CWC Energy Services Corp. Announces Fourth Quarter and Year End 2014 Financial Results
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 03/09/15 -- (TSX VENTURE: CWC) CWC Energy Services Corp. ("CWC" or the "Company") announces the release of its financial and operational results for the fourth quarter and year ended December 31, 2014 and a reduction in its quarterly dividend to $0.005 per common share ($0.02 per common share annually) to shareholders of record on March 31, 2015. The annual audited Financial Statements and Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2014 are filed on SEDAR at .
Highlights for the Three Months Ended December 31, 2014
Highlights for the Year Ended December 31, 2014
Financial and Operational Highlights
Operational Overview
Contract Drilling
Ironhand was acquired on May 15, 2014 and renamed CWC Ironhand Drilling representing our Contract Drilling segment. Our Contract Drilling segment has a fleet of nine telescopic double drilling rigs with depth ratings from 3,200 to 4,500 metres, eight of nine rigs have top drives and the rig fleet has an average age of five years. All of the drilling rigs are well suited for the most active depths for horizontal drilling in the WCSB, including the Montney, Duvernay, Cardium and other deep basin horizons.
CWC achieved industry leading utilization of 84% in Q4 2014 compared to the CAODC industry average of 45%. Such utilization and the addition of Rig #9 in late September 2014 resulted in record revenue of $20.3 million for Q4 2014. For the 7.5 months ended December 31, 2014, the Contract Drilling segment achieved utilization of 70% compared to the CAODC industry average of 42% for the same period and 45% for the year ended 2014, resulting in year ended revenue of $38.8 million. CWC began construction of Rig #10 in Q4 2014, a new telescopic double drilling rig with a depth capacity of 4,500 meters, which was expected to be put into service in Q3 2015. Due to the swift and dramatic decrease in oil prices and reduced drilling activity levels in 2015, CWC has decided to defer the continuation of building Rig #10 to beyond 2015 when management can reassess whether industry demand and conditions have improved.
Production Services
CWC is the fifth largest service rig provider in the WCSB, having a modern fleet of 72 service rigs as at December 31, 2014. The Company's service rig fleet consists of 41 singles, 27 doubles, and 4 slant rigs. The average age of CWC's service rig fleet is approximately seven years, making CWC's fleet amongst the newest in the WCSB. Rig services include completions, maintenance, workovers and abandonments with depth ratings from 1,500 to 5,000 metres.
CWC's Class I, II and III coil tubing units have depth ratings from 1,500 to 4,000 metres. As at December 31, 2014, the Company's fleet of nine coil tubing units consist of five Class I, three Class II and one Class III coil tubing units. The market for the Class III deep coil tubing unit has become extremely competitive with an increased supply of new deep coil tubing units over the last several years having an adverse affect on industry utilization and pricing. In light of these competitive challenges for CWC's one Class III coil tubing unit, the Company has chosen to focus its sales and operational efforts on its eight Class I and II coil tubing units which are better suited at servicing steam-assisted gravity drainage ("SAGD") wells, which are shallower in depth and more appropriate for these coil tubing units.
Service rig hours and utilization decreased in Q4 2014 to 45% compared to Q4 2013 of 52% as a result of the continuation from Q3 2014 of reduced activity levels with several of CWC's largest E&P customers. This reduced activity along with the sale of its snubbing assets and business in September 2014 (Q4 2013 revenue of $1.9 million with no corresponding revenue in Q4 2014) resulted in revenue of $25.7 million in Q4 2014 compared to $31.5 million in Q4 2013, a decrease of $5.8 million. For the year ended 2014, Production Services revenue was $104.8 million compared to 2013 of $113.3 million, a decrease of $8.5 million. CWC continued its efforts to more broadly diversify its customer base in Q4 2014 such that reduced activity levels from any large customers would have less of an impact on overall revenue and cash flow in the future. The Company put one new slant service rig (Rig #504) into service during Q4 2014 and has targeted heavy oil and SAGD wells for this new rig. Q4 2014 also saw the construction of two more slant service rigs. Rig #505 was delivered in January 2015 while Rig #506 is expected to be delivered Q2 2015. The addition of these two new slant service rigs will help CWC establish a greater market presence with a total of six slant service rigs capable of servicing the growing number of heavy oil and SAGD wells.
Coil tubing hours and utilization increased in Q4 2014 to 32% compared to Q4 2013 of 29% as a result of the continued focus on SAGD wells with CWC's Class I and II coil tubing units. For the year ended December 31, 2014, hours and utilization increased to 37% compared to 2013 of 28%. In August 2014, CWC purchased two Class I coil tubing units to increase our ability to service E&P customers with SAGD wells. The drop in average revenue per hour in Q4 2014 of $825 and year end 2014 of $894 compared to Q4 2013 of $1,129 and year end 2013 of $1,171 is a direct result of the lower hourly rate charged on Class I and II units compared to the Class III unit. CWC had two Class III coil tubing units for all of 2013 contributing to the higher average hourly rate compared to only one Class III coil tubing unit for much of 2014, as CWC sold one of its two Class III units in April 2014.
Capital Expenditures
In December 2014, the Board of Directors approved a 2015 capital expenditure budget of $14.6 million consisting of $9.1 million of growth capital and $5.5 million of maintenance and infrastructure capital. The growth capital of $9.1 million is primarily directed at completing two new slant service rigs and supporting equipment to expand our growth in heavy oil and SAGD wells with delivery expected in Q1 2015; upgrading of drilling Rig #2 to expand its capabilities to depths of 4,500 metres with completion expected in Q3 2015; and continuing the build of our new telescopic double drilling Rig #10 at a slower pace than previously announced with a completion date beyond Q4 2015. Maintenance capital of $5.5 million will primarily be directed at drilling rig recertification costs and upgrades or additions to field equipment for the service rig and coil tubing divisions and information technology infrastructure. CWC intends to finance its 2015 capital expenditure budget from operating cash flows.
In light of the continuing decrease in oil prices since the announcement of the 2015 capital expenditure budget in December 2014, the Board of Directors has reduced the 2015 capital expenditure budget by $3.8 million. $3.0 million will be reduced from growth capital as upgrades to drilling Rig #2 will be put on hold until industry and activity levels improve. The remaining $0.8 million will be reduced from maintenance and infrastructure capital as additions to field equipment for the drilling rig and service rig divisions will be postponed. The revised 2015 capital expenditure budget will now be $10.8 million comprised of $6.1 million of growth capital and $4.7 million of maintenance and infrastructure capital.
Quarterly Dividend
Due to the reduced activity levels, cash flow and earnings expected in 2015, and to preserve the Company's financial flexibility in this environment, the Company has reduced the quarterly dividend declared from $0.0175 per common share to $0.005 per common share, a decrease of 71%. The dividend will be paid on or about April 15, 2015 to shareholders of record on March 31, 2015. The ex-dividend date is March 27, 2015. This dividend is an eligible dividend for Canadian income tax purposes. The declaration of dividends is determined on a quarter by quarter basis by the Board of Directors and is based on the sustainability of its cash flows and earnings in the future.
Outlook
The continuing volatility of commodity prices has resulted in significant reductions to the capital and operating budgets of our E&P customers. The first two months of 2015 has seen revenue decrease in both the Contract Drilling and Production Services segments by approximately 40% compared to the first two months of 2014 as a result of lower activity levels and rate reductions as well as an unusually warm winter affecting our ability to move equipment to the well site. CWC expects an earlier than normal start to, and a prolonged spring breakup as our E&P customers choose to end their drilling, completions and production maintenance programs to conserve their cash resources until commodity prices recover. Activity levels throughout the oilfield services industry for the remainder of 2015 are expected to be significantly lower as compared to 2014, resulting in utilization and rate reductions across all business segments. On January 22, 2015, the CAODC revised its drilling rig industry utilization to 26% for 2015 compared to 45% in 2014. The forecast was based on WTI of US$55/bbl.
Lower activity and pricing pressure in 2015, is expected to negatively impact CWC's revenue, EBITDAS and Funds from Operations. CWC has already begun to implement several cash saving initiatives aimed at preserving our cash resources and maintaining our balance sheet strength as well as retaining our most valuable asset - our key employees. These cash saving initiatives as follows are intended to reduce direct operating expenses by $2.0 million, selling and administrative expenses by $2.2 million, capital expenditures by $3.8 million and cash dividends by $15.4 million resulting in total 2015 cash savings of $23.4 million compared to 2014:
At December 31, 2014, the Company's $100 million credit facility, which does not mature until June 21, 2017, has approximately $35 million undrawn. At December 31, 2014, CWC's Consolidated Debt to Consolidated EBITDA(2) ratio was 1.6:1 with a debt covenant limit of 3.0:1. Although CWC does not expect to be in breach of this debt covenants in 2015, the Company has proactively requested the banking syndicate to relax our financial covenants for Consolidated Debt to Consolidated EBITDA ratio from 3.0:1 to 3.5:1 for the quarters ending December 31, 2015 and March 31, 2016, reducing to 3.25:1 for quarters ending June 30, 2016 and September 30, 2016 and returning to 3.0:1 thereafter. The banking syndicate has agreed to the covenant relaxation and is in the process of amending the credit agreement. Other debt covenants remain unchanged.
With these initiatives already being implemented, CWC is well positioned to manage the current slowdown in activity.
About CWC Energy Services Corp.
CWC Energy Services Corp. is a premier contract drilling and well servicing company operating in the Western Canadian Sedimentary Basin with a complementary suite of oilfield services including drilling rigs, service rigs, coil tubing and well testing. The Company's corporate office is located in Calgary, Alberta, with operational locations in Nisku, Grande Prairie, Slave Lake, Red Deer, Lloydminster, Provost, and Brooks, Alberta and Weyburn, Saskatchewan. The Company's shares trade on the TSX Venture Exchange under the symbol "CWC".
READER ADVISORY - Neither 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 release.
This news release contains certain forward-looking information and statements within the meaning of applicable Canadian securities legislation. Certain statements contained in this news release including everything contained in the section titled "Outlook" and including statements which may contain such words as "anticipate", "could", "continue", "should", "seek", "may", "intend", "likely", "plan", "estimate", "believe", "expect", "will", "objective", "ongoing", "project" and similar expressions are intended to identify forward-looking information or statements. In particular, this news release contains forward-looking statements including management's assessment of future plans and operations, planned levels of capital expenditures, expectations as to activity levels, expectations on the sustainability of future cash flow and earnings and the ability to pay dividends, expectations with respect to oil and natural gas prices, activity levels in various areas, continuing focus on cost saving measures, expectations regarding the level and type of drilling and production and related drilling and well services activity in the WCSB, expectations regarding entering into long term drilling contracts and expanding its customer base, and expectations regarding the business, operations and revenue of the Company in addition to general economic conditions. Although the Company believes that the expectations and assumptions on which such forward-looking information and statements are based are reasonable, undue reliance should not be placed on the forward-looking information and statements because the Company can give no assurances that they will prove to be correct. Since forward-looking information and statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks.
These include, but are not limited to, the risks associated with the drilling and oilfield services sector (ie. demand, pricing and terms for oilfield drilling and services; current and expected oil and gas prices; exploration and development costs and delays; reserves discovery and decline rates; pipeline and transportation capacity; weather, health, safety and environmental risks), integration of acquisitions, including the Ironhand Acquisition, competition, and uncertainties resulting from potential delays or changes in plans with respect to acquisitions, development projects or capital expenditures and changes in legislation, including but not limited to tax laws, royalties and environmental regulations, stock market volatility and the inability to access sufficient capital from external and internal sources and the inability to pay dividends. Accordingly, readers should not place undue reliance on the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the Company's financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through SEDAR at . The forward-looking information and statements contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information or statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. Any forward-looking statements made previously may be inaccurate now.
Reconciliation of Non-IFRS Measures
Contacts:
CWC Energy Services Corp.
Duncan T. Au, CA, CFA
President & Chief Executive Officer
(403) 264-2177
CWC Energy Services Corp.
Craig Flint, CA
Chief Financial Officer
(403) 264-2177
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Datum: 10.03.2015 - 03:54 Uhr
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News-ID 377151
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