CALGARY, ALBERTA--(Marketwired - May 7, 2014) -
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES ("U.S.")
The news release contains "forward-looking information and statements" within the meaning of applicable securities laws. For full disclosure of the forward-looking information and statements and the risks to which they are subject, see the "Cautionary Statement Regarding Forward-Looking Information and Statements" later in this news release.
Strad Energy Services Ltd., ("Strad" or the "Company") (TSX:SDY), a North American-focused, energy services company, today announced its financial results for the three months ended March 31, 2014. All amounts are stated in Canadian dollars unless otherwise noted.
SELECTED FINANCIAL AND OPERATIONAL HIGHLIGHTS:
- First quarter EBITDA(1) of $11.0 million increased 3% compared to $10.7 million for the same period in 2013;
- First quarter revenue of $51.9 million, a 16% increase compared to $44.7 million for the same period in 2013;
- Capital additions totaled $8.9 million during the first quarter. Reported capital expenditures, net of $0.5 million rental asset disposals, were $8.4 million during the quarter;
- Total funded debt (2) to twelve month trailing EBITDA ratio of 1.1 to 1 at the end of the first quarter of 2014;
- First quarter earnings per share of $0.11 compared to $0.03 for the same period in 2013;
- The quarterly dividend payable to shareholders of record on June 30, 2014, will be 7.0 cents per share, a 27% increase from the previous quarterly dividend of 5.5 cents per share; and
- Strad has approved a total of $25.0 million in budgeted capital spending for 2014.
| Notes: | |
| (1) | Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". |
| (2) | Funded debt includes bank indebtedness plus long-term debt plus current and long-term obligations under finance lease less cash. EBITDA is based on trailing twelve months. See "Non-IFRS Measures Reconciliation". |
"This quarter, we are pleased to announce an increase to Strad's quarterly dividend, from 5.5 cents per share to 7.0 cents per share" said Andy Pernal, President and CEO of Strad. "Since first establishing our dividend in 2012, Strad has paid eight consecutive quarterly dividends of 5.5 cents per share. The dividend increase reflects our confidence in Strad's future growth prospects and the stability of our cash flows."
"Strad's increased dividend continues to represent a manageable level of payout of free cash flow," said Greg Duerr, CFO of Strad. "Further, management continues to seek strategic growth opportunities for the Company and sees opportunity to add to assets in its key product lines in both Canada and the US. The current free cash flow and borrowing capacity are capable of supporting the ongoing investment in the Company."
FIRST QUARTER FINANCIAL HIGHLIGHTS
| (in thousands of Canadian Dollars, except per share amounts) | Three months ended March 31, | |||||
| 2014 | 2013 | % Chg. | ||||
| Revenue | 51,888 | 44,723 | 16 | |||
| EBITDA (1) | 10,988 | 10,659 | 3 | |||
| EBITDA as a % of revenue | 21 | % | 24 | % | ||
| Per share ($), basic | 0.30 | 0.29 | 3 | |||
| Per share ($), diluted | 0.29 | 0.29 | - | |||
| Net income | 4,141 | 1,063 | 290 | |||
| Per share ($), basic | 0.11 | 0.03 | 267 | |||
| Per share ($), diluted | 0.11 | 0.03 | 267 | |||
| Funds from operations(2) | 10,533 | 10,752 | (2 | ) | ||
| Per share ($), basic | 0.29 | 0.29 | - | |||
| Per share ($), diluted | 0.28 | 0.29 | (3 | ) | ||
| Capital expenditures | 8,902 | 5,912 | 51 | |||
| Dispositions of rental assets(3) | (497 | ) | (3,247 | ) | (85 | ) |
| Net capital expenditures(4) | 8,405 | 2,665 | 215 | |||
| Total assets | 224,010 | 226,563 | (1 | ) | ||
| Return on average total assets(5) | 21 | % | 18 | % | ||
| Long-term debt | 38,400 | 55,500 | (31 | ) | ||
| Total long-term liabilities | 48,077 | 66,729 | (28 | ) | ||
| Common shares - end of period ('000's) | 37,253 | 37,253 | ||||
| Weighted avg common shares ('000's) | ||||||
| Basic | 36,730 | 36,533 | ||||
| Diluted | 37,476 | 37,344 | ||||
| Notes: | |
| (1) | Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". |
| (2) | Funds from operations is cash flow from operating activities before changes in working capital. Funds from operations is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". |
| (3) | Dispositions reported at net book value. |
| (4) | Includes assets acquired under finance lease and purchases of intangible assets. Net capital expenditures are net of rental asset disposals. |
| (5) | Return on average total assets is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". |
| FINANCIAL POSITION AND RATIOS |
| As at March 31, | ||||
| ($000's except ratios) | 2014 | 2013 | ||
| Working capital (1) | 10,825 | 19,143 | ||
| Funded debt (2) | 45,004 | 63,150 | ||
| Total assets | 224,010 | 226,563 | ||
| Funded debt to EBITDA(2) | 1.1 | 1.5 | ||
| Notes: | |
| (1) | Working capital is calculated as current assets less current liabilities, excluding assets held for sale. See "Non-IFRS Measures Reconciliation". |
| (2) | Funded debt includes bank indebtedness plus long-term debt plus current and long-term obligations under finance lease less cash. EBITDA is based on trailing twelve months. See "Non-IFRS Measures Reconciliation". |
FIRST QUARTER RESULTS
Strad reported an increase in revenue and EBITDA of 16% and 3%, respectively, during the three months ended March 31, 2014, compared to the same period in 2013. Increased revenue during the first quarter was a result of higher utilization and product sales compared to the prior year. In the Western Canadian Sedimentary Basin ("WCSB") region, drilling rig activity increased at a quicker pace early in the quarter compared to 2013 and averaged 5% higher during the first quarter in 2014. Despite higher revenue during the first quarter, EBITDA as a percentage of revenue declined to 21% compared to 24% in 2013. EBITDA margins were impacted by a number of factors including cold weather conditions in the WCSB during March, which delayed the deployment of Strad's matting fleet, and higher trucking and service costs.
Strad's Canadian Operations reported higher revenue and EBITDA during the three months ended March 31, 2014, compared to the same period in 2013. Increased revenue was a result of a larger rental asset base and higher drilling activity in the WCSB during the quarter, which resulted in higher utilization of Strad's Canadian drill pipe and surface equipment fleets. Cold weather conditions in March delayed the typical seasonal deployment of Strad's matting fleet, which had an impact on product mix during the quarter.
During the first quarter, rig counts in Strad's targeted U.S. resource plays remained similar to levels in the first quarter of 2013. Rig counts in the Bakken declined by 5% year-over-year, offset by a 7% rig count increase in the Rockies region, while the Marcellus remained flat at an average of 122 active drilling rigs. Overall, Strad's U.S. operations reported higher revenue and lower EBITDA during the first quarter of 2014 compared to the prior year. EBITDA as a percentage of revenue declined from 32% to 24% year-over-year, due to a shift in product and revenue type mix. During the first quarter of 2014, product mix shifted from higher margin drill pipe rental revenue to lower margin solids control rental revenue.
During the first quarter, capital expenditures were $6.5 million in Canada and $1.9 million in the U.S., net of $0.3 million and $0.2 million in rental asset disposals. Capital expenditures are reported net of the net book value of rental assets sold in the period. Strad has spent $8.9 million on a gross basis, or $8.4 million, net of $0.5 million in rental asset disposals, of its budgeted $17.0 million first half of 2014 capital program. Strad has to date approved a further $8.0 million in budgeted capital for the balance of the year. The Company continues to invest in equipment which is in high demand in both Canada and the U.S.
Dividend Increase
Strad's Board of Directors has approved an increase to the quarterly dividend from a rate of 5.5 cents per share to 7.0 cents per share, payable on July 11, 2014, to shareholders of record at the close of business on June 30, 2014. The ex dividend date is June 26, 2014.
Strad's increase in earnings over the last two quarters is a reflection of modest improvements in operating activity as well as a depreciation policy that is more reflective of the durability of the asset base. Strad also continues to efficiently convert EBITDA to free cash flow. This free cash flow along with a solid balance sheet with ample borrowing capacity, both serve to support ongoing investment in growth areas of our business. Since establishing the dividend on June 29, 2012, Strad has paid eight consecutive quarters of dividend payments at the initial 5.5 cents per share rate. The increase of 1.5 cents per share to 7.0 cents per share is a reflection of the current level of free cash flow and earnings in the business and its sustainability. The quarterly cash payment after the increase will be approximately $2.6 million. As a payout ratio of free cash flow and net income benchmarks, the Company is comfortable with the sustainability of this distribution. The $2.6 million quarterly dividend represents 24% of Q1 2014 EBITDA, 25% of Q1 2014 Funds from Operations and 63% of Q1 2014 net income. Strad also continues to believe that the Company is well positioned to access an array of additional growth opportunities and sustain a regular dividend, opening multiple value creation avenues for shareholders.
RESULTS OF OPERATIONS
Canadian Operations
| Three months ended March 31, | ||||||
| ($000's) | 2014 | 2013 | % chg. | |||
| Revenue | 21,384 | 17,742 | 21 | |||
| EBITDA (1) | 5,604 | 4,794 | 17 | |||
| EBITDA as a % of revenue | 26 | % | 27 | % | ||
| Capital expenditures | 6,792 | 2,587 | 163 | |||
| Dispositions of rental assets(2) | (300) | (2,390) | (87 | ) | ||
| Net capital expenditures (3) | 6,492 | 197 | 3,195 | |||
| Gross capital assets | 111,306 | 108,199 | 3 | |||
| Total assets | 113,476 | 108,133 | 5 | |||
| Notes: | |
| (1) | Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". |
| (2) | Dispositions represented at net book value. |
| (3) | Includes assets acquired under finance lease and purchases of intangible assets. Net capital expenditures are net of rental asset sales. |
Revenue generated for the three months ended March 31, 2014, was $21.4 million, a 21% increase compared to $17.7 million for the same period in 2013. Increased revenue during the quarter was a result of a larger rental asset base and higher drilling activity in the WCSB, which resulted in higher utilization of Strad's Canadian drill pipe and surface equipment fleets. First quarter revenue was also impacted by higher matting service and trucking revenue. The increase in matting service revenue is a result of Strad performing more service only work for customers who predominantly own their matting fleets and source new matting purchases from Strad. Trucking revenue increased during the quarter due to the increased use of third party transport suppliers to move Strad's equipment throughout the WCSB. However, lower matting rental revenue partially offset the overall revenue increase due to colder weather conditions late in the quarter, which delayed the typical seasonal deployment of Strad's matting fleet compared to the same period in 2013.
EBITDA for the three months ended March 31, 2014, of $5.6 million, increased 17%, compared to $4.8 million for the same period in 2013. EBITDA as a percentage of revenue for the three months ended March 31, 2014, was 26% compared to 27% for the same period in 2013.
U.S. Operations
| Three months ended March 31, | ||||||
| ($000's) | 2014 | 2013 | % chg. | |||
| Revenue | 14,851 | 13,979 | 6 | |||
| EBITDA (1) | 3,605 | 4,506 | (20 | ) | ||
| EBITDA as a % of revenue | 24 | % | 32 | % | ||
| Capital expenditures | 2,077 | 3,005 | (31 | ) | ||
| Dispositions of rental assets (2) | (196) | (857) | (77 | ) | ||
| Net capital expenditures (3) | 1,881 | 2,148 | (12 | ) | ||
| Gross capital assets | 111,581 | 106,014 | 5 | |||
| Total assets | 107,933 | 112,512 | (4 | ) | ||
| Notes: | |
| (1) | Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". |
| (2) | Dispositions represented at net book value. |
| (3) | Includes assets acquired under finance lease and purchases of intangible assets. Net capital expenditures are net of rental asset sales. |
Revenue for the three months ended March 31, 2014, increased 6% to $14.9 million from $14.0 million for the same period in 2013. Increased revenue during the quarter was due to higher utilization of Strad's surface equipment and matting rental fleets compared to the prior year. During the first quarter, rig counts decreased by 5% in the Bakken, increased by 7% in the Rockies and remained relatively flat in the Marcellus compared to the same period in 2013. Year-over-year, competition and pricing pressure continued in the Bakken, which impacted first quarter results, but was offset by market share gains in the Marcellus resulting from an increased field sales presence compared to the prior year. The Bakken continues to be the most active basin for Strad's U.S. Operations, accounting for 49% of total revenue during the quarter.
EBITDA for the three months ended March 31, 2014, decreased 20% to $3.6 million compared to $4.5 million for the same period in 2013. EBITDA as a percentage of revenue for the three months ended March 31, 2014, was 24% compared to 32% for the same period in 2013. The decrease in both EBITDA and EBITDA as a percentage of revenue, despite the year-over-year increase in revenue, is due to a shift in product mix during the quarter from high margin drill pipe rental revenue to lower margin solids control rental revenue. In addition to the product mix shift, Strad also incurred increased trucking expenses during the first quarter as a result of transferring equipment to a higher utilization environment in the Marcellus region from other regions in the U.S. and Canada.
Product Sales
| Three months ended March 31, | ||||||
| ($000's) | 2014 | 2013 | % chg. | |||
| Revenue | 15,653 | 13,002 | 20 | |||
| EBITDA (1) | 2,719 | 2,352 | 16 | |||
| EBITDA as a % of revenue | 17 | % | 18 | % | ||
| Capital expenditures (2) | - | 203 | (100 | ) | ||
| Total assets | 658 | 1,724 | (62 | ) | ||
| Notes: | |
| (1) | Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". |
| (2) | Includes assets acquired under finance lease and purchases of intangible assets. |
Product Sales are comprised of in-house manufactured products sold to external customers, third party equipment sales to existing customers, and sales of equipment from Strad's existing fleet to customers.
Revenue for the three months ended March 31, 2014, increased 20% to $15.7 million from $13.0 million for the same period in 2013, resulting primarily from higher in-house manufactured product and third party equipment sales offset by lower used equipment sales. During the first quarter, Product Sales consisted of $8.5 million of in-house manufactured products, $6.5 million of third party equipment sales and $0.7 million of rental fleet sales compared to $6.9 million, $1.9 million and $4.2 million, respectively, during the same period in 2013. Manufactured product sales increased due to a significant matting order from an existing customer. Third party equipment sales increased year-over-year due to more wood access mat sales, which are dependent on the timing of capital spending by Strad's customers. Sales of Strad's rental fleet equipment fluctuate quarter-over-quarter and are primarily dependent on strategic opportunities to monetize underutilized rental assets.
EBITDA for the three months ended March 31, 2014, of $2.7 million increased by 16% compared to $2.4 million for the same period in 2013. The increase in EBITDA was due to higher sales revenue during the first quarter of 2014 compared to the same period in the prior year. EBITDA as a percentage of revenue for the three months ended March 31, 2014, decreased to 17% compared to 18% for the same period in 2013. EBITDA as a percentage of revenue tends to vary quarter-over-quarter depending on the mix of sales, as realized margins on third party equipment sales and sales of equipment from Strad's existing fleet fluctuate more compared to sales of in-house manufactured products.
OUTLOOK
Industry conditions during the first quarter were slightly improved on a year-over-year basis in Canada, whereas overall drilling activity in Strad's U.S. operating regions was either flat or slightly down from the prior year. Although growth in the WCSB was limited, driven by a continuation of broader constraints relating to oil transportation bottlenecks, producer cash flows continue to be supported by crude oil and natural gas prices that have strengthened year-over-year. Activity increases have also been supported by early stage activity related to delineation of Liquified Natural Gas ("LNG") projects. Strad continued to participate in this activity increase with multi-well equipment packages deployed to key customers in northeast British Columbia through the first quarter. U.S. drilling activity in Strad's Bakken and Marcellus regions has been impacted by the ongoing maturation and increased drilling efficiency of the Bakken, as well as natural gas prices, which despite recent increases, have not yet been sustained at levels to spur a significant increase in Marcellus activity. However, initial signs of activity increases in the Marcellus region continued to be evident in the first quarter.
In the WCSB, active drilling rigs in the first quarter of 2014 remained relatively level, averaging 521 compared with 496 for the same period in 2013. In the United States, drilling rig activity continued to vary by region, with the total active U.S. rig count in Q1 2014 declining by 2% on a year-over-year basis. The majority of Strad's U.S. fleet continues to operate in the Bakken and Marcellus resource plays. The active rig count in the Bakken averaged 180 rigs in the first quarter of 2014, down from 191 in the prior year period. In the gas-weighted Marcellus play, the active rig count, including the Utica play, averaged 122 rigs during the first quarter of 2014, consistent with the prior year period.
Bakken operations are also in close proximity to the Rockies region, consisting of Colorado, Wyoming and Utah, where an average of 139 rigs were drilling during the first quarter, up from 130 rigs in the prior year. Both the Utica Shale and Rockies region represent platforms to grow utilization of rental assets from existing operating regions. In addition to drilling activity, the long-term build out of LNG infrastructure in Canada could result in increased demand for Strad's products and services.
The fundamentals for Strad's rental business continue to be sound with commodity prices supporting capital spending by producers along with the associated drilling activity. Oilsands and energy infrastructure investment are also expected to increasingly drive results over the upcoming years and will provide stability of demand through commodity price cycles.
Strad remains focused on improving operational efficiency, maximizing utilization on its existing asset base and disciplined deployment of capital targeted at opportunities in select areas such as matting in Canada and the Marcellus, solids control in the Bakken, and rental assets deployed to LNG related drilling activity in Canada. Strad remains on track with respect to its $17.0 million capital program for the first half of 2014. Strad has to date approved a further $8.0 million in budgeted capital for the balance of the year. The Company's free cash flow and financial position provide Strad with significant flexibility to pursue additional opportunities in the second half of the year.
LIQUIDITY AND CAPITAL RESOURCES
| ($000's) | March 31, 2014 | December 31, 2013 | |||
| Current assets | 54,687 | 43,519 | |||
| Current liabilities | 43,862 | 32,004 | |||
| Working capital (1) | 10,825 | 11,515 | |||
| Banking facilities | |||||
| Operating facility | 4,448 | 1,879 | |||
| Syndicated revolving facility | 38,400 | 38,500 | |||
| Total facility borrowings | 42,848 | 40,379 | |||
| Total credit facilities (2) | 110,000 | 110,000 | |||
| Unused credit capacity | 67,152 | 69,621 | |||
| Notes: | |
| (1) | Working capital is calculated as current assets less current liabilities, excluding assets held for sale. See "Non-IFRS Measures Reconciliation". |
| (2) | Facilities are subject to certain limitations on accounts receivable, inventory, and net book value of fixed assets and are secured by a general security agreement over the Company's assets. As at March 31, 2014, Strad had access to the full $110 million credit facility. |
At March 31, 2014, working capital was $10.8 million compared to $11.5 million at December 31, 2013. The change in current assets is consistent with the increase in revenue from the fourth quarter of 2013 to the first quarter of 2014. The increase in current liabilities is due to increased activity levels during the first quarter compared to the fourth quarter of 2013.
Funds from operations for the three months ended March 31, 2014, increased to $10.5 million compared to $10.4 million for the three months ended December 31, 2013. Capital expenditures totaled $8.9 million for the three months ended March 31, 2014, and $9.5 million for the three months ended December 31, 2013. Capital expenditures were offset by asset disposals totaling $0.5 million in the first quarter of 2014 compared to $1.6 million during the fourth quarter of 2013. Strad's total facility borrowing increased by $2.5 million during the first quarter of 2014 due to an increase in the asset base from growth in working capital and growth in the rental fleet. Management monitors funds from operations and the timing of capital additions to ensure adequate capital resources are available to fund Strad's capital program.
The Company's syndicated banking facility consists of an operating facility with a maximum principal amount of $15.0 million CAD and $10.0 million USD, and an $85.0 million revolving facility, both of which are subject to certain limitations on accounts receivable, inventory and net book value of fixed assets and are secured by a general security agreement over the Company's assets. The syndicated banking facility bears interest at bank prime plus a variable rate, which is dependent on the Company's funded debt to EBITDA ratio. The Company's syndicated banking facility matures on July 25, 2016.
Based on the Company's funded debt to twelve month trailing EBITDA ratio of 1.1 to 1 at the end of the first quarter of 2014, the interest rate on the syndicated banking facility is bank prime plus 1.25% on prime rate advances and at the prevailing rate plus a stamping fee of 2.25% on bankers' acceptances. For the three months ended March 31, 2014, the overall effective rates on the operating facility and revolving facility were 4.20% and 3.48%, respectively. As of March 31, 2014, $4.4 million was drawn on the operating facility and $38.4 million was drawn on the revolving facility. Required payments on the revolving facility are interest only.
As at March 31, 2014, the Company was in compliance with all of the syndicated banking facility covenants.
NON-IFRS MEASURES RECONCILIATION
Certain supplementary measures in this press release do not have any standardized meaning as prescribed under IFRS and, therefore, are considered non-IFRS measures. These measures are described and presented in order to provide shareholders and potential investors with additional information regarding the Company's financial results, liquidity and its ability to generate funds to finance its operations. These measures are identified and presented, where appropriate, together with reconciliations to the equivalent IFRS measure. However, they should not be used as an alternative to IFRS, because they may not be consistent with calculations of other companies. These measures are further explained below.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS. Management believes that in addition to net income, EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Company's principal business activities prior to consideration of how those activities are financed or how the results are taxed. EBITDA is calculated as net income plus interest, finance fees, taxes, depreciation and amortization, loss on disposal of property, plant and equipment, loss on foreign exchange, loss on assets held for sale, less gain on foreign exchange and gain on disposal of property, plant and equipment. Segmented EBITDA is based upon the same calculation for defined business segments, which are comprised of Canadian Operations, U.S. Operations, Product Sales and Corporate.
Funds from operations are cash flow from operating activities excluding changes in working capital and share-based payments. It is a supplemental measure to gauge performance of the Company before non-cash items. Working capital is calculated as current assets minus current liabilities, excluding assets held for sale. Working capital, cash forecasting and banking facilities are used by Management to ensure funds are available to finance growth opportunities.
Annualized return on average total assets for the three months ended March 31, 2014, is calculated as annualized year-to-date EBITDA divided by the average of total assets over the fourth quarter of 2013, including a three month lag. The three month lag represents the time between the purchase of capital assets and when they are deployed in the field and earning revenue.
Funded debt is calculated as bank indebtedness plus long-term debt plus current and long-term portion of finance lease obligations, less cash.
| Reconciliation of EBITDA and Funds from Operations |
| ($000's) |
| Three months ended March 31, | ||||
| 2014 | 2013 | |||
| Net income | 4,141 | 1,063 | ||
| Add: | ||||
| Depreciation and amortization | 5,487 | 7,626 | ||
| (Gain)/loss on disposal of PP&E | (758 | ) | 586 | |
| Loss on disposal of assets held for sale | 38 | 158 | ||
| Share-based payments | 138 | 188 | ||
| Deferred income tax expense | 864 | 345 | ||
| Financing fees | 88 | 72 | ||
| Interest expense | 535 | 714 | ||
| Funds from operations | 10,533 | 10,752 | ||
| Add: | ||||
| Gain on foreign exchange | (67 | ) | (121 | ) |
| Current income tax expense | 660 | 216 | ||
| Subtotal | 11,126 | 10,847 | ||
| Deduct: | ||||
| Share-based payments | 138 | 188 | ||
| EBITDA | 10,988 | 10,659 | ||
| Reconciliation of quarterly non-IFRS measures |
| ($000's) |
| Three months ended (unaudited) |
||||||||
| Mar 31, 2014 | Dec 31, 2013 | Sept 30, 2013 | Jun 30, 2013 | |||||
| Net income | 4,141 | 1,923 | 2,373 | 13 | ||||
| Add: | ||||||||
| Depreciation and amortization | 5,487 | 5,265 | 7,259 | 8,824 | ||||
| (Gain)/loss on disposal of PP&E | (758 | ) | 477 | 162 | 76 | |||
| Loss on disposal of assets held for sale | 38 | 637 | - | 17 | ||||
| Gain on foreign exchange | (67 | ) | (5 | ) | (63 | ) | (18 | ) |
| Current income tax expense | 660 | 466 | 627 | 94 | ||||
| Deferred income tax expense/(recovery) | 864 | (225 | ) | (808 | ) | (1,099 | ) | |
| Interest expense | 535 | 665 | 784 | 791 | ||||
| Restructuring reversal | - | (514 | ) | - | - | |||
| Impairment loss | - | 1,901 | - | - | ||||
| Finance fees | 88 | 88 | 88 | 71 | ||||
| EBITDA | 10,988 | 10,678 | 10,422 | 8,769 | ||||
| Three months ended (unaudited) |
||||||||
| Mar 31, 2013 | Dec 31, 2012 | Sept 30, 2012 | Jun 30, 2012 | |||||
| Net income (loss) | 1,063 | (3,490 | ) | 2,937 | 2,772 | |||
| Add: | ||||||||
| Depreciation and amortization | 7,626 | 7,667 | 7,362 | 7,003 | ||||
| Loss/(gain) on disposal of PP&E | 586 | 226 | 22 | (11 | ) | |||
| (Gain)/loss on foreign exchange | (121 | ) | (195 | ) | 510 | (32 | ) | |
| Non-controlling interest | - | - | 22 | (187 | ) | |||
| Current income tax expense/(recovery) | 216 | (13 | ) | 788 | (104 | ) | ||
| Deferred income tax expense/(recovery) | 345 | (3,804 | ) | (528 | ) | 748 | ||
| Interest expense | 714 | 739 | 854 | 638 | ||||
| Finance fees | 72 | 66 | 63 | 58 | ||||
| EBITDA | 10,659 | 7,675 | 12,030 | 10,885 | ||||
| Communications operating loss | - | 679 | 610 | 556 | ||||
| EBITDA (Adjusted) | 10,659 | 8,354 | 12,640 | 11,441 | ||||
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
Certain statements and information contained in this press release constitute forward-looking statements. More particularly, this press release contains forward-looking statements concerning an increase in dividend to be paid by Strad, future capital expenditures of the Company, changes in margin to be experienced by Strad, debt, dividends, demand for the Company's products and services, drilling activity in North America, pricing of the Company's products and services, introduction of new products and services, manufacturing capacity to meet anticipated demand for the Company's products, and expected exploration and production industry activity including the effects of industry trends on demand for the Company's products. These statements relate to future events or to the Company's future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.
The use of any of the words "expect", "plan", "continue", "estimate", "anticipate", "potential", "targeting", "intend", "could", "might", "should", "believe", "may", "predict", or "will" and similar expressions are intended to identify forward-looking information or statements. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this press release. The forward-looking information and statements included in this press release are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements. These factors include, but are not limited to, such things as the impact of general industry conditions, fluctuation of commodity prices, industry competition, availability of qualified personnel and management, stock market volatility and timely and cost effective access to sufficient capital from internal and external sources. The risks outlined above should not be construed as exhaustive. Although management of the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Accordingly, readers should not place undue reliance upon any of the forward-looking information set out in this press release. All of the forward-looking statements of the Company contained in this press release are expressly qualified, in their entirety, by this cautionary statement. The various risks to which the Company is exposed are described in this press release under the heading "Risk Factors" above and in additional detail in the Company's Annual Information Form ("AIF"). Except as required by law, the Company disclaims any intention or obligation to update or revise any forward-looking information or statements, whether the result of new information, future events or otherwise.
This press release shall not constitute an offer to sell, nor the solicitation of an offer to buy, any securities in the United States, nor shall there be any sale of securities mentioned in this press release in any state in the United States in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
FIRST QUARTER EARNINGS CONFERENCE CALL
Strad Energy Services Ltd. has scheduled a conference call to begin promptly at 8:00 a.m. MT (10:00 am. ET) on Thursday, May 8, 2014.
The conference call dial in number is 1-866-225-0198
The conference call will also be accessible via webcast at www.stradenergy.com
A replay of the call will be available approximately one hour after the conference call ends until Thursday May 8th, 2014, at 11:59pm ET. To access the replay, call 1-800-408-3053, followed by pass code 2485731.
| Strad Energy Services Ltd. |
| Interim Consolidated Statement of Financial Position |
| (Unaudited) |
| (in thousands of Canadian dollars) | As at March 31, 2014 | As at December 31, 2013 | ||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Trade receivables | 46,984 | 35,569 | ||
| Inventories | 5,746 | 5,788 | ||
| Prepaids and deposits | 1,693 | 1,772 | ||
| Note receivable | 264 | 350 | ||
| Income taxes receivable | - | 40 | ||
| 54,687 | 43,519 | |||
| Assets held for sale | 3,156 | 3,167 | ||
| Non-current assets | ||||
| Property, plant and equipment | 147,200 | 142,108 | ||
| Intangible assets | 1,546 | 1,685 | ||
| Goodwill | 17,277 | 17,277 | ||
| Deferred income tax assets | 144 | 164 | ||
| Total assets | 224,010 | 207,920 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 4,448 | 1,879 | ||
| Accounts payable and accrued liabilities | 33,075 | 25,403 | ||
| Income taxes payable | 638 | - | ||
| Deferred revenue | 2,377 | 785 | ||
| Current portion of obligations under finance lease | 1,274 | 1,887 | ||
| Dividend payable | 2,050 | 2,050 | ||
| 43,862 | 32,004 | |||
| Non-current liabilities | ||||
| Long-term debt | 38,400 | 38,500 | ||
| Obligations under finance lease | 882 | 770 | ||
| Deferred income tax liabilities | 8,795 | 7,797 | ||
| Total liabilities | 91,939 | 79,071 | ||
| Equity | ||||
| Share capital | 117,832 | 117,824 | ||
| Contributed surplus | 11,693 | 11,612 | ||
| Accumulated other comprehensive income | 1,645 | 603 | ||
| Retained earnings (deficit) | 901 | (1,190 | ) | |
| Total equity | 132,071 | 128,849 | ||
| Total liabilities and equity | 224,010 | 207,920 |
| Strad Energy Services Ltd. |
| Interim Consolidated Statement of Income and Comprehensive Income |
| For the three months ended March 31, 2014 and 2013 |
| (Unaudited) |
| (in thousands of Canadian dollars, except per share amounts) |
| 2014 | 2013 | |||
| $ | $ | |||
| Revenue | 51,888 | 44,723 | ||
| Expenses | ||||
| Operating expenses | 35,206 | 28,727 | ||
| Depreciation | 5,301 | 7,187 | ||
| Amortization of intangible assets | 186 | 439 | ||
| Selling, general and administration | 5,556 | 5,149 | ||
| Share-based payments | 138 | 188 | ||
| (Gain) loss on disposal of property, plant and equipment | (758 | ) | 586 | |
| Foreign exchange gain | (67 | ) | (121 | ) |
| Finance fees | 88 | 72 | ||
| Interest expense | 535 | 714 | ||
| Loss on assets held for sale | 38 | 158 | ||
| Income before income tax | 5,665 | 1,624 | ||
| Income tax expense | 1,524 | 561 | ||
| Net income for the period | 4,141 | 1,063 | ||
| Other comprehensive income | ||||
| Items that may be reclassified subsequently to net income | ||||
| Cumulative translation adjustment | 1,042 | 608 | ||
| Comprehensive income for the period | 5,183 | 1,671 | ||
| Earnings per share: | ||||
| Basic | $0.11 | $0.03 | ||
| Diluted | $0.11 | $0.03 | ||
| Strad Energy Services Ltd. |
| Interim Consolidated Statement of Cash Flow |
| For the three months ended March 31, 2014 and 2013 |
| (Unaudited) |
| (in thousands of Canadian dollars) | ||||
| 2014 | 2013 | |||
| Cash flow provided by (used in) | $ | $ | ||
| Operating activities | ||||
| Net income for the period | 4,141 | 1,063 | ||
| Adjustments for items not affecting cash: | ||||
| Depreciation and amortization | 5,487 | 7,626 | ||
| Deferred income tax expense | 864 | 345 | ||
| Share-based payments (net of cash settlements on share option exercises) | 84 | 158 | ||
| Interest expense and finance fees | 623 | 786 | ||
| (Gain) loss on disposal of property, plant and equipment | (758 | ) | 586 | |
| Loss on assets held for sale | 38 | 158 | ||
| Changes in items of non-cash working capital | (1,483 | ) | (4,439 | ) |
| Net cash generated from operating activities | 8,996 | 6,283 | ||
| Investing activities | ||||
| Purchase of property, plant and equipment | (8,377 | ) | (2,302 | ) |
| Proceeds from sale of property, plant and equipment | 1,717 | 695 | ||
| Purchase of intangible assets | (28 | ) | (363 | ) |
| Proceeds from assets held for sale | 81 | 1,802 | ||
| Changes in items of non-cash working capital | (129 | ) | (2,433 | ) |
| Net cash used in investing activities | (6,736 | ) | (2,601 | ) |
| Financing activities | ||||
| Proceeds on issuance of long-term debt | - | 2,000 | ||
| Repayment of long-term debt | (100 | ) | (2,000 | ) |
| Repayment of finance lease obligations (net) | (501 | ) | (536 | ) |
| Interest expense and finance fees | (623 | ) | (786 | ) |
| Payment of dividends | (2,050 | ) | (2,048 | ) |
| Changes in items of non-cash working capital | 346 | - | ||
| Net cash used in financing activities | (2,928 | ) | (3,370 | ) |
| Effect of exchange rate changes on cash and cash equivalents | (1,901 | ) | (990 | ) |
| Decrease in cash and cash equivalents | (2,569 | ) | (678 | ) |
| Cash and cash equivalents (bank indebtedness) - beginning of year | (1,879 | ) | (2,488 | ) |
| Cash and cash equivalents (bank indebtedness) - end of period | (4,448 | ) | (3,166 | ) |
| Cash paid for income tax | - | 235 | ||
| Cash paid for interest | 516 | 674 |
ABOUT STRAD ENERGY SERVICES LTD.
Strad is a North American energy services company that focuses on providing well-site infrastructure solutions to the oil and natural gas industry. Strad focuses on providing complete customer solutions in well-site-related oilfield equipment for producers active in unconventional resource plays.
Strad is headquartered in Calgary, Alberta, Canada. Strad is listed on the Toronto Stock Exchange under the trading symbol "SDY".
Contact Information:
Andy Pernal
President and Chief Executive Officer
(403) 775-9202
(403) 232-6901 (FAX)
apernal@stradenergy.com
Strad Energy Services Ltd.
Greg Duerr
Chief Financial Officer
(403) 705-4333
(403) 232-6901 (FAX)
gduerr@stradenergy.com
www.stradenergy.com