CALGARY, ALBERTA--(Marketwire - Nov. 8, 2012) - Calmena Energy Services Inc. ("Calmena" or the "Company") (TSX:CEZ) is pleased to announce its financial results for the third quarter ended September 30, 2012. All figures are reported in Canadian dollars unless otherwise stated. Our unaudited condensed consolidated financial statements and related management's discussion and analysis for the period will be filed separately on SEDAR (www.sedar.com), which should be reviewed in conjunction with this press release.
THIRD QUARTER 2012 HEADLINES
- For the three months ended September 30, 2012, the company recorded:
- Revenue of $39.7 million compared to $37.0 million in the comparable quarter of 2011, led by year over year growth in the US and Latin America but offset by a decrease in Canada; and
- EBITDAS of $2.4 million compared to $5.5 million for the comparable period in 2011. Continued strong results in the US and Mexico were offset primarily by the decreased revenue in Canada, and higher than anticipated costs associated with startup in Brazil.
- Additional financing was obtained through a US$10.0 million three year term loan;
- Six new internally developed and manufactured measurement while drilling ("MWD") kits were deployed to the US;
- Commenced contract drilling operations in Colombia on our first contract for Ecopetrol, the Colombian national resource company;
- Drilling operations commenced late in the third quarter on the final two single rigs deployed from Canada to Brazil under long term contracts with Petrobras; and
- After recommencing drilling in May 2012 with one rig, operations in Libya were temporarily suspended in July as the result of an employee strike. Agreements with the majority of our Libyan employees have been reached and we expect drilling operations to re-commence in the fourth quarter.
SELECTED FINANCIAL INFORMATION
The tables below provide a summary of Calmena's financial and operating results as at and for the three and nine months ended September 30, 2012 and 2011.
||Three months ended September 30,
||Nine months ended September 30,
|($ thousands, except per share amounts)
|Net (loss) income for the period
|Funds flow from continuing operations*
|Net (loss) income per share - Basic and diluted
|Funds flow from continuing operations per share- Basic and diluted*
|* see non-GAAP measures section of this release for a description of this term.
|Borrowings and debt, net of cash
Licensing and rig activity indicate that drilling in Canada in the fourth quarter and into the first quarter of 2013 will be lower than the prior years. In contract drilling, in spite of the lower industry drilling, we expect strong utilization for our equipment, but some price erosion on our single rigs in the first quarter of 2013, as more competitor rigs have entered the coring and heavy oil market. Utilization for total 2013 should improve as we are rebuilding three of the single drilling rigs to be more suitable in areas with year round activity. Our double rig is contracted to mid-2013 and we expect it will be utilized throughout 2013. In wireline technologies, we enhanced our sales force in early 2012, and have established ourselves as a leading provider of high pressure, horizontal completions, particularly in the Duvernay, and expect to see moderate growth over the fourth quarter and into 2013. Equipment rentals and frac fluids activity in the fourth quarter of 2012 and into the first quarter of 2013 will be somewhat lower than the prior year as customers are moving equipment such as tank farms less, affecting our service revenue, and there has been a significant reduction in the number of fracs using oil based frac fluid by our major customers.
In the United States, we expect the horizontal rig count in our core operating area to remain stable through 2012 and into 2013. With the addition of six MWD kits to the US and the relocation of two MWD kits from the US to Mexico in the fourth quarter, we will exit 2012 with 29 kits in the US. Over the next several quarters we will focus on improving market share, optimizing utilization and improving margins on our fleet, with additional expansion scheduled for later in 2013.
Drilling activity in Mexico is accelerating. Pemex is forecasting to spend more on exploration and development in 2013 and 2014 than for 2012. This increase in spending will be made in part through new production sharing agreements for development of land based fields, some of which are currently being negotiated. At present, four out of our five drilling rigs are operating under contract to the end of 2012. Given current demand and outlook for rig utilization in our areas of operation we anticipate that all our rigs will be working in the first quarter of 2013. Directional services is currently operating two kits and is providing the two kits relocated from the US to a customer under a rental arrangement.
Drilling operations in Colombia commenced in the third quarter of 2012 on a contract for Ecopetrol to drill two wells, with an option for two additional wells. To date we have successfully drilled the first two wells and the third well is in progress. The third well should continue through mid-November and we are hopeful that Ecopetrol will proceed with the second option well which would keep our drilling rig utilized until the end of 2012. Our drilling performance for Ecopetrol establishes us as a credible driller in Colombia and opens the door for more opportunities from Ecopetrol and other companies operating there. As a result we believe we should be able to re-contract our drilling rig in Colombia and achieve strong utilization during 2013.
With the mobilization and commencement of operations of the remaining two single drilling rigs in Brazil, we now have a total of five drilling rigs operating under long term contracts with Petrobras. Third quarter results were negatively impacted by a combination of rig commissioning and unanticipated startup costs relating to the delivery of the remaining two single rigs in the third quarter of 2012, and operational challenges on the two single rigs delivered in the second quarter of 2012. Over the next three to six months, as we put the start-ups behind us, we are endeavoring to optimize operational efficiencies to satisfactorily deliver on our commitment to service and achieve our budgeted margins.
In the fourth quarter of 2012, agreements have been reached with the majority of our Libyan employees to return to work, and we expect both drilling rigs to recommence operations in the fourth quarter of 2012. The contract terms for each of our drilling rigs expire in February 2013 and November 2013, respectively, and we are confident that the drilling rigs will be re- contracted in Libya for the foreseeable future.
Overall, the US and Mexico should continue delivering solid results throughout the remainder of 2012 and into 2013. As Colombia builds on the recent successes achieved, Libya returns to full operations and we execute on our plans in Brazil, consolidated financial results will improve.
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 certain forward-looking statements relating to Calmena's plans, strategies, objectives, expectations and intentions. Expressions such as "may", "anticipate", "expect", "project", "believe", "hope", "estimate", "intend", "will", "continue", "foresee", and "forecast" and similar expressions and statements are intended to identify forward looking 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.
In particular, forward-looking statements included in this news release include, but are not limited to, statements with respect to expected drilling activity in Canada in the fourth quarter of 2012 and the first quarter of 2013; anticipated effect of rebuilding three of the Company's single drilling rigs on utilization for 2013; anticipated utilization of Calmena's double drilling rig for 2013; expectations regarding growth in wireline technologies; expectations regarding demand for equipment rentals and frac fluids for the remainder of 2012 and the first quarter of 2013; expectations as to levels of horizontal drilling for the remainder of 2012 and into 2013 in the United States; expected number of MWD kits in the US at the end of 2012; plans to focus on improving market share, optimizing utilization and improving margins on the Company's fleet over the next several quarters and additional expansion later in 2013; expectations regarding levels of spending by Pemex on exploration and development in 2013 and 2014; expectations for operations in Mexico, including anticipation that all our rigs will be working in the first quarter of 2013, and continuation of directional services kits working under contract; terms of Ecopetrol drilling contract; anticipated duration of drilling of first optional well in Colombia and expectations regarding Ecopetrol proceeding with the drilling of a second option well; effect of drilling of a second option well on drilling rig utilization in Colombia; anticipated additional opportunities as a result of award of Ecopetrol drilling contract; utilization of Calmena's drilling rig in Colombia and ability to re-contract the rig at the end of its current contract; the Company's ability to optimize operational efficiencies and achieve our budgeted margins; expected timing of commencement of drilling operations in Libya; terms of drilling rig contracts in Libya and expectations regarding the drilling rigs being re-contracted in Libya; expected financial results for the United States, Mexico, Colombia, Libya and Brazil throughout the remainder of 2012; and the statements under the heading "Outlook" in this news release.
These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Calmena's control, including, but not limited to, the impact of general economic conditions; industry conditions and changes in 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 counter parties to perform on contracts; failure to successfully negotiate new contracts or renew existing contracts; failure to successfully deploy rigs; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; risks associated with international operations, including, but not limited to, effect of civil unrest on the Company's operations in Libya; 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; ability to access sufficient capital from internal and external sources; failure to successfully negotiate contracts for drilling rig operations; failure to realize the anticipated benefits of the Company's investments; and the other risks considered under "Risk Factors" in our annual information form for the year ended December 31, 2011 which is available on www.sedar.com.
With respect to forward-looking statements contained in this news release, Calmena has made assumptions regarding, but not limited to: 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; ability of Calmena to renew existing contracts and enter into new contracts; rig utilization and pricing; future exchange rates; the impact of increasing competition; conditions in general economic and financial markets; industry conditions; 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; trends in Calmena's operations; and future operating costs.
Management has included the above summary of assumptions and risks related to forward-looking information provided in this news release in order to provide Shareholders with a more complete perspective on Calmena's current and future operations and such information may not be appropriate for other purposes. Calmena's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Calmena will derive therefrom. Readers are cautioned that the foregoing lists of factors are not exhaustive.
These forward-looking statements are made as of the date of this news release and Calmena disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as 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) income and net (loss) earnings per share as calculated in accordance with GAAP:
EBITDAS (Earnings before interest, income taxes, depreciation and amortization, other items of income and expense and share based compensation) - Management believes that EBITDAS as derived from information reported in the Consolidated Statement of Operations 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. See the reconciliation of EBITDAS to net (loss) income in the Company's management's discussion and analysis for the three and nine months ended September 30, 2012.
Funds flow from continuing operations: Management believes that in addition to cash generated from operations, funds flow from continuing operations is a useful supplemental measure because it provides an indication of the funds generated by the Corporation's principal business activities prior to the consideration of working capital, which is primarily made up of highly liquid balances. See the reconciliation of funds flow from continuing operations in the Company's management's discussion and analysis for the three and nine months ended September 30, 2012.
The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.