Petrowest Corporation announces second quarter 2016 financial results; revises 2016 guidance on the back of weather delays; over $20 million of additional infrastructure awards to date in 2016

CALGARY, Aug. 10, 2016 /CNW/ - Petrowest Corporation ("Petrowest") (TSX:PRW) announced today its consolidated financial results for the three and six month periods ended June 30, 2016.

Rick Quigley, Chief Executive Officer, stated that "Our second quarter results were affected by extreme weather patterns and resulting road bans realized in Western Canada, including both forest fires and heavy rains in Northeast British Columbia, ultimately resulting in project delays which will shift a portion of our expected 2016 revenues into 2017. On the back of this, Petrowest has decreased our 2016 annual guidance to $20-25 million, which compares to $10.8 million in 2015. Notwithstanding the weather delays, the scope of our major projects are unchanged and we are well positioned for the remainder of 2016 and going into 2017. Non-energy related projects are providing the vast majority of our visible EBTIDA growth, while we remain strongly positioned for increased drilling activity, major midstream projects and pipelines. The remaining half of 2016 looks promising, with multiple road jobs underway, relatively stronger commodity prices, and the opportunity to be shortlisted on the upcoming Power Generation station at Site C."

FINANCIAL HIGHLIGHTS

In the three months ended June 30, 2016 compared to the same quarter in 2015, the Company:

  • Reported revenue of $32.5 million, a decrease of $10.0 million compared to the same quarter in 2015,
  • Reported Adjusted EBITDA of $1.1 million compared to $2.3 million for the same quarter in 2015,
  • Reported Adjusted EBITDA margin percentage of 3.4% compared to a 5.4% for the same quarter in 2015.
  • The impact of Peace River Hydro Partners ("PRHP") work on Site C was limited in the second quarter, and accordingly it is expected to have a greater impact starting in the third quarter.

FINANCIAL RESULTS


Three months ended

June 30,

Six months ended

June 30,

($000's)

2016

2015

2016

2015

Revenue

32,532

42,499

69,139

80,717

Operating expense

(30,626)

(38,486)

(63,951)

(76,471)

Gross margin

1,906

4,013

5,188

4,246

General and administrative

(785)

(1,733)

(1,969)

(3,223)

Adjusted EBITDA

1,121

2,280

3,219

1,023

Amortization of property and equipment

(5,856)

(7,732)

(12,592)

(15,128)

Amortization of intangible assets

(129)

(114)

(258)

(284)

Share based compensation

(185)

(475)

(508)

(958)

Gain on disposal of property and equipment

599

139

2,064

103

Foreign exchange (gain) loss

(1)

(8)

(16)

75

Operating loss

(4,451)

(5,910)

(8,091)

(15,170)

Gain from investment in partnership

226


264


Net finance expense

(1,718)

(1,296)

(3,479)

(2,545)

Net loss and comprehensive loss

before income tax

(5,943)

(7,206)

(11,306)

(17,715)

Deferred income tax (recovery) expense

986

(777)

2,386

(3,443)

Net and comprehensive (loss) income

(4,957)

(6,429)

(8,920)

(14,272)






Total assets

147,740

175,362

147,740

175,362

Total liabilities

84,231

100,432

84,231

100,432

Funds from (used in) Operations(1)

(334)

1,051

169

(1,242)






(1) Non-IFRS financial measure





 

In addition, Petrowest announces that its lenders (under both the syndicated credit facility and the subordinated debt agreement) have granted waivers to September 15, 2016 of non-compliance with the Adjusted EBITDA financial covenant in the Company's credit facilities.

Additional information respecting Petrowest's credit facilities and the financial covenants in those credit facilities may be found in Petrowest's Management Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2016, available under Petrowest's profile on the SEDAR website at www.sedar.com.

INDUSTRY OVERVIEW AND OUTLOOK

The first half of 2016 had significant weather challenges in Western Canada, including both forest fires and heavy rains. As a result, Petrowest was delayed on some of its major projects, shifting revenues into the back half of 2016 and into 2017. The ramp up of major projects throughout the first half of 2016 has strongly positioned Petrowest for a strong back half of a year and even stronger 2017, including the $1.75 billion Main Civil Works Site C contract.  

During the first half of 2016, Petrowest has been successful on 13 road jobs amounting to over $20 million in total additional infrastructure contract awards. In addition, the Alberta Government has progressed on the development of additional infrastructure projects in 2016, reaffirming that 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.

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 continuing low commodity prices. Year to date in 2016, both natural gas (AECO) and crude oil (WTI) prices have increased off the 2016 lows by approximately 250% and 80% as of June 30, 2016, respectively. Petrowest anticipates increased energy activity in the second half of 2016 and entering 2017, including significant midstream work publicly announced to date. Although energy related activities represent a small portion of Petrowest's cash flow, Petrowest has maintained key relationships in the energy sector, and remains strongly positioned to benefit from any increased drilling activity.

In addition, Petrowest, alongside its partners Acciona and Samsung, are completing the necessary submissions to pre-qualify for the Power Generation Station at BC Hydro's Site C. BC Hydro expects to announce the short-listed parties in the summer of 2016.

The weather in the first half of 2016 also affected the Civil division's operations during the second quarter. However, 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 gravel crushing activity conducted for the Peace River Hydro Partners Site C project. In addition, as increased infrastructure projects commence, it is anticipated that there will be increased demand for our Civil operations.

Over the quarter, the Transportation division was challenged with difficult operating conditions and road bans. In the second half of the year, we expect continued demand in the forestry industry driven component of the business partly due to a weakened Canadian dollar. 

Peace River Hydro Partners
BC Hydro provides construction bulletin updates bi-weekly located on www.sitecproject.com. In addition, BC Hydro provides quarterly updates on the project. As of June 10, 2016, BC Hydro disclosed "The Main Civil Works contractor is currently one month behind, however the overall schedule and progress remains on track to achieve the planned In-Service Dates", which is largely due to the extreme weather patterns realized in the first half of 2016. Although the delays will shift revenues from the first half of 2016, into the second half of 2016 and 2017, Petrowest expects to benefit from additional support needed for Peace River Hydro Partners ("PRHP") to catch up on any lost time.

Revising 2016 Guidance
Due to the extreme weather patterns realized in the first half of 2016 and resulting in the delay of major projects for Petrowest, which caused a portion of expected 2016 revenues to be shifted into 2017, the Company is reducing our 2016 annual guidance to $20-25 million Adjusted EBITDA. Petrowest believes 2016 could result in significant increased work load necessary to support major projects timelines, however is choosing to reduce its annual guidance at this time.

The purpose of presenting this financial outlook information is to assist investors and others in understanding our business outlook, objectives, and plans as well as the Company's expectations as to the anticipated results of its proposed business activities. Readers are cautioned that this financial outlook may not be appropriate for other purposes.

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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