Winalta Announces First Quarter Results 2013

CALGARY, May 17, 2013 /CNW/ - Winalta Inc. ("Winalta" or the "Company") announces results for the three months ended March 31, 2013. Revenue of $6.8 million and EBITDA of $3.9 million, showed decreases of $2.2 million and $1.0 million, respectively, to revenue of $9.0 million and EBITDA of $4.9 million for the comparative 3 month period in 2012. The 24% decrease in revenue was due to decreases in third party revenue utilization and to decreased industry activity levels.

Winalta's focus on cost control showed in its Q1 2013 EBITDA margins which were up 2% to 56% and decreased G&A and interest expense for the quarter.

Quarter End Highlights

  • Increased EBITDA margin, 56% in Q1 2013 from 54% in Q1 2012
  • G&A expenses decreased by 11%, a $105 thousand reduction
  • Interest expense was down by 49%, a decrease of $175 thousand over the comparable period

Selected Financial Information

             
      Three Months Ended
             
      March 31, 2013     March 31, 2012
             
Revenue     6,835     8,986
Net Earnings     1,764     3,325
Earnings per share and diluted earnings per share     0.04     0.08
EBITDA     3,851     4,901
EBITDA per share     0.10     0.12
Total Equity     25,851     25,631
Dividends     403     -



The Company has reported areas of improved results in the first quarter of 2013 versus the first quarter of 2012.  These improvements were offset by some adverse results.  One area where the Company showed improvement was in this EBITDA margin.  Winalta generated an EBITDA margin of 56% of sales, which as a percentage, improved 2% over first quarter 2012.  The Company also decreased its third party, low margin, business activity in the quarter.

Revenue

The Company saw a decrease in revenues from the Comparative Period.  The decrease can be attributed to a significant reduction in third party rentals, specifically the loss of third party camp rentals in 2013.   The decrease in third party camp equipment rentals was equal to $1.6 million in revenue during the quarter.  Third party rental equipment is only required after Winalta reaches close to full utilization of its own fleet of equipment, which happens most often at times of high industry activity. As Q1 2013 utilization and industry activity levels were down from the comparable period, third party rentals was negatively impacted.  The Company saw an increase in demand for its Wellsite units which was offset by a decrease in demand for its other equipment lines as customers adjusted their drilling activity over the winter drilling season.

Actual rental days for Wellsite units increased by 1% in the Period, compared to the Comparative Period.

Utilization of Camp units for the Period was 70% as compared to 90% for the Comparative Period as customers maintained drilling activities which required camp services but to a lesser degree in 2013.  Actual rental days for Camp units decreased by 23% in the Period, compared to the Comparative Period.

Actual rental days for Dedicated Geo-Lab units decreased by 8% in the Period, compared to the Comparative Period.

Over the past 12 months, the Company has added 21 Wellsite units and 16 Dedicated Geo-Lab units.  The Company's build program is part of its strategy to provide newer Wellsite units to its customers in order to provide the correct combination of units to meet their needs in the field.

                 
Revenue Drivers Q1 2013 versus Q1 2012                        
          % Increase     2013     2012  
                 
Fleet size         13%     334     297  
Utilization         (16%)     71%     85%  


Fleet Expansion
Over the past 3 months, the Company has added 4 Wellsite units and 6 Dedicated Geo-Labs. The Company continues to expand its fleet, maintaining a low average age of equipment which enables it to maintain its status as a premium provider of surface rental equipment.

Utilization
Utilization of Wellsite units was 65% as compared to 76% for the comparative period. The number of actual rental days for Wellsite units increased by 1%, over the comparative period.  Utilization of Drill Camps was 70% as compared to 90% for the comparative period as customers maintained drilling activities which required camp services but to a lesser degree in 2013 than in 201. Utilization of Dedicated Geo-Labs units was 36% as compared to 87% for the Comparative Period. Actual rental days for Dedicated Geo-Lab units decreased by 8%, compared to the Comparative Period.

Over the past 12 months, the Company has added 21 Wellsite units and 16 Dedicated Geo-Lab units. Winalta now has, what it perceived to be the correct ratio of Dedicated Geo-Lab units to Wellsites, and is not planning on building more Geo-Lab in 2013. The Company's build program is part of its strategy to provide newer Wellsite units to its customers in order to provide the correct combination of units to meet their needs in the field.

General and Administrative
For Q1 2013, administrative costs were $877 thousand, down from $982 thousand for the comparative period.  The Company has continued to focus on cost controls and reductions occurred in office rent and related operating costs of $76 thousand; travel, meals and entertainment of $18 thousand; and, professional fees of $28 thousand.  These reductions were offset by an increase of $7 thousand relating to the investment in land at Sylvan Lake.

Depreciation and Amortization
The increase in depreciation and amortization expense of $110 thousand in Q1 2013 reflects the acquisition of $5.5 million of equipment in the trailing 12 month period.

Interest Expense
Interest expense for Q1 2013 was $183 thousand as compared to $358 thousand for the comparable period.  The decrease in interest expense was the result of the Company renegotiating its financing facility to more favorable terms.

Outlook

The beginning of the first quarter of 2013 unfolded as expected, however, the last month of the quarter had less activity than expected which resulted in the Company not meeting targets for the month of March.  This trend has carried into the beginning of the second quarter.  However, the Company has started to receive more inquiries as to availability of equipment and there is more promise for equipment towards the end of the second quarter.  This activity should lead into stronger utilization going into the balance of 2013.

The Company implemented a two tiered, summer and winter, pricing strategy in April 2013 which should better fit industry activity levels and improve utilization rates in all categories over the slower second and third quarters of 2013.  The Company continues to look at ways to decrease low margin third party revenue and replace that revenue with its own fleet of equipment. In anticipation of an expected increase in demand and to service our customers with a good mix of equipment, the Company is continuing to expand the fleet of oilfield Wellsite units and Intergraded Wellsite Systems (IWS).

The Company continues to explore opportunities to enhance its rental fleet by expanding into the IWS, which would provide a longer term level revenue stream as compared to the traditional spot rate rental business.  This new concept product line should help mitigate some of the seasonal impact the Company experiences.

The Company has entered into an agreement to supply one IWS, commencing in Q3 2013.  This agreement will continue to the end of 2014.  The Company is currently in discussions with other interested parties for the rental of additional IWS which, if successful, would  increase rental activity commencing in the third quarter of 2013 and going forward.

Winalta Oilfield Rentals, specializes in innovative and high-quality modular buildings for the Western Canadian Oil and Gas Industry. Winalta's rental fleet is comprised of single-unit Wellsites, Integrated Wellsite Systems (IWS), Dedicated Geo Labs, and Drill Camps.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward-looking information
Certain information set forth in this press release, including management's assessment of the potential for increased cash flows, continued growth of the Company's rental fleet, demand for the Company's rental units, the Company's pricing strategy, the impact of the Company's expansion into IWS and the Company's expectation regarding the status of the economy and its impact on the Company, may constitute forward-looking statements. By their nature, forward-looking statements involve material assumptions and are subject to numerous risks and uncertainties, including with respect to market and economic conditions and their impact on the Company's business, some of which, are beyond the Company's control. Readers are cautioned not to place undue reliance on the forward-looking statements as the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and actual results, performance or outcomes could materially differ from those expressed or implied in such forward-looking statements and accordingly, no assurance can be given that any of the events anticipated by forward looking statements will transpire or occur, or if any of them do so, what benefit Winalta will derive therefrom. The Company does not assume the obligation to revise or update this forward-looking information after the date of this release or to revise such information to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws.

SOURCE: Winalta Inc.

For further information:

Austin Fraser, President
Phone: (403) 826-5701

David Hopley, CFO
Phone: (780) 469-0143
winalta@winaltainc.com

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Winalta Inc.

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