VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov. 8, 2016) - Hanwei Energy Services Corp. (TSX:HE) ("Hanwei" or the "Company"), today reported its financial results for the six months ended September 30, 2016. All amounts are in Canadian Dollars unless otherwise noted.
The Company has two reportable segments for its continuing operations: its FRP pipe manufacturing and its oil and gas production. The pipe segment produces and sells fiberglass reinforced plastic ("FRP") pipe for the oil and gas industry and other infrastructure applications. The oil and gas segment is engaged in the exploration and production of oil and natural gas in Western Canada.
For the six months ended September 30, 2016:
- Total Company revenues for the six months ended September 30, 2016 totalled some $3.2 million as compared to $3.0 million for same period of the prior year.
- FRP pipe sales totalled $2.4 million as compared to $1.9 million in the same period of the prior year.
- For the Company's Canada market, sales were $1.6 million as compared to $47,000 for the same period of the prior year.
- For the Company's Chinese market, sales were $0.6 million as compared to $1.7 million for the same period of the prior year.
- For the Company's Kazakhstan market, sales were $69,000 as compared to $106,000 for the same period of the prior year. The Company does not expect this market to rebound to historical levels nor significantly contribute to sales going forward.
- Oil and gas production revenues net of royalties amounted to $0.8 million as compared to $1.2 million for the same period of the prior year. The decrease in revenues from the oil and gas business was driven by lower commodity prices.
- EBITDA from continuing operations was $0.8 million as compared to negative EBITDA from continuing operations of $1.6 million for the same period of the prior year. The increase in EBITDA was driven by growth in pipe sales and a one time $1.7 million refund of certain prepayments relating to the FRP pipe business expensed in previous periods.
- The Company had a loss from continuing operations of $0.9 million as compared to a loss from continuing operations of $2.5 million for the same period of the prior year.
- The Company received $2.2 million due from a wind farm customer from its discontinued wind power business. This amount was previously allowed for as at March 31, 2010. As of the date of this MD&A, a balance of $3.9 million remains outstanding from this customer.
- The Company negotiated improved commercial terms with its materials suppliers resulting in prepayments of some $1.4 million (RMB 6.8 million) being refunded.
- As of September 30, 2016 the Company had:
- A cash balance (inclusive of short term investments) of $4 million
- A Net Asset Value per share for its continuing operations of $0.16 (on total shares outstanding of approximately 194.2 million)
- During the period ended September 30, 2016, the Company partially repaid one of its bank loans in the amount of $1.9 million with proceeds from the collection of outstanding accounts receivable. A total principal amount of all bank loans of $4.8 million representing a 24% debt to equity ratio. A short-term loan of $2.9 million owed by Harvest (the Company's wholly owned subsidiary in China) to a Chinese bank is currently due and paying interest of 7.9% per annum. The Company is discussing the renewal or extension of the loan with the lender.
- Subsequent to the six months ended September 30, 2016
- The Company confirmed a new order to a Canadian customer of some $1.4 million, which will be produced in three batches and is expected to fully ship within this current fiscal year.
- During the quarter ended September 30, 2016, the Company won a legal action with one of its wind power customers for the payment of an outstanding accounts receivable in the amount of $3.6 million (RMB18.3 million). Subsequent to the period end, the Company has received a first payment of $2.5 million (RMB12.8 million) that includes a carrying amount of $2.1 million (RMB10.8 million), cumulated interest and reimbursement of court fees. The remaining carrying amount of $1.5 million (RMB7.4 million) is expected to be paid pending the Company issuing additional valued added tax invoices to the customer. As at the date of this news release, the Company has fulfilled this obligation and expects to recover the remaining amount fully.
Update on Oil and Gas Activities in Canada
- For the six months ended September 30, 2016, the Company produced approximately 157 boe/d for a total of 28,498 boe, including 83 bbl/d of oil for a total of 15,103 barrels, 309 mcf/d of gas per day for a total of 56,589 mcf, and 22 boe/d of liquids for a total of 3,964 boe. This production generated revenues net of royalties of $1.2 million and net back of $0.5 million and equivalent to gross revenue of $36.42 per boe with a netback of $15.89 per boe. The majority of the Company's oil production was from its 13-33-49-26W4 and 13-4-49-26W4 Nisku horizontal wells.
- At its Entice Lands the Company spud its new 14-01-023-28W4 vertical well in November 2015 with subsequent flow tests, and spud its new 15-12-023-28W4 horizontal well in June 2016. Test production results from the 15-12-023-28W4 horizontal well were 87% water cut, 13% oil production on total fluid volume of 380 bbld. Both wells are currently shut in as an adjacent gas handling plant accommodating gas production from these wells is currently closed for maintenance. It is not yet known when such gas handling facility shall re-open. The Company is conducting ongoing study of its Entice Lands and Leduc Lands development opportunities.
Hanwei will host a conference call to discuss its operational and financial results for the second quarter ended September 30, 2016. Graham Kwan, Executive Vice President and Rick Huang, Chief Financial Officer of Hanwei will host the call. Management invites analysts and investors to participate on the conference call:
- Date: Wednesday, November 9, 2016
- Time: 11:30 a.m., Eastern Time (8:30 am Pacific Time)
- Dial in number: 1-888-264-8952 or 1-913-312-1466
A replay of the conference call will be available on the Company's website www.hanweienergy.com.
About Hanwei Energy Services Corp.
Hanwei Energy Services Corp.'s principal business operations are in two complementary key segments of the oil and gas industry as both an equipment supplier to the industry (as a leading manufacturer of high pressure, fiberglass reinforced plastic ("FRP") pipe products and associated technologies serving major energy customers in the global energy market) and as an operator of its producing oil and gas mineral rights at its Leduc and Entice Lands in Alberta.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
FORWARD-LOOKING INFORMATION AND NON-GAAP MEASURES
Certain information in this press release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions a description of which is set out in the risk factors section of the Company's Annual Information Form dated June 22, 2016 and Management Discussion and Analysis for the year ended March 31, 2016 both of which are filed with Canadian securities regulators and available on SEDAR at www.sedar.com. The forward-looking information in this press release describes the Company's expectations as of the date of this press release.
THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.