both 2016 and beyond. 

Similar to 2015, the Civil division is expected to operate near or above capacity through the gravel crushing season, double shifting some plants. Additional non-energy infrastructure contracts in 2016 versus 2015 include the Regina ring road, Fort St. James mine and Site C gravel crushing activity. In addition, as increased infrastructure projects commence, it is anticipated that there will be increased demand for our Civil operations.

The Transportation division benefitted over the quarter from inter-divisional work associated with hauling equipment to Fort St. John for PRHP. In addition, we expect continued demand in the forestry industry driven component of the business partly due to a weakened Canadian dollar. 

Finally, Petrowest sold $6.2 million of equipment over the first quarter of 2016 with additional equipment sales gross proceeds of approximately $4.3 million at the April auction. Petrowest reviews its equipment fleet on an annual basis, selling aged equipment which does not fit into our competitive advantage of having one of the largest and newest equipment fleets. Equipment values from the Ritchie Brothers auctions has continued to hold its value due to the weaker Canadian dollar and the multi-industry nature of the Company's equipment.

Peace River Hydro Partners
BC Hydro provides construction bulletin updates bi-weekly located on www.sitecproject.com. As highlighted in the bulletin, the main civil works contractor has mobilized crews and equipment to the dam site area. PRHP are now executing the preparation of site offices, a parking lot, a laydown and stockpile areas. Survey work and site investigations will occur on the north and south banks. Earthworks are expected to begin, including the construction of dikes, other work in the Peace River back channel on the south bank of the dam site, and excavation of the south bank drainage tunnel. Petrowest will support the start-up and peaks of the project as a partner to PRHP.

Reaffirms 2016 Outlook
On January 18, Petrowest announced that it currently expects its base business and the Site C main civil works contract to achieve approximately $45.0 million in Adjusted EBITDA in 2016. As noted above, 2016 presents Petrowest with a number of major industry events which include:

  • startup of work on the multi-year $1.76 billion Site C dam contract (Petrowest 25% joint venture partner)
  • increased Western Canadian infrastructure activity, including both roadbuilding and civil construction, following the completion of both provincial and federal elections. Petrowest has been invited to bid on specific projects in Saskatchewan, Alberta and British Columbia, a number of which are anticipated to commence in the spring/summer of 2016;
  • potential Final Investment Decision ("FID") on proposed future liquefied natural gas ("LNG") facilities in British Columbia. Petrowest has established firm working relationships with both companies that provide engineering and procurement services, as well as First Nations, in the area.

In addition, Petrowest has updated its corporate presentation which can be found at www.petrowestcorp.com.

SELECTED FINANCIAL INFORMATION AND NON-IFRS MEASURES

Selected financial information for the three months ended March 31, 2016 and 2015 is set out above and includes the following non-IFRS financial measures: Gross margin, Gross margin percentage, Adjusted EBITDA, Adjusted EBITDA margin percentage and Funds from (used in) Operations. This information should be read in conjunction with the consolidated financial statements for the three months ended March 31, 2016 and the Company's Management, Discussion and Analysis ("MD&A"), available under the Company's profile on the SEDAR website at www.sedar.com. Further information respecting the non-IFRS financial measures is contained in the Company's MD&A.

FORWARD LOOKING INFORMATION

Certain information and statements contained in this news release constitute forward-looking information, including the expected Adjusted EBITDA for 2016, the successful awarding to Petrowest of various projects and contracts that Petrowest has bid on and the value of such projects and contracts, the number and value of near-term infrastructure opportunities in the geographical areas in which Petrowest operates, the level and progress of work at the Site C project, and FIDs relating to proposed LNG facilities in British Columbia. Readers should review the cautionary statement respecting forward-looking information that appears below. Any forward-looking statements are made as of the date hereof and Petrowest does not undertake to publicly update and review such statements to reflect new events, subsequent events or otherwise, except to the extent events and circumstances have occurred that are reasonably likely to cause actual results to differ materially from material forward-looking information for a period that is not yet complete or as otherwise required by law.

The information and statements contained in this news release that are not historical facts are forward-looking statements.  Forward-looking statements (often, but not always, identified by the use of words such as "seek", "plan", "continue", "estimate", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "expect", "may", "anticipate" or "will" and similar expressions) may include plans, expectations, opinions, or guidance that are not statements of fact.  Forward-looking statements are based upon the opinions, expectations and estimates of management as at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. These factors include, but are not limited to, such things as changes in industry conditions (including the levels of capital expenditures made by government agencies and companies undertaking infrastructure projects and oil and gas explorers and producers), the credit risk to which Petrowest is exposed in the conduct of its business, fluctuations in prevailing commodity prices or currency and interest rates, the competitive environment to which the various business divisions are, or may be, exposed in all aspects of their business, the ability of Petrowest's various business divisions to access equipment (including parts) and new technologies and to maintain relationships with key suppliers, the ability of Petrowest's various business divisions to attract and maintain key personnel and other qualified employees, various environmental risks to which Petrowest's business divisions are exposed in the conduct of their operations, inherent risks associated with the conduct of the businesses in which Petrowest's business divisions operate, timing and costs associated with the acquisition of capital equipment, the impact of weather and other seasonal factors that affect business operations, availability of financial resources or third-party financing and the impact of new laws or changes in administrative practices on the part of regulatory authorities.  Forward-looking information respecting Adjusted EBITDA for 2016 is based on the current budget of Petrowest (which is subject to change), factors that affected the historical growth of Petrowest's business divisions, sources of historic growth opportunities and expectations relating to future economic and operating conditions including, without limitation, anticipated future growth opportunities. Forward-looking information concerning the value of projects expected to commence in 2016 is based on current commitments of projects and expectations relating to future economic and operating conditions. Forward-looking information concerning the near-term infrastructure opportunities for Petrowest is based upon the current competitive environment in which Petrowest's business divisions operate, expectations relating to future economic and operating conditions and current and announced projects of provincial governments.

Although management of Petrowest believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.  Accordingly, readers should not place undue reliance upon any of the forward-looking information set out in this news release. All of the forward looking statements of Petrowest contained in this news release are expressly qualified, in their entirety, by this cautionary statement. The various risks to which Petrowest is exposed are described under "Risk Factors" in Petrowest's Annual Information Form, available under Petrowest's profile on the SEDAR website at www.sedar.com.

ABOUT PETROWEST

Petrowest is an Alberta corporation involved in both industrial and civil infrastructure projects, as well as pre-drilling and post-completion energy services, gravel crushing and hauling for non-energy sector customers. Petrowest's primary operations are based in northwestern Alberta and northeastern British Columbia.

SOURCE Petrowest Corporation

For further information: please contact Nikolaus Kiefer, Vice President of Business Development & Investor Relations at (403) 384-0405 or info@petro-west.com.

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