CALGARY, Nov. 1, 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 nine months
ended September 30, 2019. The
Financial Statements and Management's Discussion and Analysis
("MD&A") for the three and nine months ended September 30, 2019 are filed on SEDAR at
www.sedar.com.
Financial Highlights
|
|
|
|
Three months
ended
|
Nine months
ended
|
$ thousands,
except shares, per share
|
September
30,
|
September
30,
|
amounts and
margins
|
2019
|
2018
|
Change
%
|
2019
|
2018
|
Change
%
|
FINANCIAL
RESULTS
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
Contract
Drilling
|
8,284
|
10,633
|
(22%)
|
20,792
|
25,143
|
(17%)
|
Production
Services
|
19,491
|
27,480
|
(29%)
|
56,987
|
84,140
|
(32%)
|
|
27,775
|
38,113
|
(27%)
|
77,779
|
109,283
|
(29%)
|
Adjusted EBITDA
(1)
|
3,868
|
6,002
|
(36%)
|
8,675
|
13,511
|
(36%)
|
Adjusted EBITDA
margin (%) (1)
|
14%
|
16%
|
|
11%
|
12%
|
|
Net (loss)
income
|
(234)
|
326
|
(172%)
|
(846)
|
(1,545)
|
(45%)
|
Net (loss) income
margin (%)
|
(1%)
|
1%
|
(2%)
|
(1%)
|
(1%)
|
0%
|
|
|
|
|
|
|
|
Capital
expenditures
|
968
|
2,696
|
(64%)
|
4,164
|
9,770
|
(57%)
|
|
|
|
|
|
|
|
Per share
information:
|
|
|
|
|
|
|
Weighted average
number of shares
|
|
|
|
|
|
|
outstanding –
basic
|
510,358,460
|
520,463,960
|
|
511,329,933
|
521,271,741
|
|
Weighted average
number of shares
|
|
|
|
|
|
|
outstanding -
diluted
|
510,358,460
|
524,754,635
|
|
511,329,933
|
521,271,741
|
|
Adjusted EBITDA
(1) per share -
|
|
|
|
|
|
|
basic and
diluted
|
$
|
0.01
|
$
|
0.01
|
|
$
|
0.02
|
$
|
0.03
|
|
Net (loss) income per
share -
|
|
|
|
|
|
|
basic and
diluted
|
$
|
(0.00)
|
$
|
0.00
|
|
$
|
(0.00)
|
$
|
(0.00)
|
|
$ thousands,
except ratios
|
|
|
September 30,
2019
|
December 31,
2018
|
FINANCIAL POSITION
AND LIQUIDITY
|
|
|
|
|
Working capital
(excluding debt) (1)
|
|
|
18,036
|
19,028
|
Working capital
(excluding debt) ratio (1)
|
|
|
4.2:1
|
3.4:1
|
Total
assets
|
|
|
243,647
|
252,665
|
Total long-term debt
(including current portion)
|
|
41,549
|
44,896
|
Shareholders'
equity
|
|
|
183,621
|
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 September 30, 2019
- Average Q3 2019 crude oil pricing, as measured by WTI, of
US$56.40/bbl was 6% lower than the Q2
2019 average price of US$59.89/bbl
(Q3 2018: US$69.61/bbl). The price
differential in Q3 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 175,000 bbls/day at the start of Q3
2019 to 125,000 bbls/day by the end of Q3 2019. Additionally, on
August 20, 2019 the Government of
Alberta announced adjustments to
the production curtailment including moving the curtailment end
date to December 31, 2020 and
effectively reducing the number of Alberta E&P companies
affected by the production curtailment by increasing the exemption
limit from 10,000 to 20,000 bbls/day starting October 1, 2019. Natural gas prices, as
measured by AECO, decreased 8% from an average of $1.06/GJ in Q2 2019 to $0.97/GJ in Q3 2019 (Q3 2018 $1.20/GJ), remaining very low in historical
terms.
- CWC's Canadian drilling rig utilization in Q3 2019 of 19% (Q3
2018: 60%) was below the Canadian Association of Oilwell Drilling
Contractors ("CAODC") industry average of 23%, as CWC's customers
continued to reduce or delay their drilling programs in the
quarter. Canadian activity levels in Q3 2019 decreased 74% to 130
drilling rig operating days from seven Canadian drilling rigs
(Q3 2018: 500 drilling rig operating days from nine Canadian
drilling rigs). U.S. drilling rig activity level in Q3 2019
was 155 drilling rig operating days from two U.S. drilling rigs for
a utilization of 84% (Q3 2018: nil). U.S Contract Drilling revenue
of $5.6 million represented 68% of
CWC's total Contract Drilling revenue for the quarter with the
average revenue per operating day from U.S. operations being
US$36,097 as CWC realized its first
full quarter of U.S. drilling operations. CWC's service rig
utilization in Q3 2019 of 52% (Q3 2018: 63%) was driven by 29,528
operating hours being 30% lower than the 42,316 operating hours in
Q3 2018, which was a Company record for Q3 activity. The
significant drop in Q3 2019 activity level for both the drilling
rigs and our production-oriented service rigs was a direct result
of 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, Adjusted EBITDA(1) and net loss in Q3 2019
compared to Q3 2018.
- Revenue of $27.8 million, a
decrease of $10.3 million (27%)
compared to $38.1 million in Q3
2018.
- Adjusted EBITDA(1) of $3.9
million, a decrease of $2.1
million (36%) compared to $6.0
million in Q3 2018. CWC has achieved 25 consecutive quarters
of positive Adjusted EBITDA(1) since Q2 2013.
- Net loss of $0.2 million, a
decrease of $0.5 million compared to
net income of $0.3 million in Q3
2018.
- On September 27, 2019, CWC and
its syndicated lenders completed an extension of its credit
facilities and certain other amendments to provide financial
security and flexibility to July 31,
2022. At the request of the Company, the credit facilities
were reduced from $75 million to
$60 million to reduce borrowing costs
and standby charges. The amendments further provide the Company
access to another equity cure under the same terms and conditions
and a reduction in the minimum liquidity from $10.0 million to $5.0
million. Additionally, the amendments exclude the Mortgage
Loan from the consolidated debt definition used in calculating the
quarterly financial covenants. The covenant for Consolidated Debt
to EBITDA ratio is as follows:
For the Quarter
Ended
|
Previously
|
Currently
|
September 30,
2019
|
4.00 :
1.00
|
3.75 :
1.00
|
December 31,
2019
|
4.00 :
1.00
|
3.75 :
1.00
|
March 31,
2020
|
4.00 :
1.00
|
3.75 :
1.00
|
June 30,
2020
|
4.00 :
1.00
|
3.75 :
1.00
|
September 30,
2020
|
n/a
|
3.50 :
1.00
|
December 31,
2020
|
n/a
|
3.50 :
1.00
|
March 31,
2021
|
n/a
|
3.25 :
1.00
|
June 30,
2021
|
n/a
|
3.25 :
1.00
|
September 30, 2021
and thereafter
|
n/a
|
3.00 :
1.00
|
- During Q3 2019, 405,000 common shares (Q3 2018: 1,175,500) were
purchased under the Normal Course Issuer Bid ("NCIB") and 524,500
common shares (Q3 2018: 1,309,000) were cancelled and returned to
treasury.
(1) Please
refer to the "Reconciliation of Non-IFRS Measures" section for
further information.
|
Highlights for the Nine Months Ended September 30, 2019
- CWC's Canadian drilling rig utilization in the first nine
months of 2019 of 23% (2018: 46%) exceeded the CAODC industry
average of 22% (2018: 29%). CWC's U.S. drilling rig utilization in
the first nine months of 2019 was 82% (Q3 2018: n/a) as CWC started
its U.S. drilling operations in mid-June
2019. CWC's service rig utilization in the first nine months
of 2019 was 48% compared to 61% 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 $77.8 million, a
decrease of $31.5 million (29%)
compared to $109.3 million in the
first nine months of 2018.
- Adjusted EBITDA(1) of $8.7
million, a decrease of $4.8
million (36%) compared to $13.5
million in the first nine months of 2018.
- Net loss of $0.8 million, a
decrease of $0.7 million (47%)
compared to $1.5 million in the first
nine months of 2018.
- For the nine months ended September 30,
2019, the Company purchased 3,078,500 common shares (2018:
3,593,000) under its NCIB and 3,060,500 common shares (2018:
3,563,000) 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
|
Sep. 30,
2019
|
Jun. 30,
2019
|
Mar. 31,
2019
|
Dec. 31,
2018
|
Sep. 30,
2018
|
Jun. 30,
2018
|
Mar. 31,
2018
|
Dec. 31,
2017
|
Drilling Rigs –
Canada
|
|
|
|
|
|
|
|
|
Total drilling rigs,
end of period
|
7
|
7
|
9
|
9
|
9
|
9
|
9
|
9
|
|
|
|
|
|
|
|
|
|
Revenue per operating
day (1)
|
$20,685
|
$22,750
|
$23,895
|
$26,642
|
$21,263
|
$21,227
|
$23,485
|
$23,572
|
Drilling rig operating
days
|
130
|
72
|
382
|
491
|
500
|
133
|
498
|
463
|
Drilling rig
utilization % (2)
|
19%
|
11%
|
47%
|
59%
|
60%
|
16%
|
61%
|
56%
|
CAODC industry average
utilization %
|
23%
|
18%
|
29%
|
28%
|
30%
|
17%
|
52%
|
28%
|
|
|
|
|
|
|
|
|
|
Wells
drilled
|
12
|
10
|
39
|
34
|
41
|
11
|
45
|
30
|
Average days per
well
|
10.9
|
8.0
|
9.8
|
14.4
|
12.2
|
12.1
|
11.1
|
15.0
|
Meters drilled
(thousands)
|
39.6
|
26.7
|
119.8
|
127.8
|
155.2
|
41.0
|
161.7
|
128.1
|
Meters drilled per
day
|
304
|
373
|
314
|
261
|
310
|
309
|
325
|
277
|
Average meters per
well
|
3,300
|
2,966
|
3,070
|
3,708
|
3,786
|
3,724
|
3,593
|
4,270
|
(1)
|
Revenue per operating
day is calculated based on operating days (i.e. spud to rig release
basis). New or inactive drilling rigs are added based on the first
day
of field service.
|
(2)
|
Drilling rig
utilization is calculated based on operating days (i.e. spud to rig
release basis).
|
|
|
|
Three months
ended
|
OPERATING
HIGHLIGHTS
|
Sep. 30,
2019
|
Jun. 30,
2019
|
Mar. 31,
2019
|
Dec. 31,
2018
|
Sep. 30,
2018
|
Jun. 30,
2018
|
Mar. 31,
2018
|
Dec. 31,
2017
|
Drilling Rigs - United
States
|
|
|
|
|
|
|
|
|
Total drilling rigs,
end of period
|
2
|
2
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Revenue per operating
day (US$)(1)
|
$36,097
|
$54,188
(3)
|
-
|
-
|
-
|
-
|
-
|
-
|
Drilling rig operating
days
|
155
|
25
|
-
|
-
|
-
|
-
|
-
|
-
|
Drilling rig
utilization % (2)
|
84%
|
69%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Wells
drilled
|
16
|
1
|
-
|
-
|
-
|
-
|
-
|
-
|
Average days per
well
|
9.7
|
16.6
|
-
|
-
|
-
|
-
|
-
|
-
|
Meters drilled
(thousands)
|
50.7
|
2.9
|
-
|
-
|
-
|
-
|
-
|
-
|
Meters drilled per
day
|
327
|
177
|
-
|
-
|
-
|
-
|
-
|
-
|
Average meters per
well
|
3,171
|
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.
|
(2)
|
Drilling rig
utilization is calculated based on operating days (i.e. spud to rig
release basis).
|
(3)
|
Revenue is enhanced
by one-time recovery of mobilization costs.
|
Canadian Contract Drilling revenue of $2.7 million for Q3 2019 (Q3 2018: $10.6 million) was achieved with a utilization
rate of 19% (Q3 2018: 60%), compared to the CAODC industry average
of 23%, as CWC's customers continued to reduce or delay their
drilling programs in the quarter. CWC completed 130 Canadian
drilling rig operating days with seven drilling rigs in Q3 2019, a
74% decrease from the 500 Canadian drilling rig operating days with
nine drilling rigs in Q3 2018. The Q3 2019 average revenue per
operating day of $20,685 was a
decrease of 3% from $21,263 in Q3
2018. The significant reduction in Q3 2019 activity level was a
direct result of wet weather conditions combined with a lower crude
oil price during the quarter, compared to a year ago, and the
Government of Alberta mandated
production curtailment, which continued to temporarily slow down
the need for newly drilled wells. CWC estimates that 53 Canadian
drilling rig operating days (Q3 2018: 57 Canadian drilling rig
operating days) of lost activity were due to wet weather conditions
in Q3 2019 out of a possible total 644 Canadian drilling rig
operating days (Q3 2018: 828).
U.S. Contract Drilling revenue of $5.6
million for Q3 2019 (Q3 2018: nil) was achieved with a
utilization rate of 84% (Q3 2018: nil) with 155 U.S. drilling rig
operating days completed. Q3 2019 average revenue per operating day
in the U.S. was US$36,097. CWC
intends to move two more drilling rigs into the United States by the end of 2020, 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 active fleet and 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 64 of its service rigs and focus its sales and
operational efforts on the remaining 84 active service rigs due to
the reduction in the number of service rigs currently 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. While the Company continues to service steam-assisted
gravity drainage ("SAGD") wells that are shallower in depth and
more appropriate for coil tubing operations, it has recently
shifted its sales and operational focus on decommissioning of
abandoned wells.
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. The Company has chosen to park eight of its swabbing rigs
and focus its sales and operational efforts on the remaining five
active swabbing rigs.
|
|
|
Three months
ended
|
OPERATING
HIGHLIGHTS
|
Sep.
30,
2019
|
Jun.
30,
2019
|
Mar.
31,
2019
|
Dec.
31,
2018
|
Sep.
30,
2018
|
Jun.
30,
2018
|
Mar.
31,
2018
|
Dec.
31,
2017
|
Service
Rigs
|
|
|
|
|
|
|
|
|
Active service rigs,
end of period
|
84
|
92
|
93
|
92
|
102
|
107
|
108
|
111
|
Inactive service rigs,
end of period
|
64
|
56
|
55
|
56
|
46
|
41
|
41
|
38
|
Total service rigs,
end of period
|
148
|
148
|
148
|
148
|
148
|
148
|
149
|
149
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
29,528
|
23,129
|
30,875
|
31,232
|
42,316
|
28,831
|
53,979
|
40,879
|
Revenue per
hour
|
$644
|
$646
|
$671
|
$663
|
$628
|
$642
|
$637
|
$606
|
Revenue per hour
excluding top volume customers
|
$660
|
$687
|
$690
|
$696
|
$664
|
$677
|
$681
|
$645
|
Service rig
utilization % (1)
|
52%
|
39%
|
53%
|
51%
|
63%
|
41%
|
78%
|
64%
|
|
|
|
|
|
|
|
|
|
Coil Tubing
Units
|
|
|
|
|
|
|
|
|
Active coil tubing
units, end of period
|
8
|
8
|
8
|
8
|
8
|
8
|
8
|
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
|
9
|
10
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
318
|
301
|
1,730
|
1,647
|
898
|
1,212
|
3,007
|
1,978
|
Revenue per
hour
|
$730
|
$830
|
$555
|
$625
|
$731
|
$762
|
$724
|
$725
|
Coil tubing unit
utilization % (1)
|
6%
|
6%
|
34%
|
31%
|
17%
|
23%
|
54%
|
33%
|
|
|
|
|
|
|
|
|
|
Swabbing
Rigs
|
|
|
|
|
|
|
|
|
Active swabbing rigs,
end of period
|
5
|
8
|
8
|
8
|
9
|
8
|
8
|
9
|
Inactive swabbing
rigs, end of period
|
8
|
5
|
5
|
5
|
4
|
5
|
5
|
4
|
Total swabbing rigs,
end of period
|
13
|
13
|
13
|
13
|
13
|
13
|
13
|
13
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
865
|
661
|
1,655
|
2,313
|
881
|
958
|
2,258
|
1,063
|
Revenue per
hour
|
$284
|
$262
|
$288
|
$283
|
$273
|
$265
|
$310
|
$286
|
Swabbing rig
utilization % (1)
|
19%
|
13%
|
32%
|
41%
|
15%
|
18%
|
44%
|
27%
|
|
|
|
|
|
|
|
|
|
|
(1) Effective September 1, 2019, the
CAODC changed its methodology on how it calculates service rig
utilization. Service rig, coil tubing unit and swabbing rig
utilization is now calculated based on 10 operating hours a day x
number of days per quarter x 5 days a week divided by 7 days in a
week to reflect maximum
utilization available due to hours of service restrictions on rig
crews. Utilization percentages have been retroactively updated to
reflect this new CAODC
methodology. 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. 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 $19.5
million in Q3 2019, down $8.0
million (29%) compared to $27.5
million in Q3 2018. The significant drop in Q3 2019 activity
level for our production-oriented service rigs was a direct result
of wet weather conditions combined with a lower crude oil price
during the quarter, compared to a year ago. CWC estimates that
6,704 service rig operating hours (Q3 2018: 4,024 operating hours)
of lost activity were due to wet weather conditions in Q3 2019 out
of a total 56,693 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. During the
quarter, CWC chose to park an additional eight service rigs due to
the lower industry demand. Should demand improve and rig crews are
available, CWC would be able to activate 19 of the 64 inactive
service rigs with minimal capital expenditure resulting in a 103
active service rig fleet.
CWC's service rig utilization in Q3 2019 of 52% (Q3 2018: 63%)
was driven by 29,528 operating hours being 30% lower than the
42,316 operating hours in Q3 2018. However, the Q3 2019 average
revenue per hour of $644 increased
$16 per hour (3%) over the
$628 per hour in Q3 2018 suggesting
the loss in CWC's service rig operating hours in Q3 2019 compared
to Q3 2018 were primarily from CWC's top volume customers who were
the most affected by the Government of Alberta's mandated production curtailment. Q3
2019 average revenue per hour excluding the top volume customers of
$660 was $4 per hour (1%) lower than Q3 2018 average
revenue per hour of $664 suggesting
that CWC has been successful in maintaining service rig pricing
with its customers despite significantly lower rates being offered
by some of CWC's competitors.
CWC's coil tubing utilization in Q3 2019 of 6% (Q3 2018: 17%)
with 318 operating hours was 65% lower than the 898 operating hours
in Q3 2018. Average revenue per hour for coil tubing services of
$730 in Q3 2019 is relatively
unchanged from $731 in Q3 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 Q3 2019 of 19% (Q3 2018: 15%)
with 865 operating hours was 2% lower than the 881 operating hours
in Q3 2018 as CWC parked three more swabbing rigs during the
quarter due to lower customer demand as a result of the continuing
challenge of low natural gas prices during the quarter compared to
a year ago. Average revenue per hour for swabbing rigs of
$284 in Q3 2019 is 4% higher than
$273 in Q3 2018 as CWC has been
successful in maintaining swabbing rig pricing with its customers
despite the depressed natural gas price.
Capital Expenditures
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
Nine months
ended
|
|
|
|
September
30,
|
Change
|
Change
|
September
30,
|
Change
|
Change
|
$
thousands
|
2019
|
2018
|
$
|
%
|
2019
|
2018
|
$
|
%
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
Contract
drilling
|
195
|
1,586
|
(1,391)
|
(88%)
|
1,453
|
6,702
|
(5,249)
|
(78%)
|
Production
services
|
583
|
1,110
|
(527)
|
(47%)
|
2,460
|
3,040
|
(580)
|
(19%)
|
Other
equipment
|
190
|
-
|
190
|
n/m(1)
|
251
|
28
|
223
|
796%
|
|
968
|
2,696
|
(1,728)
|
(64%)
|
4,164
|
9,770
|
(5,606)
|
(57%)
|
|
|
|
|
|
|
|
|
|
Growth
capital
|
386
|
1,581
|
(1,195)
|
(76%)
|
386
|
5,859
|
(5,473)
|
(93%)
|
Maintenance and
infrastructure
|
|
|
|
|
|
|
|
|
capital
|
582
|
1,115
|
(533)
|
(48%)
|
3,778
|
3,911
|
(133)
|
(3%)
|
Total capital
expenditures
|
968
|
2,696
|
(1,728)
|
(64%)
|
4,164
|
9,770
|
(5,606)
|
(57%)
|
Capital expenditures of $1.0
million in Q3 2019, a decrease of $1.7 million (64%) compared to $2.7 million in Q3 2018.
Capital expenditures of $4.2
million for the nine months ended September 30, 2019, a decrease of $5.6 million (57%) compared to $9.8 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 is
comprised 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$56.40/bbl in Q3 2019, a decrease of 6%
compared to Q2 2019 average price of US$59.89/bbl (Q3 2018: US$69.61/bbl). Natural gas prices, as measured by
AECO, decreased 8% from an average of $1.06/GJ in Q2 2019 to $0.97/GJ in Q3 2019 (Q3 2018 $1.20/GJ), which remains very low in historical
terms. The price differential in Q3 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 175,000 bbls/day at the
start of Q3 2019 to 125,000 bbls/day by the end of Q3 2019.
Additionally, on August 20, 2019 the
Government of Alberta announced
adjustments to the production curtailment including moving the
curtailment end date to December 31,
2020 and effectively reducing the number of Alberta E&P
companies affected by the production curtailment by increasing the
exemption limit from 10,000 to 20,000 bbls/day starting
October 1, 2019. These reductions in
the production curtailment will allow CWC's E&P customers to
increase their production capacity, which in turn will gradually
increase CWC's activity levels for both its Contract Drilling and
Production Services segments.
With the recent re-election of the Liberal government in
Canada, we now have clarity that
the regulatory environment in Canada for the energy industry will likely be
similar to before the election. The new Liberal minority
government reconfirmed they will continue to move forward with the
construction of the Trans Mountain pipeline expansion project. This
expansion will help ease the egress problems facing our Canadian
E&P customers, providing additional capacity to ship crude oil
to tidewater on the west coast. Additional capacity will allows the
E&Ps to increase their drilling and well servicing activities,
which in turn may increase CWC's contract drilling and production
services utilization.
As we move into Q4 2019, CWC is seeing utilization of both
drilling rigs and service rigs increasing and believe that although
we will continue to operate in a challenging environment, the
outlook for Q4 2019 through to Q1 2020 spring breakup is better
than recent quarters.
While Canadian oilfield service activity currently remains muted
and the United States energy
industry has slowed down from its exponential growth experienced in
recent years, CWC continues to believe that more profitable
opportunities for its drilling rig fleet will be in the United States. CWC established a U.S.
drilling rig presence in mid-June
2019 when it began operations in the Eagle Ford basin in
Texas and DJ basin in Wyoming. Since the completion of the drilling
program in October 2019 for a
multi-national E&P company in Texas, CWC has now moved this drilling rig to
Wyoming to begin another drilling
program for another customer. Currently, the two U.S. drilling rigs
are in Wyoming and the Bakken
basin in North Dakota. It is
the Company's intent to move an additional two drilling rigs to the
U.S. in 2020 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(1) 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 news release, 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 news release 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
|
Nine months
ended
|
|
September
30,
|
September
30,
|
$ thousands,
except shares, per share amounts and margins
|
2019
|
2018
|
2019
|
2018
|
NON-IFRS
MEASURES
|
|
|
|
|
Adjusted
EBITDA:
|
|
|
|
|
Net (loss)
income
|
(234)
|
326
|
(846)
|
(1,545)
|
Add:
|
|
|
|
|
Depreciation
|
3,250
|
4,670
|
9,985
|
12,588
|
Finance
costs
|
525
|
616
|
1,915
|
1,899
|
Income tax
expense
|
161
|
206
|
(2,893)
|
(290)
|
Stock based
compensation
|
166
|
241
|
592
|
763
|
Loss (gain) on sale of
equipment
|
-
|
(57)
|
(78)
|
96
|
Adjusted
EBITDA(1)
|
3,868
|
6,002
|
8,675
|
13,511
|
Adjusted EBITDA
per share – basic and diluted (1)
|
$
|
0.01
|
$
|
0.01
|
$
|
0.02
|
$
|
0.03
|
Adjusted EBITDA
margin (Adjusted EBITDA / Revenue)
(1)
|
14%
|
16%
|
11%
|
12%
|
Weighted average
number of shares outstanding - basic
|
510,358,460
|
520,463,960
|
511,329,933
|
521,271,741
|
Weighted average
number of shares outstanding - diluted
|
510,358,460
|
524,754,635
|
511,329,933
|
521,271,741
|
Gross
margin:
|
|
|
|
|
Revenue
|
27,775
|
38,113
|
77,779
|
109,283
|
Less: Direct operating
expenses
|
19,545
|
27,946
|
56,806
|
82,196
|
Gross margin
(2)
|
8,230
|
10,167
|
20,973
|
27,087
|
Gross margin
percentage (2)
|
30%
|
27%
|
27%
|
25%
|
|
|
|
|
|
|
$
thousands
|
|
September 30,
2019
|
|
December 31,
2018
|
Working capital
(excluding debt):
|
|
|
|
|
Current
assets
|
|
23,733
|
|
26,893
|
Less: Current
liabilities
|
|
(6,963)
|
|
(8,793)
|
Add: Current
portion of long term debt
|
|
1,266
|
|
928
|
Working capital
(excluding debt) (3)
|
|
18,036
|
|
19,028
|
Working capital
(excluding debt) ratio(3)
|
|
4.2:1
|
|
3.4:1
|
Net debt:
|
|
|
|
|
Long term
debt
|
|
40,283
|
|
43,968
|
Less: Current
assets
|
|
(23,733)
|
|
(26,893)
|
Add: Current
liabilities
|
|
6,963
|
|
8,793
|
Net debt
(4)
|
|
23,513
|
|
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.