Wilmington Capital Management Inc.
TSX : WCM.A
TSX : WCM.B

Wilmington Capital Management Inc.

November 12, 2014 18:00 ET

Wilmington Announces 2014 Third Quarter Results

TORONTO, ONTARIO--(Marketwired - Nov. 12, 2014) - Wilmington Capital Management Inc. ("Wilmington" or the "Corporation") (TSX:WCM.A)(TSX:WCM.B) reported net income attributable to shareholders for the three months ended September 30, 2014 of $265,000 or $0.03 per share compared to a net loss of $2.0 million or $(0.23) per share for the same period in 2013. For the nine months ended September 30, 2014, the Corporation generated net income attributable to shareholders of $247,000 or $0.03 per share compared to a net loss of $2.3 million or ($0.27) per share for the same period in 2013.

To view a full copy of the Corporation's unaudited condensed interim financial results for the period ended September 30, 2014 including the Corporation's unaudited condensed interim consolidated financial statements and accompanying Management Discussion and Analysis ("MD&A"), please refer to SEDAR's website at www.sedar.com.

THIRD QUARTER 2014 FINANCIAL HIGHLIGHTS

During the third quarter 2014, the Corporation continued to focus on executing the strategic plans approved in early 2014 for each of its three operating platforms - self-storage facilities, private equity funds and natural gas assets. The principal focus continues to be centered on adding scale to each of the operating platforms. Highlights for the third quarter 2014 were as follows:

  • NCMI closed a $15.8 million fund ("Fund 16"), which is the 16th fund since inception. Assets under management now stand at approximately $65 million;
  • Received a distribution of $562,000 from Network 2012 Fund arising from the disposition of an underlying investment in the fund;
  • Recorded an unrealized gain of $814,000 in respect of investments held in the Network 2012 Fund;
  • Generated an operating netback of $1.96 per mcf from the Shackleton Partnership up from $1.41 per mcf for the comparable quarter in 2013;
  • Recorded funds flow from operations in the Trust of $401,000, compared to $349,000 for the comparable quarter in 2013. The Trust continues to show year over year improvements in occupancy levels and rents realized in its property portfolio; and
  • Received a distribution of $75,000 from the Trust representing the Corporation's share of a 3% per annum distribution on invested capital which is paid quarterly.

As at September 30, 2014, Wilmington had assets under management in its operating platforms of approximately $173 million ($59 million representing Wilmington's share).

STRATEGIC PLAN

Wilmington continues to advance its principal objectives of making investments capable of generating appreciation in value as opposed to current income and to maximize shareholder returns by investing its own capital alongside partners and co-investors in hard assets and private equity funds. These assets are managed through the Corporation's operating platforms where Wilmington can add scale and improve valuations.

OPERATIONS REVIEW

Self-Storage Facilities

Real Storage Private Trust ("Trust")

The Trust (42% owned) owns 20 self-storage facilities comprising 791,350 square feet of rentable area and one development property. The Trust recorded significant period over period improvements in 2014 as the facilities in Western Canada, which were for the most part in the initial lease up stage in 2013, achieved stabilized occupancy levels. In addition, the Trust completed the expansion of a facility in Eastern Canada, adding 4,350 square feet of rentable area. During the third quarter of 2014, same store occupancy levels averaged 86% compared to 85% in 2013; same store operating margins improved to 63% in the third quarter of 2014 from 60% in the comparable quarter of 2013.

During the third quarter 2013, the Trust commenced quarterly distributions to its unit holders equivalent to 3% per annum on invested capital. For the nine months ended September 30, 2014, the Trust declared distributions of $605,000 (Corporation's share - $225,000).

Private Equity

Network Capital Management Inc. ("NCMI") and Network 2012 Fund

NCMI (50% owned) has funds under management totaling approximately $64.7 million. The underlying investments in each of the various funds consist of a strong mix of junior oil and gas and service companies. The Corporation invested $8.0 million of capital in the Network 2012 Fund and has received cumulative distributions of $1.7 million to date. During third quarter of 2014, NCMI closed a new fund with capital subscriptions totaling $15.8 million, which represents the 16th fund raised by NCMI since its inception in 1997.

Natural Gas Assets

Shackleton 2011 Limited Partnership (the "Shackleton Partnership")

The Shackleton Partnership (59% owned) owns a 100% interest in natural gas wells in Southwestern Saskatchewan. The Shackleton Partnership's natural gas production amounted to 563 boe per day for the third quarter of 2014 and 585 boe per day for the nine months ended September 30, 2014. For the three and nine months ended September 30, 2013, production was 690 boe per day and 712 boe per day respectively. The weighted average price realized during the third quarter of 2014 was $3.72 per mcf and operating netbacks averaged $1.96 per mcf (realized price of $2.84 per mcf and netbacks of $1.41 per mcf for the comparable period in 2013). Of its 2014 production, approximately 50% has been hedged under fixed price contracts with an average price of $3.61 per GJ.

Given the improved natural gas pricing environment, the Shackleton Partnership is focused on production optimization through well work overs and other optimization programs.

Northpoint Resources Ltd. ("Northpoint")

On July 30, 2013, the Corporation added to its natural gas platform by acquiring a 36.5% ownership interest in Northpoint, a privately held oil and gas producer with assets in the Altares region of Northeastern British Columbia. In addition and as part of an overall recapitalization plan, the Corporation acquired $798,000 of a 10%, $5.0 million debenture issue by Northpoint which matures on August 1, 2017. On June 23, 2014, the Corporation invested an additional $0.5 million in flow-through shares of Northpoint, thereby, increasing its ownership to 38.6% and bringing its total equity investment in Northpoint to approximately $2.3 million.

Northpoint's average production for the three and nine months ended September 30, 2014 of 1,249 boe per day and 1,274 boe per day respectively. During the period ended September 30, 2014, Northpoint drilled its second horizontal well within the Gething reservoir; however, technical difficulties were encountered. The well reached a partial horizontal length of 290 meters versus a planned lateral of 1,350 meters and is currently producing 83 boe per day.

Outlook

The Corporation believes that the foundation for achieving future growth through the self-storage and private equity platforms is largely in place. The Corporation's goal of scaling its interest in natural gas assets currently held through the Shackleton Partnership and Northpoint to the equivalent of 4,000 boe per day is largely dependent on natural gas prices and the success of drilling activities. The Shackleton Partnership and Northpoint combined have production of approximately 1,850 boe per day (Corporation's share - 810 boe per day). In the years ahead, the Corporation expects to continue to add scale to these operating platforms, improve valuations and realize attractive cash flow and total returns for shareholders.

FINANCIAL RESULTS

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME

(unaudited) (unaudited)
For the three months ended For the nine months ended
September 30, September 30,
(CDN $ Thousands, except per share amounts) 2014 2013 2014 2013
Revenue
Natural gas sales 1,156 1,083 3,834 3,640
Royalties (206 ) (163 ) (804 ) (581 )
Natural gas revenue 950 920 3,030 3,059
Investment and other income 46 25 145 214
996 945 3,175 3,273
Expenses
Petroleum operations 340 385 1,072 1,077
General and administrative 276 344 864 999
Depletion, depreciation and amortization 335 378 1,027 1,123
Stock-based compensation 26 33 83 125
Foreign exchange (gain) loss --- (18 ) --- 99
Finance costs 72 71 190 238
1,049 1,193 3,236 3,661
Loss before share of equity accounted investments and income taxes (53 ) (248 ) (61 ) (388 )
Share of net income from Real Storage Private Trust 259 201 547 268
Share of net income (loss) from Network Capital Management Inc. 86 (5 ) 105 (59 )
Loss on revaluation of investment Network Capital Management Inc. --- (1,584 ) --- (1,584 )
Share of net loss from Network 2012 Fund (147 ) (37 ) (182 ) (114 )
Share of net income (loss) from Northpoint Resources Ltd. 102 (240 ) (5 ) (240 )
Income (loss) before income taxes from continuing operations 247 (1,913 ) 404 (2,117 )
Income tax recovery (60 ) (119 ) (29 ) (89 )
Net income (loss) from continuing operations 307 (1,794 ) 433 (2,028 )
Income from discontinued operations, net of tax --- 2,355 --- 2,579
Net income 307 561 433 551
Net income attributable to:
Owners of the Corporation 265 358 247 260
Non-controlling interest 42 203 186 291
307 561 433 551
Net income (loss) per share from continuing operations
Basic
Diluted 0.03 (0.23 ) 0.03 (0.27 )
0.03 (0.23 ) 0.03 (0.27 )
Net income per share
Basic 0.03 0.04 0.03 0.03
Diluted 0.03 0.04 0.03 0.03

CONDENSED INTERIM CONSOLIDATED BALANCE SHEET

(unaudited) (audited)
As at September 30, December 31,
(CDN $ Thousands) 2014 2013
Assets
Non-current assets
Investment in Real Storage Private Trust 10,401 10,079
Investment in Network Capital Management Inc. 172 67
Investment in Network 2012 Fund 9,991 8,341
Investment in Northpoint Resources Ltd. 2,294 1,819
Northpoint Debenture 798 798
Natural gas property, plant and equipment 15,696 16,597
39,352 37,701
Current assets
Loan to Network Capital Management Inc. 25 25
Income tax receivable 425 299
Receivables and other assets 804 1,451
Cash and cash equivalents 1,810 730
3,064 2,505
Total assets 42,416 40,206
Liabilities
Non-current liabilities
Decommissioning liabilities 831 792
Deferred tax liabilities 506 65
1,337 857
Current liabilities
Accounts payable and accrued liabilities 905 991
Revolving Loan Facility 4,200 5,200
5,105 6,191
Total liabilities 6,442 7,048
Equity
Shareholders' equity 31,683 29,053
Non-controlling interest 4,291 4,105
Total equity 35,974 33,158
Total liabilities and equity 42,416 40,206

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited) (unaudited)
For the three months ended For the nine months ended
September 30, September 30,
(CDN $ Thousands) 2014 2013 2014 2013
Net income 307 561 433 551
Items that may subsequently be reclassified to net income (loss) from continuing operations
Share of other comprehensive income from Network 2012 Fund 814 257 2,644 435
Deferred income tax expense on above items 106 44 344 67
Other comprehensive income from continuing operations 708 213 2,300 368
Items that may subsequently be reclassified to net income discontinued operations
Other comprehensive income from discontinued operations, net of tax --- (50 ) --- (14 )
Total other comprehensive income 708 163 2,300 354
Comprehensive income 1,015 724 2,733 905
Comprehensive income attributable to:
Owners of the Corporation 973 521 2,547 614
Non-controlling interest 42 203 186 291
1,015 724 2,733 905

This news release contains forward-looking statements concerning the Corporation's business and operations. The Corporation cautions that, by their nature, forward-looking statements involve risk and uncertainty and the Corporation's actual results could differ materially from those expressed or implied in such statements. Reference should be made to the most recent Annual Information Form for a description of the major risk factors.

Contact Information

  • Wilmington Capital Management Inc.
    Executive Officers
    (403) 800-0869