Hanwei Energy Services Corp.
TSX : HE

Hanwei Energy Services Corp.

June 21, 2017 20:57 ET

Hanwei Energy Services Reports Year End Fiscal 2017 Financial and Operational Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - June 21, 2017) - Hanwei Energy Services Corp. (TSX:HE) ("Hanwei" or the "Company"), today reported its financial results for the year ended March 31, 2017 (the "2017 Fiscal Year") and provided an operational update. All amounts are in Canadian Dollars unless otherwise noted.

Hanwei's principal business operations are in two complementary segments of the oil and gas industry as an operator and developer of its own producing and exploratory oil and gas assets in Alberta and Manitoba and as a specialized pipe supplier to the industry, both in Canada and internationally. For the financial year ended March 31, 2017, a summary of the Company's annual financial results are as follows;

Summary of the 2017 Fiscal Year Financial Results from Continuing Operations
in thousands of CDN$ except percentages and per share data
FY2017 FY2016
Pipe Oil & Gas Corporate Total Pipe Oil & Gas Corporate Total
Revenue 4,947 2,528 7,475 6,483 1,886 8,369
Adjusted EBITDA 108 34 (942 ) (800 ) (1,981 ) (254 ) (8,231 ) (10,466 )
Adjusted EBITDA Margin 2 % 1 % n/a -11 % -31 % -13 % n/a -125 %
Adjusted EBITDA per share (0.00 ) 0.00 (0.00 ) (0.00 ) (0.01 ) 0.00 (0.04 ) (0.05 )
Net Income (loss) (2,427 ) (1,345 ) (1,512 ) (5,284 ) (4,056 ) (1,306 ) (8,259 ) (13,621 )
Diluted EPS (Basic and diluted) (0.01 ) (0.01 ) (0.01 ) (0.03 ) (0.02 ) (0.01 ) (0.04 ) (0.07 )
Weighted average number of outstanding shares Basic 194,201,234 Basic 194,201,234
Diluted 194,201,234 Diluted 194,201,234
  • Revenues from the Canadian FRP pipe market increased by approximately 114% to $3.1 million (representing 63% of total Company FRP pipe sales of $4.9 million for the year ended March 31, 2017) from $1.4 million in Canadian sales for the prior year (representing 22% of total Company FRP pipe sales of $6.5 million).

  • Revenues from the Company's China FRP pipe market for the year ended March 31, 2017 fell to $1.7 million for the year ended March 31, 2017 as compared to $4.6 million for the prior year. Notwithstanding these prior results and subsequent to the year ended March 31, 2017 the Company has secured FRP pipe sales contracts in its China market as of the date of this news release totalling some $3.2 million. These orders are all expected to be completed in the first half of the Company's current fiscal year ending March 31, 2018.

  • The Company produced approximately 218 barrels of oil equivalent per day (boe/d), including 81 barrels of oil per day(bbl/d), 611 mcf of gas per day (mcf/d) and 35 boe/d of liquids for the year ended March 31, 2017. The majority of the Company's oil production was from its 13-33 and 13-4 horizontal Nisku wells at its Leduc Lands and flow test production from its new 14-01 vertical well at its Entice Lands. For the year ended March 31, 2016, the Company produced approximately 167 boe/d, including 75 bbl/d of oil, 379 mcf/d of gas and 28 boe/d of liquids.

  • Oil and gas production generated revenues net of royalties of $2.2 million and net back of $0.8 million, equivalent to gross revenue per boe of $31.99 with a netback of $10.05 per boe (or a netback margin of 31%) for the year ended March 31, 2017.

  • Adjusted EBITDA from continuing operations for the year ended March 31, 2017 totalled some negative $0.8 million as compared to negative Adjusted EBITDA of $10.5 million for the prior year. A one-time, net bad debt allowance, net of provision write-off, of $7.3 million relating to the Company's disposition of its subsidiary in Tianjin China was included in the Adjusted EBITDA in the prior year.

Oil and Gas Reserves

  • The reserves of the Company were evaluated by Sproule Associates Limited ("Sproule"), an independent qualified reserves evaluator, and set out in their report dated June 13, 2017, in which Sproule has evaluated, as of March 31, 2017, the oil and natural gas reserves attributable to the Company's PNG Producing Properties (the "2017 Reserves Report") and their report dated June 15, 2016, in which Sproule has evaluated, as of March 31, 2016, the oil and natural gas reserves attributable to the Company's PNG Producing Properties (the "2016 Reserves Report").

  • The chart below provides a comparison of the 2017 Reserves Report to the 2016 Reserves Report and the "Proved" and "Proved Plus Probable" remaining reserves of the Company therein. The positive increases in both reserves and Net Present Value of the remaining reserves is due to the ongoing and intended development activities of the Company at its Leduc Lands and the addition of the two new wells at the Company's Entice Lands (yet to be placed on permanent production).

Remaining Reserves Net Present Values After Tax
Mboe; After Tax (M$) Gross Company Company @ 0% @ 5.0% @ 10.0% @ 15.0% @ 20.0%
100% Gross Net M$ M$ M$ M$ M$
2017 Reserves Report
Total Proved 1,420.1 1,366.1 1,124.7 26,544 21,083 17,381 14,773 12,865
Total Proved + Probable 2,242.7 2,161.0 1,814.4 42,892 32,621 25,934 21,341 18,042
2016 Reserves Report
Total Proved 978.2 912.2 764.5 14,218 10,832 8,473 6,828 5,659
Total Proved + Probable 1,645.9 1,567.9 1,320.9 25,198 17,974 13,151 9,866 7,565
Variance
Total Proved 442 454 360 12,326 10,251 8,908 7,945 7,206
Total Proved + Probable 597 593 494 17,694 14,647 12,783 11,475 10,477
  • At its Leduc Lands and subsequent to the year ended March 31, 2017 the Company re-entered two existing vertical wells (its 01-32-49-26W4/3 well and its 02/16-29-49-26W4/2) into the Wabamun zone. The 01-32-49-26W4/3 well has produced during test production approximately 55 bbld of oil with an approximate 50% water-cut. The 02/16-29-49-26W4/2 well has not yet been placed on production.

Bank Debt

The Company continues to effectively manage its bank loans and credit facilities. The total principal amount of all bank loans was $4.7 million as at March 31, 2017 representing a 32% debt to equity ratio (total bank debt divided by total shareholders' equity). Management believes that the Company has sufficient debt facilities to support its current operations and will continue to assess its debt structure based on the requirements of the business.

Other

  • General and administrative ("G&A") expenses for the year ended March 31, 2017 were $4.1 million as compared to $11.5 million for the prior year. G&A for the fiscal year ended March 31, 2016 included a one time, net bad debt provision of $7.3 million relating to the Company's disposition of its subsidiary in Tianjin China. Not including for the bad debt provision G&A expenses for the year ended March 31, 2016 were $4.2 million.

  • As of March 31, 2017, the Company's cash and cash equivalent balance inclusive of short-term investments in Canadian GICs was some $2.4 million.

  • As of March 31, 2017, the Company had a Net Asset Value per share for its continuing operations of $0.14.

Hanwei will host a conference call to discuss its operational and financial results for the year ended March 31, 2017. 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: Friday, June 23, 2017
Time: 1:00 p.m., Eastern Time (10:00 am Pacific Time)
Dial in number: 1-888-542-1102 or 1-719-325-2359
A replay of the conference call will be available on the Company's website http://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 oil and gas producer with properties in Alberta and joint venture interests in Manitoba.

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

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 20, 2017 and Management Discussion and Analysis for the year ended March 31, 2017 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.

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