Cordy Oilfield Services Inc.
TSX VENTURE : CKK

Cordy Oilfield Services Inc.

August 13, 2008 16:15 ET

Cordy Announces 2008 Second Quarter Results

CALGARY, ALBERTA --(Marketwire - Aug. 13, 2008) - Cordy Oilfield Services Inc. ("Cordy" and or the "Company") (TSX VENTURE:CKK) announces its consolidated operating and financial results for the three and six month periods ended June 30, 2008 with comparisons to the same period last year.



CONSOLIDATED FINANCIAL RESULTS
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Selected Quarterly
Information Three months ended Six months ended
June 30 June 30
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($ millions, except
per share amounts) 2008 2007 Change 2008 2007 Change
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Revenue 22.8 23.9 (1.1) 50.7 61.4 (10.7)
Operating
income (loss) (4.2) (2.8) (1.4) (5.3) 2.1 (7.4)
Net income (loss) (3.0) (1.8) (1.2) (3.6) 1.5 (5.1)
EBITDAS(1) (0.3) 1.4 (1.7) 2.4 10.5 (8.1)

Earnings per share
- basic & diluted (.04) (.02) (.02) (.04) .02 (.06)
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Total assets, as
at June 30th 147.5 176.6 (29.1) 147.5 176.6 (29.1)

Cash and equivalents,
as at June 30th 7.0 35.6 (28.6) 7.0 35.6 (28.6)
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Shareholders' equity,
as at June 30th 103.7 105.1 (1.4) 103.7 105.1 (1.4)
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(1)EBITDAS, a non-GAAP measure, is defined by Cordy as earnings before
interest, taxes, depreciation, amortization and stock-based compensation.


"The financial results reflect the seasonality aspect of our business and the bottom line impact of rising fuel and labour costs," stated David Mullen, Cordy's Chief Executive Officer. "The early spring breakup impacted our pipeline segment and the unusually heavy rains in southern Alberta and British Columbia limited our heavy construction activities to approximately one-third of the anticipated level. The segment of our business that is least affected by weather continued to perform well. Under these circumstances we remained sharply focused on retaining our key people, generating cash flow, managing our strong balance sheet, building new alliances and strengthening our customer relationships. We remain confident and optimistic in the long-term growth of our business."

RESULTS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2008

Due to the nature of the services we provide, the second quarter is a period of lower activity. The conventional oilfield services industry essentially shuts down as leasehold and rural roads become saturated by the spring thaw and unusable. As soon as the well sites and access roads dry out work commences right away. The other core business for the Company, which is infrastructure construction, must also wait for their work sites to dry out. This year the spring thaw came early to Alberta and the spring rains were particularly heavy in both Alberta and southeastern British Columbia.

Continued uncertainty in the oil and gas industry surrounding Alberta's royalty taxation system, the taxation of trusts and the possibility of a carbon tax have resulted in a decrease in activity among the larger oil and gas producers. Larger projects in both the conventional and unconventional plays in Alberta have been delayed due to this uncertainty. This has contributed to a decrease in the volume of work available to oilfield services providers and thereby increased the competition and downwards pricing pressure among services companies.

Consolidated revenues for the quarter ended June 30, 2008 were $22.8 million, a decrease of $1.1 million from the comparable period in 2007. On a year to date basis we are trailing our 2007 revenue figures by $10.9 million, the majority of which relates to the first quarter. The pipeline and facilities construction and drill bit manufacturing segments of our business are heavily tied to oil and gas exploration and account for nearly all of the decrease in revenues.

Net earnings are down $1.2 million in the second quarter of 2008 to a loss of $3.0 million compared to 2007. The pipeline and facilities construction and heavy construction segments account for the majority of this loss. In particular, the facilities construction side of our pipeline and facilities construction segment suffered due to the delayed start up of some projects in the Fort McMurray area. Heavy construction in southern Alberta and British Columbia did not meet expectations mainly due to the inclement weather. Increased fuel costs and tight labour conditions were also factors contributing to the loss.

CAPITAL RESOURCES AND LIQUIDITY

The consolidated cash resources of the Company at June 30, 2008 were $7.0 million compared to consolidated cash of $8.9 million at December 31, 2007, a decrease of $1.9 million. The decrease in cash is attributable to the cash invested in equipment purchases. The consolidated cash at June 30, 2007 was $35.6 million of which $19 million was used to repay the debentures in 2007.

The Company has $25.1 million of consolidated long-term debt, term bank loans and capital leases related to the financing of property and equipment (including current portion) at June 30, 2008 and $25.0 million at December 31, 2007. Consolidated net working capital at June 30, 2008 was $14.4 million as compared to $20.3 at the end of 2007. The decrease in working capital is due to the decline in our operating results and the timing of long term debt repayments. The current portion of our equipment financing at June 30, 2008 is $1.3 million higher than at the end of 2007.

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 June 30, 2008.

The Company anticipates that its current cash resources will be sufficient to meet all anticipated obligations throughout the balance of 2008.

OUTLOOK

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. With an excess of $7 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. Management further believes there will be growing opportunities within the context of softening valuations of potential target companies and a likely decreased purchaser base due to income trust tax changes.

Towards the end of 2007, Cordy, like many companies, was not immune from the effects of lower natural gas prices, a decline in drilling and related services in Alberta affecting some areas more than others and the effect of a world wide credit crunch. We felt that the first three quarters of 2008 were also going to be difficult. The first six months of 2008 have certainly proven this to be the case with the same issues carrying forward from 2007. However, 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 to the conventional oil and gas sector.

The short-term opportunities in southern Alberta and British Columbia should see the two (2) construction companies operating at near capacity from July until the end of October or later depending on weather. With contracts in hand we anticipate strong results in the third quarter of this year.

We also anticipate economic upturn in the Grande Prairie area late in 2008 and early 2009 as we expect gas exploration to resume if higher gas prices can be sustained.

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 generally less prone to short term commodity pricing, seasonality and produces higher margins.

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

  • 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