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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Lng Energy Ltd. | TSXV:LNG | TSX Venture | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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| 0.00 | 0.00% | 0 | - |
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NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.
The news release contains "forward-looking information and statements" within
the meaning of applicable securities laws. For full disclosure of the
forward-looking information and statements and the risks to which they are
subject, see the "Cautionary Statement Regarding Forward-Looking Information and
Statements" later in this news release.
Strad Energy Services Ltd., ("Strad" or the "Company"), a North
American-focused, energy services company, today announced its financial results
for the three and nine months ended September 30, 2013. All amounts are stated
in Canadian dollars unless otherwise noted.
SELECTED FINANCIAL AND OPERATIONAL HIGHLIGHTS:
-- Third quarter EBITDA(1) from continuing operations of $10.4 million
decreased 13% compared to $12.0 million for the same period in 2012;
-- Third quarter revenue from continuing operations of $47.4 million, a 7%
decrease compared to $51.1 million for the same period in 2012;
-- Capital additions totaled $5.3 million during the third quarter.
Reported capital expenditures, net of $1.1 million rental asset
disposals, were $4.2 million during the third quarter and $5.7 million
year to date;
-- Total funded debt(2) to twelve month trailing EBITDA ratio of 1.2 to 1
at the end of the third quarter of 2013; and
-- Third quarter earnings per share from continuing operations of $0.06
compared to $0.08 for the same period in 2012.
Notes:
(1) Earnings before interest, taxes, depreciation and amortization ("EBITDA") is
not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation".
(2) Funded debt includes bank indebtedness plus long-term debt plus current and
long-term obligations under finance lease less cash. EBITDA is based on trailing
twelve months. See "Non-IFRS Measures Reconciliation".
"Our third quarter results were influenced by a wetter than normal start to the
Canadian drilling season and declining year-over-year rig counts in selected
U.S. resource plays," said Andy Pernal, President and CEO of Strad. "Despite
these challenges, revenue generated by our matting and surface equipment product
lines increased steadily throughout the quarter. Further, a steady ramp-up in
Canadian drilling activity towards the end of the third quarter positions our
surface equipment assets well as we advance into the more active winter drilling
season."
"Despite a revenue decline in the U.S. business during the third quarter
compared to 2012, revenue increased sequentially over the second quarter of this
year," said Greg Duerr, CFO of Strad. "Although margins have pulled back in Q3
from Q2, EBITDA increased year-over-year on a lower revenue base. We expect
fourth quarter margins to trend back into the 25% to 30% range as equipment goes
back to work and investments in field sales staff produce results."
THIRD QUARTER FINANCIAL HIGHLIGHTS
(in thousands of Three months ended Nine months ended
Canadian Dollars) September 30, September 30,
-------------------------------------------------------
2013 2012 % Chg. 2013 2012 % Chg.
-------------------------------------------------------
Revenue from
continuing
operations 47,425 51,094 (7) 141,724 161,699 (12)
----------------------------------------------------------------------------
EBITDA from
continuing
operations(1) 10,422 12,030 (13) 29,850 38,896 (23)
EBITDA as a % of
revenue 22% 24% 21% 24%
Per share ($), basic 0.28 0.33 (15) 0.82 1.06 (23)
Per share ($),
diluted 0.28 0.32 (13) 0.80 1.03 (22)
----------------------------------------------------------------------------
Net income (loss)
from continuing
operations(2) 2,373 2,937 (19) 3,449 10,832 (68)
Per share ($), basic 0.06 0.08 (25) 0.09 0.30 (70)
Per share ($),
diluted 0.06 0.08 (25) 0.09 0.29 (69)
----------------------------------------------------------------------------
Funds from continuing
operations(3) 10,013 10,950 (9) 29,554 36,722 (20)
Per share ($), basic 0.27 0.30 (10) 0.81 1.00 (19)
Per share ($),
diluted 0.27 0.29 (7) 0.79 0.98 (19)
----------------------------------------------------------------------------
Capital expenditures
from continuing
operations 5,325 9,921 (46) 15,959 58,448 (73)
Dispositions of
rental assets(4) (1,133) (826) 37 (10,211) (2,692) 279
Net capital
expenditures(5) 4,192 9,095 (54) 5,748 55,756 (90)
----------------------------------------------------------------------------
Total assets 207,448 236,327 (12) 207,448 236,327 (12)
Return on average
total assets(6) 19% 20% 17% 23%
Long-term debt(7) 39,000 53,500 (27) 39,000 53,500 (27)
Total long-term
liabilities 47,564 70,101 (32) 47,564 70,101 (32)
----------------------------------------------------------------------------
Common shares - end
of period ('000's) 37,251 37,251 37,251 37,251
Weighted avg common
shares ('000's)
Basic 36,621 36,623 36,575 36,683
Diluted 37,389 37,499 37,345 37,623
Notes:
(1) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures
Reconciliation".
(2) Net income from continuing operations excludes income attributable to
the non-controlling interests.
(3) Funds from continuing operations is cash flow from operating activities
before changes in working capital. Funds from operations is not a recognized
measure under IFRS; see "Non-IFRS Measures Reconciliation".
(4) Dispositions reported at net book value.
(5) Includes assets acquired under finance lease and purchases of intangible
assets. Net capital expenditures are net of rental asset disposals.
(6) Return on average total assets is not a recognized measure under IFRS;
see "Non-IFRS Measures Reconciliation".
(7) Excluding current portion.
FINANCIAL POSITION AND RATIOS
As at September 30,
-------------------------------
($000's except ratios) 2013 2012
--------------- ---------------
Working capital(1) 13,212 24,117
Funded debt(2) 46,230 62,505
Total assets 207,448 236,327
Funded debt to EBITDA(2) 1.2 1.1
Notes:
(1) Working capital is calculated as current assets less current
liabilities. See "Non-IFRS Measures Reconciliation".
(2) Funded debt includes bank indebtedness plus long-term debt plus current
and long-term obligations under finance lease less cash. EBITDA is based on
trailing twelve months. See "Non-IFRS Measures Reconciliation".
THIRD QUARTER RESULTS
Strad reported a decrease in revenue and EBITDA of 7% and 13%, respectively,
during the three months ended September 30, 2013, compared to the same period in
2012. Strad's Q3 2013 results continued to be impacted by modest drilling
activity levels in the Marcellus and Bakken regions due to low natural gas
prices, improving drilling efficiencies, lower year-over-year customer spending
and increased competition and pricing pressure. In the WCSB region, drilling rig
activity increased at a slower pace, versus historical levels, during the third
quarter due to unseasonably wet weather conditions. These declines were
partially offset by profit generated from product sales related to sales of
in-house manufactured products.
Strad's Canadian Operations reported lower EBITDA during the three months ended
September 30, 2013, compared to the same period in 2012. Decreased EBITDA was a
result of reduced drilling activity in the WCSB, which impacted matting pricing
when compared to the third quarter of 2012. Early in the third quarter, wet
weather conditions resulted in a 5% decrease in year-over-year drilling
activity. Overall drilling activity averaged 2% higher year-over-year by the end
of the quarter.
During the third quarter, Strad's U.S. Operations continued to be impacted by a
continuation of lower year-over-year utilization levels in the Marcellus and
Bakken resource plays. Overall rig counts during the third quarter declined
year-over-year by 11% and 13%, in the Marcellus and Bakken, respectively,
resulting in relatively lower utilization rates and pricing for Strad's surface
equipment fleet. Third quarter results in the U.S. were also affected by a
reduced matting fleet size resulting from sales of SteelLock mats during the
second quarter of 2013. Third quarter results were also impacted by management's
strategic decision to invest in U.S. field sales staff to increase market share
in Strad's key regions in the U.S. Increased solids control utilization in the
Bakken region during the third quarter partially offset utilization and pricing
impacts on surface equipment.
During the third quarter, capital expenditures were $2.3 million in Canada and
$1.7 million in the U.S., net of $1.1 million and $0.1 million in rental asset
disposals. Capital expenditures are reported net of the net book value of rental
assets sold in the period. For the nine months ended September 30, 2013, Strad
has spent $15.9 million on a gross basis, or $5.7 million, net of $10.2 million
in rental asset disposals, of its budgeted $15.0 million capital program. Strad
continues to invest in equipment which is in high demand in both Canada and the
U.S.
RESULTS OF OPERATIONS
Canadian Operations
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
($000's) 2013 2012 % chg. 2013 2012 % chg.
-------- -------- ------- -------- -------- -------
Revenue 19,129 19,165 - 51,202 56,616 (10)
EBITDA(1) 5,599 7,618 (27) 13,058 19,144 (32)
EBITDA % 29% 40% 26% 34%
Capital expenditures from
cont. operations 3,386 4,225 (20) 9,806 23,632 (59)
Dispositions of rental
assets(2) (1,073) (575) 87 (9,179) (2,100) 337
Net capital
expenditures(3) 2,313 3,650 (37) 627 21,532 (97)
Gross capital assets 105,872 103,322 2 105,872 103,322 2
Total assets 100,269 104,255 (4) 100,269 104,255 (4)
Notes:
(1) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures
Reconciliation". EBITDA excludes Restructuring Expenses.
(2) Dispositions represented at net book value.
(3) Includes assets acquired under finance lease and purchases of intangible
assets. Net capital expenditures are net of rental asset sales.
Revenue generated for the three months ended September 30, 2013, was $19.1
million, level with $19.2 million for the same period in 2012. Third quarter
2013 revenue was consistent, despite a slower increase in drilling activity
early in the quarter due to wet weather conditions. At the beginning of the
third quarter, drilling activity was down 5% year-over-year and ended the
quarter 2% higher than during the same period in 2012. Third quarter 2013 rental
revenue was impacted by a decline in the size of Strad's Canadian matting rental
fleet, after sales of used SteelLock mats in the second quarter of 2013. In
addition to a smaller fleet, matting rental revenue was also impacted by lower
year-over-year pricing. Lower Canadian drill pipe revenue also affected third
quarter results, as Strad re-allocated drill pipe from Canada to the U.S., in
order to capitalize on long-term contract opportunities. However, offsetting
declines in matting and drill pipe rental revenue were higher surface equipment
rental revenue, higher trucking, service and other revenues, which increased
despite the wet weather conditions.
Revenue generated for the nine months ended September 30, 2013, decreased 10% to
$51.2 million compared to $56.6 million for the same period in 2012. Lower
drilling activity levels were the main driver of year-over-year revenue
declines.
EBITDA for the three months ended September 30, 2013, of $5.6 million, decreased
27%, compared to $7.6 million for the same period in 2012. EBITDA as a
percentage of revenue for the three months ended September 30, 2013, was 29%
compared to 40% for the same period in 2012. This decrease was primarily due to
reduced rental revenue and a shift in product mix from matting and drill pipe to
surface equipment. Lower rental revenue was offset by higher service, trucking
and other revenues, which typically have lower margins than rental revenue.
EBITDA for the nine months ended September 30, 2013, decreased 32% to $13.1
million compared to $19.1 million for the same period in 2012. Decreased EBITDA
was a result of lower rental revenue and a shift in product mix during the first
nine months of 2013 compared to the same period in 2012. EBITDA as a percentage
of revenue for the nine months ended September 30, 2013, was 26% compared to 34%
for the same period in 2012.
U.S. Operations
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
($000's) 2013 2012 % chg. 2013 2012 % chg.
-------- -------- ------- -------- -------- -------
Revenue 13,580 16,550 (18) 40,343 57,401 (30)
EBITDA(1) 3,071 2,785 10 11,493 15,390 (25)
EBITDA % 23% 17% 28% 27%
Capital expenditures from
cont. operations 1,808 4,540 (60) 5,607 32,966 (83)
Dispositions of rental
assets(2) (60) (251) (76) (1,033) (593) 74
Net capital
expenditures(3) 1,748 4,289 (59) 4,574 32,373 (86)
Gross capital assets 102,048 105,754 (4) 102,048 105,754 (4)
Total assets 103,089 118,872 (13) 103,089 118,872 (13)
Notes:
(1) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures
Reconciliation". EBITDA excludes Restructuring Expenses.
(2) Dispositions represented at net book value.
(3) Includes assets acquired under finance lease and purchases of intangible
assets. Net capital expenditures are net of rental asset sales.
Revenue for the three months ended September 30, 2013, decreased 18% to $13.6
million from $16.6 million for the same period in 2012. Year-over-year revenue
declines continue to reflect the impact of lower drilling activity in the U.S.,
specifically in the Marcellus and Bakken resource plays, where rig counts
declined 11% and 13%, respectively, from third quarter 2012 levels. Decreased
rig counts have resulted in increased competition in both resource plays, which
caused lower surface equipment utilization as well as pricing pressure relative
to 2012. Third quarter revenue was also impacted by idle drill pipe, which was
on standby and not collecting a day rate while rig moves were completed during
the quarter. The Bakken continued to be the most active resource play for
Strad's U.S. Operations, generating 72% of total U.S. revenue.
Revenue for the nine months ended September 30, 2013, decreased 30% to $40.3
million from $57.4 million for the same period in 2012. The decrease in revenue
year-over-year was due to the same activity related factors impacting the third
quarter results in comparative periods.
EBITDA for the three months ended September 30, 2013, increased 10% to $3.1
million compared to $2.8 million for the same period in 2012. EBITDA as a
percentage of revenue for the three months ended September 30, 2013, was 23%
compared to 17% for the same period in 2012. The increase in both EBITDA and
EBITDA as a percentage of revenue, despite the previously mentioned
year-over-year decline in revenue, is due to the ongoing success of management's
restructuring plan, which re-aligned the U.S. Operations cost structure with
current market conditions. EBITDA as a percentage of revenue has declined from
first and second quarter 2013 levels of 32% and 31%, respectively, due to drill
pipe being idle during the third quarter, a shift in product mix and
management's strategic investment in an expanded U.S. field sales force.
EBITDA for the nine months ended September 30, 2013, decreased 25% to $11.5
million compared to $15.4 million for the same period in 2012. The decrease is
consistent with utilization and revenue declines discussed previously. EBITDA as
a percentage of revenue for the nine months ended September 30, 2013, increased
to 28% compared to 27% for the same period in 2012.
Product Sales
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
($000's) 2013 2012 % chg. 2013 2012 % chg.
-------- -------- ------- -------- -------- -------
Revenue 14,716 15,379 (4) 50,179 47,682 5
EBITDA(1) 2,632 2,357 12 7,995 6,913 16
EBITDA % 18% 15% 16% 14%
Capital expenditures(2) 61 208 (71) 264 855 (69)
Total assets 838 8,339 (90) 838 8,339 (90)
Notes:
(1) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures
Reconciliation". EBITDA excludes Restructuring Expenses.
(2) Includes assets acquired under finance lease and purchases of intangible
assets.
Product Sales are comprised of in-house manufactured products sold to external
customers, third party equipment sales to existing customers, and sales of
equipment from Strad's existing fleet to customers.
Revenue for the three months ended September 30, 2013, decreased 4% to $14.7
million from $15.4 million for the same period in 2012, resulting primarily from
lower in-house manufactured product sales. During the third quarter, Product
Sales consisted of $8.5 million of in-house manufactured products, $4.7 million
of third party equipment sales and $1.5 million of rental fleet sales compared
to $9.4 million, $5.0 million and $1.0 million, respectively, during the same
period in 2012. Manufactured product sales decreased due to lower drilling
activity in 2013 compared to 2012. However, demand for manufactured products,
primarily rig mats, increased sequentially during the third quarter compared to
the second quarter of 2013. Sales of Strad's rental fleet equipment fluctuate
quarter-over-quarter and are primarily dependent on strategic opportunities to
monetize underutilized rental assets.
Revenue for the nine months ended September 30, 2013, increased 5% to $50.2
million from $47.7 million for the same period in 2012. Product Sales consisted
of $20.9 million of in-house manufactured products, $15.4 million of third party
equipment sales and $13.9 million of rental fleet sales compared to $24.9
million, $19.5 million and $3.3 million, respectively, during the same period in
2012. Increased matting sales during the second quarter were the primary driver
of year-over-year revenue increases. Matting sales during the first nine months
of 2013 consisted of both third party mat sales and sales of Strad's rental
fleet to existing customers.
EBITDA for the three months ended September 30, 2013, of $2.6 million increased
by 12% compared to $2.4 million for the same period in 2012. The increase in
EBITDA was due to higher in-house manufactured product sales margins during the
third quarter of 2013 due to reduced overhead costs. EBITDA as a percentage of
revenue for the three months ended September 30, 2013, increased to 18% compared
to 15% for the same period in 2012. EBITDA as a percentage of revenue tends to
vary quarter-over-quarter depending on the mix of sales, as realized margins on
third party equipment sales and sales of equipment from Strad's existing fleet
fluctuate more compared to sales of in-house manufactured products.
EBITDA for the nine months ended September 30, 2013, of $8.0 million, increased
by 16% compared with $6.9 million for the same period in 2012. EBITDA as a
percentage of revenue for the nine months ended September 30, 2013, increased to
16% from 14% during the same period in 2012.
OUTLOOK
Industry conditions during the third quarter remained relatively level on a
year-over-year basis in Canada, whereas overall drilling activity in the U.S.
declined slightly. Limited growth in the WCSB was a byproduct of wetter than
normal summer months as well as the continuation of broader constraints relating
to oil transportation bottlenecks and the general lack of access to capital for
many companies in the Canadian E&P sector. South of the border, U.S. drilling
activity continued to be impacted by the reduced number of rigs targeting lower
margin natural gas plays as well as the ongoing maturation and increased
drilling efficiency of the Bakken resource play.
In the WCSB, active drilling rigs in the third quarter of 2013 remained
relatively level, averaging 338 compared with 331 for the same period in 2012.
In the United States, drilling rig activity continued to vary by region, with
the total active U.S. rig count declining by 7% on a year-over-year basis. The
majority of Strad's U.S. fleet continues to operate in the Bakken and Marcellus
resource plays, both of which experienced reduced rig counts. The active rig
count in the Bakken averaged 183 rigs in the third quarter of 2013, down 13%
from 210 in the prior year period. In the gas-weighted Marcellus play, the
active rig count averaged 83 during the third quarter of 2013, down 11% from 93
in the prior year period. On a sequential basis, rig counts in the Bakken and
Marcellus declined 3% and increased 5%, respectively.
Marcellus operations are in close proximity to the Utica Shale where rig counts
have grown 64% over the prior year period. Bakken operations are also in close
proximity to the Rockies region, consisting of Colorado, Wyoming and Utah, where
an average of 149 rigs were drilling during the third quarter. Both the Utica
Shale and Rockies region represent platforms to grow utilization of rental
assets from existing operating regions. In addition to drilling activity, the
the long-term build out of Liquefied Natural Gas ("LNG") infrastructure in
Canada could result in increased demand for Strad's products and services.
Strad's third quarter Canadian operations were impacted by unseasonably wet
weather conditions during the months of June and July, which resulted in a
slower ramp up in third quarter drilling activity. Strad's matting fleet had
lower revenues on similar year-over-year utilization levels, which was primarily
a result of Strad's reduced matting inventory following sales of used mats in
the second quarter. Strad's Canadian matting business also experienced some
pricing pressure in the third quarter, which impacted the product line's
contribution to company-wide revenue. A similar decline in revenue contribution
was also experienced with Strad's Canadian drill pipe rentals, where Strad has
re-allocated a portion of these assets to its U.S. operating regions to
capitalize on long-term contract opportunities. The Company expects drilling
activity levels in the WCSB to ramp up through the fourth quarter and into the
winter drilling season.
In Strad's U.S. business, the Company realized EBITDA margins of 23% during the
third quarter despite the year-over-year decline in rig counts in the Bakken and
Marcellus resource plays. Management continues to expect margins to normalize in
the range of 25% to 30% for the Company's U.S. operations and views this margin
range as sustainable for the foreseeable future. Strad remains optimistic
regarding the potential of its operations in the maturing Bakken and Marcellus
markets where the Company's investment into its field sales force have
reinforced a solid foothold and created opportunities to expand.
Strad's product sales division continues to comprise a consistent component of
the Company's revenue stream. The Company's product sales business is made up of
its manufacturing, third party sales, and existing rental fleet asset sales
operations. The manufacturing and third party sales typically produce the
majority of the division's overall revenue stream. Strad's product sales
division remains strongly correlated with its U.S. and Canadian matting rental
fleet divisions, with similar demand drivers impacting both aspects of the
Company's business.
Strad's third quarter net capital expenditures totaled $4.2 million, with the
majority of this capital deployed in Canada. This represented a year-over-year
decline of 54%, which continues to be the result of significant investment made
to Strad's fleet during 2012 as well as relatively stagnant industry conditions.
Management plans to continue its practice of deploying cash from operations
towards both capital expenditures and debt reduction on a quarter-by-quarter
basis, thereby allowing the Company to selectively target key areas for growth,
maintain its current dividend, and reduce its overall debt levels.
LIQUIDITY AND CAPITAL RESOURCES
($000's) September 30, 2013 June 30, 2013
-------------------- --------------------
Current assets 45,301 50,466
Current liabilities 32,089 30,961
-------------------- --------------------
Working capital(1) 13,212 19,505
Banking facilities
Operating facility 4,079 2,847
Syndicated revolving facility 39,000 49,400
-------------------- --------------------
Total facility borrowings 43,079 52,247
Total credit facilities(2) 110,000 110,000
-------------------- --------------------
Unused credit capacity 66,921 57,753
-------------------- --------------------
(1) Working capital is calculated as current assets less current
liabilities, excluding assets held for sale. See "Non-IFRS Measures
Reconciliation".
(2) Facilities are subject to certain limitations on accounts receivable,
inventory, and net book value of fixed assets and are secured by a general
security agreement over the Company's assets. As at September 30, 2013,
Strad had access to $104 million out of the $110 million credit facility.
At September 30, 2013, working capital was $13.2 million compared to $19.5
million at June 30, 2013. The change in current assets is consistent with the
decrease in revenue from the second quarter to the third quarter of 2013 and
faster collection of accounts receivable balances. The increase in current
liabilities is due to the timing of payments at the end of the third quarter.
Funds from operations for the three months ended September 30, 2013, increased
to $10.0 million compared to $8.8 million for the three months ended June 30,
2013. Capital expenditures from continuing operations totaled $5.3 million for
the three months ended September 30, 2013 and June 30, 2013, and were offset by
$1.1 million and $6.4 million of rental asset sales during the same periods.
Management used funds from operations and proceeds from Product Sales to repay
$9.2 million of Strad's total facility borrowing during the third quarter of
2013. Management monitors funds from operations and the timing of capital
additions to ensure adequate capital resources are available to fund Strad's
capital program.
The Company's syndicated banking facility consists of an operating facility with
a maximum principal amount of $15.0 million CAD and $10.0 million USD, and an
$85.0 million revolving facility, both of which are subject to certain
limitations on accounts receivable, inventory and net book value of fixed assets
and are secured by a general security agreement over the Company's assets. The
syndicated banking facility bears interest at bank prime plus a variable rate,
which is dependent on the Company's funded debt to EBITDA ratio. On July 18,
2013, the Company amended its syndicated credit facility, extending the maturity
date from July 25, 2015 to July 25, 2016.
Based on the Company's funded debt to twelve month trailing EBITDA ratio of 1.2
to 1 at the end of the third quarter of 2013, the interest rate on the
syndicated banking facility is bank prime plus 1.25% on prime rate advances and
at the prevailing rate plus a stamping fee of 2.25% on bankers' acceptances. For
the three months ended September 30, 2013, the overall effective rates on the
operating facility and revolving facility were 4.36% and 3.51%, respectively. As
of September 30, 2013, $4.1 million was drawn on the operating facility and
$39.0 million was drawn on the revolving facility. Payments on the revolving
facility are interest only.
As at September 30, 2013, the Company was in compliance with all of the
syndicated banking facility covenants.
NON-IFRS MEASURES RECONCILIATION
Certain supplementary measures in this MD&A do not have any standardized meaning
as prescribed under IFRS and, therefore, are considered non-IFRS measures. These
measures are described and presented in order to provide shareholders and
potential investors with additional information regarding the Company's
financial results, liquidity and its ability to generate funds to finance its
operations. These measures are identified and presented, where appropriate,
together with reconciliations to the equivalent IFRS measure. However, they
should not be used as an alternative to IFRS, because they may not be consistent
with calculations of other companies. These measures are further explained
below.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not
a recognized measure under IFRS. Management believes that in addition to net
income, EBITDA is a useful supplemental measure as it provides an indication of
the results generated by the Company's principal business activities prior to
consideration of how those activities are financed or how the results are taxed.
EBITDA is calculated as net income from continuing operations plus interest,
finance fees, taxes, depreciation and amortization, non-controlling interest,
loss on disposal of property, plant and equipment, loss on foreign exchange,
loss on assets held for sale, restructuring charges, impairment loss, less gain
on foreign exchange and gain on disposal of property, plant and equipment.
Segmented EBITDA is based upon the same calculation for defined business
segments, which are comprised of Canadian Operations, U.S. Operations, Product
Sales and Corporate.
Funds from operations are cash flow from operating activities excluding changes
in working capital and share-based payments. It is a supplemental measure to
gauge performance of the Company before non-cash items. Working capital is
calculated as current assets minus current liabilities. Working capital, cash
forecasting and banking facilities are used by Management to ensure funds are
available to finance growth opportunities.
Annualized return on average total assets for the nine months ended September
30, 2013, is calculated as annualized year-to-date EBITDA divided by the average
of total assets over the fourth quarter of 2012 and the first and second
quarters of 2013, including a three month lag. The three month lag represents
the time between the purchase of capital assets and when they are deployed in
the field and earning revenue.
Funded debt is calculated as bank indebtedness plus current and long-term
portion of debt plus current and long-term portion of finance lease obligations,
less cash.
Reconciliation of EBITDA and Funds from Operations
($000's)
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2013 2012 2013 2012
---------- ---------- ---------- ----------
Net income from continuing
operations 2,373 2,937 3,449 10,832
Add:
Depreciation and amortization 7,259 7,362 23,709 20,618
Loss on disposal of PP&E 162 22 824 46
Loss on disposal of assets held
for sale - - 175 -
Non-controlling interest - 22 - 355
Share-based payments 155 218 438 580
Deferred income tax
(recovery)/expense (808) (528) (1,561) 2,176
Financing fees 88 63 231 179
Interest expense 784 854 2,289 1,936
--------------------- ---------------------
Funds from operations 10,013 10,950 29,554 36,722
--------------------- ---------------------
Add:
(Gain)/loss on foreign exchange (63) 510 (202) 879
Current income tax
expense/(recovery) 627 788 936 1,875
--------------------- ---------------------
Subtotal 10,577 12,248 30,288 39,476
--------------------- ---------------------
Deduct:
Share-based payments 155 218 438 580
--------------------- ---------------------
EBITDA 10,422 12,030 29,850 38,896
--------------------- ---------------------
Reconciliation of quarterly non-IFRS measures
($000's)
Three months ended
(unaudited)
September December
30, June 30, March 31, 31,
2013 2013 2013 2012
---------- ---------- ---------- ----------
Net income/(loss) from cont.
operations 2,373 13 1,063 (3,490)
Add:
Depreciation and amortization 7,259 8,824 7,626 7,667
Loss on disposal of PP&E 162 76 586 226
Loss on disposal of assets held
for sale - 17 158 -
(Gain)/loss on foreign exchange (63) (18) (121) (195)
Current income tax
expense/(recovery) 627 94 216 (13)
Deferred income tax
(recovery)/expense (808) (1,099) 345 (3,804)
Interest expense 784 791 714 739
Restructuring expense - - - 4,129
Impairment loss - - - 2,350
Finance fees 88 71 72 66
---------- ---------- ---------- ----------
EBITDA 10,422 8,769 10,659 7,675
---------- ---------- ---------- ----------
Communications operating loss - - - 679
---------- ---------- ---------- ----------
EBITDA (Adjusted) 10,422 8,769 10,659 8,354
---------- ---------- ---------- ----------
Three months ended
(unaudited)
September December
30, June 30, March 31, 31,
2012 2012 2012 2011
---------- ---------- ---------- ----------
Net income from cont. operations 2,937 2,772 5,123 7,661
Add:
Depreciation and amortization 7,362 7,003 6,253 5,713
Loss/(gain) on disposal of PP&E 22 (11) 35 (96)
Loss/(gain) on foreign exchange 510 (32) 401 52
Non-controlling interest 22 (187) 520 543
Current income tax
expense/(recovery) 788 (104) 1,191 1,177
Deferred income tax
(recovery)/expense (528) 748 1,956 1,499
Interest expense 854 638 444 620
Finance fees 63 58 58 -
---------- ---------- ---------- ----------
EBITDA 12,030 10,885 15,981 17,169
Communications operating loss 610 556 167 213
---------- ---------- ---------- ----------
EBITDA (Adjusted) 12,640 11,441 16,148 17,382
---------- ---------- ---------- ----------
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
Certain statements and information contained in this MD&A constitute
forward-looking statements. More particularly, this MD&A contains
forward-looking statements concerning future capital expenditures of the
Company, debt, dividends, demand for the Company's products and services,
drilling activity in North America, pricing of the Company's products and
services, introduction of new products and services, manufacturing capacity to
meet anticipated demand for the Company's products, and expected exploration and
production industry activity. These statements relate to future events or to the
Company's future financial performance and involve known and unknown risks,
uncertainties and other factors that may cause the Company's actual results,
levels of activity, performance or achievements to be materially different from
future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements.
The use of any of the words "expect", "plan", "continue", "estimate",
"anticipate", "potential", "targeting", "intend", "could", "might", "should",
"believe", "may", "predict", or "will" and similar expressions are intended to
identify forward-looking information or statements. Various assumptions were
used in drawing the conclusions or making the projections contained in the
forward-looking statements throughout this MD&A. The forward-looking information
and statements included in this MD&A are not guarantees of future performance
and should not be unduly relied upon. Forward-looking statements are based on
current expectations, estimates and projections that involve a number of risks
and uncertainties, which could cause actual results to differ materially from
those anticipated and described in the forward-looking statements. Such
information and statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ materially from
those anticipated in such forward-looking information or statements. These
factors include, but are not limited to, such things as the impact of general
industry conditions, fluctuation of commodity prices, industry competition,
availability of qualified personnel and management, stock market volatility and
timely and cost effective access to sufficient capital from internal and
external sources. The risks outlined above should not be construed as
exhaustive. Although management of the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Accordingly,
readers should not place undue reliance upon any of the forward-looking
information set out in this MD&A. All of the forward-looking statements of the
Company contained in this MD&A are expressly qualified, in their entirety, by
this cautionary statement. The various risks to which the Company is exposed are
described in this MD&A under the heading "Risk Factors" above and in additional
detail in the Company's Annual Information Form ("AIF"). Except as required by
law, the Company disclaims any intention or obligation to update or revise any
forward-looking information or statements, whether the result of new
information, future events or otherwise.
This press release shall not constitute an offer to sell, nor the solicitation
of an offer to buy, any securities in the United States, nor shall there be any
sale of securities mentioned in this press release in any state in the United
States in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
THIRD QUARTER EARNINGS CONFERENCE CALL
Strad Energy Services Ltd. has scheduled a conference call to begin promptly at
8:00 a.m. MT (10:00 am. ET) on Wednesday, November 6, 2013.
The conference call dial in number is 1-800-565-0813
The conference call will also be accessible via webcast at www.stradenergy.com
A replay of the call will be available approximately one hour after the
conference call ends until Wednesday, November 13th, 2013, at 11:59pm ET. To
access the replay, call 1-800-408-3053, followed by pass code 7220278.
Strad Energy Services Ltd.
Interim Consolidated Statement of Financial Position
(Unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(in thousands of Canadian As at September 30, As at December 31,
dollars) 2013 2012
$ $
Assets
Current assets
Trade receivables 35,631 33,418
Inventories 6,888 12,022
Prepaids and deposits 1,774 2,379
Current portion of notes
receivable 690 665
Income taxes receivable 318 1,526
------------------------------------------
45,301 50,010
Assets held for sale 2,690 4,728
Non-current assets
Property, plant and equipment 139,660 157,042
Intangible assets 2,237 2,721
Notes receivable 208 729
Goodwill 17,277 17,277
Deferred income tax assets 75 198
------------------------------------------
Total assets 207,448 232,705
------------------------------------------
Liabilities
Current liabilities
Bank indebtedness 4,079 2,488
Accounts payable and accrued
liabilities 20,548 24,244
Deferred revenue 1465 160
Current portion of obligations
under finance lease 2,374 2,735
Note payable 1,029 1,492
Dividend payable 2,050 2,050
Restructuring provision 544 3,813
-------------------------------------------
32,089 36,982
Non-current liabilities
Long-term debt 39,000 55,500
Obligations under finance lease 777 2,285
Deferred income tax liabilities 7,787 9,279
-------------------------------------------
Total liabilities 79,653 104,046
Equity
Share capital 117,840 117,462
Contributed surplus 11,469 11,016
Accumulated other comprehensive
loss (449) (1,451)
Retained (deficit) earnings (1,065) 1,632
------------------------------------------
Total equity 127,795 128,659
------------------------------------------
Total liabilities and equity 207,448 232,705
------------------------------------------
Strad Energy Services Ltd.
Interim Consolidated Statement of Income
For the three and nine months ended September 30, 2013 and 2012
(Unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(in thousands of Canadian dollars, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Continuing operations
Revenue 47,425 51,094 141,724 161,699
Expenses
Operating expenses 29,703 30,796 89,823 97,655
Depreciation 7,025 6,952 22,755 19,477
Amortization of intangible assets 234 410 954 1,141
Selling, general and administration 7,145 8,050 21,613 24,568
Share-based payments 155 218 438 580
Loss on disposal of property, plant
and equipment 162 22 824 46
Foreign exchange (gain) loss (63) 510 (202) 879
Finance fees 88 63 231 179
Interest expense 784 854 2,289 1,936
Loss on assets held for sale - - 175 -
-----------------------------------------
Income before income tax from
continuing operations 2,192 3,219 2,824 15,238
Income tax (recovery) expense (181) 260 (625) 4,051
-----------------------------------------
Net income from continuing
operations for the period 2,373 2,959 3,449 11,187
-----------------------------------------
Income from discontinued
operations, net of tax - - - 437
-----------------------------------------
Net income for the period 2,373 2,959 3,449 11,624
-----------------------------------------
Net income attributable to:
Owners of the parent 2,373 2,937 3,449 11,269
Non-controlling interests - 22 - 355
-----------------------------------------
2,373 2,959 3,449 11,624
-----------------------------------------
Earnings per share from continuing
operations attributable to the
equity owners of the Company:
Basic $ 0.06 $ 0.08 $ 0.09 $ 0.30
Diluted $ 0.06 $ 0.08 $ 0.09 $ 0.29
Earnings per share from
discontinued operations
attributable to the equity owners
of the Company:
Basic $ 0.00 $ 0.00 $ 0.00 $ 0.01
Diluted $ 0.00 $ 0.00 $ 0.00 $ 0.01
Earnings per share from total
operations attributable to the
equity owners of the Company:
Basic $ 0.06 $ 0.08 $ 0.09 $ 0.31
Diluted $ 0.06 $ 0.08 $ 0.09 $ 0.30
Strad Energy Services Ltd.
Interim Consolidated Statement of Comprehensive Income
For the three and nine months ended September 30, 2013 and 2012
(Unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(in thousands of Canadian dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
$ $ $ $
Net income for the period 2,373 2,959 3,449 11,624
-------------------------------------------
Other comprehensive (loss)
incomeItems that may be
reclassified subsequently to net
income
Cumulative translation adjustment (766) (1,002) 1,002 (1,171)
-------------------------------------------
Total other comprehensive (loss) ) ) )
income (766 (1,002 1,002 (1,171
-------------------------------------------
Comprehensive income for the
period 1,607 1,957 4,451 10,453
-------------------------------------------
Comprehensive income
attributable to:
Owners of the parent 1,607 1,935 4,451 10,098
Non-controlling interests - 22 - 355
-------------------------------------------
1,607 1,957 4,451 10,453
-------------------------------------------
Strad Energy Services Ltd.
Interim Consolidated Statement of Cash Flow
For the nine months ended September 30, 2013 and 2012
(Unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(in thousands of Canadian dollars)
2013 2012
Cash flow provided by (used in) $ $
Operating activities
Net income for the period 3,449 11,624
Adjustments for items not affecting cash:
Depreciation and amortization 23,709 20,618
Deferred income tax (recovery) expense (1,561) 2,176
Share-based payments (net of cash
settlement on stock option exercises) 399 383
Interest expense and finance fees 2,520 2,115
Loss on disposal of property, plant and
equipment 824 46
Loss on sale of investment in subsidiary - 441
Loss on assets held for sale 175 -
Changes in items of non-cash working
capital 3,453 1,457
---------------------------------
Net cash generated from operating
activities 32,968 38,860
---------------------------------
Investing activities
Purchase of property, plant and equipment (4,944) (53,451)
Proceeds from sale of property, plant and
equipment 1,574 1,060
Purchase of intangible assets (463) (1,355)
Proceeds on sale of subsidiaries - 7,129
Purchase of assets held for sale (125) (2,094)
Proceeds from sale of assets held for sale 1,876 -
Purchase of non-controlling interest - (4,627)
Changes in items of non-cash working
capital (4,565) (5,521)
---------------------------------
Net cash (used) in investing activities (6,647) (58,859)
---------------------------------
Financing activities
Proceeds on issuance of long-term debt 2,000 33,000
Repayment of long-term debt (18,500) (3,000)
Repayment of finance lease obligations
(net) (1,869) (3,199)
Issue of share capital - 24
Issue of shareholder loan (net of
repayments) 378 (308)
Interest expense and finance fees (2,520) (2,115)
Payment of dividends (6,146) (2,049)
Changes in items of non-cash working
capital 219 (242)
---------------------------------
Net cash (used) generated from financing
activities (26,438) 22,111
---------------------------------
Effect of exchange rate changes on cash and
cash equivalents (1,474) 148
---------------------------------
(Decrease) increase in cash and cash
equivalents (1,591) 2,260
---------------------------------
Cash and cash equivalents (including bank
indebtedness) - beginning of year (2,488) (5,570)
---------------------------------
Cash and cash equivalents (including bank
indebtedness) - end of period (4,079) (3,310)
---------------------------------
Cash and cash equivalents - included in
liabilities of disposal group - (205)
---------------------------------
Cash and cash equivalents (including bank
indebtedness) - end of period (4,079) (3,515)
---------------------------------
Cash paid for income tax 1,290 5,521
---------------------------------
Cash paid for interest 2,106 2,191
---------------------------------
ABOUT STRAD ENERGY SERVICES LTD.
Strad is a North American energy services company that focuses on providing
well-site infrastructure solutions to the oil and natural gas industry. Strad
focuses on providing complete customer solutions in well-site-related oilfield
equipment for producers active in unconventional resource plays.
Strad is headquartered in Calgary, Alberta, Canada. Strad is listed on the
Toronto Stock Exchange under the trading symbol "SDY".
FOR FURTHER INFORMATION PLEASE CONTACT:
Strad Energy Services Ltd.
Andy Pernal
President and Chief Executive Officer
(403) 775-9202
(403) 232-6901 (FAX)
apernal@stradenergy.com
Strad Energy Services Ltd.
Greg Duerr
Chief Financial Officer
(403) 705-4333
(403) 232-6901 (FAX)
gduerr@stradenergy.com
www.stradenergy.com
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