Petrowest Corporation announces fourth quarter and year end 2015 financial results following transformational contract award; reaffirms 2016 guidance

CALGARY, March 17, 2016 /CNW/ - Petrowest Corporation ("Petrowest") (TSX:PRW) announced today its consolidated financial results for the three months and year ended December 31, 2015.

Rick Quigley, Chief Executive Officer, stated that "2015 ended with the culmination of Petrowest's infrastructure development plan, winning BC Hydro's Site C Clean Energy Project ("Site C") main civil works contract. This contract provides Petrowest with a strong, long term, revenue base entering 2016 and continuing in 2017 and beyond. In addition, 2016 will be an exciting year for Petrowest as Western Canada enters an aggressive infrastructure development timeframe, with Petrowest strongly positioned to capture a portion of this development. Since inception, Petrowest has focused on growing firm local working relationships and reputation, resulting in a strong track record in both the infrastructure and energy space. The next chapter of Petrowest's story begins as of December 21, 2015, with the award of the Site C main civil works contract. As a result, Petrowest is set up to have materially increasing Adjusted EBITDA in 2016 with non-energy providing up to approximately 90% of Adjusted EBITDA."  

KEY QUARTERLY AND ANNUAL HIGHLIGHTS

2015 was a transformational year for Petrowest with the slowdown in energy-related operations and increased focus on the emerging infrastructure build out in Western Canada. Our annual results were affected by the slowdown in our Construction operations related to energy projects coupled with the lack of offsetting infrastructure projects announced in 2015. That being said, activity levels throughout the year in the Civil division remained strong. The mobile aggregate rock crushing services operated at, or near, full capacity for the majority of the crushing season.

Throughout 2015, Petrowest focused on cost management which included the sale of our Grande Prairie office building, and additional general and administrative reductions, including office employee reductions, salary freezes and price negotiations with various vendors. In addition, Petrowest realized capital expenditures in 2015 of $15.2 million which compared to $41.6 million in 2014. This decrease of $26.4 million reflects the Company's focus to control capital cost spending in the current economic environment. Petrowest also reduced its contractual obligations related to operating leases on equipment, offices, shops and yards by $10.3 million to $23.1 million, compared to $33.4 million in 2014. This reduction was achieved by returning un-utilized equipment and renegotiating contractual agreements.

On December 21, 2015, Petrowest announced that the Site C main civil works contract had been awarded to Peace River Hydro Partners, in which Petrowest is partnered with Acciona Infrastructure Canada Inc. and Samsung C&T Canada Ltd, two global industry leaders. The main civil works contract is the largest single contract for construction on the Site C Clean Energy Project, valued at approximately $1.75 billion. It includes the construction of an earthfill dam, two diversion tunnels, and a concrete foundation for the generating station and spillways. Petrowest began the preparation for the commencement of Site C over the quarter, which resulted in additional expenses incurred in the fourth quarter.

During the fourth quarter of 2015, Petrowest focused its operations on existing long term clients and implementing its execution strategy on emerging 2016 infrastructure projects. Competitive pressures in the oil and gas sector, in addition to reduced industry drilling activity, resulted in unprofitable business opportunities within its Construction business unit which the Company chose to forgo during the fourth quarter. In addition, due to both the Federal and Alberta Provincial election years, infrastructure development throughout 2015 was significantly lower than 2016 projects announced to date. Finally, delayed projects, including anticipated Site C work in December, 2015, are now expected to commence during the second quarter of 2016. That being said, over the quarter Petrowest continued to build our non-energy business, which culminated with the award of Site C, and is timely given the aggressive infrastructure build out in Western Canada.

FINANCIAL HIGHLIGHTS

In the three months ended December 31, 2015 compared to the same quarter in 2014, the Company:

  • Reported revenue of $40.3 million, a decrease of $22.8 million compared to the same quarter in 2014,
  • Reported Adjusted EBITDA of $0.1 million compared to an Adjusted EBITDA of $7.3 million for the same quarter in 2014,
  • Reported Adjusted EBITDA margin percentage of 0.0% compared to 11.6% for the same quarter in 2014,

In the year ended December, 2015 compared to 2014, the Company:

  • Reported revenue of $186.4 million, a decrease of $82.9 million compared to the same period in 2014,
  • Reported Adjusted EBITDA of $10.8 million compared to an Adjusted EBITDA of $34.9 million for the same period in 2014,
  • Reported Adjusted EBITDA margin percentage of 5.8% compared to 13.0% for the same period in 2014.

FINANCIAL RESULTS



Three months ended

December 31,

Year ended

December 31,

($000's)


2015

2014

2015

2014

Revenue


40,339

63,124

186,351

269,334

Operating expense


40,012

54,707

170,697

227,329

Gross margin


327

8,417

15,654

42,005

General and administrative


191

1,017

4,901

7,099

Adjusted EBITDA


136

7,346

10,753

34,906

Amortization of property and equipment


7,717

7,682

30,835

22,916

Amortization of intangible assets


172

175

606

611

Impairment


-

8,471

-

8,471

Share based compensation


648

453

2,043

1,431

(Gain) loss on disposal of property and equipment


(432)

(196)

(781)

(156)

Foreign exchange gain


(1)

(81)

Operating (loss) profit


(7,968)

(9,239)

(21,869)

1,633

Net finance expense


2,170

1,718

5,778

5,163

Net and comprehensive loss before income tax


(10,138)

(10,957)

(27,647)

(3,530)

Current income tax (recovery) expense


(58)

259

Deferred income tax (recovery) expense


(2,700)

85

(7,238)

1,619

Net and comprehensive loss


(7,380)

(11,042)

(20,668)

(5,149)







Total assets


161,373

192,291

161,373

192,291

Total long term liabilities


67,951

67,953

67,951

67,953

Funds from Operations


(1,769)

6,368

5,417

30,908

INDUSTRY OVERVIEW AND OUTLOOK

Activity levels in the energy sector across Western Canada in 2015 were significantly impacted by the slowdown in drilling activity by the oil and natural gas industry due to low commodity prices, as well as the lack of additional infrastructure projects underway over the year. The Company's strategy of operating a diversified business model accompanied by the cost saving initiatives implemented by the Company throughout 2015 proved to be prudent in reducing the impact of the slowdown in our energy sector related operations. Petrowest has maintained its strong, long term, oil and gas relationships and is well positioned to benefit from an increase in oil and gas activity, following stability in associated commodity prices.

Throughout 2015 Petrowest continued its transition to a diversified infrastructure company culminating with the award of the Site C main civil works contract on December 21, 2015. Entering 2016, Petrowest anticipates having approximately 15% of its total revenues in 2016 (including Site C) derived from the oil and gas sector, of which the majority of its revenue is related to liquids rich natural gas projects such as the Duvernay in NW Alberta and the Montney in NW Alberta and NE BC. In addition, Petrowest previously announced that it has been named the prime contractor for a key customer's civil earthworks program around the Fort St. John area.

Peace River Hydro Partners
On November 25, 2015, PRHP was identified by BC Hydro as the preferred proponent to be awarded the Site C main civil works contract. PRHP, in which Petrowest (25% interest) was partnered with Acciona Infrastructure Canada Inc. (37.5% interest) and Samsung C&T Canada Ltd. (37.5% interest) was awarded the contract on December 18, 2015, valued at approximately $1.75 billion.  The Peace River Hydro Partners work is anticipated to commence on the project in March 2016 and is expected to be executed over the course of an eight year development period. The Company's upfront capital commitment to PRHP is anticipated to be approximately $1.25 million. For the year ended December 31, 2015, the only impact on the financial statements is additional expenses incurred during the fourth quarter in preparation for, and anticipation of, the award of the contract to PRHP. 

Base Business
Petrowest's base business (excluding Site C) exited 2015 with over $100.0 million of projects expected to commence in 2016, which is over 25% higher than the Company's lowest point in 2015. In the Construction Division, Petrowest has increased its focus on mid-stream and road infrastructure projects. In addition, Petrowest's civil division has been awarded contracts which include work at the Fort St James mine and the Regina ring road, which are expected to contribute higher revenues in the first quarter of 2016 compared to the first quarter of 2015 and help contribute to another strong operational year for the division.

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 million in Adjusted EBITDA in 2016, which compares to approximately $11 million in 2015 and $35 million in 2014. In addition, 2016 is expected to bring numerous additional opportunities on the infrastructure development side which are further highlighted below.    

Additional Emerging Opportunities in 2016
Looking forward, 2016 presents Petrowest with a number of major industry events which include:

  • 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;
  • continued demand in the forestry industry driven component of the business partly due to a weakened Canadian dollar; and
  • 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 and year ended December 31, 2015 and 2014 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 and year ended December 31, 2015 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 value of projects expected to commence in 2016 and the near-term infrastructure opportunities.  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 Investor Relations & Corporate Development at (403) 384-0405 or info@petro-west.com.

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www.petrowestcorp.com

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