Hyduke announces fiscal 2013 third quarter financial results

NISKU, AB, Nov. 12, 2013 /CNW/ - Hyduke Energy Services Inc. (HYD: TSX), announced operating results for the three months and nine months ended September 30, 2013.  Hyduke's Financial Statements and Management's Discussion and Analysis have been filed with regulators and are available at www.hyduke.com and at www.sedar.com.

Highlights during the quarter include the following:

• Financial performance:
• Current quarter revenue of $18.6 million is up 53% from the prior quarter
• Current quarter revenue from Canadian markets of $13.2 million is up 40%
• Current quarter revenue from International markets of $5.4 million is up 101%
• Current quarter gross profit of $2.5 million is up 58% from the prior quarter
• Current quarter gross profit percentage of 13.6% is up 0.4 percentage points from the second quarter and is up 0.7 percentage points from the first quarter
• Current quarter EBITDAS of $0.6 million represents an increase of $1.1 million from the prior quarter
• Current quarter net income from continuing operations of $0.1 million represents an increase of $0.9 million from the prior quarter
• Liquidity remains strong with current ratio of 3.33 to 1.00.
• Cash balances remain consistent over the prior quarter at $2.0 million.
• Debt to equity ratio remains strong at 0.28 to 1.00.

A summary of Fiscal 2013 third quarter and nine months year to date results is as follows:

Selected Statement of Comprehensive Income Information	Three Months Ended
($000's, except per share data)	September 30 2013	June 30 2013	September 30 2012
Revenues - continuing operations	18,577	12,107	24,822
International revenues	5,393	2,678	9,157
Gross profit - continuing operations	2,525	1,603	3,258
Gross profit (%)	13.6%	13.2%	13.1%
EBITDAS - continuing operations	584	(518)	1,196
Profit (loss) - continuing operations	32	(825)	307
Profit (loss)	(316)	(1,148)	61
Profit (loss) per share - basic ($)	(0.013)	(0.047)	0.001
Profit (loss) per share-diluted ($)	(0.013)	(0.047)	0.001

Selected Statement of Comprehensive Income Information	Nine Months Ended September 30
($000's, except per share data)	2013	2012
Revenues - continuing operations	47,272	83,066
International revenues	12,978	38,846
Gross profit - continuing operations	6,269	12,114
Gross profit (%)	13.3%	14.6%
EBITDAS - continuing operations	111	5,552
Profit (loss) - continuing operations	(1,131)	2,739
Profit (loss)	(1,896)	2,058
Profit (loss) per share - basic ($)	(0.079)	0.085
Profit (loss) per share-diluted ($)	(0.078)	0.083

Note: For purposes of this News Release, the following terminology is used:

• "Current Quarter" means the three months ended September 30, 2013
• "Prior Quarter" means the three months ended June 30, 2013
• "Previous Year Quarter" means the three months ended September 30, 2012
• "EBITDAS" means earnings before interest, taxes, depreciation, amortization and stock based compensation

Current Quarter revenue from continuing operations of $18.6 million represents an increase of $6.5 million (53%) over the Prior Quarter.  The increase is due to increased revenues in the Manufacturing segment of approximately $2.1 million and increased revenues in the Supply and Service segment of $3.1 million.

Current Quarter gross profit from continuing operations of $2.5 million increased $0.9 million (58%) over the Prior Quarter and is due to increased revenues.  Current Quarter gross profit percentage of 13.6% increased 0.4 percentage points over the Prior Quarter.

Current quarter EBITDAS from continuing operations of $0.6 million increased $1.1 million over the Prior Quarter and is due to a 53% increase in revenue and a 58% increase in gross profit.

Selected Financial Position Information
($000's, except ratios)	September 30, 2013	December 31, 2012	December 31, 2011
Total assets	50,069	58,155	55,529
Total current assets	35,125	43,066	40,720
Total cash	1,920	1,843	4,824
Total liabilities	20,093	26,246	24,476
Total current liabilities	10,557	16,111	21,915
Total bank indebtedness	Nil	1,200	Nil
Total interest bearing debt	8,522	8,669	1,149
Total equity	29,975	31,909	31,053
Current ratio (current assets divided by current liabilities)	3.33 to 1:00	2.67 to 1.00	1.86 to 1.00
Debt to equity ratio (interest bearing debt divided by shareholders' equity)	0.28 to 1.00	0.27 to 1.00	0.04 to 1.00

The Company continues to maintain a very strong financial position with a current ratio at 3.3 to 1.00 and a debt to equity ratio of 0.28 to 1.00.

OUTLOOK
The oilfield services industry in Canada has undergone major changes in the past five years as exploration and production (E&P) companies change their focus from natural gas to oil and liquids and from vertical to horizontal wells.  The number of wells drilled has declined sharply with activity characterized as fewer, deeper and longer wells requiring less rigs.

As a result, Hyduke is experiencing low Canadian industry activity.  However, Hyduke remains focused on growing our market share in the Canadian market, developing our Houston operations into a key platform of our manufacturing and service strategy and continuing to develop international customers in order to participate in the worldwide turn-key rig market.  Additionally, we continue to challenge our manufacturing team to realize greater gross profits and are actively restructuring our operations to reduce our footprint costs, realize on labor efficiencies and increasingly, use our Houston operation as a low-cost manufacturing alternative to Canada.

Over the past five years, Hyduke has also experienced low gross profit margin percentages in our equipment manufacturing operations.  In response, Hyduke continues to look at streamlining and restructuring these operations to reduce footprint costs, increase productivity efficiencies and develop the Houston operation as a lower-cost manufacturing alternative to Alberta.

Canadian new well drilling activity in 2013 (experienced to date and expected for the remainder of the year) and a slowdown in new equipment commitments is negatively impacting domestic revenue in 2013.  Industry expectations for western Canada for new wells drilled in 2013 are forecast to be slightly lower than that experienced in 2012.  The Canadian Association of Oilwell Drilling Contractors (CAODC) has forecast the number of wells to be drilled  for calendar 2013 to be 10,409, 6% lower than 2012 activity.  As noted above, the major change in the type of wells drilled and continued low gas prices leads Hyduke to believe that a recovery or change to historical levels and types of activity is unlikely. On October 30, 2013 the Petroleum Services Association of Canada (PSAC) released its 2014 drilling forecast. PSAC sees 10,800 wells drilled on a completion basis in 2014, a reduction from 10,960 in 2013 (forecast) and 10,088 in 2011.

The PSAC forecast indicates that the total number of metres drilled in 2014 will be 23.0 million, up from 22.5 million in 2013 and 22.1 million in 2011. The average meters per well is estimated to be 2,125 in 2014, up from 2,050 in 2012 and 1,996 in 2011. This indicates a bias towards drilling and well servicing rigs with greater horsepower and higher depth capacity and that existing smaller equipment will be underutilized.  One area that looks promising in Canada is the requirement for more large drilling rigs in the 6,000 metre depth range to drill prospects like the Duvernay, Montney and Horn River in northwest Alberta and northeast British Columbia. The potential for LNG exports from the west coast of B.C. will increase demand for rigs in this depth capacity. Hyduke will be actively pursuing opportunities to participate in this anticipated Canadian rig fleet expansion.

Internationally, Hyduke continues to actively market its products and services in the United States, Russian Federation, Central and Eastern Europe, Mexico, South America and the Middle East.  While the project decision making cycle is longer on international work, active quoting continues on a significant number of international opportunities.  The Company continues to invest in product development and personnel in order to achieve more consistent success winning international projects.

Continued development of the international market will have a positive impact on Hyduke.  International projects tend to be larger, more turn-key in nature and have significant benefits throughout Hyduke due to the integrative nature of the Hyduke's products and service offerings.  Not only will the manufacturing segments of the organization benefit, but a positive impact will be felt in the Life Cycle Management businesses such as repair and maintenance, inspections and certification, and consumables.  The Company will continue to focus on increasing market share through marketing Hyduke's Life Cycle Management and Single Source Supplier platforms to customers.  These platforms benefit customers by offering continued support throughout the useful life of their equipment and by offering a wide array of consistent, reliable services from a single source.

Improved manufacturing margins is a major focus.  Areas such as engineering, drafting, project management, electrical, hydraulic and mechanical functions are being reviewed and improved as opportunities are identified. In some cases this is requiring investment that may not yield immediate revenue but will improve margins going forward. As an offset to productivity investments, management is continually seeking cost reductions in areas like support staff reductions and facility restructuring that do not impair revenue generating capability.

We are optimistic the efforts of our sales and marketing team will result in a more consistent stream of future significant turn-key projects. The type of drilling rigs required to drill tight oil and shale gas reservoirs worldwide is materially different that the capabilities of current equipment resulting in significant investements in new, bigger and more powerful rigs with extended depth capacity. Additionally, management focus on manufacturing processes, project management and the strategic investment in key areas of manufacturing processes will result improved operating margins.

As the market changes, the Company is in a process of continuous strategic review of the best way to minimize the negative impacts of the structural changes our drilling and well servicing clients are enduring while simultaneously examining how to best participate in the new drilling equipment requirements in Canada, the United States and worldwide. The objective is to ensure Hyduke remains what it has been for decades - a stable, respected, active and profitable supplier of equipment, products and services for the drilling and well servicing industry.

Forward Looking Statements
This report contains certain forward-looking statements under the heading "Outlook" and elsewhere concerning future events or the Company's operations, anticipated financial performance, business prospects and strategies of Hyduke.  Forward-looking information typically contains statements with words such as "anticipate", "believe", "estimate", "expect", "plan", "intend" or similar words suggesting future outcomes or outlooks on, without limitation, estimates of business activity, supply and demand for the Company's products, the estimated amounts and timing of capital expenditures, anticipated future debt levels, or other expectations, beliefs, plans, objectives, assumptions or statements about future events or performance.  Readers are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties both general and specific that may cause actual future results to differ materially from those contemplated and contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur.  These factors may affect anticipated earnings or assets and include, but are not limited to: industry activity levels, market liquidity, customer credit risk, competition, oil and gas prices, product liability, fixed price contracts, development of new products, uninsured and underinsured losses, access to additional financing, source of supply of raw material and third party components, availability of key personnel, agreements and contracts, government regulations, foreign exchange exposure, interest rate risk, international scope of operations, environmental health and safety regulations and Hyduke's anticipation of and success in managing the risks implied by the foregoing. The Company cautions that the foregoing list of important factors is not exhaustive.  The Company believes that the expectations reflected in the forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon.  The forward-looking statements in this report speak only as of the date of this report.  Hyduke undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required pursuant to applicable securities legislation.

About Hyduke
Hyduke is an integrated oilfield services company with over thirty-five years experience in the manufacture, repair and distribution of oilfield equipment and supplies in Canada and worldwide.  Hyduke specializes in providing customized, integrated solutions to the drilling and well service industries including:

• Turn-Key Equipment - drilling rig, work-over rig and service rig packages including in-house design, engineering and drafting, major component procurement and overall project management;
• Life Cycle Management - inspection, certification, service, repair and supply services throughout the operating life of the drilling, work-over or well service rig; and
• Single Source Supply - providing new capital equipment, repair and maintenance on existing capital equipment and supply of operating consumables.

Hyduke is headquartered in Nisku, Alberta, Canada and has facilities in Edmonton, Calgary, Nisku, Leduc, Red Deer and Lloydminster, Alberta and Houston, Texas, USA.

The Company conducts its business operations in two operating segments and one corporate services segment as follows:

Hyduke Rig Equipment: the Hyduke Rig Equipment segment includes the design, manufacture and refurbishment of land-based drilling rigs, workover rigs, well service rigs, drilling and well service support equipment.

Hyduke Supply and Service: the Hyduke Supply and Service segment includes the procurement and distribution of spare parts, equipment components, operating supplies and pneumatic controls to the drilling and well service industries, the service and repair of drilling rig, workover rig, service rig and truck mounted equipment, and the inspection and certification of drilling rig and well service equipment.

Corporate Services: The Corporate Services segment includes costs for management and administration, sales and marketing, accounting and finance and engineering and drafting services provided to all Hyduke operating segments.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this News Release.

SOURCE: Hyduke Energy Services Inc.

Gordon R. McCormack, CA
President and Chief Executive Officer
[phone]

Veronica Dutchak, CA
Chief Financial Officer
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