Winalta Announces Record Second Quarter Results for 2014

CALGARY, Aug. 14, 2014 /CNW/ - Winalta Inc. ("Winalta" or the "Company") (TSXV:WTA) is pleased to announce results for the three months ended June 30, 2014 (the "Period"). Record revenues of $5.0 million and record EBITDA of $1.3 million, showed increases of $3.5 million or 232% and $1.5 million or 609%, respectively, to revenue of $1.5 million and EBITDA of negative $0.3 million for the three months ended June 30, 2013 (the "Comparative Period").

A 105% increase in utilization of Company owned assets was a leading factor in improved Company performance. The Company has been successful in diversifying its customer base and penetrating the pad and multilateral drilling space, a strategy that has helped to normalize the seasonality in its revenues.

The Company recorded a Net Loss of $(0.4) million or $(0.01) per share, a $1.0 million improvement over $(1.4) million or $(0.04) per share for the Comparative Period. The Net Loss included a one time impairment of $(0.4) million relating to the  $1.1 million sale of Winalta's Sylvan Lake land assets.

QUARTER END HIGHLIGHTS

Revenue increased by $3.5 million or 232%
EBITDA increased by $1.5 million or 609%

Q2 2014 SELECTED FINANCIAL HIGHLIGHTS

(Thousands of Canadian dollars, except for per share amounts)
	Three Months Ended		Six Months Ended
	June 30, 2014	June 30, 2013	June 30, 2014	June 30, 2013
Revenue	4,976	1,499	14,627	8,334
Net Earnings (Loss)	(442)	(1,443)	1,414	321
Earnings (Loss) per share and diluted earnings	(0.01)	(0.04)	0.03	0.01
EBITDA1	1,291	(254)	5,548	3,598
EBITDA per share	0.03	(0.01)	0.14	0.09
Total assets	46,815	41,426	46,815	41,426
Total liabilities	22,809	17,400	22,809	17,400
Dividends paid	821	403	1,630	807

 

(1) EBITDA is defined as net earnings from continuing operations before interest and finance costs, income taxes, depreciation and amortization. EBITDA does not have a standardized meaning and is therefore not likely to be comparable with similar measures used by other issuers. However, Winalta calculates EBITDA consistently from period to period. While EBITDA is not considered an alternative to net earnings in measuring performance, it is a key measure used by the Company and its investors. The Company believes EBITDA assists investors in assessing Winalta's performance on a consistent basis without regard to financing costs, taxes and depreciation which, can vary significantly from period to period for reasons not directly related to operations.

REVENUE

Winalta increased revenues by $3.5 million or 232% over the Comparative Period.  Of the $3.5 million increase, $1.7 million (49%) was generated through Company owned assets and $1.8 million (51%) was generated through sub-contractor revenue.

Wellsite utilization improved 95% along with a 7% increase in day rates. Sub-contractor revenue showed an increase of $1.8 million (552%) over the Comparative Period.

For the six months ended June 30, 2014, the Company increased revenues by $6.3 million (76%) over the comparative six month period.   Of the $6.3 million increase, $2.0 million (32%) was generated through Company owned assets and $4.3 million (68%) was generated through sub-contractor revenue.

DIRECT COSTS

Direct operating costs increased by $2.0 million over the Comparative Period. The majority ($1.8 million or 90%) of the increase can be attributed to the increase in sub-contractor equipment and services.  The remaining $194 thousand represents the growth in service staff wages and benefits of $43 thousand and fleet costs of $151 thousand.

For the six months ended June 30, 2014, direct operating costs were $7.4 million versus $2.8 million for the six months ended June 30, 2013.  The increase of $4.6 million can be attributed to increases in sub-contractor equipment and services of $4.2 million; $234 thousand in fleet cost service and maintenance and $132 thousand in service staff wages and benefits.

GENERAL AND ADMINISTRATIVE

For the Period, administrative costs were $1.0 million compared to $0.9 million for the Comparative Period.  The Company saw a reduction in professional fees ($36 thousand) which was offset by increases in staff costs ($42 thousand), marketing costs ($25 thousand), office rent and operating costs ($26 thousand), and bad debt expense ($10 thousand).  The Company recorded additional non-recurring expenses of $50 thousand relating to legal fees for the Plan of Arrangement. 

For the six months ended June 30, 2014, administrative costs were $2.0 million versus $1.7 million for the comparative six month period. 

DEPRECIATION AND AMORTIZATION

Depreciation and amortization was $1.5 million for the Period as compared to $1.4 million for the Comparative Period.  The increase in depreciation and amortization expense reflects the net acquisition of $10.0 million of equipment in the trailing 12 months.

For the six months ended June 30, 2014, depreciation and amortization was $3.0 million for the period as compared to $2.7 million for the comparative six month period. 

FINANCE COSTS

Finance costs, which include interest on long-term debt and finance leases, and fees paid on refinancing, were $251 thousand for the Period as compared to $190 thousand for the Comparative Period.  The increase was primarily the result of the Company entering into fixed term financing agreements for the purchase of 4 Integrated Wellsite System ("IWS") units.  The current rate for the Company's operating loan facility and revolving term loan facility is prime plus 1.00% per annum and prime plus 1.50% per annum, respectively.

For the six months ended June 30 2014, finance costs, which include interest on long-term debt and finance leases, and fees paid on refinancing, were $486 thousand as compared to $373 thousand for the comparative six month period. 

OUTLOOK  & PROPOSED BUSINESS COMBINATION

Winalta achieved a strong second quarter and management has an optimistic outlook for the balance of 2014 based on an expected diversified customer base and continued penetration into pad and multilateral drilling space specifically with IWS units.  

A shift to deploy equipment within the pad drilling programs, combined with conventional drilling, should continue to mitigate some of the seasonal impact on revenues in the third quarter of 2014 and second quarter of 2015.  Demand for, and utilization of, wellsite units is expected to continue to increase throughout the second half of 2014. 

On June 26, 2014 the Company entered into an arrangement agreement with CERF Incorporated ("CERF") pursuant to which CERF will acquire all of the outstanding Winalta common shares in exchange for 0.3352 of a common share of CERF for each Winalta common share. Upon completion of the plan of arrangement with CERF (the "Plan of Arrangement"), the current shareholders of CERF would own approximately 61% of the combined entity and the shareholders of Winalta would own approximately 39%, on a fully diluted basis. Based on CERF's closing price on June 25, 2014 of $3.49, the exchange ratio equates to $1.17 per Winalta share.  The combined company is expected to operate under the name CERF and will continue to trade on the TSX Venture Exchange under the symbol "CFL".

CERF operates 3 business lines; MCL, 4-Way and TRAC Energy Services ("TRAC"). TRAC is similar to Winalta in that it provides surface rental equipment to oil and gas companies. TRAC and Winalta have different oilfield rental asset classes and do not share the same customer base. The proposed Plan of Arrangement is expected allow Winalta to expand its customer base along with TRAC.

Completion of the Plan of Arrangement is contingent upon, among other things, the approval of the shareholders of each of Winalta and CERF at meetings to be held on August 26, 2014.  An Information Circular dated July 25, 2014 describing the terms of the Plan of Arrangement, has been mailed to shareholders of Winalta and is available under Winalta's profile on SEDAR.

FORWARD-LOOKING INFORMATION

Certain information set forth in this press release, including management's assessment of the potential for increased cash flows, continued growth of the Company's rental fleet, demand and utilization rates for the Company's rental units, possible expansion of the Company's rental offerings, expansion of the Company's customer base, completion (including timing for completion) of the Plan of Arrangement and the Company's expectation regarding the status of the economy and its impact on the Company, may constitute forward-looking statements. By their nature, forward-looking statements involve material assumptions and are subject to numerous risks and uncertainties, including with respect to market and economic conditions and their impact on the Company's business, some of which, are beyond the Company's control. Readers are cautioned not to place undue reliance on the forward-looking statements as the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and actual results, performance or outcomes could materially differ from those expressed or implied in such forward-looking statements and accordingly, no assurance can be given that any of the events anticipated by forward looking statements will transpire or occur, or if any of them do so, what benefit Winalta will derive therefrom. The Company does not assume the obligation to revise or update this forward-looking information after the date of this release or to revise such information to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws.

SOURCE Winalta Inc.

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