Dalmac Energy Inc.

Dalmac Energy Inc.

November 30, 2010 09:30 ET

Dalmac Energy Inc.: Period Ended October 31, 2010 ("Q2'11")

EDMONTON, ALBERTA--(Marketwire - Nov. 30, 2010) - John Babic, President and CEO of Dalmac Energy Inc. (TSX VENTURE:DAL) ("Dalmac") announces the Corporations second quarter results.

Selected Financial Information                
(000's Cdn Dollars, except per share data) Q2'11   Q2'10   YTD' 11   YTD'10  
Revenues 5,910   3,557   9,723   7,124  
Gross Margin 2,182   595   3,308   1,048  
Gross Margin% 37 % 17 % 34 % 15 %
EBITDAS (loss) 1,436   (278 ) 1,825   (654 )
EBIDTAS per share - basic 0.08   (0.02 ) 0.10   (0.05 )
Net income (loss) 651   (1,007 ) 414   (1,811 )
  Net income (loss) per share - basic 0.04   (0.08 ) 0.02   (0.14 )
  Net income (loss) per share - diluted 0.04   (0.08 ) 0.02   (0.14 )

Total revenue for Q2'11 increased 66% to $5.9M from the $3.6M reported at Q2'10. Revenue for the six months ended October 31, 2010 increased 36% to $9.7M from the $7.1M reported in the previous year. After the heavy rains which plagued most of Q1'11, the weather finally began to cooperate favorably in Q2'11 and helped fire up the activity levels along with the scheduled fracturing and well servicing programs. The gross margin for Q2'11 increased by $1.6M to $2.2M from the $595K reported in Q2'10. The year to date gross margin increased by $2.3M to $3.3M as compared to $1.0M at the same period in the previous year. As a percentage of revenue the gross profit margin for the current quarter was 37% compared to 17% in previous year. The YTD'11 gross margin profit was 34% as compared to 15% in YTD'10. For Q2'11 the EBITDAS increased by $1.7M to $1.4M from $(278)K reported in Q2'10. The EBITDAS for YTD'11 increased by $2.5M to $1.8M as compared to $(654)K at the same period in the previous year. As a percentage of revenue, Q2'11 EBITDAS was 24% as compared to (8)% in Q2'10. The percentage of revenue for EBITDAS at YTD'11 was 19% as compared to (9)% at the same period in the prior year. Net income for Q2'11 increased by $1.7M to $651K from the $(1.0)M reported in Q2'10. For YTD'11 net income increased by $2.2M to $414K from $(1.8)M in the prior year.


After the spring break up conditions and wet weather which plagued most of Q1'11 Dalmac's utilization levels bounced back in Q2. This is further evidenced by the drilling rig utilizations which have also recovered to near record levels. The Canadian Association of Oilwell Drilling Contractors ("CAODC") stated that current drilling utilization in Alberta levels are 73% higher than they were in 2009. This trend is expected to continue into 2011. COADC is forecasting 11,811 wells to be drilled in 2011 which is up marginally from the 11,587 expected to be completed this year. As further corroboration of better things to come, based on the September 29th land sale results, the Alberta government has already reached a calendar year record of $1.86 billion for petroleum and natural gas land sales (excluding oil sands auction revenue) surpassing a previous record high of $1.83 billion set in 2005.

As the production rates in the Western Canadian Sedimentary Basin ("WCSB") continue to decline, the current production levels can only be maintained through more drilling. This in turn bodes well for long term fundamentals for the oilfield services economy.

With the increased activity in the Cardium zone, The Petroleum Services Association of Canada ("PSAC") has predicted earlier in the year that 2010 would see more oil than gas wells drilled in Alberta for the first time in 40 years. As of late about 55% of the wells completed in Alberta were oil wells, which is a significant switch from a few years ago when more than two-thirds of the wells drilled were natural gas.

In the previous year, the majority of Dalmac's revenue was derived from existing production services such as fluid hauling which usually exclude drilling and well workovers. Increased drilling and well servicing activity in the current year has further supplemented the Company's existing revenue base by creating additional demand for our products and services. The outlook for Dalmac's products and services continues to be more and more positive each year.

Dalmac's overall utilization levels do not hinge on the aggregate number of wells drilled in the province but rather those being drilled in our operating areas. Dalmac's core operations are well situated in west central Alberta which covers a substantial part Cardium geographical zone. Many of the new wells being drilled in west central Alberta are of the deeper kind which involves the use of multi-stage fracturing technology. As a result, these wells are more capital intensive and take more time to complete which in turn increases the demand for Dalmac's products and services.

We seek Safe Harbor.

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