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

Wilmington Capital Management Inc.

August 09, 2016 16:00 ET

Wilmington Announces 2016 Second Quarter Results

TORONTO, ONTARIO--(Marketwired - Aug. 9, 2016) - Wilmington Capital Management Inc. (TSX:WCM.A)(TSX:WCM.B) ("Wilmington" or the "Corporation") reported a net loss attributable to shareholders for the three months ended June 30, 2016 of $0.3 million or ($0.02) per share compared to net income of $0.8 million or $0.09 per share for the same period in 2015. For the six months ended June 30, 2016, the Corporation generated a net loss attributable to shareholders of $0.7 million or ($0.07) per share compared to net income of $0.5 million or $0.06 per share for the same period in 2015.

To view a full copy of the Corporation's interim financial results for the three and six months ended June 30, 2016 including the Corporation's unaudited interim Consolidated Financial Statements and accompanying Management Discussion and Analysis ("MD&A"), please refer to SEDAR's website at www.sedar.com.

SECOND QUARTER 2016 FINANCIAL HIGHLIGHTS

The financial highlights of the Corporation and those of its associated and controlled entities are set out below. Investments in associated and controlled entities account for the majority of the Corporation's financial results and are accounted for on a consolidated basis or using the equity method of accounting.

Self-storage facilities

  • Real Storage Private Trust (42.5% owned - the "Trust") generated net operating income of $1.9 million for the three months ended June 30, 2016, a 5% increase from the comparable period in 2015. The Trust reported declines in occupancy levels and operating margins from certain facilities in Alberta given the severe downturn in the energy sector but the impact was mitigated by higher rents and continued strong performance in the Ontario portfolio.
  • In June 2016, the Trust's self-storage facility in Fort McMurray, Alberta re-opened after a fire forced the evacuation of residents and the closure of businesses. Damage sustained to the facility has been remediated and the Trust has filed a claim with its insurance provider for forgone revenues during the period the facility was unable to service its customers.
  • In June 2016, the Trust acquired a facility in Ontario for total consideration of $3.9 million.
  • The Trust paid a quarterly distribution of $0.4 million (Q2 2015 - $0.2 million) to unit holders in the period, representing the equivalent of 4% of invested capital per annum.

Private equity

  • During the second quarter 2016, the Corporation completed the acquisition of an additional 50% interest in Network Capital Management Inc. ("NCMI"). The incremental interest was purchased for total consideration of $186,000, which increased the Corporation's ownership to 100%. The transaction resulted in the acquisition of control of NCMI by the Corporation. In June 2016, NCMI's name was changed to Northbridge Capital Partners Ltd. ("Northbridge").

Natural gas assets

  • Shackleton 2011 Limited Partnership's (59% owned - "Shackleton Partnership") production decreased approximately 7% for the six months ended June 30, 2016 as compared to 11% the same period in 2015.
  • Northpoint's gas production was dependent on Station 2 natural gas pricing which reached record lows in the spring of 2016 due to the combination of oversupply, pipeline constraints and the Fort McMurray, Alberta fire. As a result of the significant impairment to its liquidity, Northpoint filed for bankruptcy on May 30, 2016 and an order was granted by the Court of Queen's Bench of Alberta, Judicial Centre of Calgary. A Receiver has been appointed to facilitate the divesture of the oil and natural gas properties held by Northpoint.

As at June 30, 2016, Wilmington had assets under management ("AUM") in its operating platforms of approximately $149 million ($60 million representing Wilmington's share).

OPERATIONS REVIEW

Self - Storage Facilities
Real Storage Private Trust

For the six months ended June 30, 2016, occupancy levels declined due to higher vacancies in certain Alberta based facilities given the severe downturn in the energy sector as well as the 33 day closure of the facility in Fort McMurray, Alberta due to the wildfires and highway construction limiting access to the facility in Sherwood Park, Alberta. Leasing activity has improved since late spring and occupancy levels are expected to rise through to the remainder of the year.

Private Equity
Northbridge Capital Partners Ltd. and Network 2012 Limited Partnership

Northbridge (100% owned) assets under management amounted to approximately $22.7 million as at June 30, 2016, a decrease of $6.8 million from December 31, 2015. The decrease was in part due to $4.2 million in distributions paid in the period to fund participants, the result of the divesture of underlying investments in certain funds and lower valuations attributed to the underlying investments remaining in the funds given the continued depression of oil and natural gas commodity prices. Northbridge is focused on deploying capital raised in its most recent fund, Fund 16, which closed in the fall of 2014 and has $7.6 million of undeployed capital.

During the second quarter, Wilmington entered into a memorandum of understanding whereby Network Capital Management Inc. changed its name to be Northbridge Capital Partners Ltd. and the ownership of Northbridge would be realigned through the issuance of treasury shares. The proposed transaction is expected to close no later than early September and will result in Northbridge's shareholdings being owned as to 40% by each of Wilmington and a strategic partner specializing in the oil and gas industry and the remaining 20% by Northbridge's management. Northbridge's mandate will be expanded to include real estate investments. The new ownership will transform Northbridge into a unique platform with expertise in both the oil and gas and real estate sectors.

Natural Gas Assets
Shackleton 2011 Limited Partnership

The Shackleton Partnership owns and operates a 100% interest in natural gas assets in Southwestern Saskatchewan. Production during the second quarter 2016 declined 7% compared to the same period in 2015 to 497 boe/d due to natural production decline. Shackleton Partnership realized a netback of ($0.05) per mcf in Q2 2016, a decrease of $1.11 per mcf from Q2 2015 due to a 45% decline in realized natural gas prices.

Subsequent to the period ended June 30, 2016, the lender advised the Shackleton Partnership that the amount available under the Revolving Loan will be reduced to a level yet to be determined by the lender. Such reduction absent a favorable renegotiation with the lender will severely impact the Shackleton Partnership's liquidity.

Northpoint Resources Ltd.

Northpoint is a privately held natural gas producer with assets in the Altares region of Northeastern British Columbia. Northpoint filed for receivership on May 30, 2016 and all production has been shut-in while the court appointed receiver is in the process of selling the assets held by Northpoint and Wilmington is closely monitoring the process to see what, if any, value can be salvaged.

Outlook
The last 18 months have weighed heavily on companies invested in the oil and gas industry, particularly those dependent on natural gas pricing. Wilmington believes the energy sector is entering into the first phase of rebalancing and early indications are improvements seen in the leasing performance of the Corporation's western based storage facilities. The eastern based facilities continue to perform well and provide good diversification. The added skill sets brought to the realigned ownership and management of Wilmington's private equity platform positions the Corporation exceptionally well, as the oil and gas and real estate sectors in Alberta move into the recovery phase. Wilmington is optimistic in the opportunities and growth that will unfold in the year ahead.

FINANCIAL RESULTS
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (unaudited)

For the three months ended June 30, six months ended June 30,
(CDN $ Thousands, except per share amounts) 2016 2015 2016 2015
Revenue
Natural gas sales 397 786 904 1,553
Royalties (56 ) (121 ) (135 ) (244 )
Natural gas revenue 341 665 769 1,309
Investment and other income 92 50 127 100
433 715 896 1,409
Expenses
Petroleum operations 355 357 688 744
General and administrative 422 304 726 612
Depletion, depreciation and amortization 169 230 338 452
Stock-based compensation 53 10 106 20
Finance costs 56 58 112 118
1,055 959 1,970 1,946
Loss before share of equity accounted investments and income tax (622 ) (244 ) (1,074 ) (537 )
Share of net income from Real Storage Private Trust 48 278 103 493
Loss on ownership change in Real Storage Private Trust --- --- --- (83 )
Share of net income (loss) from Northbridge Capital Partners Ltd. (21 ) 110 (53 ) 127
Gain on ownership change in Northbridge Capital Partners Ltd. 118 --- 118 ---
Share of net income from Network 2012 Limited Partnership 132 1,154 54 1,104
Share of net loss from Northpoint Resources Ltd. --- (382 ) --- (583 )
Income (loss) before income tax (345 ) 916 (852 ) 521
Income tax expense 49 145 97 74
Net income (loss) (394 ) 771 (949 ) 447
Net income (loss) attributable to:
Owners of the Corporation (271 ) 801 (738 ) 522
Non-controlling interest (123 ) (30 ) (211 ) (75 )
(394 ) 771 (949 ) 447
Net income (loss) per share:
Basic (0.02 ) 0.09 (0.07 ) 0.06
Diluted (0.02 ) 0.09 (0.07 ) 0.06

CONSOLIDATED BALANCE SHEETS (unaudited)

As at June 30, December 31,
(CDN $ Thousands) 2016 2015
Assets
Non-current assets
Investment in Real Storage Private Trust 15,899 16,107
Investment in Northbridge Capital Partners Ltd. --- 257
Investment in Network 2012 Limited Partnership 2,900 3,315
Natural gas property, plant and equipment 5,415 5,752
Deferred income tax assets 559 622
24,773 26,053
Current assets
Accounts receivables and other assets 922 1,057
Cash 4,074 3,993
4,996 5,050
Total assets 29,769 31,103
Liabilities
Non-current liabilities
Decommissioning liabilities 1,105 1,074
1,105 1,074
Current liabilities
Accounts payable and accrued liabilities 875 861
Revolving loan facility 4,050 4,350
4,925 5,211
Total liabilities 6,030 6,285
Equity
Shareholders' equity 23,599 24,467
Non-controlling interest 140 351
Total equity 23,739 24,818
Total liabilities and equity 29,769 31,103

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)

For the three months ended June 30, six months ended June 30,
(CDN $ Thousands) 2016 2015 2016 2015
Net income (loss) (394 ) 771 (949 ) 447
Items that may be reclassified to net income (loss)
Share of other comprehensive loss from Network 2012 Fund (110 ) (2,164 ) (273 ) (2,229 )
Deferred income tax recovery (15 ) (281 ) (37 ) (289 )
Other comprehensive loss (95 ) (1,883 ) (236 ) (1,940 )
Comprehensive loss (489 ) (1,112 ) (1,185 ) (1,493 )
Comprehensive loss attributable to:
Owners of the Corporation (366 ) (1,082 ) (990 ) (1,418 )
Non-controlling interest (123 ) (30 ) (211 ) (75 )
(489 ) (1,112 ) (1,201 ) (1,493 )

Executive Officers of the Corporation will be available at 403-705-8038 to answer any questions on the Corporation's financial results.

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this news release may constitute forward-looking statements or information under applicable securities legislation. Forward-looking statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding the operations, business, financial conditions, expected financial results, performance, opportunities, priorities, ongoing objectives, strategies and outlook of the Corporation and its investee entities and contain words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar expressions and statements relating to matters that are not historical facts constitute "forward-looking information" within the meaning of applicable Canadian securities legislation.

While the Corporation believes the anticipated future results, performance or achievements reflected or implied in those forward-looking statements are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond the Corporation's control, which may cause the actual results, performance and achievements of the Corporation to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

These risks and uncertainties include but are not limited to: the ability of management of Wilmington and its investee entities to execute its and their business plans; health, safety and environmental risks; uncertainties as to the availability and cost of financing; general economic and business conditions; the possibility that government policies or laws may change or governmental or regulatory approvals may be delayed or withheld; risks associated with existing and potential future law suits and regulatory actions against Wilmington; and other risks and uncertainties described in Wilmington's filings with Canadian securities regulatory authorities.

The foregoing list of important factors that may affect future results is not exhaustive. When relying on the forward-looking statements, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, the Corporation undertakes no obligation to publicly update or revise any forward-looking statements or information, that may be as a result of new information, future events or otherwise. These forward-looking statements are effective only as of the date of this document.

This new release contains natural gas volumes which have been converted on the basis of six thousand cubic feet of natural gas to one barrel of oil equivalent. Barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Contact Information

  • Wilmington Capital Management Inc.
    Executive Officers
    403-705-8038