Petrowest Corporation Announces Third Quarter 2016 Financial Results

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

Rick Quigley, Chief Executive Officer, stated that "Similar to our second quarter, Petrowest's third quarter results continued to be affected by extreme weather patterns, ultimately resulting in project delays which will shift a portion of our expected 2016 revenues into 2017. Across our infrastructure projects in Western Canada, Petrowest lost over 200 operating days over the quarter. Although this does not result in lost revenue, this will shift expected revenues on successful contract awards into 2017. Non-energy related projects continue to provide the vast majority of our visible EBTIDA growth, while we remain strongly positioned for increased drilling activity, major midstream projects and pipelines. In addition, Petrowest is excited to be shortlisted for the upcoming Power Generation station at Site C, which is expected to be awarded in the summer of 2017."

FINANCIAL HIGHLIGHTS

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

  • Reported revenue of $45.7 million, a decrease of $19.6 million compared to the same quarter in 2015,
  • Reported Adjusted EBITDA of $3.5 million compared to $9.6 million for the same quarter in 2015,
  • Reported Adjusted EBITDA margin percentage of 7.7% compared to a 14.7% for the same quarter in 2015.
  • Realized $2.8 million in EBITDA from the 25% ownership interest in Peace River Hydro Partners for the first nine months of 2016 ($9.5 million Total Adjusted EBITDA for the first nine months of 2016 – see Non-IFRS Measures)

FINANCIAL RESULTS


Three months ended
September 30,

Nine months ended
September 30,

($000's)

2016

2015

2016

2015

Revenue

45,741

65,295

114,880

146,012

Operating expense

41,383

54,214

105,334

130,684

Gross margin1

4,358

11,081

9,546

15,328

General and administrative

858

1,487

2,827

4,711

Adjusted EBITDA1

3,500

9,594

6,719

10,617

Amortization of property and equipment

5,775

7,990

18,367

23,118

Amortization of intangible assets

112

150

370

434

Share based compensation

289

437

797

1,395

Gain on disposal of property and equipment

(92)

(246)

(2,156)

(349)

Foreign exchange gain (loss)

(5)

16

(80)

Operating income (loss)

(2,584)

1,268

(10,675)

(13,901)

Gain from investment in partnership

(303)

(567)

Net finance expense

1,436

1,063

4,915

3,608

Net (loss) income and comprehensive (loss) income

before income tax

(3,717)

205

(15,023)

(17,509)

Income tax (recovery) expense

(693)

(778)

(3,079)

4,221

Net and comprehensive (loss) income

(3,024)

983

(11,944)

(13,288)

Total assets

157,786

182,052

157,786

182,052

Total liabilities

96,907

114,378

96,907

114,378

Funds from Operations(1)

2,127

8,427

2,296

7,186






1 See "Non-IFRS Measures"

 

In addition, Petrowest announces that its lenders (under both the syndicated credit facility and the subordinated debt agreement) have granted waivers to March 31, 2017 of non-compliance with the Adjusted EBITDA financial covenant in the Company's credit facilities. Petrowest has been working with the lenders, and other potential lenders, to finalize a long term debt solution.

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 nine months ended September 30, 2016, available under Petrowest's profile on the SEDAR website at www.sedar.com.

INDUSTRY OVERVIEW AND OUTLOOK

The first nine months of 2016 had significant weather challenges in Western Canada, including early spring forest fires and unseasonably heavy rains throughout the summer. The Fort St. John area experienced its fourth wettest August on record. In addition, flooding in and around the Grande Prairie region resulted in additional lost operating days in the third quarter. As a result Petrowest was delayed on some of its major projects, shifting revenues into 2017. Even with these weather issues, the ramp up of major projects in the third quarter of 2016 has positioned Petrowest for a strong 2017, including the $1.75 billion Main Civil Works Site C contract. 

Petrowest has successfully bid on 13 road jobs amounting to over $20.0 million in additional infrastructure contracts to date in 2016. However, due to extreme weather patterns experienced to date in 2016, the revenue realization will be shifted into 2017. 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 five year capital plan which includes approximately $4.6 billion for roads and bridges, approximately $2.0 billion dollars of which is budgeted to be expended in 2016 and 2017.

Activity levels in the energy sector across Western Canada remain significantly impacted by the slowdown in drilling activity in the oil and natural gas industry due to continuing low commodity prices. Petrowest has maintained key relationships in the energy sector and remains strongly positioned to benefit from any increased drilling activity.

In addition, Petrowest is pleased to announce that PRHP, in which Petrowest is a 25% working interest partner, has been shortlisted in a BC Hydro announcement made September 26, 2016 for the generating station and spillways civil works contract for the Site C Clean Energy Project. As indicated in the BC Hydro announcement, the proponents have been issued the request for proposals. Following submission and evaluation of the proposals, a preferred proponent will be selected and negotiations to reach a final agreement will begin. Contract award is anticipated in summer 2017.

The weather also affected the Civil division's operations during the third quarter, in addition to increase mobilization activity as a result of the nature and size of jobs to date in 2016. However, similar to 2015, the Civil division is expected to operate near or above capacity through the gravel crushing season, double shifting some plants. 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 competitive economic conditions. Petrowest has maintained significant contracts within the forestry industry but realized approximately 30% less revenue, year over year, from these contracts in the quarter.

Peace River Hydro Partners
BC Hydro provides bi-weekly construction bulletin updates on www.sitecproject.com. BC Hydro also provides quarterly updates on the project. As of October 28, 2016, BC Hydro disclosed that the Main Civil Works contractors are well underway on both the north and south banks of the project site. Petrowest will be a key contributor to PRHP's recovery from project delays in the first half of 2016.

2016 Guidance
The purpose of having previously presented financial outlook information for 2016 had been 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 for 2016. Readers are cautioned that financial outlook information may not be appropriate for other purposes. See the "Forward Looking Statements" section below in this MD&A for additional information on the assumptions on which financial outlook information is based. In our annual MD&A, we set an Adjusted EBITDA target of $45 million for the fiscal year 2016. We reduced our 2016 annual guidance to $20-25 million Adjusted EBITDA in Q2 2016.  Petrowest has now determined that the 2016 annual guidance range of $20-25 million Adjusted EBITDA presented in Q2 will not be achieved in 2016 due to the extremely atypical and unseasonal weather conditions that have persisted in the Company's operating locations during much of this year, having a significant adverse effect on the Company's ability to achieve and maintain projected operating levels over this period of time.  2016 has marked one of the wettest years on record over the last 40 years in Western Canada. Entering the fourth quarter, atypical and unseasonal weather continued and as a result, unfavourable operating conditions also continued in October. The resulting and cumulative delays to date in much of Petrowest's operations have the effect of shifting expected 2016 revenues into 2017.  However, given the unprecedented impact of the extremely atypical weather patterns on operations to date in 2016, Petrowest has determined that it is prudent to discontinue the issuance of 2016 financial outlook guidance at this time.  The Company's Adjusted EBITDA for the nine months ended September 30, 2016 was $6.7 million, and the Total Adjusted EBITDA for the nine months ended September 30, 2016 was $9.5 million.

SELECTED FINANCIAL INFORMATION AND NON-IFRS MEASURES

Selected financial information for the nine months ended September 30, 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, Total Adjusted EBTIDA, Funds from (used in) Operations. This information should be read in conjunction with the consolidated financial statements for the nine months ended September 30, 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 any 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 and operate 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 a diversified infrastructure company with primary operations based in northeastern British Columbia and Alberta. Petrowest's operations are focused on industrial and civil infrastructure projects, gravel crushing and hauling activities, as well as pre-drilling and post-completion energy services.

SOURCE Petrowest Corporation

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

RELATED LINKS
www.petro-west.com

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