Cordy Oilfield Services Inc.
TSX VENTURE : CKK

Cordy Oilfield Services Inc.

March 25, 2008 15:46 ET

Cordy Announces 2007 Year End Results

CALGARY, ALBERTA--(Marketwire - March 25, 2008) - Cordy Oilfield Services Inc. ("Cordy" and or the "Company") (TSX VENTURE:CKK) reported its consolidated operating and financial results for the year ending December 31, 2007.

David Mullen, Cordy's Chief Executive Officer, stated, "in comparing these 2007 results with those of the same period last year, consideration must be given to the fact that conditions in 2007 were challenging for any company serving the Western Canadian oil and gas industry market. While Cordy's business is increasingly diverse, it was not immune to the effects of lower natural gas prices, a decline in drilling and related services in Alberta and the effect of an overall reduction of confidence in the economy. Like many companies, Cordy's operations were impacted by the slowdown of business activity and increasing pricing pressures affecting those of our clients who produce oil and gas. This impact was felt most noticeably in the fourth quarter of 2007." Mr. Mullen also stated that, "year over year comparisons of Cordy's results are limited given that the Company's ten operating business units have been included in the operating results for a full year in 2007 while 2006 reflects operations for various periods of time depending on when the subsidiaries were acquired."

Consolidated revenues for the twelve months ended December 31, 2007 were $129.5 million, up $42.5 million from $87.0 million in 2006. Operating income was $1.9 million, a decrease of $0.9 million from $2.8 million in 2006. The decrease reflects increased direct costs which were 76% of revenue for 2007 as compared to 73% in 2006. Expenses for 2007 also include amortization of property and equipment of $9.3 million (2006 -$5.4 million), a full year's general and administrative cost for 2007 of $12.1 million (2006 - $8.8 Million) and an additional $1.1 million of amortization of intangible assets as compared to 2006.

Net earnings were $0.9 million, down $1.5 million from $2.4 million in 2006. A higher effective tax rate in 2007, because certain expenses, primarily stock-based compensation and certain amortization, are not deductible for tax purposes, and a slower fourth quarter contributed to this decrease. Basic and diluted earnings per share were $0.01 per share compared with a $0.03 per share in 2006.

The Company generated cash from operations before changes in working capital of $14.4 million in 2007 as compared to $11.1 million for 2006. The difference between cash flow generated from operations of $14.4 million and net earnings of $0.9 million for 2007 reflects the capital intensive nature of the businesses and the related depreciation thereon. Consolidated EBITDAS for 2007 was $19.3 million, up $4.2 million from $15.1 million in 2006.



2007 CONSOLIDATED FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------
Selected Annual & Quarterly Three months ended Year ended
Information December 31 December 31
----------------------------------------------------------------------------
($ millions, except per
share amounts) 2007 2006 Change 2007 2006 Change
----------------------------------------------------------------------------
Revenue 31.2 29.4 1.8 129.5 87.0 42.5
Operating income (loss) (1.9) 0.2 (2.1) 1.9 2.8 (0.9)
Net earnings (loss) (1.5) 0.0 (1.5) 0.9 2.4 (1.5)
EBITDA (1) 1.7 3.7 (2.0) 17.4 12.9 4.5
EBITDAS (1) 2.2 4.2 (2.0) 19.3 15.1 4.2

Earnings per share
- diluted (0.02) (0.01) (0.01) 0.01 0.03 (0.02)
----------------------------------------------------------------------------
Total assets,
as at December 31st 146.2 161.4 (15.2) 146.2 161.4 (15.2)
Cash and equivalents,
as at Dec. 31st 8.9 37.3 (28.4) 8.9 37.3 (28.4)
----------------------------------------------------------------------------
Shareholders' equity,
as at Dec 31st 104.5 99.3 5.2 104.5 99.3 5.2
----------------------------------------------------------------------------
(1) Refer to the "Non GAAP Measures" section for further details


YEAR ENDED DECEMBER 31, 2007 SEGMENT REVENUE

($ millions) 2007 2006 $ Change
----------------------------------------------------------------------------
Heavy Construction 65.8 37.0 28.8
Pipeline & Facilities 27.1 25.4 1.7
Manufacturing & Supply 23.0 16.1 6.9
Environmental Services 13.6 8.5 5.1
----------------------------------------------------------------------------
Total 129.5 87.0 42.5
----------------------------------------------------------------------------


The Heavy Construction segment revenues increased $28.8 million in 2007 as compared to 2006. The increase is attributable to the August 2006 acquisition of Battle River and increased infrastructure projects in southern Alberta and British Columbia in 2007. Battle River accounts for $15.2 million of the increase as 2007 results include a full year of operations and the revenue from the date of acquisition on May 31, 2007 of the Bry-Don division while 2006 only includes five (5) months of operations. The remaining increase in revenue of $13.6 million is attributable to the construction companies in southern Alberta (Mesken) and British Columbia (Nohels) where there was increased activity in infrastructure projects as compared to 2006.

The Pipeline and Facilities Construction segment revenues increased $1.7 million for 2007 over the comparable period in 2006. The 2007 increase reflects a strong first quarter demand in northern Alberta for pipeline work and for facilities work in the Fort McMurray area. This strength was offset by a weakness in the central Alberta area in 2007 where revenues decreased $2.2 million over 2006.

The Manufacturing and Supply segment revenues increased $6.9 million from 2006 to 2007. This segment commenced operations in June 2006 with the acquisition of Sphere. The 2007 first quarter revenues for Sphere of $9.5 million were very strong compared to the remainder of the year's revenues of $9.4 million. The decrease in revenues in the last nine months of 2007 as compared to the first quarter of 2007 reflects a change in the economy whereby fewer larger projects were commenced in the natural resource sector.

The Environmental Services segment revenues increased $5.1 million over 2006 and are mainly attributable to the contribution from Hartwell for a full twelve months in 2007 as it was acquired in August 2006 and growth in the waste management and maintenance sector that is less dependent upon the resource sector.



THREE MONTHS ENDED DECEMBER 31, 2007
----------------------------------------------------------------------------


The fourth quarter of 2007 was challenging with the slow down in the oil and gas sector in the Grande Prairie area and construction activities in southern Alberta and British Columbia. There were a number of contributors to the fourth quarter loss of $1.5 million and they included a significant decrease in camp revenues most noticeably in December 2007 where it was 50% of December 2006 camp revenues, increased repairs and maintenance on some ageing equipment, increased costs due to unfavorable weather conditions and an overall slowdown in construction activities in the Grande Prairie area where revenues for the fourth quarter were far less than anticipated.

Consolidated revenues for the three months ended December 31, 2007 were $31.2 million, an increase of $1.8 million from $29.4 million in 2006. The increase is primarily attributable to the Construction segment where revenue increased $5.8 million from the increased volume of infrastructure work. The revenue increase in the Construction segment was offset by a significant decrease in the Pipeline and Facilities segment of $3.4 million quarter over quarter reflecting the changing marketplace where there are fewer large contracts.



THREE MONTHS ENDED DECEMBER 31, 2007 SEGMENT REVENUE
----------------------------------------------------------------------------
($ millions) 2007 2006 $ Change
----------------------------------------------------------------------------
Heavy Construction 17.4 11.6 5.8
Pipeline & Facilities 4.5 7.9 (3.4)
Manufacturing & Supply 6.1 7.0 (0.9)
Environmental Services 3.2 2.9 0.3
----------------------------------------------------------------------------
Total 31.2 29.4 1.8
----------------------------------------------------------------------------


Direct operating expenses were $26.5 million, up $4.6 million from $21.9 million in 2006 and as a percentage of revenue were 85% and 74% respectively. The increase in costs as a percentage of revenues is partially due to a cost structure that was anticipating higher revenues in the fourth quarter for construction activities and the requirement to rent equipment on a short term basis in order to meet customer demands. General and administrative expenses were $2.5 million, down $0.8 million from $3.3 million in 2006. The decrease is directly attributable to efficiencies in 2007. As a result, the operating income decreased $2.1 million to a loss of $1.9 million from a $0.2 million income in 2006.



NON-GAAP MEASURES EBITDAS
----------------------------------------------------------------------------


EBITDAS

EBITDAS is defined as earnings before interest, taxes, depreciation, amortization and stock-based compensation. EBITDA is the same calculation as EBITDAS less stock-based compensation. EBITDA and EBITDAS are not a recognized measure under Canadian GAAP. Management believes, in addition to net income, these calculations are a useful supplemental measure as it provides an indication of the results generated form the Company's principal business activities prior to consideration of how these activities are financed or how the results are taxed. Readers should be cautioned however that EBITDA and EBITDAS should not be construed as an alternative to net income in accordance with Canadian GAAP as an indicator of the Company's performance. The Company's method of calculating EBITDA and EBITDAS may differ from other companies and, accordingly, EBITDA and EBITDAS may not be comparable to measures used by other companies.



OUTLOOK
----------------------------------------------------------------------------


Cordy intends to continue its strategy of growth through acquisition and organic growth within its existing business units. Management believes that the Company is well positioned to expand due to a strong cash position and the cash being generated by its business units. Management further believes there will be a number of acquisition opportunities within the context of softening valuations of potential target companies and a likely decreased purchaser base due to income trust tax changes and the decrease in drilling activity in 2007.

The Company will continue to construct efficiencies in relation to its ten business units while proceeding with expansions and new acquisitions. The outlook for the Alberta oil and gas industry remains positive in the long-term regardless of the softening of market conditions that we are currently experiencing. Management remains confident in the long-term growth of its businesses and will continue to expand its focus to the infrastructure build out which is occurring in Alberta and southeast British Columbia. With a large portion of Cordy's business derived from this build-out, Cordy remains optimistic for 2008.

David Mullen stated, "while the first three quarters of 2008 could be difficult, our degree of diversification both geographically and operationally provides a level of protection from the uncertain impacts of the cycles and abrupt changes in the oil and gas sector that we have experienced to date. With our diversification in the construction, pipeline and facilities, manufacturing, and environmental segments, our strong balance sheet and numerous available opportunities, we believe we are in a position to succeed in a slower economy by continuing to mitigate the risks associated with our exposure to the conventional oil and gas sector."

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

This press release contains forward-looking statements which reflect management's expectations regarding the Company's future plans and intentions, results of operations, performance and business prospects and opportunities. Words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", "continue", and similar expressions have been used to describe these forward-looking statements. These statements reflect management's current beliefs and are based on the information currently available to management. Forward-looking statements involve significant risk and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including, but not limited to, changes in general economic and market conditions and other risk factors. Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, management cannot assure that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances.

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

Contact Information

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