Cordy Oilfield Services Inc.
TSX VENTURE : CKK

Cordy Oilfield Services Inc.

April 13, 2010 17:16 ET

Cordy Announces 2009 Fourth Quarter Results

CALGARY, ALBERTA--(Marketwire - April 13, 2010) - Cordy Oilfield Services Inc. ("Cordy" and or the "Company") (TSX VENTURE:CKK) announces its consolidated operating and financial results for the quarter and year ended December 31, 2009.

The Company, through aggressive repayment programs, reduced its long term debt by $8.2 million or 40% from $20.5 million to $12.3 million during 2009 and ended the year with cash in the bank, no bank debt, an unused authorized line of credit and in compliance with its lending covenants.

At December 31, 2009, the Company had a positive working capital position of $16.8 million excluding current portions of long term debt and capital leases. Cordy's working capital position exceeds its total debts outstanding of $12.3 million which bear interest at an average rate of approximately 6% and is scheduled to be repaid over the next five years. The Company's cash flow is also expected to be positively impacted during fiscal 2010 due to a reduction in the scheduled debt repayments.

The Company generated net cash flow from its investing activities of $1.3 million during 2009 from proceeds on disposals of property and equipment of $2.3 million which exceeded the value of capital expenditures during the year of $0.9 million and the cash consideration paid for the acquisition of Tawow of $0.2 million.

Cordy's ability to meet its current scheduled debt repayments and other commitments will depend on its ability to generate cash flows from operations, dispose of redundant or non-core assets and if necessary, refinance existing debt to extend the maturity dates and/or finance unencumbered assets to generate additional cash resources.

CASH AND LIQUIDITY

  Three months ended
December 31
Twelve months ended
December 31
($ millions) 2009   2008   Change   2009   2008   Change  
Cash provided by (used for):                        
Operating Activities 1.6   2.6   (1.0 ) 1.8   9.0   (7.2 )
Financing Activities (2.0 ) (1.7 ) (0.3 ) (8.3 ) (4.5 ) (3.8 )
Investing Activities 0.7   (1.8 ) 2.5   1.3   (8.0 ) 9.3  
Net Increase (Decrease) in Cash 0.3   (0.9 ) 1.2   (5.2 ) (3.5 ) (1.7 )
                         

RESULTS FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2009

The economic downturn that commenced during the second half of 2008 resulted in a decline in the demand for oilfield and construction services which in turn, resulted in increased competition by service providers for the available business. Consumers of these services began demanding lower prices and more work was awarded to the low cost bidders than was traditional in the past economic and labor conditions. In response to these pricing pressures, the Company adjusted its pricing structure, where appropriate, with a resulting impact on operating margins, cash flow and earnings for 2009. The Company continued to implement various cost-cutting measures, reduced personnel levels, implemented additional measures to increase efficiencies in its shops, offices and at work sites and introduced automated administrative workflow processes to enhance operating margins and maintain a high level of service to its customers.

Consolidated fourth quarter revenue was $14.9 million in 2009 representing a decline of 43% compared to the same quarter in 2008. Consolidated revenue for the year was $56.2 million, a decrease of 51% over 2008. Revenues have been impacted by the significant decline in drilling and related construction activity experienced in Alberta primarily due to the changes in the Alberta Royalty structure and lower oil and natural gas prices as compared to 2008.

Product and service pricing adjustments, fixed costs, and in particular the $0.7 million fourth quarter inventory write-down of various product and supply inventories to realizable value, negatively impacted the operating cost percentage and resulting operating margins for the quarter. Of this, $0.4 million related to obsolete parts and finished goods inventories in the manufacturing and supply segment and $0.3 million related to the write-down in value of supplies in the heavy construction segment. As a result, fourth quarter operating expenses as a percentage of revenue was 101% as compared to 82% for the fourth quarter of 2008.

For 2009, direct operating expenses as a percentage of revenue were 90% as compared to 81% for the prior year.

General and administrative expenses include a fourth quarter charge in 2009 for bad debts in the amount of $0.4 million and third party legal and professional costs of approximately $0.5 million related to addressing numerous proposals from and defending against a shareholder activist. Partially offsetting the incremental shareholder costs were approximately $0.2 million of cost savings relating to reduced corporate office personnel and other cost reductions.

Also during the fourth quarter of 2009, the Company performed reviews of certain assets including goodwill and intangible assets. As a result of these reviews, the Company recorded a non-cash charge to earnings in the fourth quarter of 2009 totaling $2.5 million consisting of $1.2 million for goodwill impairment and $1.3 million for impairment of intangibles.

CONSOLIDATED FINANCIAL RESULTS  
Selected Financial Information     Quarter ended
     December 31
     Year ended
     December 31
($ millions, except per share amounts) 2009   2008   2009   2008  
Revenue 14.9   26.2   56.2   115.5  
EBITDAS (1) (3.4 ) 2.1   (4.3 ) 9.9  
Net Earnings (Loss) (6.7 ) (5.2 ) (13.3 ) (38.6 )
Earnings (loss) Per Share – Basic and Diluted (0.08 ) (0.06 ) (0.16 ) (0.46 )
Total Assets, as at December 31st         78.5   105.2  
Total Liabilities, as at December 31st         22.4   36.1  
Cash and Equivalents, as at December 31st         0.2   5.4  
Shareholders' Equity, as at December 31st         56.1   69.1  
                 

(1)EBITDAS, a non-GAAP measure, is defined by Cordy as earnings before interest, taxes, depreciation, amortization, impairment and stock-based compensation.

OUTLOOK

Oil prices, and to a lesser extent natural gas prices, have strengthened recently leading to higher levels of drilling and completion activity in western Canada and cautious optimism about a continuing improvement in industry conditions. Management believes that 2010 will likely continue to be a challenging and uncertain period of time for service providers. Management also expects pricing pressures on service providers to continue throughout most of 2010. The ability to survive these uncertain and challenging times remains paramount but the business environment could prove to be rich in possibilities for those who are prepared.

Cordy has demonstrated its ability to survive two years of turbulence in the economy and numerous and costly distractions of a shareholder activist. Management believes it will now have the time and energy to focus on executing its strategic business plan and capitalizing on future growth opportunities. 

Several factors determine a company's ability to pursue growth opportunities during difficult times. First and foremost is an unwavering commitment and uncompromising focus on creating value for customers, employees, communities and shareholders. Secondly is the ability of the core business to recover from the stresses created by difficult times.

Management has demonstrated its commitment, protected the corporation's balance sheet, pursued new opportunities and believes it has Cordy positioned for success. Management believes it can continue to maintain and increase the Corporation's competitive position in the current economic environment and plans to improve performance and increase shareholder value by:

  • Maintaining a strong balance sheet with a low debt level and deploying cash and resources in a manner consistent with a growth oriented company
  • Employing a highly selective capital spending strategy focused on projects with the potential to deliver solid returns on investment
  • Consolidating entities within segments, as appropriate, and disposing of non-core or redundant assets
  • Continually enhancing and investing in safety programs to protect our people
  • Strengthening relationships with customers and the First Nations

Cordy's diversification is, and will remain, a key driver of its overall business.

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

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 and services. 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.

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.

Contact Information

  • For general information:
    Cordy Oilfield Services Inc.
    David Mullen, Chairman and CEO
    (403) 266-2067
    (403) 266-2087 (FAX)
    dmullen@cordy.ca
    or
    For investor relations information:
    Cordy Oilfield Services Inc.
    H. Allen Cameron, President
    (403) 266-2067
    (403) 266-2087 (FAX)
    acameron@cordy.ca
    www.cordy.ca