CWC Energy Services Corp. Announces First Quarter 2015 Financial Results and Declares June 2015 Dividend
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 05/13/15 -- CWC Energy Services Corp. (TSX VENTURE: CWC) ("CWC" or the "Company") announces the release of its operational and financial results for the three months ended March 31, 2015. The interim Management Discussion and Analysis ("MD&A") for the period ended March 31, 2015 and the Information Circular dated April 14, 2015 are filed on SEDAR at . CWC's Annual General and Special Meeting of shareholders will be held on May 14, 2015 at 11:00am in the Hamilton Room, 3rd Floor, Bow Valley Square Conference Centre, 205 - 5th Avenue SW, Calgary, Alberta.
Highlights for the Three Months Ended March 31, 2015
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 six 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.
Contract Drilling revenue of $11.0 million was achieved with a utilization rate of 44%, 10% higher than the CAODC industry average of 34% for the same period. While drilling activity levels would normally be expected to be higher in Q1, the global oversupply of oil and corresponding collapse in oil prices of greater than 50% led our exploration and production ("E&P") customers to choose to reduce drilling, completions and production maintenance programs to conserve their cash resources until commodity prices recover. In addition, an unusually warm winter has resulted in an early start to spring breakup beginning in early March 2015, which lowered revenue, EBITDAS and funds from operations in Q1 2015 for the Contract Drilling segment.
Production Services
CWC is the fourth largest service rig provider in the WCSB, having a modern fleet of 73 service rigs as at March 31, 2015. The Company's service rig fleet consists of 41 singles, 27 doubles, and 5 slant rigs. CWC's fleet is 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 March 31, 2015, 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.
Production Services revenue was $16.9 million, down $21.5 million (56%) from the prior year period. Service rig revenue was severely impacted by a reduction in activity levels to 29% compared to 61% in Q1 2014 and a 6% reduction in hourly rates compared to the prior period as E&P customers asked for and were given significant pricing reductions to help them become more competitive in a lower commodity price environment. In addition, an unusually warm winter led to road ban restrictions occurring in late January 2015 and an extremely early spring breakup beginning in early March 2015, which resulted in the significantly reduced revenue, EBITDAS and funds from operations. Coil tubing utilization of 60% compared to 64% in Q1 2014 continued to be relatively strong as its focus on production work on shallower SAGD wells was resilient in the current low commodity price environment. The 8% decrease in the coil tubing units' average hourly rate is a function of shallower Class I and II unit work in Q1 2015 compared to Q1 2014 as opposed to lower pricing pressure from CWC's customers. In September 2014, CWC sold its Snubbing assets and business which contributed Q1 2014 revenue of $2.3 million and EBITDAS of $0.8 million with no corresponding amounts in Q1 2015. In March 2015, CWC suspended its non-core Well Testing business indefinitely, which contributed Q1 2015 revenue of $0.3 million and EBITDAS of $(0.2 million) compared to Q1 2014 revenue of $1.0 million and EBITDAS of $0.1 million.
The Company completed, but has yet to put into service, one new slant service rig (Rig #505) during Q1 2015. A second new slant service rig (Rig #506) is expected to be completed in 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.
Capital Expenditures
On March 9, 2015, the Board of Directors announced a revised 2015 capital expenditure budget of $10.8 million, comprised of $6.1 million of growth capital and $4.7 million of maintenance and infrastructure capital. The growth capital of $6.1 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 Rig #505 being delivered in January 2015 and Rig #506 expected to be delivered in Q2 2015. Maintenance capital of $4.7 million will primarily be directed at a walking system for drilling rig #3, drilling and service rig recertification costs and upgrades or additions to field equipment for the service rig and coil tubing divisions and information technology infrastructure.
Quarterly Dividend
The Company is pleased to announce that the Board of Directors has declared a quarterly dividend of $0.005 per common share. The dividend will be paid on July 15, 2015 to shareholders of record on June 30, 2015. The ex-dividend date is June 26, 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.
The Company currently has a Dividend Reinvestment Plan ("DRIP") and a Stock Dividend Program ("SDP") in place. Holders of approximately 72% of outstanding common shares elected to participate in the DRIP or SDP for the March 31, 2015 dividend resulting in cash dividend payments of $0.4 million and the issuance from treasury of 3,420,804 common shares on April 15, 2015.
Outlook
The continuing volatility of commodity prices since June 2014 has resulted in significant reductions to the capital and operating budgets of our E&P customers, which in turn has resulted in a more competitive environment for oilfield services and correspondingly rate reductions for our drilling rigs, service rigs and coil tubing unit services. In April 2015, the Petroleum Services Association of Canada ("PSAC") released its mid year forecast announcing a 47% drop from its original 2015 forecast released in October 2014. The updated forecast of 5,230 wells drilled (rig releases) across Canada is based on crude oil prices of US$53/barrel (WTI), natural gas prices of Cdn$2.50/mcf (AECO) and a U.S. dollar to Canadian dollar exchange rate of $0.77. In addition, uncertainty over a potential royalty review and increases to corporate income tax rates by the newly elected Alberta NDP government may have an effect on short-term and long-term investments by our E&P customers and activity levels at CWC.
Not unlike previous industry downturns, the timing and magnitude of an oil and/or natural gas price improvement is difficult to forecast. CWC has prepared for the possibility that any meaningful improvement to commodity prices and activity levels will occur beyond 2015. However in May 2015 oil prices have increased to approximately US$60/barrel (WTI) as U.S. and Canadian drilling rig counts and shale oil production has declined. In addition, analysts forecast that U.S. refineries are expected to be running at full capacity throughout the summer months. CWC is optimistic of the opportunities this may present in the short-term.
CWC expects a prolonged spring breakup as our E&P customers continue to monitor and assess their plans for drilling, completions, production maintenance and abandonments for the remainder of 2015. As a result, activity levels throughout the oilfield services industry for the remainder of 2015 are expected to be significantly lower than 2014. Lower activity and pricing pressure in 2015 is expected to negatively impact CWC's revenue, EBITDAS and funds from operations. In Q1 2015, CWC implemented 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. The Company believes these cash saving initiatives are necessary to maneuver CWC through these choppy industry conditions. CWC also has significant tax pools to shelter corporate income taxes and does not expect to pay cash taxes until 2018.
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, and coil tubing. 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: 13.05.2015 - 21:57 Uhr
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