Cordy Oilfield Services Inc.
TSX VENTURE : CKK

Cordy Oilfield Services Inc.

November 27, 2008 17:29 ET

Cordy Announces 2008 Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 27, 2008) - Cordy Oilfield Services Inc. ("Cordy" and or the "Company") (TSX VENTURE:CKK) announces its consolidated operating and financial results for the three and nine month periods ended September 30, 2008 with comparisons to the same period last year. This press release was made available on the SEDAR web-site on November 17, 2008.



CONSOLIDATED FINANCIAL RESULTS
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Selected Quarterly Information Three months ended Nine months ended
September 30 September 30
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($ millions, except per
share amounts) 2008 2007 Change 2008 2007 Change
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Revenue 38.8 36.8 2.0 89.3 98.3 (9.0)
Net earnings (loss) (29.7) 1.5 (31.2) (33.3) 3.0 (36.3)
EBITDAS (1) 5.4 6.6 (1.2) 7.7 17.1 (9.4)

Earnings per share - basic
& diluted (0.36) 0.02 (0.38) (0.40) 0.04 (0.44)
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Total assets, as at
September 30th 119.6 166.6 (47.0) 119.6 166.6 (47.0)

Cash and equivalents, as at
September 30th 6.3 16.2 (9.9) 6.3 16.2 (9.9)
Shareholders' equity, as at
September 30th 74.3 107.2 (32.9) 74.3 107.2 (32.9)
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(1) EBITDAS, a non-GAAP measure, is defined by Cordy as earnings before
interest, taxes, depreciation, amortization, impairment and stock-based
compensation.


"It continues to be a significant challenge for companies that provide services to the oil and gas industry to deliver positive results in these uncertain and turbulent economic times. The strength of our diversification model, the sharp focus on operating performance and the prudent management of our cash contributed positively to Cordy's third quarter results.

The real disappointment for the third quarter was the requirement to record a $34.9 million impairment of goodwill and intangible assets. A number of factors including the slowdown in the industry, the credit crisis, the impact of the Alberta government's announced changes to the oil and gas royalty regime, depressed natural gas prices and reduced drilling activities obliged us to take the impairment charge.

Notwithstanding the impact of the factors outside our control, with an excess of $6 million in the bank and a $20 million operating facility in place, we are optimistic about the company's future prospects and our ability to move forward and grow," stated David Mullen, Cordy's Chief Executive Officer.

RESULTS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2008

Revenues for the three month period increased by $2 million over the 2007 comparable period primarily due to increased levels of activity and equipment utilization in our heavy construction segment. We pursued and completed more civil construction contracts while the number of oilfield construction contracts available for bid continued to decline. Civil construction contracts generally contain more material and supply costs which ultimately impacted our margins.

The heavy construction segment's results were somewhat offset by a decrease in activity in the pipeline and facilities construction segment which provides services to the conventional oil and gas sector. We continued to experience downward pricing pressures, especially in the pipeline segment, as the volume of contracts for bid decreased and more competitors reduced their bid prices to keep their men and equipment working.

Our manufacturing and supply segment achieved better results in the third quarter of 2008 compared to 2007. Revenues and profitability improved due to pursuing international markets, reducing employee counts and the impact of operating more efficient equipment.

Environmental operations remained consistent with the prior year. The Company made further investments in this segment and continues to look for expansion opportunities in this segment as it offers steady operating results with good margins. Expanding our environmental fleet, which consists mainly of vacuum trucks, takes time as there are long lag times when purchasing new trucks.

CAPITAL RESOURCES AND LIQUIDITY

At September 30, 2008, the Company had $6.3 million in cash and cash equivalents compared to a consolidated cash balance of $8.9 million at December 31, 2007. The decrease in cash is attributed to paying down our debt. The Company had $22.1 million of consolidated long-term debt, term bank loans and capital leases related to the financing of property and equipment (including current portions) at September 30, 2008 and $25.0 million at December 31, 2007.

Our net working capital position remains strong; at September 30, 2008 our working capital was $17.1 million as compared to $20.3 at the end of 2007, a decline of $3.2 million. The decline in working capital is primarily attributed to cash used to reduce debt levels. The Company anticipates that its current cash resources will be sufficient to meet all anticipated obligations throughout the balance of 2008.

The Company has a bank operating line of credit of $20 million which has not been drawn on. Interest is based on the bank prime rate, is secured by a general security agreement covering all unencumbered assets and requires maintenance of certain financial ratios and other covenants. The Company was in compliance with the financial covenants at September 30, 2008.

OUTLOOK

Cordy, like many companies, is not immune to the effects of lower natural gas prices, a decline in drilling and related services in Alberta and the effect of a world wide credit crisis. Preserving liquidity continues to be paramount for Cordy and the Company has maintained its strong financial position throughout these turbulent economic times. Despite the industry, labor, economic and political conditions, we have remained sharply focused on performance and liquidity. With an excess of $6 million in the bank and a $20 million operating facility in place, management believes the Company is in a position to weather this downturn in the economy and to be ready for a recovery in the industry. We believe that with diversified operations both geographically and operationally, we will be able to manage through this difficult period by continuing to mitigate our risks in the conventional oil and gas sector.

Cordy intends to continue its strategy of organic growth within its existing business units and will selectively look at acquisitions where it makes business sense. Management believes that there will be growth opportunities within the context of softening valuations of potential target companies and a likely decreased purchaser base due to income trust tax changes.

Looking out past 2008, we have and will continue to advance our discussions and increase our focus on the oil sands which could utilize all our business units. The work in this area is somewhat less prone to short-term commodity pricing and to seasonality, and produces higher margins.

Success for the Company will continue to be achieved by making good decisions under conditions of uncertainty and by responding quickly to those factors outside our control.

CORPORATE PROFILE

Cordy presently consists of ten wholly-owned operating subsidiaries, CSC Ltd. ("CSC"), Mesken Contracting Limited ("Mesken"), New West Pipelines Ltd. ("New West"), Coverall Pipeline Construction Ltd. ("Coverall"), Nohels Group Inc. ("Nohels"), Top-Notch Oilfield Services Ltd. ("Top-Notch"), Sphere Drilling Supplies Ltd. ("Sphere"), Hartwell Oilfield Ltd. ("Hartwell"), Battle River Oilfield Construction Ltd. ("Battle River") and Lamont Bit Services Ltd. ("Lamont"), each operating as a separate business accountable for its own profitability and performance. The operating businesses provide specialized services that include: small diameter pipeline and facilities construction, oilfield site preparation and reclamation, highway and subdivision construction, environmental services and drilling solutions. The Company provides management and financial expertise, capital resources and strategic planning to enable its subsidiaries to expand and increase profits.

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this news release contains forward looking statements and information concerning Cordy's expectations of future cash flow and earnings. The forward-looking statements and information are based on certain key expectations and assumptions made by Cordy, including expectations and assumptions concerning fluctuations in the level of oil and gas industry capital expenditures, Cordy's ability to integrate acquired businesses and complete strategic acquisitions of additional business and other factors that affect demand for Cordy's products. Although Cordy believe that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward looking statements and information because Cordy can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause Cordy's actual results and experience to differ materially from the anticipated results or expectations expressed. These risks and uncertainties, include, but are not limited to, risks associated with the oilfield services sector (such as demand, pricing and terms for oilfield services; current and expected oil and gas prices; competition; equipment and material costs; exploration and development costs and delays; reserves discovery rates; pipeline and transportation capacity; weather, health, safety and environmental risks), integration of acquisitions, access to capital markets, interest and currency exchange rates, technological developments, political and economic conditions and Cordy's ability to attract and retain key personnel. Additional information on these and other factors is available in continuous disclosure materials filed by Cordy with Canadian securities regulators. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is expressed in this news release or otherwise, and to not use future-oriented information or financial outlooks for anything other than their intended purpose. Cordy undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

Additional information on Cordy is available on our website www.cordy.ca or on SEDAR at www.sedar.com.

The TSX Venture Exchange does not accept responsibility for the accuracy or adequacy of this release.

Contact Information

  • Cordy Oilfield Services Inc.
    David Mullen
    Chairman and CEO
    (403) 266-2067
    (403) 266-2087 (FAX)
    Email: dmullen@cordy.ca
    or
    Cordy Oilfield Services Inc.
    David Orr
    Senior Vice President
    (403) 266-2067
    (403) 266-2087 (FAX)
    Email: dorr@cordy.ca
    Website: www.cordy.ca