Calmena Energy Services Inc.
TSX : CEZ

Calmena Energy Services Inc.

November 15, 2010 08:00 ET

Calmena Energy Services Inc. Announces Third Quarter 2010 Results

CALGARY, ALBERTA--(Marketwire - Nov. 15, 2010) - Calmena Energy Services Inc. ("Calmena" or the "Company") (TSX:CEZ) is pleased to report its financial results for the third quarter of 2010. All figures are reported in Canadian dollars unless otherwise stated. Our unaudited consolidated financial statements with notes and related MD&A for the period will be filed separately on SEDAR (www.sedar.com). Please review that material in conjunction with this press release.

THIRD QUARTER DEVELOPMENTS

Encouraging performance from service lines in North America, which were strategically re-focused earlier in the year, helped minimize the impact of a challenging quarter in Mexico. Strong performance from wireline technologies, frac fluid management and directional drilling services helped offset the loss of income from the termination of our Mexican drilling services contract, which was terminated late in the second quarter. Management has been actively streamlining its Mexican cost structure in the third quarter and feels that it has scaled its team in order to address expected resumption of operations. Additionally, unforeseen challenges in Libya resulted in downtime in September which impacted Calmena's first full quarter of operations in this new market. This is a one time event in Libya and is not anticipated to cause ongoing challenges.

Calmena further diversified its geographical footprint, establishing a foothold in Colombia to capitalize on the favourable business climate and expected growth in activity in the country as well as the region. The Company set up a country headquarters in Bogota and was awarded a contract with a major Canadian resource company to provide contract drilling services with one of the Company's super single rigs from Mexico in a stratigraphic evaluation project. The contract commences in the fourth quarter of 2010 and is scheduled to carry through the first half of 2011. In addition, early in the fourth quarter two directional drilling kits were redeployed from Mexico to Colombia to be actively marketed there. The Company believes that the physical presence of assets operating under contract as well as a dedicated local organization will significantly improve its ability to capitalize on the evolving Colombian service industry.

FINANCIAL AND OPERATING RESULTS

The table below provides a summary of Calmena's financial and operating results for the three and nine month periods ended September 30, 2010 and 2009.

Summary Financial Information

($ thousands, except per share amounts) Three Months Ended September 30, Nine Months Ended September 30,
  2010 2009 2010 2009
Revenue from continuing operations $20,999 $ 6,085 $71,328 $ 23,461
         
Operating income1 from continuing operations $3,259 $ 152 $13,858 $ 3,995
         
EBITDA1 $ 1,486 $ (553) $8,764 $ 1,761
         
Net loss from continuing operations $(2,907) $ (1,334) $(11,263) $ (4,292)
  Per common share - basic and diluted $ (0.01) $ (0.01) $ (0.05) $ (0.06)
         
Net loss for the period $ (3,068) $ (1,724) $ (11,646) $ (6,686)
Per common share - basic and diluted $ (0.01) $ (0.01) $ (0.05) $ (0.09)
         
1 See definition in Non-GAAP Measures section.    

 

($ thousands) As at September 30, As at December 31,
  2010 2009
Total assets $ 184,336 $ 140,068
     
Debt and capital lease obligations net of cash $ 35,834 $ 5,223
     
Shareholders' equity $ 125,874 $ 122,335

Revenue and EBITDA for the third quarter were $14.9 million and $2.0 million higher respectively, relative to the same quarter of 2009 and $47.9 million and $7.0 million higher for the nine months ended September 30, 2010 relative to the same period ended September 30, 2009. The increase is attributable to the Company's strategic acquisitions and the successful execution of various initiatives implemented in the first half of the year. Directional services in the United States and wireline technologies hit full stride in the third quarter, contributing impressive revenue and operating income, and equipment rentals and frac fluids management continued to show solid results. Financial performance during the third quarter was affected by the previously announced termination of our services contract in Mexico as well as customer transition in Libya that resulted in unexpected downtime. Net loss from continuing operations reflects higher depreciation and amortization on assets acquired, increased interest, bank and finance costs and stock based compensation related to the issuance of options.

OUTLOOK

The near term outlook for our Canadian and United States operations is encouraging. In Canada, our re-focused service lines are positioned to capitalize on continued strength in oil related and unconventional horizontal well drilling. While the near term outlook for shallow natural gas related drilling activity remains unconvincing, the approaching winter season looks promising. We are seeing signs of a significant increase in heavy oil and oilsands coring projects which will result in higher pricing and near 100% utilization for our single rigs. We also expect maximum utilization for our double rig. Newly focused service lines continue to benefit from the shift in the Canadian oilfield sector toward more horizontal and directional well completions. Frac fluid handling and equipment rentals are expected to see improved pricing and activity levels over the winter drilling season, while our wireline services will see a seasonal reduction in horizontal completion activities late in the fourth quarter as many large completion projects come to an end. We anticipate the wireline market will resume in the second quarter of 2011, with an even greater back-log of wells to be completed than experienced in 2010 and we remain encouraged by the prospects for this new service line in 2011. Wireline technologies will focus on more traditional completion activities in the first quarter of 2011, which will be driven by our customers' winter drilling programs.

Drilling activity in the United States continues to expand with more than 1,600 rigs working and over 60% of those on horizontal or directional applications. Our directional services business in the United States continued to build momentum in the third quarter of 2010 with 57% utilization and we expect that current levels will be maintained through the first quarter of 2011. We remain optimistic that pricing levels will continue to strengthen in the United States and our directional service business will enjoy strong utilization in 2011.

In 2010 Mexico witnessed a major shift in Pemex's oilfield services contracting strategy, which resulted in a significant suspension of spending. More recent announcements suggest Pemex spending will resume in 2011 and will surpass that of prior years. Our focus in Mexico continues to be on mitigating the effects of the termination of the long-term drilling contract. We are marketing our services in many oilfield markets within Mexico and in other countries of Latin America and are encouraged by the prospects for our Mexican assets.

During the third quarter we successfully contracted one of our six Mexico rigs to a major Canadian resource company operating in Colombia. The contract will commence in the fourth quarter of 2010 and carry through the second quarter of 2011. Early in the fourth quarter two directional drilling kits were redeployed from Mexico to Colombia to be actively marketed there.

The initiation of operations in Libya has faced challenges typical of a start-up operation. Our two rigs were shut down a total of 97 days at the end of the third quarter and the beginning of the fourth quarter for inspections and re-certifications, affecting results. We have taken the opportunity to review and optimize our operations and equipment and are making the changes necessary to ensure the Libya drilling rigs are operated to our standard. The rigs returned to operations on October 19 and November 2 and are expected to generate cash flows in line with expectations over the remainder of the contract term which expires in the fourth quarter of 2011. The anticipated success of the Libya operation will give Calmena credibility in the Middle East and North Africa and will improve our ability to participate in growth opportunities for both contract drilling and other well construction services in the region. 

Over the next six months, our focus will be on improving utilization and profitability of existing assets, getting our remaining Mexican rigs back to work, identifying and developing opportunities in Colombia, executing on Libyan operations and preparing for and delivering on what promises to be a busy period in Canada and the United States. At the same time we will be using our presence in Latin America and the Middle East and North Africa to continually identify and evaluate opportunities for expansion of our asset base and operations.

ABOUT CALMENA ENERGY SERVICES INC.

Calmena is a diversified energy services company that provides well construction services to its customers operating in Canada, the United States, Latin America and the Middle East and North Africa. The common shares of Calmena trade on the Toronto Stock Exchange under the symbol "CEZ".

FORWARD LOOKING STATEMENTS

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. Such statements represent Calmena's internal projections, estimates or beliefs concerning, among other things, an outlook on the estimated amounts and timing of capital expenditures, anticipated future debt, revenues or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. These statements are only predictions and actual events or results may differ materially. Although Calmena believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Calmena's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Calmena.

More particularly, and without limitation, this news release contains forward-looking statements and information with respect to: statements with respect to benefits from the continued implementation of the Company's strategy of international growth and product line diversification, including the establishment of an office in Bogota, Colombia; effect of termination of the Mexican drilling contract on the Company's operations and the Company's strategy with respect to streamlining its cost structure in Mexico; the effect of unforeseen challenges in Libya on the Company's future operations; terms of the Company's contract in Colombia, including anticipated effect on the Company's future operations in Colombia; the effect of the Company's physical presence of assets operating under contract as well as a dedicated local organization on the Company's ability to capitalize on the evolving Colombian service industry; the outlook for Calmena's operations; specific events and trends in the oil and gas industry, including, but not limited to the outlook for shallow natural gas related drilling activity and heavy oil and oilsands coring projects; rig utilization; effect of seasonality on the Company's operations; the Company's strategy for the remainder of 2010, including the focus of capital expenditures; expectations regarding the growth of the Company's directional services business in the United States, pricing levels and expected utilization rates; projected effect of increased activity in the United States on the Company's directional services; changes in spending by Pemex and the effect on the Company's operations in Mexico; expectations regarding potential opportunities in Mexico and the Latin America region; opportunities being pursued by management with respect to providing services in oilfield markets in Mexico and Latin America; term of contract for Mexico rig contracted to a major Canadian resource company operating in Colombia; expected cash flow from drilling rigs in Libya; changes being made by the Company to ensure the Libya drilling rigs are operated to the Company's standards; anticipated success of the Libya operation on the Company's credibility in the Middle East and North Africa and its ability to participate in growth opportunities for both contract drilling and other well construction services in the region; the Company's strategy for the remainder of 2010, including the focus of capital expenditures; and the statements under the heading "Outlook" in this press release.

These forward-looking statements and information are based on certain key expectations and assumptions made by the Company regarding: the implementation of the Company's international growth strategy; current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; ability of Calmena to re-finance or extend the maturity date of its senior debt; future exchange rates; the price of oil and natural gas; the impact of increasing competition; conditions in general economic and financial markets; supply and demand for oilfield services relating to the drilling, completion and maintenance of oil and gas wells as well as services related to oilfield equipment rentals and production and ancillary services; effects of regulation by governmental agencies; and future operating costs. Although the Company believes 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 the Company can give no assurance that they will prove to be correct.

Since forward-looking statements and information address future events, by their nature, such statements and information involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks, including, but not limited to, the impact of general economic conditions; industry conditions; volatility of commodity prices; decreased demand for energy services; competition from other energy services providers; the lack of availability of qualified personnel or management; ability of Calmena to re-finance or extend the maturity date of its senior debt and generate positive cash flow; failure of counterparties to perform on contracts; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; international operations; seasonality; loss of key customers; fluctuations in foreign exchange or interest rates and stock market volatility; supply and demand for oilfield services relating to the drilling, completion and maintenance of oil and gas wells as well as services related to, oilfield equipment rentals and production and ancillary services; liabilities and risks, including environmental liabilities and risks inherent in oil and natural gas operations; uncertainties in weather and temperature affecting the duration of the service periods and the activities that can be completed; and the ability to access sufficient capital from internal and external sources.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of the Company are included in reports on file with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). 

The forward-looking statements and information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws.

NON GAAP MEASURES

The following measures are used within this release, but not recognized under GAAP. As a result, the method of calculation may not be comparable with other companies. These measures should not be considered alternatives to net loss and net loss per share as calculated in accordance with GAAP:

Operating income – This measure is considered a primary indicator of operating performance and is calculated as revenue less operating expenses.

EBITDA (Earnings before interest, income taxes, depreciation and amortization, foreign exchange and share based compensation) – Management believes that EBITDA as derived from information reported in the Consolidated Statement of Operations and Deficit is a useful supplemental measure as it provides an indication of the Company's ability to generate funds by the Company's core business activities prior to consideration of how those activities are financed, the impact of foreign exchange, how the results are taxed, how funds are invested or how non-cash depreciation and amortization charges affect results.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • For more information regarding these financial and operating
    results, please contact: Calmena Energy Services Inc.
    John King, President and Chief Executive Officer
    (403) 225-3879
    (403) 366-2066 (FAX)
    or
    Calmena Energy Services Inc.
    Peter Balkwill, Vice President, Finance & CFO
    (403) 225-3879
    (403) 366-2066 (FAX)
    or
    Calmena Energy Services Inc.
    700, 333 - 7th Avenue SW
    Calgary, Alberta T2P 2Z1
    www.calmena.com