Hyduke Announces Second Quarter 2017 Financial Results, Refinances Term Debt

NISKU, AB, Aug. 14, 2017 /CNW/ - Hyduke Energy Services Inc. ("Hyduke" or the "Company") (HYD – TSX) announced operating results for the six months ended June 30, 2017 and 2016. Hyduke's Financial Statements and Management Discussion & Analysis have been filed with regulators and are available at www.sedar.com.


Three months

June 30, 2017

change (%)

Three months

June 30, 2016

Six months

June 30, 2017

change (%)

Six months
June 30, 2016








Cost of goods sold







Gross margin(2)





Gross margin %





Selling, general & administrative







EBITDAS(2) continuing operations







Net profit (loss)

from continuing operations







Net loss







Per share – basic & diluted





June 30, 2017

December 31, 2016

Total assets



Total liabilities



(1) Certain amounts related to selling and distribution, general and administrative, and other operating income and expenses were reclassified from Cost of Sales.

(2) See "Non-GAAP Measures"



Three Months Ended June 30

Six Months Ended June 30



Change (%)



Change (%)

Manufacturing & Fabrication







Supply & Service







Elimination Entries





Total Revenue








For the three months ended June 30, 2017, the Manufacturing & Fabrication segment generated $10,201 of revenue, a 341% increase over the same period in the prior year. Approximately 65% of the increase reflects revenues from acquisitions and 35% from increased revenues from organic growth. The organic growth reflects increased revenues related to oil sands projects and the diversification of its products and services to include the manufacture and repair of storage tanks and custom steel fabrication.

Consistent with the increase in operating drilling and service rigs, Supply & Service revenue increased 93% in the second quarter of 2017 compared to the second quarter of 2016. The sector experienced an overall increase in activity resulting from an increase in oil prices in addition to a longer winter drilling season compared to the early spring break up experienced in 2016. These factors resulted in an increase in demand for oilfield supplies, pneumatics and inspection services.

Gross margin (see "Non-GAAP Measures") was $1,139 or 9.3% compared to gross margin of $121 (3.5% of revenue) in the second quarter of 2016. The increased gross margin reflects a combination of increased revenues, operating efficiencies, and price improvements offset by some increases in SG&A costs.

SG&A expenses for the three months ended June 30, 2017 were $2,456, an increase of 80% compared to $1,367 for the three months ended June 30, 2016.

Negative EBITDAS for continuing operations was $1,143 for the second quarter of 2017 compared to a negative EBITDAS of $1,063 in the second quarter of 2016.

Depreciation and amortization of $355 increased from $168 in the second quarter of 2016. The increase in the expense was due to the property, plant, and equipment acquired with the business acquisitions.

Stock based compensation was $47 compared to $18 in the second quarter of 2016.

The Company recorded $173 in interest charges during the second quarter of 2017, an increase of $62 from 2016. The increase is due to an increase in the rate of interest on its term loan facility.

Continuing operations net loss for Q2/17 was $(1,722) compared to a loss of $(1,359) in Q2/16.


The Company closed an $8,500,000 financing facility on August 11, 2017 and used the funds advanced on closing to pay in full the Term Debt facility scheduled to mature on August 15, 2017. The Company also simultaneously completed an amendment to its operating facility allowing immediate access to $1.5 million of that facility.


Three years ago management began to execute a turnaround strategy for Hyduke. The plan was to simplify the business, improve margins and profits, and expand into other sectors of the oil and gas industry besides drilling and service rigs. One year into that strategy, the oilfield services industry entered a severe downward cycle caused by the collapse of world oil prices. This downturn slowed the pace but not progress of the turnaround strategy. Non-core and non-relevant businesses have been divested or shut down. The Company has improved and expanded safety, quality, sales and engineering capabilities. New product lines like the Swift Environmental fluid management system have been added and our customer base has been expanded within the oilfield and into additional industries.

More recently, in anticipation of a reversal of the oilfield services down cycle, Hyduke has focused on the growth elements of the turnaround strategy with a focus on non-traditional product lines and customers. This has included the acquisitions of Western Manufacturing Ltd. and Avalanche Metal Industries Ltd. to expand manufacturing capacity and geographic footprint.  Nisku manufacturing capabilities were expanded and enhanced to manufacture pressure vessels by obtaining our ABSA, ASME and U stamp certifications. The recent accreditation by the American Petroleum Institute allows Hyduke to use the API Standard 650 Monogram on our field constructed storage tanks.

Late in 2016 and into the first quarter of 2017, the E&P industry began to show signs of increased activity as commodity prices increased and stabilized. Drilling rig activity in Q1 2017 averaged 253 up from 172 in Q4 2016 and up sharply from only 153 in Q1 2016. Hyduke has seen the impact of these improvements with a significant increase in our first quarter revenue compared to both Q4 2016 and Q1 2016. Current indications are that 2017 rig activity should remain above 2016 levels. The revenues of BW Rig have historically been directly impacted by this increased industry activity, a trend already evidenced in the 2017 financial statements. Revenues from Manufacturing & Fabrication are also ultimately related to rig activity but is typically delayed one to two quarters. Rig activity increases production which ultimately drives the need for on-site storage and expansion of midstream facilities. This is the new market Hyduke has pursued through marketing and acquisitions to fabricate and sell tanks and pressure vessels.

The Company believes that the diversification of its product line and expansion of the geographic footprint and manufacturing capacity will allow Hyduke to offer unique solutions to customers, grow revenues and leverage the fixed cost base across more revenue in the current stabilizing business cycle. The financial performance of the legacy Hyduke business lines have met expectations and have provided significantly improved financial performance on a year-over-year basis in terms of both revenue and operating margins. However, the complete integration of the acquisitions of Western and Avalanche into Hyduke's operating protocols will take longer than the three months in Q2 when the Company owned them. Both companies were acquired on attractive terms relative to their historic financial performance.

Therefore, results for the second quarter demonstrates both the successes of the expansion and diversification strategy and focus of management for the future.  The signing of a $20 million contract with AltaGas as a key vendor for AltaGas's Ridley Island propane export facility provides a solid base of revenue for the Company over the coming quarters and, importantly, solidly positions the Company as a participant in the market for large storage tanks. Financial results for both the Supply business and Hyduke's legacy Manufacturing businesses showed strong revenue and margin performance. However, the complete integration of Western and Avalanche with Hyduke into a single and more efficient business unit remains a key priority of management for the rest of the 2017 fiscal year.

As discussed earlier in this MD&A, the Company has been successful in renegotiating its capital structure to replace its legacy long-term debt due August 15, 2017 with a 25-year mortgage on its real estate assets. As a result of the significant increase in working capital as measured by inventory and accounts receivable, the Company's operating facility lender has amended its covenants to provide Hyduke with enhanced liquidity to pursue the growing business opportunities the recovery in the industry it serves and its acquisition strategies have created.

As at August 10, 2017 the active drilling rig count in western Canada was 223, significantly higher than 130 on the same day in 2016. On July 31, 2017 the Petroleum Services Association of Canada (PSAC) increased its forecast for the number of wells drilled for the third time since its original forecast was released in November of last year. PSAC now believes 7,200 wells will be drilled on a rig-released basis this year, up 30% from an estimate of only 4,175 wells late last year. This is because of strong activity in the second quarter and the shift of capital from oil sands exploitation to conventional plays with quicker returns.

This improved outlook for the remainder of 2017, new business lines in storage tanks and steel fabrication, plus the large AltaGas project which will take over a year to complete, give Hyduke confidence the higher revenues experienced year-over-year will continue. This gives management the ability to concentrate on integration, margin improvement, capital management and operating efficiency. 

Additional information relating to Hyduke is available under the Company's profile on SEDAR website at www.sedar.com and www.hyduke.com

Forward looking information

This news release contains forward-looking information relating to the expectations of management that the integration process will lead to improvements in operations and efficiency for both Western and Hyduke. Such forward-looking information is subject to important risks, uncertainties and assumptions. The results or events predicated in this forward-looking information may differ materially from actual results or events. As a result, you are cautioned not to place undue reliance on this forward-looking information.

Forward-looking information is based on certain factors and assumptions regarding, among other things, general assumptions respecting the business and operations of Hyduke and economic factors. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward looking-information is subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what is currently expected. These factors include but are not limited to risks associated with the failure of the Company to obtain the benefits of integration; volatility in market prices for oil and natural gas; and the general economic conditions in Canada.

You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, the Company is under no obligation and does not undertake to update this information at any particular time, except as required by law.

About Hyduke

Trading on the TSX under the symbol "HYD," Hyduke Energy Services Inc. is a supplier of equipment and services to the oil and gas drilling and well servicing industry. 

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

SOURCE Hyduke Energy Services Inc.

For further information: Patrick Ross, President & Chief Executive Officer, (780) 955-0355; James Hill, Chief Financial Officer, (780) 955-0355


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