CALGARY, July 31, 2019 /CNW/ - (TSXV: CWC) CWC Energy
Services Corp. ("CWC" or the "Company") announces the release of
its operational and financial results for the three and six months
ended June 30, 2019. The Financial
Statements and Management's Discussion and Analysis ("MD&A")
for the three and six months ended June 30,
2019 are filed on SEDAR at www.sedar.com.
Financial Highlights
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
$ thousands,
except shares, per share
amounts, and margins
|
2019
|
2018
|
Change
%
|
2019
|
2018
|
Change
%
|
|
|
|
|
|
|
|
FINANCIAL
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
Contract
drilling
|
3,388
|
2,824
|
20%
|
12,508
|
14,509
|
(14%)
|
Production
services
|
15,358
|
19,421
|
(21%)
|
37,496
|
56,661
|
(34%)
|
|
18,746
|
22,245
|
(16%)
|
50,004
|
71,170
|
(30%)
|
|
|
|
|
|
|
|
Adjusted EBITDA
(1)
|
115
|
31
|
n/m(2)
|
4,807
|
7,509
|
(36%)
|
Adjusted EBITDA
margin (%) (1)
|
1%
|
0%
|
|
10%
|
11%
|
|
|
|
|
|
|
|
|
Funds from
operations
|
115
|
31
|
n/m(2)
|
4,807
|
7,509
|
(36%)
|
|
|
|
|
|
|
|
Net loss and
comprehensive loss
|
(565)
|
(3,067)
|
(82%)
|
(612)
|
(1,871)
|
(67%)
|
Net loss and
comprehensive loss margin (%)
|
(3%)
|
(14%)
|
(11%)
|
(1%)
|
(3%)
|
(2%)
|
|
|
|
|
|
|
|
Capital
Expenditure
|
1,902
|
6,109
|
(69%)
|
3,196
|
7,074
|
(55%)
|
|
|
|
|
|
|
|
Per share
information:
|
|
|
|
|
|
|
Weighted average
number of shares outstanding – basic and diluted
|
510,978,053
|
521,289,658
|
|
511,823,718
|
521,682,326
|
|
Adjusted
EBITDA(1) per share- basic and diluted
|
$0.00
|
$0.00
|
|
$0.01
|
$0.01
|
|
Net loss per share –
basic and diluted
|
($0.01)
|
($0.01)
|
|
($0.01)
|
($0.00)
|
|
|
|
|
|
|
|
|
$ thousands,
except ratios
|
June 30,
2019
|
December 31,
2018
|
|
|
|
FINANCIAL POSITION
AND LIQUIDITY
|
|
|
Working capital
(excluding debt) (1)
|
10,756
|
19,028
|
Working capital
(excluding debt) ratio (1)
|
2.4:1
|
3.4:1
|
Total
assets
|
240,603
|
252,665
|
Total long-term debt
(including current portion)
|
36,618
|
44,896
|
Shareholders'
equity
|
183,526
|
184,231
|
(1)
|
Please refer to the
"Reconciliation of Non-IFRS Measures" section for further
information
|
(2)
|
Not
meaningful
|
Highlights for the Three Months Ended June 30, 2019
- Average Q2 2019 crude oil pricing, as measured by WTI, of
US$59.89/bbl was 9% higher than the
Q1 2019 average price of US$54.87/bbl
(Q2 2018: $67.97/bbl). The price
differential in Q2 2019 between Canadian heavy crude oil, as
represented by WCS, and WTI maintained a differential in the range
of US$10.00/bbl to US$15.00/bbl as the Government of Alberta mandated crude oil production
curtailment was reduced from 250,000 bbls/day at the start of Q2
2019 to 175,000 bbls/day by the end of Q2 2019. Natural gas prices,
as measured by AECO, decreased 57% from an average of $1.84/GJ in Q1 2019 to $0.79/GJ in Q2 2019 (Q2 2018 $1.14/GJ), which is very low in historical
terms.
- CWC moved two Contract Drilling rigs into the United States in Q2 2019 with operations
beginning in mid-June 2019.
U.S.Contract Drilling revenue of $1.7
million and 25 drilling rig operating days for Q2 2019 was
achieved. Q2 2019 average revenue per operating day of US
$54,188 was largely due to customer
recovery of mobilization costs to relocate equipment from
Canada to the Eagle Ford basin in
Texas and the DJ basin in
Wyoming.
- CWC's Canadian drilling rig utilization in Q2 2019 of 11% (Q2
2018: 16%) was below the Canadian Association of Oilwell Drilling
Contractors ("CAODC") industry average of 18%, as CWC's customers
reduced or delayed their drilling programs in the quarter. Activity
levels decreased 46% to 72 drilling rig operating days in Q2 2019
(Q2 2018: 133 drilling rig operating days) as the Company prepared
to move two drilling rigs to its U.S. operations. CWC's U.S.
drilling rig utilization in Q2 2019 was 69% (Q2 2018: n/a) as CWC
started its U.S. drilling operations in mid-June 2019. CWC's service rig utilization in
Q2 2019 of 28% (Q2 2018: 30%) was driven by 23,129 operating hours
being 20% lower than the 28,831 operating hours in Q2 2018. The
significant drop in Q2 2019 activity level for both the drilling
rigs and our production-oriented service rigs was a direct result
of a prolonged spring breakup and wet weather conditions combined
with a lower crude oil price during the quarter, compared to a year
ago. In addition, the Government of Alberta mandated production curtailment
continued to temporarily slow down the need for newly drilled wells
and workover and maintenance work on producing wells. These lower
activity levels resulted in lower revenue in Q2 2019 compared to Q2
2018, while Adjusted EBITDA (1) and net loss stayed
constant as a result of management's unrelenting focus on reducing
costs, as noted below.
- Revenue of $18.7 million, a
decrease of $3.5 million (16%)
compared to $22.2 million in Q2
2018.
- Adjusted EBITDA(1) of $0.1
million, an increase of $0.07
million compared to $0.03
million in Q2 2018. CWC has achieved 24 consecutive quarters
of positive Adjusted EBITDA since Q2 2013.
- Net loss of $0.6 million, a
decrease of $2.5 million compared to
net loss of $3.1 million in Q2
2018.
- During Q2 2019, 623,000 (Q2 2018: 1,023,000) common shares were
purchased under the Normal Course Issuer Bid ("NCIB") and 744,000
common shares (Q2 2018: 935,500) were cancelled and returned to
treasury.
(1)
|
Please refer to the
"Reconciliation of Non-IFRS Measures" section for further
information.
|
Highlights for the Six Months Ended June 30, 2019
- CWC's Canadian drilling rig utilization in the first six months
of 2019 of 31% (2018: 39%) exceeded the CAODC industry average of
27%. CWC's U.S. drilling rig utilization in the first six months of
2019 was 69% (Q2 2018: n/a) as CWC started its U.S. drilling
operations in mid-June 2019. CWC's
service rig utilization in the first six months of 2019 was 28%
compared to 43% in the same period in 2018. Activity levels in both
the drilling rig and service rig divisions dropped in 2019 as a
result of CWC's exploration and production ("E&P") customers
reducing or delaying their drilling and well maintenance programs
as a result of lower crude oil prices and the Government of
Alberta mandated production
curtailment temporarily slowing down the need for newly drilled
wells and workover and maintenance work on producing wells.
- Revenue of $50.0 million, a
decrease of $21.2 million (30%)
compared to $71.2 million in the
first six months of 2018.
- Adjusted EBITDA (1) of $4.8
million, a decrease of $2.7
million (36%) compared to $7.5
million in the first six months of 2018.
- Net loss of $0.6 million, a
decrease of $1.2 million (67%)
compared to $1.9 million in the first
six months of 2018.
- For the six months ended June 30,
2019, the Company purchased 2,673,500 (2018: 2,417,500)
common shares under its NCIB and 2,536,000 (2018: 2,254,000) common
shares were cancelled and returned to treasury.
(1)
|
Please refer to the
"Reconciliation of Non-IFRS Measures" section for further
information
|
Operational Overview
Contract Drilling
CWC Ironhand Drilling, the Company's Contract Drilling segment,
has a fleet of nine telescopic double drilling rigs with depth
ratings from 3,200 to 5,000 metres. Eight of nine rigs have top
drives and three have pad rig walking systems. All of the drilling
rigs are well suited for the most active depths for horizontal
drilling in the Western Canadian Sedimentary Basin ("WCSB"),
including the Montney, Cardium,
Duvernay and other deep basin
horizons. The Company has expanded its drilling rig services into
select United States basins
including the Permian, Eagle Ford, Denver-Julesburg ("DJ") and Bakken. One of the
Company's strategic initiatives is to continue to increase the
capabilities of its existing fleet to meet the growing demands of
E&P customers for deeper depths at a cost effective price while
providing a sufficient internal rate of return for CWC's
shareholders.
|
Three months
ended
|
OPERATING
HIGHLIGHTS
|
Jun. 30,
2019
|
Mar. 31,
2019
|
Dec. 31,
2018
|
Sep. 30,
2018
|
Jun.
30, 2018
|
Mar. 31,
2018
|
Dec. 31,
2017
|
Sep. 30,
2017
|
Drilling Rigs
- Canada
|
|
|
|
|
|
|
|
|
Total drilling rigs,
end of period
|
7
|
9
|
9
|
9
|
9
|
9
|
9
|
9
|
|
|
|
|
|
|
|
|
|
Revenue per operating
day (1)
|
$22,750
|
$23,895
|
$26,642
|
$21,263
|
$21,227
|
$23,485
|
$23,572
|
$19,424
|
Drilling rig operating
days
|
72
|
382
|
491
|
500
|
133
|
498
|
463
|
522
|
Drilling rig
utilization % (2)
|
11%
|
47%
|
59%
|
60%
|
16%
|
61%
|
56%
|
63%
|
CAODC industry average
utilization %
|
18%
|
29%
|
28%
|
30%
|
17%
|
52%
|
28%
|
29%
|
|
|
|
|
|
|
|
|
|
Wells
drilled
|
10
|
39
|
34
|
41
|
11
|
45
|
30
|
29
|
Average days per
well
|
8.0
|
9.8
|
14.4
|
12.2
|
12.1
|
11.1
|
15.0
|
18.0
|
Meters drilled
(thousands)
|
26.7
|
119.8
|
127.8
|
155.2
|
41.0
|
161.7
|
161.1
|
112.2
|
Meters drilled per
day
|
373
|
314
|
261
|
310
|
309
|
325
|
277
|
215
|
Average meters per
well
|
2,966
|
3,070
|
3,708
|
3,786
|
3,724
|
3,593
|
4,270
|
3,869
|
(1)
|
Revenue per operating
day is calculated based on operating days (i.e. spud to rig release
basis). New or inactive drilling rigs are added based on the first
day of field service.
|
(2)
|
Drilling rig
utilization is calculated based on operating days (i.e. spud to rig
release basis) in accordance with the methodology prescribed by the
CAODC.
|
|
|
|
Three months
ended
|
OPERATING
HIGHLIGHTS
|
Jun. 30,
2019
|
Mar. 31,
2019
|
Dec. 31,
2018
|
Sep. 30,
2018
|
Jun. 30,
2018
|
Mar. 31,
2018
|
Dec. 31,
2017
|
Sep. 30,
2017
|
Drilling Rigs -
United States
|
|
|
|
|
|
|
|
|
Total drilling
rigs, end of period
|
2
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Revenue per operating
day(US$) (1)
|
$54,188
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
Drilling rig operating
days
|
25
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Drilling rig
utilization % (2)
|
69%
|
-%
|
-%
|
-%
|
-%
|
-%
|
-%
|
-%
|
|
|
|
|
|
|
|
|
|
Wells
drilled
|
1
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Average days per
well
|
16.6
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Meters drilled
(thousands)
|
2.9
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Meters drilled per
day
|
177
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Average meters per
well
|
2,939
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1)
|
Revenue per operating
day is calculated based on operating days (i.e. spud to rig release
basis). New or inactive drilling rigs are added based on the first
day of field service. Revenue is enhanced by a one-time recovery of
mobilization costs.
|
(2)
|
Drilling rig
utilization is calculated based on operating days (i.e. spud to rig
release basis).
|
Canadian Contract Drilling revenue of $1.6 million for Q2 2019 (Q2 2018: $2.8 million) was achieved with a utilization
rate of 11% (Q2 2018: 16%), compared to the CAODC industry average
of 18%, as CWC's customers reduced or delayed their drilling
programs in the quarter. CWC completed 72 drilling rig
operating days in Q2 2019, a 46% decrease from 133 drilling rig
operating days in Q2 2018, as the Company prepared to move two
drilling rigs to its U.S. operations. The Q2 2019 average revenue
per operating day of $22,750 was an
increase of 7% from $21,227 in Q2
2018. The significant reduction in Q2 2019 activity level was
a direct result of a prolonged spring breakup and wet weather
conditions combined with a lower crude oil price during the
quarter, compared to a year ago. In addition, the Government of
Alberta mandated production
curtailment continued to temporarily slow down the need for newly
drilled wells.
CWC moved two Contract Drilling rigs into the United States in Q2 2019 with operations
beginning in mid-June 2019. U.S.
Contract Drilling revenue of $1.7
million and 25 drilling rig operating days for Q2 2019 was
achieved. Q2 2019 average revenue per operating day of US
$54,188 was largely due to customer
recovery of mobilization costs to relocate equipment from
Canada to the Eagle Ford basin in
Texas and the DJ basin in
Wyoming. CWC intends to move two
more drilling rigs into the United
States by the end of 2019, subject to obtaining contracts
with U.S. customers.
Production Services
With a fleet of 148 service rigs, CWC is the largest well
servicing company in Canada as
measured by operating hours. CWC's service rig fleet consists of 77
single, 57 double, and 14 slant rigs providing services which
include completions, maintenance, workovers and abandonments with
depth ratings from 1,500 to 5,000 metres. CWC has chosen to park 56
of its service rigs and focus its sales and operational efforts on
the remaining 92 active service rigs due to the reduction in the
number of service rigs required to service the WCSB, in part as a
result of the Government of Alberta's mandated crude oil production
curtailments.
CWC's fleet of nine coil tubing units consist of six Class I and
three Class II coil tubing units having depth ratings from 1,500 to
3,200 metres. The Company continues to focus its sales and
operational efforts on servicing steam-assisted gravity drainage
("SAGD") wells that are shallower in depth and more appropriate for
coil tubing operations.
CWC's fleet of 13 swabbing rigs operate under the trade name CWC
Swabtech. The swabbing rigs are used to remove liquids from
the wellbore and allow reservoir pressures to push the commodity up
the tubing casing. The Company has chosen to park five of its
swabbing rigs and focus its sales and operational efforts on the
remaining eight active swabbing rigs.
|
Three months
ended
|
OPERATING
HIGHLIGHTS
|
Jun.
30,
2019
|
Mar.
31,
2019
|
Dec.
31,
2018
|
Sep.
30,
2018
|
Jun.
30,
2018
|
Mar.
31,
2018
|
Dec.
31,
2017
|
Sep.
30,
2017
|
Service
Rigs
|
|
|
|
|
|
|
|
|
Active service rigs,
end of period
|
92
|
93
|
92
|
102
|
107
|
108
|
111
|
66
|
Inactive service rigs,
end of period
|
56
|
55
|
56
|
46
|
41
|
41
|
38
|
8
|
Total service rigs,
end of period
|
148
|
148
|
148
|
148
|
148
|
149
|
149
|
74
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
23,129
|
30,875
|
31,232
|
42,316
|
28,831
|
53,979
|
40,879
|
28,320
|
Revenue per
hour
|
$646
|
$671
|
$663
|
$628
|
$642
|
$637
|
$606
|
$559
|
Revenue per hour
excluding top volume customers
|
$687
|
$690
|
$696
|
$664
|
$677
|
$681
|
$645
|
$610
|
Service rig
utilization % (1)
|
28%
|
37%
|
37%
|
45%
|
30%
|
56%
|
46%
|
47%
|
|
|
|
|
|
|
|
|
|
Coil Tubing
Units
|
|
|
|
|
|
|
|
|
Active coil tubing
units, end of period
|
8
|
8
|
8
|
8
|
8
|
8
|
9
|
9
|
Inactive coil tubing
units, end of period
|
1
|
1
|
1
|
1
|
1
|
1
|
1
|
1
|
Total coil tubing
units, end of period
|
9
|
9
|
9
|
9
|
9
|
9
|
10
|
10
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
301
|
1,730
|
1,647
|
898
|
1,212
|
3,007
|
1,978
|
1,783
|
Revenue per
hour
|
$830
|
$555
|
$625
|
$731
|
$762
|
$724
|
$725
|
$688
|
Coil tubing unit
utilization % (2)
|
4%
|
24%
|
22%
|
12%
|
17%
|
39%
|
24%
|
22%
|
|
|
|
|
|
|
|
|
|
Swabbing
Rigs
|
|
|
|
|
|
|
|
|
Active swabbing rigs,
end of period
|
8
|
8
|
8
|
9
|
8
|
8
|
9
|
-
|
Inactive swabbing
rigs, end of period
|
5
|
5
|
5
|
4
|
5
|
5
|
4
|
-
|
Total swabbing rigs,
end of period
|
13
|
13
|
13
|
13
|
13
|
13
|
13
|
-
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
661
|
1,655
|
2,313
|
881
|
958
|
2,258
|
1,063
|
-
|
Revenue per
hour
|
$262
|
$288
|
$283
|
$273
|
$265
|
$310
|
$286
|
-
|
Swabbing rig
utilization % (3)
|
9%
|
23%
|
30%
|
11%
|
13%
|
31%
|
19%
|
-
|
|
|
|
|
|
|
|
|
|
(1)
|
Service and swabbing
rig utilization is calculated based on 10 hours a day, 365 days a
year. New service and swabbing rigs are added based on the first
day of field service. Service and swabbing rigs requiring their
24,000 hour recertification, refurbishment or have been otherwise
removed from service for greater than 90 days are excluded from the
utilization calculation until their first day back in field
service.
|
(2)
|
Coil tubing unit
utilization is calculated based on 10 hours a day, 365 days a year.
New coil tubing units are added based on the first day of field
service. Coil tubing units that have been removed from service for
greater than 90 days are excluded from the utilization calculation
until their first day back in field service.
|
Production Services revenue was $15.4
million in Q2 2019, down $4.0
million (21%) compared to $19.4
million in Q2 2018. The significant drop in Q2 2019 activity
level for our production-oriented service rigs was a direct result
of a prolonged spring breakup and wet weather conditions combined
with a lower crude oil price during the quarter, compared to a year
ago. CWC estimates that 4,224 service rig operating hours (Q2 2018:
1,856 operating hours) of lost activity were due to wet weather
conditions in Q2 2019 out of a total 83,840 operating hours. In
addition, the Government of Alberta mandated production curtailment
continued to temporarily slow down the need for workover and
maintenance work on producing wells.
CWC's service rig utilization in Q2 2019 of 28% (Q2 2018: 30%)
was driven by 23,129 operating hours being 20% lower than the
28,831 operating hours in Q2 2018. However, the Q2 2019 average
revenue per hour of $646 increased
$4 per hour (1%) over the
$642 in Q2 2018. Furthermore, Q2 2019
average revenue per hour excluding the top volume customers of
$687 was $10 per hour (1%) higher than Q2 2018 average
revenue per hour of $677 suggesting
the loss in CWC's service rig operating hours in Q2 2019 were
primarily from CWC's top volume customers who were the most
affected by the Government of Alberta's mandated production curtailment.
CWC's coil tubing utilization in Q2 2019 of 4% (Q2 2018: 17%)
with 301 operating hours was 75% lower than the 1,212 operating
hours in Q2 2018. Average revenue per hour for coil tubing services
of $830 in Q2 2019 is 9% higher than
$762 in Q2 2018. The lower
utilization reflects the continuing challenge of low natural gas
prices and lower crude oil prices during the quarter, compared to a
year ago, as well as the Government of Alberta mandated production curtailments
temporarily slowing down the need for work on SAGD wells.
CWC swabbing rig utilization in Q2 2019 of 9% (Q2 2018: 13%)
with 661 operating hours was 31% lower than the 958 operating hours
in Q2 2018. Average revenue per hour for swabbing rigs of
$262 in Q2 2019 is 1% lower than
$265 in Q2 2018 reflecting the
continuing challenge of low natural gas prices.
Capital Expenditures
|
Three months
ended
June
30,
|
|
Six months
ended
June
30,
|
|
|
$
thousands
|
2019
|
2018
|
Change
$
|
Change
%
|
2019
|
2018
|
Change
$
|
Change
%
|
Contract
drilling
|
1,164
|
4,986
|
(3,822)
|
(77%)
|
1,258
|
5,116
|
(3,858)
|
(75%)
|
Production
services
|
692
|
1,123
|
(431)
|
(38%)
|
1,877
|
1,930
|
(53)
|
(3%)
|
Corporate
|
46
|
-
|
46
|
n/m(1)
|
61
|
28
|
33
|
118%
|
Total capital
expenditures
|
1,902
|
6,109
|
(4,207)
|
(69%)
|
3,196
|
7,074
|
(3,878)
|
(55%)
|
|
|
|
|
|
|
|
|
|
Growth
capital
|
-
|
4,278
|
(4,278)
|
(100%)
|
-
|
4,278
|
(4,278)
|
(100%)
|
Maintenance and
infrastructure capital
|
1,902
|
1,831
|
71
|
4%
|
3,196
|
2,796
|
400
|
14%
|
Total capital
expenditures
|
1,902
|
6,109
|
(4,207)
|
(69%)
|
3,196
|
7,074
|
(3,878)
|
(55%)
|
Capital expenditures of $1.9
million in Q2 2019, a decrease of $4.2 million (69%) compared to $6.1 million in Q2 2018.
Capital expenditures of $3.2
million for the six months ended June
30, 2019, a decrease of $3.9
million (55%) compared to $7.1
million in the same period in 2018.
The 2019 capital expenditure budget of $5.4 million was approved by the Board of
Directors on January 16, 2019 and
comprises entirely of maintenance and infrastructure capital
related to recertifications, additions and upgrades to field
equipment for the drilling rigs, service rigs and coil tubing
divisions as well as information technology infrastructure.
Outlook
Crude oil, as represented by WTI, averaged US$59.89/bbl in Q2 2019, an increase of 9%
compared to Q1 2019 average price of US$54.87/bbl (Q2 2018: US$67.97/bbl) and finished the quarter on
June 30, 2019 at US$58.20/bbl. Natural gas prices, as measured by
AECO, decreased 57% from an average of $1.84/GJ in Q1 2019 to $0.79/GJ in Q2 2019 (Q2 2018 $1.14/GJ), which remains very low in historical
terms. The price differential in Q2 2019 between Canadian heavy
crude oil, as represented by WCS, and WTI maintained a differential
in the range of US$10.00/bbl to
US$15.00/bbl as the Government of
Alberta mandated crude oil
production curtailment was reduced from 250,000 bbls/day at the
start of Q2 2019 to 175,000 bbls/day by the end of Q2 2019. A
further approved 25,000 bbls/day reduction in each of August 2019 and September
2019 will reduce the total production curtailment to 125,000
bbls/day. In addition, recent negotiations between certain senior
E&P companies and the Government of Alberta to reduce the remaining production
curtailment by allowing E&P companies to increase their crude
oil production if such incremental capacity is transported by
railcars, appears to have both industry and government support. The
existing and future reductions in the production curtailment has
and will continue to allow CWC's E&P customers to increase
their production capacity, which in turn has and will continue to
gradually increase CWC's activity levels for both its Contract
Drilling and Production Services segment.
CWC has sustainably positioned itself by providing its E&P
customers with the highest quality service from the highest quality
people at reasonable prices. However, the Canadian federal
government's passing of Bill C-69 and Bill C-48 has negatively
affected the availability of investment capital and growth for
Canada's oil and gas
industry. Bill C-69 imposes more requirements for consulting
affected Indigenous communities, widens public participation in the
review process and requires climate change to be considered when
major national resource-exploitation and transportation projects
are being evaluated. It applies to a wide range of projects
including interprovincial pipelines, highways, mines and power
links. Bill C-48 imposes a moratorium on oil tankers north of
Vancouver Island. Despite these challenges, there appears to
be renewed optimism in Canada's
energy industry with Albertans electing a new government on
April 16, 2019 whose leader intends
to fight for Canada's energy
sector, and with the recent approval by the National Energy Board
of the expansion of the Trans Mountain Pipeline on June 18, 2019. Combining these recent
events with the positive final investment decisions made in Q4 2018
by proponents of a liquefied natural gas processing facility (LNG
Canada) and the building of its corresponding pipeline (Coastal
GasLink) in northeast British
Columbia, there is renewed optimism that investment capital
and growth may return to the Canadian Energy sector.
While Canadian oilfield service activity currently remains
muted, the United States energy
industry continues to experience exponential growth. Over the past
year, CWC has been actively identifying opportunities to establish
a U.S. presence and is pleased to report that in March 2019 the Company signed its first U.S.
contract to deliver contract drilling services to a multinational
E&P company in the Eagle Ford basin in Texas. A second U.S. contract was signed in
April 2019 to move a second drilling
rig for another E&P customer to the DJ basin in Wyoming. Both drilling rigs began operations
in the U.S. in mid-June 2019. It is
the Company's intent to move an additional two drilling rigs to the
U.S. in the second half of 2019 subject to signing customer
contracts such that CWC positions up to four of its nine drilling
rig fleet (44%) in the U.S. CWC believes these moves will help the
Company achieve higher utilization, revenue and Adjusted EBITDA for
its Contract Drilling segment over a longer-term period.
While CWC remains focused on its operational and financial
performance, it also recognizes the need to pursue opportunities
that create long-term shareholder value. With the support of the
Board of Directors, management continues to actively pursue
business combinations in North
America and globally in the drilling and well servicing
industry. CWC cautions that there are no guarantees that strategic
opportunities will result in a transaction, or if a transaction is
undertaken, as to its terms or timing.
About CWC Energy Services Corp.
CWC Energy Services Corp. is a premier contract drilling and
well servicing company operating in the WCSB and the United States with a complementary suite
of oilfield services including drilling rigs, service rigs,
swabbing rigs and coil tubing units. The Company's corporate office
is located in Calgary, Alberta,
with a U.S. office in Houston,
Texas and operational locations in Nisku, Grande
Prairie, Slave Lake,
Sylvan Lake, Drayton Valley, Lloydminster, Provost and Brooks,
Alberta. The Company's shares trade on the TSX Venture
Exchange under the symbol "CWC".
Forward-Looking Information
This news release contains certain forward-looking
information and statements within the meaning of applicable
Canadian securities legislation. Certain statements contained in
this MD&A, including most of those contained in the section
titled "Outlook" and including statements which may contain such
words as "anticipate", "could", "continue", "should", "seek",
"may", "intend", "likely", "plan", "estimate", "believe", "expect",
"will", "objective", "ongoing", "project" and similar expressions
are intended to identify forward-looking information or statements.
In particular, this MD&A contains forward-looking statements
including management's assessment of future plans and operations,
planned levels of capital expenditures, expectations as to activity
levels, expectations on the sustainability of future cash flow and
earnings, expectations with respect to crude oil and natural gas
prices, activity levels in various areas, expectations regarding
the level and type of drilling and production and related drilling
and well services activity in the WCSB and the United States, expectations regarding
entering into long term drilling contracts and expanding its
customer base, and expectations regarding the business, operations,
revenue and debt levels of the Company in addition to general
economic conditions. Although the Company believes that the
expectations and assumptions on which such forward-looking
information and statements are based are reasonable, undue reliance
should not be placed on the forward-looking information and
statements because the Company can give no assurances that they
will prove to be correct. Since forward-looking information and
statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include, but are not
limited to, the risks associated with the drilling and oilfield
services sector (ie. demand, pricing and terms for oilfield
drilling and services; current and expected oil and gas prices;
exploration and development costs and delays; reserves discovery
and decline rates; pipeline and transportation capacity; weather,
health, safety and environmental risks), integration of
acquisitions, competition, and uncertainties resulting from
potential delays or changes in plans with respect to acquisitions,
development projects or capital expenditures and changes in
legislation, including but not limited to tax laws, royalties and
environmental regulations, stock market volatility and the
inability to access sufficient capital from external and internal
sources. Accordingly, readers should not place undue reliance on
the forward-looking statements. Readers are cautioned that the
foregoing list of factors is not exhaustive. Additional information
on these and other factors that could affect the Company's
financial results are included in reports on file with applicable
securities regulatory authorities and may be accessed through SEDAR
at www.sedar.com. The forward-looking information and statements
contained in this news release are made as of the date hereof and
the Company undertakes no obligation to update publicly or revise
any forward-looking information or statements, whether as a result
of new information, future events or otherwise, unless so required
by applicable securities laws. Any forward-looking statements made
previously may be inaccurate now.
Reconciliation of Non-IFRS Measures
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
$ thousands except
share and per share amounts
|
2019
|
2018
|
2019
|
2018
|
NON-IFRS
MEASURES
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA:
|
|
|
|
|
Net loss and
comprehensive loss
|
(565)
|
(3,067)
|
(612)
|
(1,871)
|
Add:
|
|
|
|
|
Depreciation
|
3,002
|
2,905
|
6,735
|
7,918
|
Finance
costs
|
658
|
593
|
1,390
|
1,283
|
Deferred income tax
recovery
|
(3,022)
|
(1,044)
|
(3,054)
|
(496)
|
Stock based
compensation
|
197
|
237
|
426
|
522
|
Loss (gain) on sale of
equipment
|
(55)
|
407
|
(78)
|
153
|
Adjusted
EBITDA (1)
|
115
|
31
|
4,807
|
7,509
|
Adjusted EBITDA
per share – basic and diluted (1)
|
$0.00
|
$0.00
|
$0.01
|
$0.01
|
Adjusted EBITDA
margin (Adjusted EBITDA/Revenue) (1)
|
1%
|
0%
|
10%
|
11%
|
Weighted average
number shares outstanding – basic and diluted
|
510,978,053
|
521,289,658
|
511,823,718
|
521,682,326
|
|
|
|
|
|
Gross
margin:
|
|
|
|
|
Revenue
|
18,746
|
22,245
|
50,004
|
71,170
|
Less: Direct operating
expenses
|
14,923
|
17,904
|
37,261
|
54,250
|
Gross margin
(2)
|
3,823
|
4,341
|
12,743
|
16,920
|
Gross margin
percentage (2)
|
20%
|
20%
|
25%
|
24%
|
$
thousands
|
June 30,
2019
|
December 31,
2018
|
|
|
|
Working capital
(excluding debt):
|
|
|
Current
assets
|
18,596
|
26,893
|
Less: Current
liabilities
|
(9,197)
|
(8,793)
|
Add: Current
portion of long term debt
|
1,357
|
928
|
Working capital
(excluding debt) (3)
|
10,756
|
19,028
|
Working capital
(excluding debt) ratio (3)
|
2.4:1
|
3.4:1
|
|
|
|
Net debt:
|
|
|
Long term
debt
|
35,261
|
43,968
|
Less: Current
assets
|
(18,596)
|
(26,893)
|
Add: Current
liabilities
|
9,197
|
8,793
|
Net debt
(4)
|
25,862
|
25,868
|
(1)
|
Adjusted EBITDA
(Earnings before interest and finance costs, income tax expense,
depreciation, amortization, gain or loss on disposal of asset,
goodwill impairment, stock based compensation and other one-time
gains and losses) is not a recognized measure under IFRS.
Management believes that in addition to net income, Adjusted EBITDA
is a useful supplemental measure as it provides an indication of
the Company's ability to generate cash flow in order to fund
working capital, service debt, pay current income taxes, pay
dividends, repurchase common shares under the Normal Course Issuer
Bid, and fund capital programs. Investors should be cautioned,
however, that Adjusted EBITDA should not be construed as an
alternative to net income (loss) determined in accordance with IFRS
as an indicator of the Company's performance. CWC's method of
calculating Adjusted EBITDA may differ from other entities and
accordingly, Adjusted EBITDA may not be comparable to measures used
by other entities. Adjusted EBITDA margin is calculated as Adjusted
EBITDA divided by revenue and provides a measure of the percentage
of Adjusted EBITDA per dollar of revenue. Adjusted EBITDA per share
is calculated by dividing Adjusted EBITDA by the weighted average
number of shares outstanding as used for calculation of earnings
per share.
|
|
|
(2)
|
Gross margin is
calculated from the statement of comprehensive loss as revenue less
direct operating costs and is used to assist management and
investors in assessing the Company's financial results from
operations excluding fixed overhead costs. Gross margin percentage
is calculated as gross margin divided by revenue. The Company
believes the relationship between revenue and costs expressed by
the gross margin percentage is a useful measure when compared over
different financial periods as it demonstrates the trending
relationship between revenue, costs and margins. Gross margin and
gross margin percentage are non-IFRS measures and do not have any
standardized meaning prescribed by IFRS and may not be comparable
to similar measures provided by other companies.
|
|
|
(3)
|
Working capital
(excluding debt) is calculated based on current assets less current
liabilities excluding the current portion of long-term debt.
Working capital (excluding debt) is used to assist management and
investors in assessing the Company's liquidity. Working capital
(excluding debt) does not have any meaning prescribed under IFRS
and may not be comparable to similar measures provided by other
companies. Working capital (excluding debt) ratio is calculated as
current assets divided by the difference of current liabilities
less the current portion of long term debt.
|
|
|
(4)
|
Net debt is not a
recognized measure under IFRS and does not have any standardized
meaning prescribed by IFRS and may not be comparable to similar
measures provided by other companies. Management believes net debt
is a useful indicator of a company's debt position.
|
SOURCE CWC Energy Services Corp.