Hyduke Announces Second Quarter Fiscal 2014 Financial Results

NISKU, AB, Aug. 12, 2014 /CNW/ - Hyduke Energy Services Inc. (HYD - TSX), announced operating results for the three and six month periods ended June 30, 2014.  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 include the following:

• Revenue for the current quarter of $11.6 million down 7% from $12.4 million in the prior quarter.
• Gross profit for the current quarter of $2.4 million down 12% from $2.7 million in the prior quarter.
• Gross profit percentage for the current quarter of 20.4% reflects a decrease of 1.3 basis points from the prior quarter.
• Net loss from continuing operations for the current quarter of $27 thousand.
• Loss per share (basic) from continuing operations for the current quarter of $0.001.
• EBITDAS for continuing operations for the current quarter of $216 thousand.
• During the quarter the Company discontinued the operations its paint and sandblast facility located in Nisku, Alberta.
• Liquidity remains positive with current ratio at 2.15 to 1.00 with cash and cash equivalents increasing by $3.6 million. 
• Debt to equity ratio remains low at 0.28 to 1.00

Selected Statement of Comprehensive Income Information	Three Months Ended
($000's, except per share data)	June 30 2014	Mar 31 2014	June 30 2013 (Restated)
Total revenue – continuing operations	11,585	12,392	12,609
Gross profit^–continuing operations	2,363	2,687	3,556
Gross profit (%)	20.4	21.7%	28.2%
EBITDAS – continuing operations	216	773	1,629
Profit (loss) – continuing operations	(27)	588	1,203
Profit (loss)	(1,491)	(50)	(1,148)
Profit (loss) per share – basic ($)	(0.061)	(0.002)	(0.047)
Profit (loss) per share – diluted ($)	(0.061)	(0.002)	(0.047)

Second quarter 2014 revenues of $11,585,470 decreased $806 thousand (7%) from the prior quarter due to an seasonality of  activity of drilling and well service contractors in Western Canada. 

Second quarter 2014 gross profit (refer to NON-IFRS MEASURES) of $2,362,908 decreased $324 thousand (12%) from the prior quarter and was due to slightly lower realized margins during the competitive spring break up season in the supply and service segment in addition to a reduction in revenue. 

Second quarter 2014 EBITDAS (refer to NON-IFRS MEASURES) was $216 thousand, a $0.6 million decrease from the prior quarter.  This is a result of a decrease in revenue and a decrease in gross margin percentage. 

Second quarter 2014 loss from continuing operations of $27 thousand represents a decrease of $0.6 million from the prior quarter.

Selected Financial Position  Information
($000's, except ratios)	March 31  2014	December 31  2013
Total assets	44,228	44,300
Total current assets	31,719	30,417
Total cash and short term deposits	5,791	2,228
Total liabilities	15,426	17,497
Total current liabilities	14,787	16,654
Total bank indebtedness	-	Nil
Total interest bearing debt	8,043	8,433
Total equity	28,802	26,804
Current ratio (current assets divided by current liabilities)	2.15 to 1:00	1.83 to 1.00
Debt to equity ratio (interest bearing debt divided by shareholders' equity)	0.28 to 1.00	0.31 to 1.00

At June 30, 2014 Hyduke maintained a strong balance sheet as measured by liquidity (current ratio of 2.15 to 1.00) and debt to equity (ratio of 0.28 to 1.00)

Total assets of $44.2 million as at June 30, 2014 represents a decrease of $73 thousand (0%) from December 31, 2013 and is due primarily to an increase in cash offset by a reduction in property plant and equipment due to the disposition of assets of discontinued operations. 

Total liabilities of $15.4 million as at June 30, 2014 represents a decrease of $2.1 million (12%) from December 31, 2013.  Total current liabilities decrease of $1.9 million relates primarily to a decrease in accounts payable of $1.2 million due to a decline in business activity.

OUTLOOK

The restructuring of the operation and organization of the Company continued in the second quarter with several major steps accomplished. As has been written in previous disclosures, the Board has determined that the Company will better serve its stakeholders by management streamlining its operations and simplifying its business with the objective of focusing on a few cores operations.

On May 2, 2014, Pat Ross assumed the position of President and CEO.  Mr. Ross has extensive business and investment experience in a number of enterprises.  One of his areas of specialization is with turnaround situations in which he invests in and manages underperforming companies. With the support of the Board, Mr. Ross is executing the plan the Board identified and disclosed last year.

Congruent with this plan, Walter Chayka joined the Board at the Annual General Meeting on June 10, 2014. Mr. Chayka has extensive management experience in all of the Company's core businesses plus public company board experience.

To strengthen the balance sheet and provide the company with the financial flexibility to execute its restructuring strategy, on June 27, 2014, the Company closed an equity issue of 6,075,000 million common share from treasury priced at $0.62 per share. Gross proceeds before commissions and expenses were $3,766,500. The offering was heavily oversubscribed. Reduced on a pro-rata basis along with other investors, the Board purchased a total of 888,030 common shares. This was to demonstrate the Board's confidence in its strategy and the Company's new CEO and to ensure the objectives of the Board and the rest of the shareholders are aligned.

Operationally, the Company executed several moves that over time will contribute towards the overall plan. The paint facility, a small and marginally profitable wholly-owned subsidiary, was closed and its closure has been completed with no future financial obligations.

The administrative offices were consolidated in a single, newer, Company-owned building allowing the Company to substantially reduce its monthly rent obligations and enhance management effectiveness by having all key administrative and engineering personnel in the same facility. The enhanced communications and information flow alone will contribute to efficiency in the future. While the move was not fully completed until the end of July, going forward this is expected to save the Company over quarter a million dollars per year.

The main warehouse for the distribution division, currently the company's largest in terms of revenue, moved into a new facility only minutes from the main fabrication facility and head office. Other divisions continue to be reviewed to evaluate their relevance to the company's long-term business strategy.

Operational staff is being both augmented in key areas such as sales, procurement, internal processes and systems, and rationalized in areas where cost saving are available. Due to severance and other one-time restructuring costs, the long term goal of reduced fixed costs on overall SG&A expenses is not apparent in the Q2 financial results, nor will it appear in Q3 as the foregoing issues are resolved.

The Board and management is confident that the initiatives underway will yield lower fixed costs as a percentage of total revenue from the fourth quarter of 2014 and onwards.

The general operating environment in which the Company operates remains robust. Exploration and production (E&P) company capital expenditures remain strong in 2014 driving demand for drilling and well servicing rigs and related oilfield service activities. As a result of rising production volumes, steady oil prices and higher natural gas prices, E&P companies are enjoying improved financial performance on a year-to-date basis in 2014 compared to 2013. This creates the free cash for re-investment that ultimately drives drilling and well servicing activity and the Company's business.

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

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, [phone]; Veronica Dutchak, CA, Chief Financial Officer, [phone]