Leader Energy Services Ltd.

TSX VENTURE : LEA


Leader Energy Services Ltd.

April 08, 2014 19:05 ET

Leader Energy Services Reports 2013 Results

CALGARY, ALBERTA--(Marketwired - April 8, 2014) - Leader Energy Services Ltd. (TSX VENTURE:LEA) ("Leader" or the "Company") has released its financial and operating results for the three and twelve month periods ended December 31, 2013.

Fourth Quarter Results (000's - unaudited):

Quarter ended Dec. 31,
2013
Dec. 31,
2012
$ Change % Change
Revenue $ 6,467 $ 4,178 $ 2,289 55 %
Operating expenses 5,089 4,550 539 12 %
Gross profit 1,378 (372 ) 1,750 n/a
General and administrative 904 1,008 (104 ) (10 )%
Amortization 1,032 1,229 (197 ) (16 )%
Finance cost 985 430 555 129 %
Other losses 31 194 (163 ) (84 )%
Net Loss $ (1,574 ) $ (3,233 ) $ 1,659 n/a
Loss per share - Basic $ (0.05 ) $ (0.11 ) $ 0.06
Loss per share - Diluted $ (0.05 ) $ (0.11 ) $ 0.06
EBITDA $ 443 $ (1,574 ) $ 2,017 n/a
Adjusted EBITDA $ 462 $ (1,323 ) $ 1,785 n/a
Year Ended (000's): Dec. 31,
2013
Dec. 31,
2012
$ Change % Change
Revenue $ 22,667 $ 25,016 $ (2,349 ) (9 )%
Operating expenses 17,867 20,556 (2,689 ) (13 )%
Gross profit 4,800 4,460 340 8 %
General and administrative 3,970 4,384 (414 ) (9 )%
Amortization 4,032 3,572 460 13 %
Finance costs 3,899 2,335 1,564 67 %
Loss on settlement of loans and borrowings 233 1,338 (1,105 ) (83 )%
Other losses 109 128 (19 ) (15 )%
Net Loss $ (7,443 ) $ (7,297 ) $ (146 ) n/a
Loss per share - Basic and Diluted $ (0.25 ) $ (0.27 ) $ 0.02
EBITDA $ 488 $ (1,390 ) $ 1,878 n/a
Adjusted EBITDA $ 823 $ 292 $ 531 182 %

EBITDA refers to net income before finance costs, taxes, depreciation, and amortization. As the Company has not recorded any provision for income taxes, taxes have been excluded from the reconciliation. Adjusted EBITDA is calculated as EBITDA before non-cash losses on the settlement of loans and borrowings, share based payments and non-recurring dispute settlement charges. EBITDA and Adjusted EBITDA are not measures that have a standardized meaning and accordingly may not be comparable to similar measures used by other companies. Management believes that EBITDA and Adjusted EBITDA are useful measures of cash flow generated from operations as they eliminate non-cash items, non-recurring items and the effects of finance costs and financial restructuring.

Results of Operations

Well Stimulation Services (000's)

Year ended Dec. 31,
2013
Dec. 31,
2012

$ Change

% Change
Revenue $ 22,667 $ 25,016 $ (2,349 ) (9 )%
Operating expenses 17,867 20,556 (2,689 ) (13 )%
Gross profit* $ 4,800 $ 4,460 $ 340 8 %

* Management believes that gross profit provides investors with an indication of profit earned from field activities before administrative costs, amortization, finance costs, taxes and other. Readers are cautioned that gross profit should not be considered as an alternative to income determined in accordance with International Financial Reporting Standards ("IFRS") as an indicator of the Company's performance.

For the year ended December 31, 2013, the Company reported revenues of $22.7 million as compared to $25.0 million reported in 2012. Leader continues to provide larger diameter deep coil services in north-central Alberta and northeast British Columbia focusing on oil and liquids-rich resource plays. The reduction in 2013 revenue as compared to 2012 is attributed to lower revenue in the first and third quarters, partially offset by an increase in activity in the second and fourth quarters. After a slow start in January and early February, activity improved significantly in the last six weeks of the first quarter with Leader remaining active through until the end of March. Although Leader performed fewer jobs in the first quarter as compared to 2012, a higher percentage of work required the Company to supply equipment to complete full service deep coiled tubing jobs utilizing 2" and 2 3/8" coiled tubing units, nitrogen units and fluid pumpers. In addition to fewer jobs performed in the quarter, another factor contributing to lower revenues in the first quarter was the increase in work performed in geographic areas where pricing for services is historically lower than other areas within the WCSB. As a result of lower prices charged in these areas, increased competition for available work due to the slow start in the quarter, and the mix of jobs performed in the quarter, the Company experienced a small reduction in average pricing on a per job basis as compared to the first quarter of 2012. In addition to the above, changes in customer timing resulted in the Company continuing to experience situations where its equipment was deployed at lower standby rates waiting for work to commence. In these situations and when the demand for services was at its highest, the Company was periodically short of qualified personnel due to regular scheduled days off. At times, this forced the Company to delay upcoming work and in some circumstances turn down potential jobs while equipment and personnel were not available.

After a strong finish to the first quarter and despite the effects of spring break-up, the Company reported second quarter revenues 15% higher than the same period in 2012. This increase was attributed to the completion of some large deep coil jobs during the second quarter, which kept all services active while these jobs were in process combined with an increase in the utilization of nitrogen pumpers. During the second quarter, the number of nitrogen jobs completed by the Company increased by 30%, including some stand-alone nitrogen jobs where the Company was required to supply significant volumes of nitrogen having a positive effect on reported revenue. During the third quarter, the Company continued to experience an increase in stand-alone nitrogen work; however, the June flood in Alberta and wet weather delayed full service coiled tubing work in the third quarter contributing to lower reported revenues. After a slower than expected third quarter, activity improved in both the full service coiled tubing work and stand-alone nitrogen work during the fourth quarter. The Company reported revenues of $6.5 million in the fourth quarter, an increase of $1.2 million from the third quarter and a 55% increase over the fourth quarter of 2012. In the quarter, the Company performed a higher number of full service deep coiled tubing jobs utilizing 2" and 2 3/8" coiled tubing leading to higher average revenues per job as compared to the fourth quarter in 2012. In addition, the Company continued to experience an increase in stand-alone nitrogen work, particularly in October and November, where the Company supplied significant volumes of nitrogen. This led to an improvement in equipment utilization and an increase in the job count as compared to the third quarter of 2013 and the fourth quarter of the prior year. In the fourth quarter of 2012 revenue was also lower due to the increase in standby days on work in Saskatchewan.

The Company exited 2013 with six coiled tubing units plus one reel trailer capable of 2-3/8" deep coil applications, seven nitrogen pumpers and three fluid pumpers. Three of the coiled tubing units and one reel trailer are classified as "deep" coil units. The Company has the equipment capable of running up to six coiled tubing jobs concurrently.

For the year ended December 31, 2013, the Company reported operating costs of $17.9 million as compared to $20.6 million for the year ended December 31, 2012. As a percentage of revenue, operating costs decreased by 3.4% as compared to 2012. Savings in repair and maintenance and third party equipment rentals and transportation charges contributed to the decrease in variable costs. These savings were partially offset by higher coiled tubing charges resulting from the Company utilizing a higher percentage of larger diameter coiled tubing which is more expensive than smaller diameter coiled tubing (particularly in the first half of 2013), higher fuel costs due to an increase in equipment on location (with the addition of fluid pumpers added to the fleet and support trailers utilized on the deep coil jobs) and higher nitrogen charges to support the deep coiled tubing jobs and the increase in stand-alone nitrogen work particularly in the latter half of the year. In 2013, the Company benefited from its capital expenditure initiatives to purchase equipment to reduce the reliance on third party transportation. As a result of cost reduction initiatives implemented in late 2012 and to coincide with spring break-up, the Company also saved over $1.1 million in operational salaries and benefits during 2013.

The Company reported a loss of $7.4 million for the year ended December 31, 2013, compared to a loss of $7.3 million in the year ended December 31, 2012. Despite lower revenues, the Company improved its field profitability by 8% to $4.8 million and Adjusted EBITDA by 182% to $0.8 million.

Outlook

The Company anticipates improved operating results in 2014. Year to date revenue has shown some improvement over the same period last year. In the shorter term, utilization rates are expected to improve as commodity prices remain buoyant and customers expand their resources in various plays including the Duvernay, Montney and Horn River areas. If various west coast liquefied natural gas (LNG) export pipelines begin to receive regulatory approval, the long-term demand for all of the Company's services will be positively impacted. Management remains focused on cost management initiatives, and continues to evaluate various alternatives to reduce its borrowing costs and overall debt levels.

Other

Additional information can be found on SEDAR at www.sedar.com or the Company web site at www.leaderenergy.com. The number of common shares issued and outstanding at the date hereof is 29,388,021 which does not include 2,343,000 unexercised stock options and 400,000 share purchase warrants.

Forward-looking information

This press release contains certain statements or disclosures relating to the Company that are based on the expectations of the Company as well as assumptions made by and information currently available to the Company which may constitute forward-looking information under applicable securities laws. All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that the Company anticipates or expects may, or will occur in the future (in whole or in part) should be considered forward-looking information.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

Contact Information