Hanwei Energy Services Reports Year End Fiscal 2021 Financial and Operational Results
June 28 2021 - 6:36PM
Hanwei Energy Services Corp. (TSX: HE) (“Hanwei”
or the “Company”), today reported its financial results for the
year ended March 31, 2021 (the “2021 Fiscal Year”). All amounts are
in Canadian Dollars unless otherwise noted.
Update on COVID-19 Impact
As COVID-19 vaccination programs continue to be
implemented in Canada and around the world oil prices have
continued to increase. To the extent that the COVID-19 pandemic
negatively impacts demand, and OPEC members and other oil exporting
nations fail to implement production cuts or other actions that are
sufficient to stabilize commodity prices, there may be volatility
in crude oil prices despite the recent increase in prices over the
last nine months. The COVID-19 situation remains dynamic due in
part to new variants of the virus, and the ultimate duration and
magnitude of the impact on the economy and the financial effect on
the Company is not known at this time.
Financial and Operating
Update
Hanwei's principal business operations are in
two segments of the oil and gas industry as an operator and
developer of its own oil and gas assets in Canada and as a
specialized pipe supplier to the industry, both in Canada and
internationally. For the financial year ended March 31, 2021, a
summary of the Company’s annual financial results are as
follows:
Summary of the 2021 Fiscal Year Financial Results from
Continuing Operations |
in thousands of
CDN$ except percentages and per share data |
|
FY2021 |
FY2020 |
|
Pipe |
Oil & Gas |
Corporate |
Total |
|
Pipe |
Oil & Gas |
Corporate |
Total |
Revenue |
8,343 |
1,202 |
- |
9,545 |
|
8,310 |
1,986 |
- |
10,296 |
Adjusted EBITDA |
795 |
(641) |
(630) |
(476) |
|
759 |
(967) |
(696) |
(904) |
Adjusted EBITDA Margin |
10% |
-53% |
n/a |
-5% |
|
9% |
-49% |
n/a |
-9% |
Adjusted EBITDA per share |
0.00 |
(0.00) |
(0.00) |
(0.00) |
|
0.00 |
(0.00) |
(0.00) |
(0.00) |
Net Income (loss) |
508 |
(4,256) |
(1,150) |
(4,898) |
|
777 |
(3,310) |
(935) |
(5,022) |
Diluted EPS(Basic and
diluted) |
0.00 |
(0.02) |
(0.01) |
(0.03) |
|
0.00 |
(0.02) |
(0.01) |
(0.03) |
Weighted average
number of outstanding shares |
Basic |
194,201,234 |
|
|
|
Basic |
194,201,234 |
|
|
|
Diluted |
194,201,234 |
|
|
|
Diluted |
194,201,234 |
- The Company’s
revenues for the year ended March 31, 2021 totalled approximately
$9.55 million as compared to $10.30 million for the prior year. The
$0.75 million and 8% decrease in revenues was a result of a $0.78
million decrease in oil and gas revenue in Canada primarily due to
lower commodity prices, partially offset by the minor increase in
FRP pipe sales driven by the Company’s China market.
- FRP pipe sales for the year ended March
31, 2021 totalled $8.34 million as compared to $8.31 million for
the prior year. All the sales in the period were contributed by the
Company’s Chinese market.
- FRP pipe sales from the Company’s
Canadian market and other countries was nil for the year ended
March 31, 2021 as compared to $0.3 million in the prior year. The
Canadian market has experienced a significant drop in activity in
the oil and gas industry due to COVID-19, and the general fall in
oil pricing in 2020 significantly restricted capital programs by
end users in this market. The Company is currently reviewing its
Canadian market programs and potential enhancements to its
distribution activities so as to improve sales once the oil and gas
industry in western Canada improves.
- The Company’s oil
and gas business unit generated revenues net of royalties of $1.03
million and net back of $54,000, equivalent to gross revenue of
$44.40 per boe with a netback of $2.00 per boe (or a netback margin
of 5%) for the year ended March 31, 2021. For the year ended March
31, 2020, the Company generated revenues net of royalties of $1.72
million and net back of $0.2 million, equivalent to gross revenue
of $58.58 per boe with a netback of $6.64 per boe (or a netback
margin of 11%). The decrease in revenues resulted from both reduced
production volumes and lower commodity prices. The lower production
volume was primarily due to the shut-in of certain lower production
wells that were uneconomic to produce at lower crude oil
prices.
- During the year
ended March 31, 2021, the Company produced approximately 74 barrels
of oil equivalent per day (boe/d), including 70 barrels of oil per
day (bbl/d) and 22 mcf of gas per day. The majority of this
production was from the Nisku wells at the Company’s Leduc Lands,
with only nominal production from the Wabamun wells at this
property and the Nevis Lands, and with no production from the
Entice Lands. For the year ended March 31, 2020, the Company
produced approximately 93 barrels of oil equivalent per day
(boe/d), including 89 bbl/d of oil and 21 mcf/d of gas.
- Adjusted EBITDA
from continuing operations for the year ended March 31, 2021
totalled approximately negative $0.48 million as compared to
Adjusted EBITDA of negative $0.90 million for the prior year. The
improvement of $$0.42 million was due to the reduction of operating
expenses.
- The Company had a
loss from continuing operations of $4.90 million for the year ended
March 31, 2021, which included a write-down of oil and gas assets
in the amount of $2.91 million, as compared to a loss from
continuing operations of $5.02 million for the prior year, which
included a write-down of oil and gas assets in the amount of $1.38
million. Except for effect of the write-down of oil and gas assets,
the decrease of $1.65 million in loss from continuing operations
was primarily driven by the decrease in operating expenses offset
by the oil and gas revenue decline.
Oil and Gas Reserves
- The oil and gas
reserves of the Company as of March 31, 2021 were evaluated by
Trimble Engineering Associates Ltd. (“Trimble”), an independent
qualified reserves evaluator, as set out in their report dated
April 26, 2021 (the “2021 Reserves Report”). The Company’s prior
year oil and gas reserves as of March 31, 2020 were also evaluated
by Trimble as set out in their report dated May 11, 2020 (the “2020
Reserves Report”).
- The following table
provides a comparison of the 2021 Reserves Report to the 2020
Reserves Report and the “Proved” and “Proved Plus Probable”
remaining reserves of the Company’s PNG Properties on a gross
(before royalties) and net (after royalties) basis together with
the net present values at various discount rates on an after tax
basis. Both the remaining reserves and the net present value of the
Company’s reserves decreased for both Proved and Proved Plus
Probable and it should be noted that:
- The Entice Lands being shut-in (with no
current economically viable solution for gas handling to allow for
production) and the Nevis Lands (having only minor and nominal
production) were each not included in the 2021 Reserves
Report.
- No gas reserves are included since all
gas at the Company’s Leduc Lands is re-injected and is not for
sale
- The Company’s restrained capital
spending program did not substantiate any additional oil production
or reserves.
|
Remaining Reserves |
|
Net Present Values After Tax |
Mboe; After Tax (M$) |
Gross |
Company |
Company |
|
@ 0% |
@ 5.0% |
@ 10.0% |
@ 15.0% |
@ 20.0% |
|
100% |
Gross |
Net |
|
M$ |
M$ |
M$ |
M$ |
M$ |
2021 Reserves
Report |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Proved |
204 |
|
204 |
|
177 |
|
|
3,754 |
|
3,178 |
|
2,727 |
|
2,372 |
|
2,090 |
|
Total Proved + Probable |
659 |
|
659 |
|
595 |
|
|
9,243 |
|
7,330 |
|
5,860 |
|
4,719 |
|
3,822 |
|
2020 Reserves
Report |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Proved |
702 |
|
702 |
|
591 |
|
|
14,221 |
|
9,410 |
|
6,734 |
|
5,078 |
|
3,968 |
|
Total Proved + Probable |
1,300 |
|
1,300 |
|
1,128 |
|
|
24,038 |
|
14,756 |
|
10,044 |
|
7,232 |
|
5,376 |
|
Variance |
|
|
|
|
|
|
|
|
|
Total Proved |
(498 |
) |
(498 |
) |
(413 |
) |
|
(10,467 |
) |
(6,232 |
) |
(4,007 |
) |
(2,706 |
) |
(1,878 |
) |
YoY Variance % |
-70.9 |
% |
-70.9 |
% |
-70.0 |
% |
|
-73.6 |
% |
-66.2 |
% |
-59.5 |
% |
-53.3 |
% |
-47.3 |
% |
|
|
|
|
|
|
|
|
|
|
Total Proved + Probable |
(641 |
) |
(641 |
) |
(532 |
) |
|
(14,796 |
) |
(7,426 |
) |
(4,184 |
) |
(2,513 |
) |
(1,555 |
) |
YoY Variance % |
-49.3 |
% |
-49.3 |
% |
-47.2 |
% |
|
-61.5 |
% |
-50.3 |
% |
-41.7 |
% |
-34.8 |
% |
-28.9 |
% |
-
For disclosure relating to the oil and gas reserves attributable to
Hanwei as of March 31, 2021, please see Hanwei's Form 51–101F1 –
Statement of Reserves Data and other Oil and Gas Information of
Hanwei Energy Services Corp., Hanwei's Form 51–101F2 – Report of
Reserves Data by Independent Qualified Reserves Evaluator or
Auditor and Hanwei's Form 51–101F3 – Report of Management and
Directors on Reserves Data and Other Information, all of which can
be found on SEDAR at www.sedar.com under Hanwei's profile.
Update On Management Changes
Mr Graham Kwan will step down from his
management responsibilities with the Company as its Executive
Vice-President, Strategic Development and Corporate Affairs, and
has resigned as its Corporate Secretary and as a Director of the
Company effective June 30, 2021. The Company would like to thank
Mr. Kwan for his contributions to the Company and wishes him
success in his future endeavours.
About Hanwei Energy Services
Corp.
Hanwei Energy Services Corp.’s principal
business operations are in two segments of the oil and gas industry
as both an equipment supplier to the industry (as a manufacturer of
high pressure, fiberglass reinforced plastic (“FRP”) pipe products
serving energy customers in the global energy market) and as an oil
and gas producer with properties in Alberta.
For more information, please contact:
Mary MaChief Financial
Officer604-685-2239mma@hanweienergy.com
Neither the TSX nor its Regulation Services Provider (as that
term is defined in the policies of the TSX) accepts responsibility
for the adequacy or accuracy of this release.
FORWARD-LOOKING INFORMATION
Certain information in this press release is
forward-looking within the meaning of certain securities laws, and
is subject to important risks, uncertainties and assumptions a
description of which is set out in the risk factors section of the
Company’s Annual Information Form dated June 18, 2020 and
Management Discussion and Analysis for the year ended March 31,
2020 both of which are filed with Canadian securities regulators
and available on SEDAR at www.sedar.com. The forward-looking
information in this press release describes the Company’s
expectations as of the date of this press release.
THE FORWARD-LOOKING INFORMATION CONTAINED IN
THIS PRESS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF
THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO
CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE
ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS
INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO,
THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY
PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES
LEGISLATION.
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