CWC Energy Services Corp. Announces Second Quarter 2015 Financial Results and Declares September 2015 Dividend
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 08/10/15 -- CWC Energy Services Corp. ("CWC" or the "Company") (TSX VENTURE: CWC) announces the release of its operational and financial results for the three and six months ended June 30, 2015 and the declaration of the September 30, 2015 dividend. The interim Financial Statements and Management Discussion and Analysis ("MD&A") for the six months ended June 30, 2015 and 2014 are filed on SEDAR at .
Highlights for the Three Months Ended June 30, 2015
(1) Please refer to the "Reconciliation of Non-IFRS Measures" section for further information.
Highlights for the Six Months Ended June 30, 2015
Financial and Operational Highlights
(1) CWC entered into the contract drilling business on May 15, 2014, through the acquisition of Ironhand and results are included May 16, 2014 onward.
(2) Please refer to the "Reconciliation of Non-IFRS Measures" section for further information.
(3) Not meaningful.
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. In Q2 2015 Rig #3 was upgraded to include a Pad Rig Walking System. 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.
(1) Ironhand was acquired on May 15, 2014, as such the Contract Drilling segment includes the results for the period commencing May 16, 2014.
(2) Number of drilling rigs at the end of the period.
(3) Revenue per operating day is calculated based on operating days (i.e. spud to rig release basis). New drilling rigs are added based on the first day of field service.
(4) Drilling rig utilization is calculated based on operating days (i.e. spud to rig release basis) in accordance with the methodology prescribed by the CAODC. New drilling rigs are added based on the first day of field service.
(5) Not meaningful.
Contract Drilling revenue of $2.6 million for the quarter and $13.6 million for the first half of 2015 was achieved with a utilization rate of 12% and 28% respectively comparable to the CAODC industry average of 13% and 24% for the same periods. Drilling activity levels continue to be affected by the global oversupply of oil and corresponding collapse in oil prices of greater than 50% which has led our E&P customers to reduce drilling, completions and production maintenance programs to conserve their cash resources until commodity prices improve and E&P companies increase their programs.
Production Services
CWC is the fourth largest service rig provider in the WCSB, having a modern fleet of 74 service rigs as at June 30, 2015. The Company's service rig fleet consists of 41 single, 27 double, and 6 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 June 30, 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.
(1) Number of units at the end of the period - includes units which are out of service for recertification, refurbishment or otherwise unavailable in the period.
(2) Service rig utilization is calculated based on 10 hours a day, 365 days a year. New service rigs are added based on the first day of field service. Service rigs requiring their 24,000 hour recertification, refurbishment or have been otherwise removed from service for greater than 90 days are excluded from the utilization calculation until their first day back in field service.
(3) Coil tubing unit utilization is calculated based on 10 hours a day, 365 days a year. New coil tubing units are added based on the first day of field service.
Production Services revenue was $10.9 million for the quarter, $27.7 million year to date, down $6.4 million and $27.9 million respectively year over year. Service rig revenue was severely impacted by a reduction in activity levels to 23% compared to 33% in Q2 2014 and a 11% reduction in hourly rates compared to the prior period. E&P customers asked for and were given significant pricing reductions to help them become more competitive given the current commodity price environment and our competitors are working at lower rates to maintain or increase utilizations. Coil tubing utilization of 29% compared to 22% in Q2 2014 continued to be relatively strong as the focus on production work for shallower SAGD wells was resilient in the current environment. The 8% decrease in the coil tubing units' average hourly rate is a function of shallower Class I and II unit work in Q2 2015 compared Q2 2014 having experienced less pricing pressure from CWC's customers. In September 2014, the Company sold its Snubbing assets and business which contributed year to date 2014 revenue of $3.0 million and EBITDAS of $0.8 million with no corresponding amounts in year to date 2015. In March 2015, CWC suspended its non-core Well Testing business indefinitely, which contributed year to date 2014 revenue of $1.1 million and EBITDAS of ($53) thousand.
The Company completed, but has yet to put into service, two new slant service rigs, Rig #505, completed during Q1 2015 and Rig #506 completed in Q2 2015. The addition of these two new slant service rigs will bring the slant fleet to six rigs and will help CWC establish a greater market presence servicing the growing number of heavy oil and SAGD wells.
Capital Expenditures
Year to date growth capital spending of $4.2 million was primarily incurred to complete slant service Rigs #505 and #506 and supporting equipment in order to further expand our growth in heavy oil and SAGD wells. Additional growth capital was incurred to complete upgrades to Drilling Rig #2. Maintenance capital spending of $3.0 million has been primarily directed at adding a Rig Walking System for Drilling Rig #3, required drilling and service rig recertification costs and upgrades, 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 $0.0025 per common share. The dividend will be paid on October 15, 2015 to shareholders of record on September 30, 2015. The ex-dividend date is September 28, 2015. This dividend is an eligible dividend for Canadian income tax purposes. The reduction in the declared dividend from $0.02 cents per share annually to $0.01 cent per share annually will provide CWC additional flexibility to repay long term debt, invest in capital expenditures and/or acquire the Company's shares under its NCIB program.
The Company currently has a Dividend Reinvestment Plan ("DRIP") and a Stock Dividend Program ("SDP") in place. Holders of approximately 70% of outstanding common shares elected to participate in the DRIP or SDP for the June 30, 2015 dividend resulting in a cash savings of $1.0 million.
Outlook
The Canadian oil and gas industry has been negatively impacted by ongoing volatility of commodity prices and reduced capital and operating budgets of E&P companies. The timing and magnitude of a crude oil and/or natural gas price recovery continues to be uncertain as global political and economic events put pressure on the commodity supply and demand imbalance. In addition, concern over the impact of the newly elected Alberta government with significant corporate income tax and carbon tax rate increases announced in Q2 2015 and the potential outcome of an announced royalty review has created uncertainty for oil and gas and oilfield services industries' investors. In June 2015, The Canadian Association of Oilwell Drilling Contractors ("CAODC") updated its 2015 forecast to 5,531 wells drilled in western Canada, down 19% from its January 2015 estimate, highlighting the short and medium term challenges for the oilfield services industry.
The lower activity and pricing pressure in 2015 is expected to negatively impact CWC's revenue, EBITDAS and funds from operations. In 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 cash saving initiatives are necessary to maneuver CWC through these choppy industry conditions until commodity prices recover. With the continued uncertainty, CWC remains focused on managing discretionary spending, staffing levels and critically evaluating pricing and its capital spending program. CWC also has significant tax pools to shelter corporate income taxes and does not expect to pay cash taxes until 2018.
For the remainder of 2015, CWC expects stronger than industry average drilling rig utilization to offset softer pricing as six of our nine drilling rigs are currently active. In addition, CWC anticipates that at some point in the short to medium term future, E&P customers will start increasing service rig activity for workovers and maintenance as an indefinite deferral of this type of work by our E&P customers on their producing wells will result in lower production and cash flow streams. CWC has the right equipment, employees, locations and relationships to properly position us to service this work.
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.
610, 205 - 5th Avenue SW
Calgary, Alberta T2P 2V7
(403) 264-2177
Duncan T. Au, CA, CFA
President & Chief Executive Officer
Craig Flint, CA
Chief Financial Officer
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Datum: 10.08.2015 - 23:19 Uhr
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News-ID 412709
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