IROC Energy Services Corp. announces increased net income and filing of
quarterly financial statements
/THIS PRESS RELEASE IS NOT FOR DISSEMINATION IN UNITED STATES OR TO ANY UNITED STATES NEWS SERVICES/
CALGARY, May 26 /CNW/ - IROC Energy Services Corp. ("IROC" or the "Corporation") (TSX Venture Exchange: "ISC") is pleased to present a summary of its operating and financial results for the three month period ended March 31, 2010. For a complete copy of IROC's quarterly financial statements and management's discussion and analysis ("MD&A") please visit www.sedar.com.
HIGHLIGHTS FOR THE THREE MONTHS ENDED MARCH 31, 2010: ----------------------------------------------------- - Total revenue from continuing operations increased 16% to $16.2 million for the three months ended March 31, 2010 as compared to $14.0 million in the comparable period of the prior year. - Gross margin from continuing operations increased 17% to $5.6 million for the three months ended March 31, 2010 as compared to $4.8 million in the comparable period of the prior year. - EBITDAS from continuing operations increased 31% to $3.4 million for the three months ended March 31, 2010 as compared to $2.6 million in the comparable period of the prior year. - Net income from continuing operations increased 539% to $524 thousand for the three months ended March 31, 2010 as compared to $82 thousand in the comparable period of the prior year. - The Corporation paid a cash dividend of $0.02 per common share on January 29, 2010. OPERATIONS ----------
IROC's continuing operations are reported in three segments; the Drilling and Production Services segment, the Technology Services segment and Corporate Services. The following is a discussion of the reporting segments in which IROC operates.
DRILLING AND PRODUCTION SERVICES
The Drilling and Production Services segment provides services and rental equipment to oil and gas exploration, development and production companies with most of our customers and operations being located in western Canada, in the provinces of Alberta and Saskatchewan.
The Drilling and Production Services segment consists of two divisions:
Eagle Well Servicing ("Eagle") contracts service rigs to oil and gas companies to perform various completion, work-over and maintenance services on oil and natural gas wells. Eagle has offices and equipment in Red Deer, Grande Prairie and Lloydminster in Alberta and an office and equipment in Estevan, Saskatchewan with equipment being used in those geographic areas.
Aero Rental Services ("Aero") provides rental equipment for surface pressure control in drilling and work-over operations and tubular handling equipment used for the work over, re-entry and completion operations. Aero has an office in Red Deer, Alberta with equipment being rented for use primarily in Alberta. Aero's results are directly affected by the level of new well drilling activity.
This segment generated revenue of $13.5 million, or 83% of the Corporation's total revenue, for the three month period ended March 31, 2010.
Eagle currently has a fleet of 36 service rigs with our fleet amongst the newest in the industry. All Eagle's service rigs are internally guyed (no requirement for external anchors) which reduces set up time and corresponding costs when compared to anchored rigs.
Service rig utilization, as measured by IROC's internal methodology, improved in the quarter to 55%. This is the best utilization since the third quarter of 2008 and is the third consecutive quarter of improvement. This trend is attributed to the improving environment in the energy sector due to improved and stabilizing oil prices. Natural gas focussed activity continues to be constrained at current price levels. Pricing for services continues to be very competitive and, notwithstanding the increases in utilization, has not been able to recover to year ago levels.
Aero rentals has followed a similar trend over the past three quarters with improving gross margin returns on capital used for rental equipment.
TECHNOLOGY SERVICES
The Technology Services segment is comprised solely of our Canada Tech division. Canada Tech develops, manufactures and sells or rents a wide line of tools and systems that measure pressures, temperatures and other attributes in the down-hole and surface environment of oil and gas wells.
This segment generated revenue of $2.7 million, or 17% of the Corporation's total revenue, for the three month period ended March 31, 2010. During the quarter 25% of Canada Tech's sales were to Canadian customers, 25% were to the customers located in the United States and 50% were to international customers.
Canada Tech's customers require data that is reliable, consistent and accurate. Our products utilize new and superior technology enabling our gauges and systems to operate in higher temperatures and more challenging environments. Canada Tech's competitive advantage continues to be the ability to look at each well individually and adapt a system to match the needs of the customer within the well parameters.
Canada Tech differs from our other divisions in that the capital requirement is smaller and the value of the division is contained in its patents and proprietary technology. A significant portion of Canada Tech's costs are fixed and as such increased sales volumes have a magnified effect on the EBITDAS of IROC. We expect improved performance from this division in the coming quarters as we increase sales to international markets and introduce new products and technology both domestically and internationally.
Canada Tech's operations were consolidated in our Calgary facility in the current quarter and we expect to start to see the benefit of reduced overall costs as we continue through the year. Previously, Canada Tech had offices and facilities in both Red Deer, and Calgary, Alberta.
CORPORATE SERVICES
IROC's non-operating segment, Corporate Services, captures general and administrative expenses associated with supporting each of the reporting segments operations noted above, plus costs associated with being a public company. Also, included in Corporate Services is interest expense for debt servicing and income tax expense.
FINANCIAL RESULTS AND SELECTED FINANCIAL INFORMATION ---------------------------------------------------- ------------------------------------------------------------------------- $ 000's except number Three months ended of shares and per March 31, December 31, September 30, June 30, share amounts 2010 2009 2009 2009 ------------------------------------------------------------------------- Revenue: Eagle Well Servicing 11,731 10,537 7,166 5,349 Aero rentals 1,776 1,501 1,013 900 ------------------------------------------------------------------------- Total drilling & production services 13,507 12,038 8,179 6,249 Technology services 2,741 3,445 2,052 3,053 ------------------------------------------------------------------------- Total revenue 16,248 15,483 10,231 9,302 ------------------------------------------------------------------------- Operating costs: Eagle Well Servicing 7,570 6,982 4,652 3,919 Aero rentals 1,309 1,047 702 840 ------------------------------------------------------------------------- Total drilling & production services 8,879 8,029 5,354 4,759 Technology services 1,751 2,356 1,554 1,808 ------------------------------------------------------------------------- Total operating costs 10,630 10,385 6,908 6,567 ------------------------------------------------------------------------- Gross margin(1) Eagle Well Servicing 4,162 3,555 2,509 1,434 Aero rentals 467 455 311 60 ------------------------------------------------------------------------- Total drilling & production services 4,629 4,010 2,820 1,494 Technology services 989 1,088 498 1,245 ------------------------------------------------------------------------- Total gross margin 5,618 5,098 3,318 2,739 ------------------------------------------------------------------------- Gross margin %(1): Eagle Well Servicing 35% 34% 35% 27% Aero rentals 26% 30% 31% 7% ------------------------------------------------------------------------- Total drilling & production services 34% 33% 34% 24% Technology services 36% 32% 24% 41% ------------------------------------------------------------------------- Total gross margin % 35% 33% 32% 29% ------------------------------------------------------------------------- EBITDAS(1): Eagle Well Servicing 3,566 3,057 2,129 1,001 Aero rentals 316 331 206 (53) ------------------------------------------------------------------------- Total drilling & production services 3,882 3,388 2,335 948 Technology services 475 512 29 556 Corporate (979) (927) (992) (928) ------------------------------------------------------------------------- Total EBITDAS 3,378 2,973 1,372 576 ------------------------------------------------------------------------- ------------------------------------------------------------------------- General and administrative 2,240 2,125 1,951 2,159 ------------------------------------------------------------------------- Depreciation and amortization 1,991 2,392 2,073 1,978 ------------------------------------------------------------------------- Interest expense net of interest income 360 446 308 205 ------------------------------------------------------------------------- Stock based compensation 178 74 57 85 ------------------------------------------------------------------------- Provision for current and future income taxes 235 380 (268) (785) ------------------------------------------------------------------------- Loss (gain) on foreign exchange 97 43 168 354 ------------------------------------------------------------------------- Net income (loss) from continuing operations 524 (395) (9,314) (1,260) ------------------------------------------------------------------------- Net income (loss) 524 (481) (9,324) (1,260) ------------------------------------------------------------------------- Net income (loss) per common share from continuing operations: - Basic $0.01 $(0.01) $(0.21) $(0.03) ------------------------------------------------------------------------- - Diluted $0.01 $(0.01) $(0.21) $(0.03) ------------------------------------------------------------------------- Net income (loss) per common share: - Basic $0.01 $(0.01) $(0.21) $(0.03) ------------------------------------------------------------------------- - Diluted $0.01 $(0.01) $(0.21) $(0.03) ------------------------------------------------------------------------- Weighted average common shares outstanding: - Basic 43,576,971 43,565,754 43,947,852 44,200,651 ------------------------------------------------------------------------- - Diluted 43,576,971 43,565,754 43,947,852 44,200,651 ------------------------------------------------------------------------- (1) See Non-GAAP Measures ------------------------------------------------------------------------- $ 000's except number Three months ended of shares and per March 31, December 31, September 30, June 30, share amounts 2009 2008 2008 2008 ------------------------------------------------------------------------- Revenue: Eagle Well Servicing 10,444 12,238 12,275 6,852 Aero rentals 1,362 1,367 1,329 567 ------------------------------------------------------------------------- Total drilling & production services 11,806 13,605 13,604 7,419 Technology services 2,201 3,398 5,043 2,735 ------------------------------------------------------------------------- Total revenue 14,007 17,003 18,647 10,154 ------------------------------------------------------------------------- Operating costs: Eagle Well Servicing 6,544 7,117 6,891 4,725 Aero rentals 994 1,001 864 808 ------------------------------------------------------------------------- Total drilling & production services 7,538 8,118 7,755 5,533 Technology services 1,688 2,573 3,154 1,986 ------------------------------------------------------------------------- Total operating costs 9,226 10,691 10,909 7,519 ------------------------------------------------------------------------- Gross margin(1) Eagle Well Servicing 3,900 5,121 5,384 2,127 Aero rentals 368 366 465 (241) ------------------------------------------------------------------------- Total drilling & production services 4,268 5,487 5,849 1,886 Technology services 513 825 1,889 749 ------------------------------------------------------------------------- Total gross margin 4,781 6,312 7,738 2,635 ------------------------------------------------------------------------- Gross margin %(1): Eagle Well Servicing 37% 42% 44% 31% Aero rentals 27% 27% 35% (43%) ------------------------------------------------------------------------- Total drilling & production services 36% 40% 43% 25% Technology services 23% 24% 37% 27% ------------------------------------------------------------------------- Total gross margin % 34% 37% 41% 26% ------------------------------------------------------------------------- EBITDAS(1): Eagle Well Servicing 3,434 4,397 4,814 1,772 Aero rentals 261 241 344 (382) ------------------------------------------------------------------------- Total drilling & production services 3,695 4,638 5,158 1,390 Technology services (165) 159 1,354 245 Corporate (950) (895) (994) (1,151) ------------------------------------------------------------------------- Total EBITDAS 2,580 3,902 5,518 484 ------------------------------------------------------------------------- General and administrative 2,201 2,410 2,220 2,150 ------------------------------------------------------------------------- Depreciation and amortization 2,011 1,791 1,959 1,914 ------------------------------------------------------------------------- Interest expense net of interest income 273 512 976 1,085 ------------------------------------------------------------------------- Stock based compensation 110 67 59 63 ------------------------------------------------------------------------- Provision for current and future income taxes 54 615 538 (686) ------------------------------------------------------------------------- Loss (gain) on foreign exchange 54 (616) (24) 6 ------------------------------------------------------------------------- Net income (loss) from continuing operations 82 1,532 2,024 (1,894) ------------------------------------------------------------------------- Net income (loss) 488 1,268 315 (2,142) ------------------------------------------------------------------------- Net income (loss) per common share from continuing operations: - Basic $ - $0.05 $0.05 $(0.04) ------------------------------------------------------------------------- - Diluted $ - $0.05 $0.05 $(0.04) ------------------------------------------------------------------------- Net income (loss) per common share: ------------------------------------------------------------------------- - Basic $0.01 $0.04 $0.01 $(0.05) ------------------------------------------------------------------------- - Diluted $0.01 $0.04 $0.01 $(0.05) ------------------------------------------------------------------------- Weighted average common shares outstanding: - Basic 44,296,448 44,304,504 44,304,504 44,301,080 ------------------------------------------------------------------------- - Diluted 44,296,448 44,324,122 44,324,122 44,321,531 ------------------------------------------------------------------------- (1) See Non-GAAP Measures OUTLOOK -------
With the continued firming of oil prices, the return to more normal winter activity and the expansion of horizontal drilling technology in Western Canada there is a great deal more optimism in our industry than we saw during the summer and fall of 2009. While we expect activity to increase on a year over year basis, we will face a tight labour market and margins that continue to be pressured. We do not expect this situation will change noticeably over the coming months but the expected increase in activity will provide the basis for improvement in both these areas. It should be noted that the activity currently being achieved is happening despite continuing low natural gas prices and difficulties brought on by the Alberta government royalty tax changes introduced in 2009. Recent changes to the Alberta royalty structure and conventional gas activity provides further reason for optimism as we head into the last half of 2010.
About IROC Energy Services Corporation
IROC Energy Services Corp. is an Alberta oilfield services company that, through the IROC Energy Services Partnership, provides a diverse range of products, services and equipment to the oil and gas industry that are among the newest and most innovative in the WCSB. IROC combines cutting-edge technology with depth of experience to deliver a product and services offering in three core areas: Well Servicing & Equipment, Downhole Temperature & Pressure Monitoring Tools, and Rental Services. For more information on IROC Energy Services Corp. visit our website at www.iroccorp.com.
Cautionary Statements
Certain statements contained in this press release may constitute forward looking statements concerning, among other things, expected revenues, expected expenses, profits, developments and strategies for IROC's operations all of which are subject to certain risks, uncertainties and assumptions. These forward looking statements are identified by their use of terms and phrases such as "anticipate", "continue", "estimate", "expect", "may", "will", "projected", "should", "believe" and other similar terms and phrases. By its nature, such forward looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward looking statements. These risks include, but are not limited, to the risks associated with the oil and gas industry generally, fluctuating prices in crude oil and natural gas, changes in drilling activity, general global economic, political and business conditions, weather conditions, regulatory changes and availability of products, qualified personnel and manufacturing capacity and raw materials. If any of these uncertainties materialize, or if assumptions are incorrect actual results may vary materially from those expected. IROC relies on litigation protection for any forward looking statements.
The Common Shares of IROC have not and will not be registered on the United States Securities Act of 1933, as amended (the "United States Securities Act") or any state securities laws and are not offered or sold in the United States or to any US person except in certain transactions exempt from the registration requirements of the United States Securities Act and applicable state securities laws.
Neither 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.
NON-GAAP MEASURES -----------------
The financial statements have been prepared in accordance with GAAP. Certain supplementary information and measures not recognized under GAAP are provided where Management believes they assist the reader in understanding IROC's results. These measures include:
1. EBITDAS and EBITDAS per share - EBITDAS is defined as earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, foreign exchange gains and losses, goodwill impairment, note receivable impairment, and gains or losses on disposal of property and equipment. EBITDAS and EBITDAS per share are not recognized measures under GAAP. The Corporation believes that EBITDAS is provided as a measure of operating performance without reference to financing decisions, income tax impacts and non-cash expenses, which are not controlled at the operating management level. Accordingly, the Corporation believes EBITDAS is a useful measure for prospective investors in evaluating the financial performance of the Corporation, and specifically, the ability of the Corporation to service the interest on its indebtedness. Investors should be cautioned that EBITDAS should not be construed as an alternative to net income determined in accordance with GAAP as an indicator of the Corporation's performance. IROC's method of calculating EBITDAS may differ from those of other companies, and accordingly, EBITDAS may not be directly comparable to measures used by other companies. 2. Gross margin is defined as revenue less operating expenses. Gross margin % is defined as gross margin divided by revenue. The Company believes that gross margin and gross margin % are useful measures which provide an indicator of the Corporation's fundamental ability to make money on the products and services it sells. The Corporation believes the relationship between revenues and costs expressed by the gross margin % is a useful measure when compared between different financial periods as it demonstrates the trending relationship between revenues, costs and margins. Gross margin and gross margin % are not recognized measures of GAAP and do not have any standardized meaning prescribed by GAAP. IROC's method of calculating gross margin and gross margin % may differ from those of other companies, and accordingly, may not be directly comparable to measures used by other companies. Gross margin is reconciled to revenue - continuing operations in the FINANCIAL HIGHLIGHTS table.
The following is a reconciliation of EBITDAS and EBITDAS per share to net income from continuing operations:
------------------------------------------------------------------------- $ 000's except number Three months ended of shares and per March 31, December 31, September 30, June 30, share amounts 2010 2009 2009 2009 ------------------------------------------------------------------------- Net income (loss) from continuing operations 524 (395) (9,314) (1,260) Depreciation and amortization 1,991 2,392 2,073 1,978 Loss (gain) on foreign exchange 97 43 168 354 Stock based compensation expense 178 74 57 85 Loss (gain) on disposal of equipment (7) 33 (2) (1) Other interest 81 92 50 54 Interest on long-term debt 290 373 276 187 Interest income (11) (19) (18) (36) Goodwill Impairment - - 6,850 - Note Receivable Impairment - - 1,500 - Income taxes: Current (recovery) - - - - Future (recovery) 235 380 (268) (785) ------------------------------------------------------------------------- EBITDAS - continuing operations 3,378 2,973 1,372 576 ------------------------------------------------------------------------- ------------------------------------------------------------------------- EBITDAS per share Basic $0.08 $0.07 $0.03 $0.01 Diluted $0.08 $0.07 $0.03 $0.01 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ 000's except number Three months ended of shares and per March 31, December 31, September 30, June 30, share amounts 2009 2008 2008 2008 ------------------------------------------------------------------------- Net income (loss) from continuing operations 82 1,532 2,024 (1,894) Depreciation and amortization 2,011 1,791 1,959 1,914 Loss (gain) on foreign exchange 54 (616) (24) 6 Stock based compensation expense 110 67 59 63 Loss (gain) on disposal of equipment (4) 1 (14) (4) Other interest 73 155 68 23 Interest on long-term debt 212 357 756 827 Interest income (12) - - - Interest and accretion on debentures - - 152 235 Goodwill Impairment - - - - Note Receivable Impairment - - - - Income taxes: Current (recovery) - (45) - - Future (recovery) 54 660 538 (686) ------------------------------------------------------------------------- EBITDAS - continuing operations 2,580 3,902 5,518 484 ------------------------------------------------------------------------- ------------------------------------------------------------------------- EBITDAS per share Basic $0.06 $0.09 $0.12 $0.01 Diluted $0.06 $0.09 $0.12 $0.01 -------------------------------------------------------------------------
For further information: IROC Energy Services Corp., Mr. Thomas M. Alford, President and CEO, Telephone: (403) 263-1110, Email: [email protected]
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