Trican Well Service Ltd. Q1 2014 Update and Outlook
CALGARY, ALBERTA--(Marketwired - Mar 31, 2014) - Trican Well
Service Ltd. ("Trican", the "Company", "we" or "our") (TSX:TCW)
anticipates that consolidated financial results for the first
quarter of 2014 will be negatively impacted by pricing pressure and
cost inflation in Canada and unfavorable weather conditions in the
United States.
We estimate consolidated operating income* for the first quarter
of 2014 to be between $30 million and $40 million. This estimate is
subject to completion of our first quarter interim financial
report, which we expect to release on May 7, 2014. Our Audit
Committee has reviewed the financial outlook and information
provided in this document.
Canadian Operations
We expect first quarter 2014 Canadian operating income to be up
slightly compared to the fourth quarter of 2013 on higher revenue
and activity levels, offset partially by lower operating margins.
Canadian financial results for the first quarter of 2014 are
expected to be negatively impacted by continued pricing pressure in
the region. Equipment utilization has been very strong throughout
the first quarter; however, lower pricing experienced at the end of
the fourth quarter in 2013 has been carried throughout all of the
first quarter of 2014. As a result, first quarter Canadian pricing
is expected to be down slightly on a sequential basis.
Additionally, cost increases for fuel and third party hauling
are expected to have a negative impact on first quarter Canadian
operating margins. As a percentage of revenue, fuel and third party
hauling expenses are consistent with the fourth quarter of 2013,
but are up substantially compared to the first quarter of 2013. A
weaker Canadian dollar, both sequentially and year-over-year, is
also expected to have a negative impact on operating margins as a
portion of our Canadian materials and operating costs are incurred
in U.S. dollars.
Despite the disappointing first quarter results in Canada, our
outlook for this region remains positive. Cash flows for our
customers are expected to increase due to higher commodity prices
combined with a strengthening U.S. dollar, which we expect will
lead to higher year-over-year activity in the second half of 2014.
With strong Canadian activity levels anticipated for the second
half of 2014, we expect to implement a pricing increase in the
second quarter that will be phased in for third quarter work
programs. Rising costs combined with lower pricing have led to
Canadian financial results that are below our return on capital
targets and we believe that a price increase is needed and
justified given the current operating environment in Canada.
US Operations
Weather related operational delays for our U.S. fracturing crews
in the Marcellus, Oklahoma and Permian regions negatively impacted
equipment utilization and financial results for January and
February. Despite these delays, first quarter U.S. financial
results are expected to increase sequentially due to utilization
improvements across several of our U.S. regions; however, operating
income, while improved relative to the fourth quarter of 2013, is
still expected to be slightly negative. Activity and utilization
for March has been strong for our U.S. operations and we believe
this indicates improving fundamentals for this region. We have also
seen operational improvements for our U.S. business during the
first quarter that are positively impacting our U.S. equipment
utilization. As a result, we expect to see sequential improvements
in U.S. operating margins throughout 2014.
International Operations
Russia and Kazakhstan comprise the majority of our international
results, and financial results for the first quarter of 2014 are
projected to meet expectations. As expected, activity in Russia has
been negatively impacted by cold weather throughout most of January
and February; however, first quarter Russian financial results are
expected to be consistent with the first quarter of 2013. In
addition, first quarter international results are expected to be
negatively impacted by start-up costs in Saudi Arabia and Colombia
as we will not be completing our first jobs in these regions until
early in the second quarter. We have been awarded contracts in
these regions and will be looking to add additional contracts as
the year progresses.
* Operating income is a measure that is not recognized under
International Financial Reporting Standards (IFRS). Management of
Trican believes that operating income is a useful supplemental
measure. Operating income provides investors with an indication of
earnings before depreciation, foreign exchange, other income
(loss), taxes and interest. Investors should be cautioned that
operating income should not be construed as an alternative to net
income (loss) and cash flow from operations determined in
accordance with IFRS as an indicator of Trican's performance.
Trican's method of calculating operating income may differ from
that of other companies and accordingly may not be comparable to
measures used by other companies.
FORWARD-LOOKING INFORMATION
This document contains certain forward-looking information and
financial outlook or future orientated financial information based
on Trican's current expectations, estimates, projections and
assumptions that were made by the Company in light of information
available at the time the statement was made. Forward-looking
information and financial outlook or future orientated financial
information that address expectations or projections about the
future, and other statements and information about the Company's
strategy for growth, expected and future expenditures, costs,
operating and financial results, future financing and capital
activities are forward-looking statements. Some forward-looking
information and financial outlook or future orientated financial
information are identified by the use of terms and phrases such as
"anticipate," "achieve", "achievable," "believe," "estimate,"
"expect," "intention", "plan", "planned", and other similar terms
and phrases. This forward-looking information and financial outlook
or future orientated financial information speak only as of the
date of this document, other than the update in respect of our
first quarter earnings per share and operating income that will be
provided upon the release of our complete financial results for the
first quarter of 2014, and we do not undertake to publicly update
this forward-looking information and financial outlook or future
orientated financial information except in accordance with
applicable securities laws. This forward-looking information and
financial outlook or future orientated financial information
includes, among others:
- The expectation that consolidated financial results for the
first quarter of 2014 will be negatively impacted by pricing
pressure and cost inflation in Canada and unfavorable weather
conditions in the United States;
- The expectation that consolidated operating income for the
first quarter of 2014 will be between $30 million and $40
million;
- The expectation that our first quarter interim financial report
will be released on May 7, 2014;
- The expectation that first quarter 2014 Canadian operating
income will be up slightly compared to the fourth quarter of 2013
on higher revenue and activity levels, offset partially by lower
operating margins;
- The expectation that Canadian financial results for the first
quarter of 2014 will be negatively impacted by continued pricing
pressure in the region;
- The expectation that first quarter Canadian pricing will be
down slightly on a sequential basis;
- The expectation that cost increases for fuel and third party
hauling will have a negative impact on first quarter Canadian
operating margins;
- The expectation that a weaker Canadian dollar, both
sequentially and year-over-year, will have a negative impact on
Canadian operating margins;
- The expectation that cash flows for our customers will increase
due to higher commodity prices combined with a strengthening U.S.
dollar;
- The expectation that higher cash flows for our Canadian
customers will lead to higher year-over-year Canadian activity in
the second half of 2014;
- The expectation that we will implement a pricing increase in
the second quarter that will be phased in for third quarter work
programs;
- The belief that a price increase is needed and justified given
the current operating environment in Canada;
- The expectation that, despite weather-related delays, first
quarter U.S. financial results will increase sequentially due to
utilization improvements across several of our U.S. regions;
- The expectation that U.S. operating income, while improved
relative to the fourth quarter of 2013, will be slightly
negative;
- The belief that strong activity and utilization for our U.S.
operations in March indicates improving fundamentals for this
region;
- The expectations that in U.S. operating margins will improve
sequentially throughout 2014;
- The expectation that financial results for our Russian and
Kazakhstan regions will meet expectations;
- The expectation that Russian financial results will be
consistent with the first quarter of 2013;
- The expectation that first quarter international results will
be negatively impacted by start-up costs in Saudi Arabia and
Colombia as we will not be completing our first jobs in these
regions until early in the second quarter;
- The intention to add contracts in Saudi Arabia and Colombia as
the year progresses.
Forward-looking information and financial outlook or future
orientated financial information is based on current expectations,
estimates, projections and assumptions, which we believe are
reasonable but which may prove to be incorrect. Trican's actual
results may differ materially from those expressed or implied and
therefore such forward-looking information and financial outlook or
future orientated financial information should not be unduly relied
upon. In addition to other factors and assumptions which may be
identified in this document, assumptions have been made regarding,
among other things: industry activity; the general stability of the
economic and political environment; effect of market conditions on
demand for the Company's products and services; the ability to
obtain qualified staff, equipment and services in a timely and cost
efficient manner; the ability to operate its business in a safe,
efficient and effective manner; the performance and characteristics
of various business segments; the effect of current plans; the
timing and costs of capital expenditures; future oil and natural
gas prices; currency, exchange and interest rates; the regulatory
framework regarding royalties, taxes and environmental matters in
the jurisdictions in which the Company operates; and the ability of
the Company to successfully market its products and services.
Forward-looking information and financial outlook or future
orientated financial information is subject to a number of risks
and uncertainties, which could cause actual results to differ
materially from those anticipated. These risks and uncertainties
include: fluctuating prices for crude oil and natural gas; changes
in drilling activity; general global economic, political and
business conditions; weather conditions; regulatory changes; the
successful exploitation and integration of technology; customer
acceptance of technology; success in obtaining issued patents; the
potential development of competing technologies by market
competitors; and availability of products, qualified personnel,
manufacturing capacity and raw materials. The foregoing important
factors are not exhaustive. In addition, actual results could
differ materially from those anticipated in forward-looking
information and financial outlook or future orientated financial
information provided herein as a result of the risk factors set
forth under the section entitled "Risks Factors" in our Annual
Information Form dated March 21, 2014. Readers are also referred to
the risk factors and assumptions described in other documents filed
by the Company from time to time with securities regulatory
authorities.
Any financial outlook or future oriented financial information
in this document, as defined by applicable securities legislation,
has been approved by management. Such financial outlook or future
oriented financial information is based on assumptions that
management believes to be reasonable under the circumstances and is
provided for the purpose of providing information about
management's current expectations and plans relating to the future.
Readers are cautioned that reliance on such information may not be
appropriate for other purposes.
Additional information regarding Trican including Trican's most
recent annual information form is available under Trican's profile
on SEDAR (www.sedar.com).
Headquartered in Calgary, Alberta, Trican has operations in
Canada, the United States, Russia, Kazakhstan, Australia, Algeria,
Norway, Colombia and Saudi Arabia. Trican provides a comprehensive
array of specialized products, equipment and services that are used
during the exploration and development of oil and gas reserves.
Requests for shareholder information should be directed
to:Trican Well Service Ltd.Dale DusterhoftChief Executive
Officerddusterhoft@trican.caTrican Well Service Ltd.Michael
BaldwinSenior Vice President, Finance &
CFOmbaldwin@trican.caTrican Well Service Ltd.Gary SummachDirector
of Reporting and Investor Relationsgsummach@trican.caTrican Well
Service Ltd.2900, 645 - 7th Avenue S.W.Calgary, Alberta T2P
4G8(403) 266 - 0202(403) 237 - 7716www.trican.ca
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