CanElson Announces Third Quarter Financial Results, Initial 2014 Capital Program and Declares Third Quarter Dividend
November 07 2013 - 6:30AM
Marketwired Canada
CanElson Drilling Inc. (TSX:CDI) today announced the financial results for the
third quarter ending September 30, 2013 compared to a year earlier. CanElson
also announced its initial 2014 capital program and declared a third quarter
dividend of $0.06 per share.
THIRD QUARTER 2013 SUMMARY (compared with a year earlier)
-- Services revenue $66.2 million, up 17% from $56.7 million
-- EBITDA $23.1 million, up 5% from $22.1 million
-- Income attributable to shareholders of the Corporation $9.8 million,
down 4% from $10.2 million
-- EPS (diluted) $0.12, down 8% from $0.13
-- Weighted average diluted shares outstanding 84.2 million, up 10% from
76.3 million
-- Declared third quarter dividend of $0.06 per share, up 20% from $0.05
NINE MONTHS ENDED 2013 SUMMARY (compared with a year earlier)
-- Services revenue $175.9 million, up 15% from $153.1 million
-- EBITDA $59.6 million, up 1% from $58.8 million
-- Income attributable to shareholders of the Corporation $24.9 million,
down 16% from $29.7 million
-- EPS (diluted) $0.31, down 21% from $0.39
-- Weighted average diluted shares outstanding 79.9 million, up 6% from
75.2 million
Notably, CanElson's US utilization for the third quarter increased to 81% from
79% during the same period of 2012 even though the overall US rig count was down
approximately 7% at September 30, 2013 relative to September 30, 2012 (source:
Baker Hughes). CanElson's Canadian utilization rate in the third quarter of 2013
was 55% (2012: 62%), which exceeded the industry average of 41%. Overall,
CanElson's utilization was 65% during the third quarter of 2013, which was down
slightly compared to third quarter 2012 levels of 68%.
For the first nine months ended September 30, 2013, CanElson's US year-to-date
utilization was 82% (2012: 79%), even though the overall US rig count was down
approximately 10% for the nine months ended September 30, 2013 relative to
September 30, 2012 (source: Baker Hughes). CanElson's Canadian utilization rate
was 48% (2012: 52%), or 1.17 times the industry average (2012: 1.22 times the
industry average). Overall, CanElson's utilization for the first nine months of
2013 was similar to 2012 levels at 62%.
"Despite the relatively flat drilling rig counts in North America, we continue
to increase our market share in both Canada and the United States which is a
reflection of our efficiencies in the drilling process and our modern drilling
fleet," stated Randy Hawkings, President and CEO of CanElson.
Fleet deployment (by rigs and jurisdiction)
North Mexico Mexico
Canada Texas Dakota Drilling Service Total
----------------------------------------------------------------------------
At
September 26 (net 12 (net
30, 2013 24.5) 10.5) 5 2 (net 1.0) 2 (net 1) 47 (net 42)
At December 23 (net 10 (net 40 (net
31, 2012 22.5) 8.5) 4 1 (net 0.5) 2 (net 1) 36.5)
----------------------------------------------------------------------------
Change % 13% 20% 25% 100% Unchanged 18%
----------------------------------------------------------------------------
Gross fleet deployment (by % and jurisdiction)
North Mexico Mexico
Canada Texas Dakota Drilling Service Total
----------------------------------------------------------------------------
At September 30,
2013 55% 26% 11% 4% 4% 100%
At December 31,
2012 57% 25% 10% 3% 5% 100%
----------------------------------------------------------------------------
CanGas Solutions Inc. ("CanGas")
We acquired CanGas on May 14, 2012 to build an innovative solutions-focused
business to assist clients in displacing high cost diesel and other fuels with
more economical and environmentally friendly compressed natural gas ("CNG").
While we have continued to build our ability to displace high cost diesel on our
own drilling rig fleet, interest in CanGas' services has grown. At this point
CanElson related revenues amount to only a quarter of CanGas' overall revenues.
To fund further growth for CanGas, CanElson is seeking external capital for
CanGas' 2014 growth plans. This process will likely result in CanGas becoming a
strategic investment, as compared to a wholly-owned subsidiary of CanElson.
We believe continuing to hold a strategic investment for CanGas will provide our
shareholders with the continued opportunity to participate in the development of
a new, high potential oilfield service opportunity which complements our core
business.
Our assessment of CanGas' future growth prospects is based on a recent increase
in the demand for and interest in CanGas' services, environmental trends to
reduce greenhouse gas emissions and waste, as well as the cost savings available
from the substitution of diesel for less expensive natural gas.
OUTLOOK
Drilling Services
During the third quarter of 2013, CanElson was able to maintain consolidated
activity levels, even though Canadian and US drilling services markets
experienced continued subdued markets due to weather delays and overall market
slowness. We believe that our strategy and key drivers have uniquely positioned
us to sustain relatively strong profitability during the full drilling industry
cycle. The strategy and key drivers for our relative industry strength,
profitability, and historically top quartile financial results are:
1. Strategically diversified operations in oil-weighted regions within two
balanced geographical segments that provide diversity of earnings and
less seasonality while maintaining focus and operational efficiency.
2. Standardized deep, modern rigs (average age of approximately 5 years and
average vertical rating of approximately 4,000 metres) allowing us to
outperform peers when considering the total costs of safely drilling
wells.
3. A problem-solving culture as evidenced by our ability to service our
customers with performance drilling and innovative cost saving
initiatives such as our natural gas fuel and flare gas initiative with
CanGas.
4. A history of developing mutually-beneficial partnerships and strong
client relationships with First Nations organizations, oil and gas
operators and our Mexican joint venture, the latter of which leverages
our joint venture partner's established Mexican footprint.
5. Prudent financial management which allows the Company to be
opportunistic at any point in the economic cycle.
6. Operational excellence based on a culture of safety, as reflected by
superior drilling industry safety performance relative to benchmarks
from third party sources, such as provincial and state workers'
compensation boards and private insurance providers.
Efficiency and Opportunity
The North American land drilling rig markets are currently characterized by
relatively flat land drilling rig counts as customers continue to be prudent
with their capital programs. The primary challenge facing our customers within
the horizontal drilling movement is high well costs. In this relatively flat
land drilling rig market, market divergence is being driven as much by
efficiency in the drilling process as it is by modernization of the land
drilling rig fleet. It is our belief that drilling contractors providing an
efficiency solution rather than a rig rental will have the most profitable
opportunities. Therefore, while we continue to offer our customers a high
quality rig, we are seeing incremental demand being driven from those operators
looking for assistance in reducing drilling and related well costs. This
reduction in drilling costs does not necessarily correspond to a lower revenue
rate for the drilling contractor, but instead focuses on the contractor's
ability to minimize non-productive time and maximize performance while drilling.
Currently, a large majority of our new rig contract opportunities are being
driven by our historical performance combined with our ability to identify cost
saving opportunities in the drilling process. As a result, we continue to invest
in personnel and customer relationships that allow us to assist in the drilling
optimization process. This is expected to result in new opportunities that
leverage some of our existing operations to participate in new geographical
areas of activity.
Canada
Our customers in Canada are cautious with respect to their current capital
spending programs, but appear to be increasingly optimistic towards increased
spending levels for 2014. Additionally, with potentially large field
developments as a result of proposed west coast LNG terminals there may be
significant incremental investment into the WCSB in 2014 and beyond. Through the
fourth quarter of 2013 and first quarter of 2014, we expect to see stabilizing
revenue rates with small increases primarily resulting from customer requests
for additional equipment upgrades and inflation pressure on wages. We have
recently deployed a new drilling rig into north east British Columbia as this
market continues to grow and offers new opportunities that we expect to benefit
from.
United States - Texas
CanElson has 26% of its fleet focused on oil directed drilling in the Permian
Basin in Texas. During 2013 CanElson continued to expand its fully contracted
fleet in this basin even though the industry-wide rig count in this area has
recently declined due to commodity price volatility. Growth in the area has
largely been the result of our drilling and operating efficiencies. With a
relatively flat drilling rig count, any further growth in the area will be
dependent on our ability to reduce customers' well costs. We anticipate that the
current revenue rates for CanElson's Texas rigs will continue for the balance of
the year. We also expect to achieve capacity utilization in excess of 90% for
2013 and into the first half of 2014 with downtime caused only by rig move
intervals and planned re-certifications of some drilling equipment.
United States - North Dakota
Our customers in North Dakota continue to look for drilling efficiencies. We
expect that the same number of wells will be drilled in 2013 compared to 2012
with fewer rigs being required due to more efficient drilling practices. We do
not anticipate our utilization levels to be significantly impacted, and our
efficiencies have allowed us to transfer an additional drilling rig into the
area.
Mexico
We have demonstrated our ability to successfully do business in Mexico. We
believe our performance in the region and our alignment with an experienced and
strong local partner (Grupo Diavaz, with 40 years of experience serving PEMEX)
provides an excellent opportunity for our joint venture DCM to expand its range
of services, including potentially expanding its drilling rig fleet beyond the
two recently refurbished drilling rigs.
Rig Assembly
Based on existing customer contracts and those being finalized, CanElson's 2013
investment and deployment of new build tele-double's is expected to be as
follows:
-- Rig #38: Expected to be delivered Q4 2013
-- Rig #44: Expected to be delivered Q1 2014
-- Rig #45: Long lead items are expected to be procured in Q4 of 2013 and
Q1 2014
CanGas Solutions Inc.
CanElson is seeking external capital for CanGas' 2014 growth plans. For the
remainder of 2013 we expect to continue investment in our fleet of truck-hauled
CNG delivery trailers and to convert primary diesel engines in our drilling rigs
to bi-fuel capacity based on customer demand. For more information about our
investment plan see the Capital Availability and Capital Program below.
Capital Availability and Capital Investment Program
CanElson is well capitalized to take advantage of strategic opportunities with
$95 million available on existing credit facilities. Funds flow continues to be
strong and fully supports our quarterly dividend rate of $0.06 per share as well
as a majority of the expected 2013 and 2014 capital investment programs, with
the remaining amount being funded through existing credit facilities. Subsequent
to the September 30, 2013 CanElson renewed its credit facility.
CanElson's total 2013 and 2014 capital investment programs are expected to be as
follows:
2014 Capital Program ($34.1 million):
Drilling Services
----------------------------------------------------
Spare
equipment,
Capital Investment facilities & Upgrades &
Program overhead maintenance Expansion Total
----------------------------------------------------------------------------
Total approved 2014
capital projects $ 4.7 $ 21.5 $ 7.9 $ 34.1
----------------------------------------------------------------------------
Our modern standardized fleet allows us to minimize capital investment on
maintenance and spare equipment. As in the past, the Corporation's initial
capital program includes long lead items for incremental rigs and components,
but excludes any fully constructed new rig builds, the latter of which require
long-term committed contracts.
2013 Capital Program ($102.2 million):
Drilling Services
-------------------------------------
Spare
equipment,
Capital facilities
Investment & Upgrades &
Program overhead maintenance Expansion CanGas Total
----------------------------------------------------------------------------
Nine months
ended
September 30,
2013 $ 2.9 $ 11.7 $ 43.1 $ 7.8 $ 65.5
Anticipated
costs to
complete 2013
capital
projects 3.5 5.3 23.7 4.2 36.7
-----------------------------------------------------------
Total approved
costs for 2013
capital projects $ 6.4 $ 17.0 $ 66.8 $ 12.0 $ 102.2
Previously
anticipated
costs for 2013
capital projects
(i) 6.4 14.5 69.4 12.5 102.8
-----------------------------------------------------------
Variance from
previously
anticipated
2013 capital
projects $ - $ 2.5 $ (2.6) $ (0.5) $ (0.6)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Refer to the MD&A dated July 31, 2013.
The 2013 total expected capital investment program of $102.2 million is
relatively consistent with the capital program as previously reported. During
the first nine months of 2013, our expansion capital investment primarily
related to the purchase of three fully crewed drilling rigs from Calmena Energy
Services Inc. for $15 million, expenditures required for the completion and
deployment of Rig #35, Rig #36 and Rig #37 as well as long lead items for Rig
#38 and Rig #44.
Key elements of the remaining 2013 capital program are:
Drilling Services
$32.5 million capital investment allocated as follows:
(1) $18.5 million remaining for the construction and completion of two
contracted tele-doubles with top drives (relating to rigs #38 and #44),
long lead items for one tele-double (rig #45) and $5.2 million of other
growth capital; and
(2) Approximately $8.8 million for spares, shop upgrades and maintenance
capital.
We anticipate $7.1 million of our 2013 capital program will carry over into 2014.
CanGas
$4.2 million capital investment allocated as follows:
(1) Conversion of primary diesel engines on our drilling rigs to bi-fuel
capability to enable the operation on a mixture of natural gas and
diesel fuel;
(2) Expansion of our fleet of truck-hauled natural gas delivery trailers,
compression and conditioning equipment to meet both current and
anticipated demand; and
(3) Collection and leverage of operating data to facilitate greater diesel
fuel displacement and better management of costs.
Primary Corporate Objectives
Looking to the end of 2013 and into 2014, CanElson's primary objective is to
maintain and strengthen its industry leading utilization by consistently
providing operational excellence and drilling efficiencies to its customers.
With this focus, we will be well positioned to obtain strong customer
commitments and capitalize on new opportunities. Subject to obtaining customer
commitments we intend to carry out the following activities that will enhance
our competitive positioning:
-- Continue to expand our standard tele-double fleet
-- Expand our service offering in Mexico
-- Continue to form innovative long-term business relationships
-- Growth through acquisitions
Achieving these objectives will present expanded opportunities for CanElson, its
customers and shareholders.
DIVIDEND
On November 6, 2013, the Board of Directors declared a third quarter dividend of
$0.06 per share for the three month period ended September 30, 2013, payable on
December 6, 2013 to shareholders of record at the close of business on November
27, 2013. The ex-dividend date is November 25, 2013. The dividend is an eligible
dividend for Canadian tax purposes.
FINANCIAL SUMMARY
For the three months ended For the nine months ended
September 30, September 30,
% %
2013 2012 change 2013 2012 change
----------------------------------------------------------------------------
Services revenue $ 66,155 $ 56,717 17% $ 175,931 $153,075 15%
EBITDA (i) $ 23,060 $ 22,054 5% $ 59,551 $ 58,815 1%
Share of profit
unconsolidated
joint venture $ 586 $ 35 1574% $ 1,100 $ 994 11%
Net income
attributable to
shareholders of the
Corporation $ 9,767 $ 10,172 -4% $ 24,972 $ 29,656 -16%
Net income per share
Basic $ 0.12 $ 0.13 -8% $ 0.32 $ 0.40 -20%
Diluted $ 0.12 $ 0.13 -8% $ 0.31 $ 0.39 -21%
Funds flow (i) $ 23,081 $ 21,766 6% $ 58,463 $ 55,113 6%
Gross Margin
(services) (i) $ 28,225 $ 26,025 8% $ 74,201 $ 70,292 6%
Weighted average
diluted shares
outstanding 84,197 76,335 10% 79,857 75,161 6%
----------------------------------------------------------------------------
(Tabular amounts are stated in thousands of Canadian dollars, except per
share amounts and rig operating days)
FINANCIAL STATEMENTS AND MD&A
This is the Corporation's first fiscal year adopting IFRS 11 accounting for
Joint Arrangements. In accordance with IFRS 11 the transition date was January
1, 2013 with retroactive application to January 1, 2012 and, accordingly, the
comparative information for 2012 has been restated to conform to the
requirements of IFRS 11. The application of IFRS 11 has changed the
classification and subsequent accounting of the Corporation's investment in
Diavaz CanElson de Mexico S.A. de C.V. ("DCM"), which was classified as a
jointly controlled entity and previously accounted for using the proportionate
consolidation method. Applying IFRS 11 requires that the Corporation apply
equity accounting for its 50% interest in DCM. Due to the fact that the joint
venture partners have joint control over the relevant activities. Additional
information about the adoption of this standard and the Corporation's IFRSs
accounting policies is discussed in the Accounting Policies and Critical
Estimates section of this MD&A as well as in the notes to the September 30, 2013
condensed consolidated financial statements and the audited December 31, 2012
consolidated financial statements.
CanElson's complete unaudited interim financial results and Management's
Discussion and Analysis (MD&A) for the third quarter ended September 30, 2013
have been filed on SEDAR and posted to the company's website at this link:
http://www.canelsondrilling.com/investor-relations/financial-reports.
FORWARD-LOOKING INFORMATION
This press release contains certain statements or disclosures relating to
CanElson that are based on the expectations of CanElson as well as assumptions
made by and information currently available to CanElson which may constitute
forward-looking information under applicable securities laws. In particular,
this press release contains forward-looking information related to: our belief
that our strategy and key drivers have uniquely positioned us to sustain
relatively strong profitability during the full drilling industry cycle; our
belief that drilling contractors providing a drilling efficiency solution rather
than a rig rental will have the most profitable opportunities; our expectations
that investment in personnel and customer relationships that us to assist in the
drilling optimization process. This is expected to result in new opportunities
that leverage some of our existing operations to participate in new geographic
areas of activity; our expectation that in Canada revenue rates will stabilize
through the fourth quarter of 2013 and first quarter of 2014 with small
increases primarily as a result of customer requests for additional equipment
upgrades and inflation pressure on wages; our expectation that we will benefit
from new opportunities in northeast British Columbia as that market continues to
grow; our expectation that the current revenue rates for CanElson's Texas rigs
will continue for the balance of the year; our expectation that we will achieve
capacity utilization in excess of 90% for 2013 and into the first half of 2014
for our Texas rigs; our expectation that in North Dakota the same number of
wells will be drilled in 2013 compared to 2012 with fewer rigs and our
anticipation that our utilization levels will not be significantly impacted; our
performance and partner relationships in Mexico provides an opportunity for DCM
to expand in the region; expected delivery dates of rigs; our expectation to
continue investment in the fleet of truck hauled CNG delivery trailers and to
convert primary diesel engines in our drilling rigs to bi-fuel capacity;
expectation that funds flow will support our quarterly dividend and a majority
of our capital program; expected 2013 capital programs and anticipated cost to
complete 2013 capital projects; our anticipation that $7.1 million of our 2013
capital program will carry over to 2014; our primary corporate objectives.
Such forward-looking information involves material assumptions and known and
unknown risks and uncertainties, certain of which are beyond CanElson's control.
Many factors could cause the performance or achievement by CanElson to be
materially different from any future results, performance or achievements that
may be expressed or implied by such forward-looking information. CanElson's
Annual Information Form and other documents filed with securities regulatory
authorities (accessible through the SEDAR website at www.sedar.com) describe the
risks, material assumptions and other factors that could influence actual
results and which are incorporated herein by reference. CanElson disclaims any
intention or obligation to publicly update or revise any forward-looking
information, whether as a result of new information, future events or otherwise,
except as may be expressly required by applicable securities laws.
FOR FURTHER INFORMATION PLEASE CONTACT:
CanElson Drilling Inc.
Randy Hawkings
President and CEO
(403) 266-3922
CanElson Drilling Inc.
Robert Skilnick
Chief Financial Officer
(403) 266-3922
www.canelsondrilling.com
Data Communications Mana... (TSX:DCM)
Historical Stock Chart
From Jun 2024 to Jul 2024
Data Communications Mana... (TSX:DCM)
Historical Stock Chart
From Jul 2023 to Jul 2024
