IROC Energy Services Corp. announces third quarter 2009 results and updates
semi-annual dividend process
/THIS PRESS RELEASE IS NOT FOR DISSEMINATION IN
FINANCIAL HIGHLIGHTS (Expressed in thousands of dollars, except share and per share amounts) For the 3 months For the nine months ended Sept 30, ended Sept 30, -------------- -------------- (Unaudited) (Unaudited) % % 2009 2008 Change 2009 2008 Change ------------------------------------------------------------------------- Revenue - continuing operations $10,231 $18,647 -45% $33,540 $48,321 -31% ------------------------------------------------------------------------- Operating costs 6,908 10,909 -37% 22,701 30,148 -25% ------------------------------------------------------------------------- Gross margin 3,323 7,738 -57% 10,839 18,173 -40% Gross margin % 32% 41% -22% 32% 38% -16% ------------------------------------------------------------------------- General and administrative expenses 1,951 2,220 -12% 6,311 6,256 1% ------------------------------------------------------------------------- EBITDAS - continuing operations(1) 1,372 5,518 -75% 4,528 11,917 -62% Per share diluted(1) 0.03 0.12 -75% 0.10 0.27 -63% ------------------------------------------------------------------------- Net earnings (loss) - continuing operations (9,314) 2,024 -560% (10,490) 2,280 -560% Per share diluted (0.21) 0.05 -520% (0.24) 0.05 -575% ------------------------------------------------------------------------- Net earnings (loss) (9,324) 315 -3060% (10,096) 910 -1209% Per share diluted (0.21) 0.01 -2200% (0.23) 0.02 -1243% ------------------------------------------------------------------------- Weighted Average Number of shares outstanding Basic 43,947,852 44,304,504 -1% 44,147,039 44,285,624 0% Diluted 43,947,852 44,324,122 -1% 44,147,039 44,446,091 -1% ------------------------------------------------------------------------- (1) Refer to the "NON-GAAP MEASURES" section for further details. Overall Performance -------------------
While the Corporation posted EBITDAS of
The low activity levels the oil and gas industry experienced during the first half of 2009 continued through the third quarter. The global economic conditions and the uncertainty of commodity prices for oil and gas lead to some of the lowest historical activity levels in the oilfield in
Other Results from the Period ----------------------------- - IROC's revenue from continuing operations for the third quarter ended September 30, 2009 decreased 45.1%, to $10.2 million from $18.6 million compared to the same period in 2008. Revenue for the nine months ended September 30, 2009 was $33.5 million compared to $48.3 million, representing a decrease of 30.6%. Although IROC had additional equipment capacity year over year from the service rig build program in the second half of fiscal 2008, additional revenue growth was hampered as a result of lower than expected utilization and competitive pressure on pricing. Activity levels were down in all three operating divisions year over year for the third quarter. Results in all our divisions are lower on a year to date basis to the end of September 30, 2009 compared to the previous year as a result of the significant reduction in demand for services brought about by the low commodity price environment, the rising Canadian dollar, and the ongoing royalty structure issues in Alberta. - EBITDAS from continuing operations for the third quarter ended September 30, 2009 was $1.4 million or $0.03 per share, compared to $5.5 million, or $0.12 per share, in the same period of 2008. For the nine months ended September 30, 2009 EBITDAS was $4.5 million or $0.10 per share compared to $11.9 million or $0.27 per share in the same period of 2008, a decrease of 62%. EBITDAS for the third quarter and for the nine months decreased year over year mainly as a result of lower activity levels across the industry and reduced demand for the Corporation's goods and services. Additionally, operating costs were higher as field personnel wages were increased in October 2008 at a time when the industry activity levels were reducing. In the past pricing to customers was increased to partially offset some of these higher costs but with the increased competitive environment and lower demand from customers, pricing increases were not achievable. Generally costs associated with field activities have not moved directionally with the lower demand environment despite best efforts of our people as there is a base line of costs necessary to operate. EBITDAS as a percentage of revenue was 13.5% and 24.7% for the nine months ended September 30, 2009 and 2008, respectively. - G and A costs for the three months ended September 30, 2009 fell 12.1% as compared to the previous year, with G and A costs of $1.95 million as compared to $2.22 million the previous year. This reflects management's ongoing efforts to align overhead costs with reduced revenues. - On May 28, 2009 the Corporation renewed its credit facility with its syndicate of lenders. The renewal extends the revolving feature of the facility to May 29, 2010. Due to a significant increase in renewal and standby fees, management requested a decrease in the facility size from $75.5-million to $40-million. The credit facility has an accordion feature that allows the Corporation to increase the credit facility by $20-million at a future date, subject to certain terms and conditions. The $40 million credit facility consists of an extendible revolving operating credit facility of $10 million and an extendible revolving term facility of up to $30 million available to finance equipment purchases for organic growth and potential acquisitions. IROC exited the third quarter of 2009 with net debt of approximately $11 million. During the three months ended September 30, 2009, the Corporation reduced its long debt by $0.4 million.
Eagle Well Servicing
Eagle Well Servicing ("Eagle"), which comprises a significant portion of the Drilling and Production Services segment, finished the quarter with a fleet of 36 service rigs. Eagle continued to increase its capacity by completing the build of two previously announced service rigs during the first quarter of 2009. Eagle's utilization during the third quarter of 2009 was approximately 34% compared to 61% utilization in the comparable period of 2008. Revenue per hour also decreased in the third quarter by
Aero Rentals
Aero Rental Services ("Aero") provides rental equipment for surface pressure control in drilling and workover operations and tubular handling equipment in the workover, re-entry and completion areas. Aero's results are directly affected by the level of drilling activity in the industry. During the third quarter of 2009, Aero contributed revenue of
Dividend --------
On
Outlook -------
While the outlook for the remainder 2009 remains uncertain, IROC's management is of the view the affect of the global economic crisis on the oil and gas industry, and specifically the oilfield service business, has reached the bottom of the trough. There has been stabilization in commodity pricing and some producers are now beginning to shift their focus from strict balance sheet preservation to a more opportunistic approach of trying to accumulate assets at a low cost. Accordingly we expect to see more activity in the industry during the fourth quarter 2009 and into the first quarter of 2010 which should translate into high utilization rates. Pricing pressure that has been evident throughout the past year should ease somewhat with expected utilization increases and a very tight labour supply. IROC's management is acutely aware that we are in a cyclical business and we will continue to closely monitor industry activity levels and commodity pricing to insure we are well positioned at each stage of the cycle.
Publicly reported information for IROC Energy Services Corp. is available at www.sedar.com.
About IROC Energy Services Corp.
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.
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IROC ENERGY SERVICES CORP. Consolidated Balance Sheets Expressed in thousands of dollars (Unaudited) ------------------------------------------------------------------------- September 30, December 31, 2009 2008 (As restated - note 1) ------------------------------------------------------------------------- Assets Current assets: Cash $ 1 $ 1 Accounts receivable 8,373 13,128 Inventory 4,169 3,730 Prepaid expenses and deposits 490 452 Income taxes receivable 72 72 Assets of discontinued operations (note 10) 778 3,615 ----------------------------------------------------------------------- 13,883 20,998 Notes receivable (note 3) 640 - Intangible assets 3,448 4,076 Property and equipment 62,779 64,759 Goodwill (note 4) - 6,850 Assets of discontinued operations (note 10) - 7,170 ------------------------------------------------------------------------- $ 80,750 $ 103,853 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Operating loan (note 5) $ 1,027 $ 4,716 Accounts payable and accrued liabilities 2,920 6,393 Current portion of long-term debt (note 6) 3,650 4,891 Liabilities of discontinued operations (note 10) - 472 ----------------------------------------------------------------------- 7,597 16,472 Long-term debt (note 6) 18,125 20,116 Future income taxes 3,374 3,897 Shareholders' equity: Share capital (note 7) 50,830 51,591 Contributed surplus (note 7(c)) 3,997 3,526 Retained earnings (deficit), as restated (note 1) (3,173) 8,251 ----------------------------------------------------------------------- 51,654 63,368 ------------------------------------------------------------------------- $ 80,750 $ 103,853 ------------------------------------------------------------------------- ------------------------------------------------------------------------- IROC ENERGY SERVICES CORP. Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Expressed in thousands of dollars except share and per share amounts (Unaudited) ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, --------------------------- --------------------------- 2009 2008 2009 2008 (As restated - (As restated - note 1) note 1) ------------------------------------------------------------------------- Revenue $ 10,231 $ 18,647 $ 33,540 $ 48,321 Expenses: Operating 6,908 10,909 22,701 30,148 General and administrative 1,951 2,220 6,311 6,256 Stock-based compensation 57 59 252 198 Note receivable impairment (note 3) 1,500 - 1,500 - Goodwill impairment (note 4) 6,850 - 6,850 - Depreciation and amortization 2,073 1,959 6,062 5,749 Interest and accretion on debentures - 152 - 624 Interest on long-term debt 276 756 675 2,558 Other interest 50 68 177 227 Interest income (18) - (66) - Gain on disposal of property and equipment (2) (14) (7) (75) Foreign exchange (gain) loss 168 (24) 575 (81) ----------------------------------------------------------------------- 19,813 16,085 45,030 45,604 ------------------------------------------------------------------------- Earnings (loss) before income taxes from continuing operations (9,582) 2,562 (11,490) 2,717 Future income taxes (reduction) (268) 538 (1,000) 437 ------------------------------------------------------------------------- Net income (loss) from continuing operations (9,314) 2,024 (10,490) 2,280 Net income (loss) from discontinued operations (note 10) (10) (1,709) 394 (1,370) ----------------------------------------------------------------------- Net income (loss) and comprehensive income (loss) $ (9,324) $ 315 $ (10,096) $ 910 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings (loss) per share from continuing operations: Basic $ (0.21) $ 0.05 $ (0.24) $ 0.05 Diluted $ (0.21) $ 0.05 $ (0.24) $ 0.05 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Earnings (loss) per share from discontinued operations: Basic $ - $ (0.04) $ 0.01 $ (0.03) Diluted $ - $ (0.04) $ 0.01 $ (0.03) ----------------------------------------------------------------------- ----------------------------------------------------------------------- Earnings (loss) per share: Basic $ (0.21) $ 0.01 $ (0.23) $ 0.02 Diluted $ (0.21) $ 0.01 $ (0.23) $ 0.02 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Weighted average number of shares outstanding: Basic 43,947,852 44,304,504 44,147,039 44,285,624 Diluted 43,947,852 44,324,122 44,147,039 44,446,091 ------------------------------------------------------------------------- ------------------------------------------------------------------------- IROC ENERGY SERVICES CORP. Consolidated Statements of Cash Flows Expressed in thousands of dollars (Unaudited) ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, --------------------------- --------------------------- 2009 2008 2009 2008 (As restated - (As restated - note 1) note 1) ------------------------------------------------------------------------- Cash provided by (used in): Operations: Net income (loss) from continuing operations $ (9,314) $ 2,024 $ (10,490) $ 2,280 Items not affecting cash: Note receivable impairment (note 3) 1,500 - 1,500 - Goodwill impairment (note 4) 6,850 - 6,850 - Depreciation and amortization 2,073 1,959 6,062 5,749 Future income taxes (reduction) (268) 538 (1,000) 437 Stock-based compensation 57 59 252 198 Non-cash accretion on debentures - 64 - 256 Gain on disposal of equipment (2) (14) (7) (75) ----------------------------------------------------------------------- 896 4,630 3,167 8,845 Changes in non-cash working capital balances (note 8) (102) (3,362) 1,686 (52) ----------------------------------------------------------------------- 794 1,268 4,853 8,793 Discontinued operations (note 10): Funds provided by (used in) discontinued operations (15) 760 (166) 2,585 Changes in non-cash working capital balances of discontinued operations 114 (1,108) 2,365 584 --------------------------------------------------------------------- 893 920 7,052 11,962 Investing: Purchase of property and equipment of continuing operations (284) (2,773) (3,296) (5,474) Purchase of property and equipment of discontinued operations - (854) (4) (1,238) Proceeds on disposal of property and equipment from continuing operations 8 26 102 529 Proceeds on disposal of property and equipment from discontinued operations - 23,995 6,042 24,056 Change in non-cash working capital balances (note 8) - - (906) - ----------------------------------------------------------------------- (276) 20,394 1,938 17,873 Financing: Repayment of long-term debt (408) (21,619) (3,232) (26,421) Operating loan advances (repayments) 102 7,290 (3,689) 3,893 Issue of common shares 7 15 15 33 Loan commitment fees - - (200) (340) Repayment of debentures - (7,000) - (7,000) Payment of dividend - - (1,328) - Shares repurchased for cancellation (318) - (556) - ----------------------------------------------------------------------- (617) (21,314) (8,990) (29,835) ------------------------------------------------------------------------- Increase in cash - - - - Cash at beginning of period 1 1 1 1 ------------------------------------------------------------------------- Cash at end of period $ 1 $ 1 $ 1 $ 1
For further information: 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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