CALGARY, Feb. 28, 2020 /CNW/ - (TSXV: CWC) CWC Energy
Services Corp. ("CWC" or the "Company") announces the release of
its operational and financial results for the three months and year
ended December 31, 2019. The
Financial Statements and Management Discussion and Analysis
("MD&A") for the three months and year ended December 31, 2019 are filed on SEDAR at
www.sedar.com.
Financial and Operational Highlights
|
|
Three months
ended
|
|
Year
ended
|
$ thousands,
except shares, per
share amounts and margins
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
Change
%
|
|
2019
|
|
2018
|
|
2017
|
FINANCIAL
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Contract
Drilling
|
|
7,705
|
|
13,081
|
(41%)
|
|
28,497
|
|
38,223
|
|
35,222
|
Production
Services
|
|
22,962
|
|
22,397
|
3%
|
|
79,949
|
|
106,539
|
|
76,993
|
|
|
30,667
|
|
35,478
|
(14%)
|
|
108,446
|
|
144,762
|
|
112,215
|
Adjusted EBITDA
(1)
|
|
3,491
|
|
4,978
|
(30%)
|
|
12,166
|
|
18,489
|
|
16,063
|
Adjusted EBITDA
margin (%) (1)
|
|
11%
|
|
14%
|
|
|
11%
|
|
13%
|
|
14%
|
Net (loss)
income
|
|
(854)
|
|
(157)
|
444%
|
|
(1,700)
|
|
(1,702)
|
|
4,861
|
Net (loss) income
margin (%) (1)
|
|
(3%)
|
|
(0%)
|
(2%)
|
|
(2%)
|
|
(1%)
|
|
4%
|
Capital
expenditures
|
|
1,185
|
|
1,983
|
(40%)
|
|
5,349
|
|
11,753
|
|
44,532
|
Per share
information:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares
outstanding – basic
|
|
510,443,613
|
|
518,513,776
|
|
511,106,531
|
520,576,582
|
399,008,915
|
Weighted average
number of shares
outstanding - diluted
|
|
510,443,613
|
|
518,513,776
|
|
511,106,531
|
520,576,582
|
403,359,537
|
Adjusted EBITDA
(1) per share -
basic and diluted
|
$
|
0.01
|
$
|
0.01
|
|
$
|
0.02
|
$
|
0.04
|
$
|
0.04
|
Net (loss) income per
share -
basic and diluted
|
$
|
(0.00)
|
$
|
(0.00)
|
|
$
|
(0.00)
|
$
|
(0.00)
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December
31,
|
$ thousands,
except ratios
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
FINANCIAL POSITION
AND LIQUIDITY
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
(excluding debt) (1)
|
|
|
|
|
|
|
18,534
|
|
19,028
|
|
19,543
|
Working capital
(excluding debt) ratio (1)
|
|
|
|
|
|
|
3.3:1
|
|
3.4:1
|
|
2.6:1
|
Total
assets
|
|
|
|
|
|
|
243,398
|
|
252,665
|
|
264,354
|
Total long-term debt
(including current portion)
|
|
|
|
|
|
|
40,552
|
|
44,896
|
|
49,810
|
Shareholders'
equity
|
|
|
|
|
|
|
182,032
|
|
184,231
|
|
186,519
|
(1)
|
Please refer to the
"Reconciliation of Non-IFRS Measures" section for further
information.
|
Working capital (excluding debt) for December 31, 2019 has decreased $0.5 million (2%) since December 31, 2018 driven by decreases in cash
($0.4 million (76%)), accounts
receivable ($0.9 million (4%)), and
prepaid expenses and deposits ($0.1
million (3%)) partially offset by a decrease in accounts
payable of $0.9 million (11%).
Long-term debt (including current portion) has decreased
$4.3 million (10%) from December 31, 2018 driven by cash generated from
operations which was used to pay down long-term debt. Shareholders'
equity has decreased since December 31,
2018 primarily due to the net loss for the year ended
December 31, 2019 and the purchase
and cancellation of common shares under the NCIB program.
Highlights for the Three Months Ended December 31, 2019
- Average Q4 2019 crude oil pricing, as measured by WTI, of
US$56.85/bbl was 1% higher than the
Q3 2019 average price of US$56.40/bbl
(Q4 2018: US$59.32/bbl). The price
differential in Q4 2019 between Canadian heavy crude oil, as
represented by WCS, and WTI widened to over US$20.00/bbl. The Government of Alberta announcements in Q3 2019 reducing the
production curtailment to 125,000 bbls/day and extending the
curtailment end date to December 31,
2020 while increasing the exemption limit from 10,000 to
20,000 bbls/day starting October 1,
2019, effectively reduced the number of Alberta exploration and production ("E&P")
companies affected by the production curtailment. The widening
price differential between WTI and WCS is partially a result of
this increased crude oil supply which saw an increase in
Alberta crude oil storage levels
in November 2019 nearing all-time
highs last achieved in 2018. Natural gas prices, as measured by
AECO, increased 141% from an average of $0.97/GJ in Q3 2019 to $2.34/GJ in Q4 2019 (Q4 2018 $1.53/GJ); a result of the Canadian Energy
Regulator's approval of TC Energy's Temporary Service Protocol
("TSP") application which caused the differential between
Alberta gas prices and other North
American natural gas prices, such as NYMEX, to narrow.
- CWC's Canadian drilling rig utilization in Q4 2019 of 36% (Q4
2018: 59%) exceeded the Canadian Association of Oilwell Drilling
Contractors ("CAODC") industry average of 23%. Canadian activity
levels in Q4 2019 decreased 53% to 232 drilling rig operating days
from seven Canadian drilling rigs (Q4 2018: 491 drilling rig
operating days from nine Canadian drilling rigs) as E&P
customers deferred their drilling programs into Q1 2020. U.S.
drilling rig activity levels in Q4 2019 were 56 drilling rig
operating days from two U.S. drilling rigs for a utilization of 31%
(Q4 2018: nil) as the Company moved one drilling rig from
Texas to Wyoming in November
2019 to start operations in late December 2019. U.S. Contract Drilling revenue of
$2.6 million represented 34% of CWC's
total Contract Drilling revenue in Q4 2019 with the average revenue
per operating day of US$45,461 from
U.S. operations (which includes a one-time recovery of mobilization
costs). CWC's service rig utilization in Q4 2019 of 61% (Q4 2018:
51%) was driven by 33,656 operating hours being 8% higher than the
31,232 operating hours in Q4 2018; a result of E&P customers
choosing to do workovers to optimize production on their wells
prior to the end of the year.
- Revenue of $30.7 million, a
decrease of $4.8 million (14%)
compared to $35.5 million in Q4 2018.
The decrease in Q4 2019 revenue is a direct result of lower
utilizations in the Canadian drilling rig division partially offset
by increased activity and higher day rates in the U.S. drilling rig
division and increased activity in the Canadian service rig
divisions.
- Adjusted EBITDA(1) of $3.5
million, a decrease of $1.5
million (30%) compared to $5.0
million in Q4 2018, is a result of the decrease in revenue
offset by lower costs associated with the reduced activity levels
in the Canadian drilling rig division. CWC has achieved 26
consecutive quarters of positive Adjusted EBITDA(1)
since Q2 2013.
- Net loss of $0.9 million, an
increase of $0.7 million compared to
a net loss of $0.2 million in Q4
2018. The increase in net loss in Q4 2019 is partially due to a
loss on disposal of equipment of $0.4
million in Q4 2019.
- During Q4 2019, 1,453,500 common shares (Q4 2018: 7,828,000)
were purchased under the Normal Course Issuer Bid ("NCIB") and
1,342,000 common shares (Q4 2018: 7,828,000) were cancelled and
returned to treasury.
(1) Please refer to the
"Reconciliation of Non-IFRS Measures" section for further
information.
|
Highlights for the Year Ended December
31, 2019
- CWC's Canadian drilling rig utilization in 2019 of 30% (2018:
49%) exceeded the CAODC industry average of 22% (2018: 28%). CWC's
U.S. drilling rig utilization in 2019 was 60% (2018: n/a) after CWC
started its U.S. drilling operations in mid-June 2019. CWC's service rig utilization in
2019 was 51% compared to 59% in 2018. Activity levels in both the
Canadian drilling rig and service rig divisions dropped in 2019 as
a result of CWC's E&P customers reducing or delaying their
drilling and well maintenance programs due to lower crude oil
prices and the Government of Alberta mandated production curtailment
program temporarily slowing down the need for newly drilled wells
and workover and maintenance work on producing wells.
- Revenue of $108.5 million, a
decrease of $36.3 million (25%)
compared to $144.8 million in 2018.
The decrease is primarily a result of reduced activity levels in
the Contract Drilling and Production Services segments due to the
aforementioned Alberta production
curtailments and lower crude oil prices.
- Adjusted EBITDA(1) of $12.2
million, a decrease of $6.3
million (34%) compared to $18.5
million in 2018. The decrease in Adjusted
EBITDA(1) is consistent with the reduced revenue from
lower activity levels in both segments as a result of the
aforementioned Alberta production
curtailments and lower crude oil prices partially offset by
significantly lower selling and administrative expenses as a result
of lower bad debt expenses in 2019 compared to 2018.
- Net loss of $1.7 million,
unchanged from a net loss of $1.7
million in 2018. Net loss in 2019 is a result of the
decreased Adjusted EBITDA(1) partially offset by a
reduction in selling and administrative expenses and depreciation
and amortization expenses, and deferred income tax recoveries as a
result of a reduction in the Alberta provincial corporate tax rates from
12% to 8% by 2022.
- 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 $75.0 million to
$60.0 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 Consolidated EBITDA ratio is as
follows:
For the Quarter
Ended
|
Previously
|
Currently
|
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
|
- On April 10, 2019, the Company
renewed its NCIB with an Automatic Securities Purchase Plan
("ASPP") with Raymond James Ltd., which expires on April 14, 2020. During 2019, the Company
purchased 4,532,000 (2018: 11,421,000) common shares under its
NCIB. 4,402,500 shares which were cancelled and returned to
treasury (2018:11,421,000). The 4,532,000 common shares purchased
under the NCIB represented 38% of the 11,930,386 shares traded on
the TSX Venture Exchange ("TSXV") in 2019 (2018: 47%).
(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 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.
OPERATING
HIGHLIGHTS
|
Three months
ended
|
Dec. 31,
2019
|
Sep. 30,
2019
|
Jun. 30,
2019
|
Mar. 31,
2019
|
Dec. 31,
2018
|
Sep. 30,
2018
|
Jun. 30,
2018
|
Mar. 31,
2018
|
Drilling Rigs –
Canada
|
|
|
|
|
|
|
|
|
Total drilling rigs,
end of period
|
7
|
7
|
7
|
9
|
9
|
9
|
9
|
9
|
|
|
|
|
|
|
|
|
|
Revenue per operating
day (1)
|
$22,161
|
$20,685
|
$22,750
|
$23,895
|
$26,642
|
$21,263
|
$21,227
|
$23,485
|
Drilling rig operating
days
|
232
|
130
|
72
|
382
|
491
|
500
|
133
|
498
|
Drilling rig
utilization % (2)
|
36%
|
19%
|
11%
|
47%
|
59%
|
60%
|
16%
|
61%
|
CAODC industry average
utilization %
|
23%
|
23%
|
18%
|
29%
|
28%
|
30%
|
17%
|
52%
|
|
|
|
|
|
|
|
|
|
Wells
drilled
|
18
|
12
|
10
|
39
|
34
|
41
|
11
|
45
|
Average days per
well
|
12.9
|
10.9
|
8.0
|
9.8
|
14.4
|
12.2
|
12.1
|
11.1
|
Meters drilled
(thousands)
|
75.6
|
39.6
|
26.7
|
119.8
|
127.8
|
155.2
|
41.0
|
161.7
|
Meters drilled per
day
|
326
|
304
|
373
|
314
|
261
|
310
|
309
|
325
|
Average meters per
well
|
4,199
|
3,300
|
2,966
|
3,070
|
3,708
|
3,786
|
3,724
|
3,593
|
|
|
|
|
|
|
|
|
|
Drilling Rigs - United States
|
|
|
|
|
|
|
|
|
Total drilling rigs,
end of period
|
2
|
2
|
2
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Revenue per operating
day (US$)(1)
|
$45,461(3)
|
$36,097
|
$54,188
(3)
|
-
|
-
|
-
|
-
|
-
|
Drilling rig operating
days
|
56
|
155
|
25
|
-
|
-
|
-
|
-
|
-
|
Drilling rig
utilization % (2)
|
31%
|
84%
|
69%
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Wells
drilled
|
5
|
16
|
1
|
-
|
-
|
-
|
-
|
-
|
Average days per
well
|
11.3
|
9.7
|
16.6
|
-
|
-
|
-
|
-
|
-
|
Meters drilled
(thousands)
|
14.5
|
50.7
|
2.9
|
-
|
-
|
-
|
-
|
-
|
Meters drilled per
day
|
258
|
327
|
177
|
-
|
-
|
-
|
-
|
-
|
Average meters per
well
|
2,942
|
978
|
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 $5.1 million for Q4 2019 (Q4 2018: $13.1 million) was achieved with a utilization
rate of 36% (Q4 2018: 59%), compared to the CAODC industry average
of 23%, as CWC's E&P customers deferred their drilling programs
into Q1 2020. CWC completed 232 Canadian drilling rig
operating days with seven drilling rigs in Q4 2019, a 53% decrease
from the 491 Canadian drilling rig operating days with nine
drilling rigs in Q4 2018 as activity levels in Q4 2019 were reduced
as a result of the Government of Alberta mandated production curtailment, which
continued to temporarily slow down the need for newly drilled
wells. The Q4 2019 average revenue per operating day of
$22,161 was a decrease of 17% from
$26,642 in Q4 2018 which included a
one-time contract payout amount of $0.7
million.
U.S. Contract Drilling revenue of $2.6
million for Q4 2019 (Q4 2018: nil) was achieved with a
utilization rate of 31% (Q4 2018: nil) with 56 U.S. drilling rig
operating days completed. Q4 2019 average revenue per operating day
in the U.S. was US$45,461 and
included $0.8 million in one-time
recovery of mobilization costs. CWC plans 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 146 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 75 single, 57 double, and 14 slant rigs providing
services which include completions, maintenance, workovers and well
decommissioning with depth ratings from 1,500 to 5,000 metres. CWC
has chosen to park 62 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. In January
2020, CWC sold one of its inactive swabbing rigs for a
current fleet of 12 swabbing rigs.
OPERATING
HIGHLIGHTS
|
Three months
ended
|
Dec.
31,
2019
|
Sep.
30,
2019
|
Jun.
30,
2019
|
Mar.
31,
2019
|
Dec.
31,
2018
|
Sep.
30,
2018
|
Jun.
30,
2018
|
Mar.
31,
2018
|
Service
Rigs
|
|
|
|
|
|
|
|
|
Active service rigs,
end of period
|
84
|
84
|
92
|
93
|
92
|
102
|
107
|
108
|
Inactive service rigs,
end of period
|
62
|
64
|
56
|
55
|
56
|
46
|
41
|
41
|
Total service rigs,
end of period
|
146
|
148
|
148
|
148
|
148
|
148
|
148
|
149
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
33,656
|
29,528
|
23,129
|
30,875
|
31,232
|
42,316
|
28,831
|
53,979
|
Revenue per
hour
|
$664
|
$644
|
$646
|
$671
|
$663
|
$628
|
$642
|
$637
|
Revenue per hour
excluding top volume customers
|
$682
|
$660
|
$687
|
$690
|
$696
|
$664
|
$677
|
$681
|
Service rig
utilization % (1)
|
62%
|
52%
|
39%
|
53%
|
51%
|
63%
|
41%
|
78%
|
|
|
|
|
|
|
|
|
|
Coil Tubing
Units
|
|
|
|
|
|
|
|
|
Active coil tubing
units, end of period
|
7
|
8
|
8
|
8
|
8
|
8
|
8
|
8
|
Inactive coil tubing
units, end of period
|
2
|
1
|
1
|
1
|
1
|
1
|
1
|
1
|
Total coil tubing
units, end of period
|
9
|
9
|
9
|
9
|
9
|
9
|
9
|
9
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
448
|
318
|
301
|
1,730
|
1,647
|
898
|
1,212
|
3,007
|
Revenue per
hour
|
$646
|
$730
|
$830
|
$555
|
$625
|
$731
|
$762
|
$724
|
Coil tubing unit
utilization % (1)
|
10%
|
6%
|
6%
|
34%
|
31%
|
17%
|
23%
|
54%
|
|
|
|
|
|
|
|
|
|
Swabbing
Rigs
|
|
|
|
|
|
|
|
|
Active swabbing rigs,
end of period
|
5
|
5
|
8
|
8
|
8
|
9
|
8
|
8
|
Inactive swabbing
rigs, end of period
|
8
|
8
|
5
|
5
|
5
|
4
|
5
|
5
|
Total swabbing rigs,
end of period
|
13
|
13
|
13
|
13
|
13
|
13
|
13
|
13
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
1,141
|
865
|
661
|
1,655
|
2,313
|
881
|
958
|
2,258
|
Revenue per
hour
|
$282
|
$284
|
$262
|
$288
|
$283
|
$273
|
$265
|
$310
|
Swabbing rig
utilization % (1)
|
35%
|
19%
|
13%
|
32%
|
41%
|
15%
|
18%
|
44%
|
|
|
|
|
|
|
|
|
|
(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 $23.0
million in Q4 2019, up $0.6
million (3%) compared to $22.4
million in Q4 2018. The increase in Q4 2019 activity levels
for our production-oriented service rigs was a result of our
E&P customers choosing to do workovers to optimize production
on their wells prior to the end of the year. CWC's Production
Services segment was affected by a tight labour market for field
employees during Q4 2019. Had rig crews been available, CWC
believes it could activate 19 of the 62 inactive service rigs with
minimal capital expenditure resulting in a 103 active service rig
fleet.
CWC's service rig utilization in Q4 2019 of 61% (Q4 2018: 51%)
was driven by 33,656 operating hours being 8% higher than the
31,232 operating hours in Q4 2018. In addition, the Q4 2019 average
revenue per hour of $664 remained
relatively unchanged compared to the $663 per hour in Q4 2018. Q4 2019 average revenue
per hour excluding the Company's top volume customers of
$682 was $14 per hour (2%) lower than Q4 2018 average
revenue per hour of $696 as CWC was
able to increase its hourly rate with its largest volume customers
while being more competitive at slightly lower rates offered by our
competitors for its smaller volume customers.
CWC's coil tubing utilization in Q4 2019 of 10% (Q4 2018: 31%)
with 448 operating hours was 73% lower than the 1,647 operating
hours in Q4 2018. Average revenue per hour for coil tubing services
of $646 in Q4 2019 is $21 per hour higher (3%) than $625 in Q4 2018. The lower utilization reflects
the continuing challenge of 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 Q4 2019 of 35% (Q4 2018: 41%)
with 1,141 operating hours was 51% lower than the 2,313 operating
hours in Q4 2018 as CWC had three less swabbing rigs active during
the quarter compared to the prior year, due to lower customer
demand from continued low natural gas prices. Average revenue per
hour for swabbing rigs of $282 in Q4
2019 is relatively unchanged from $283 in Q4 2018.
Capital Expenditures
|
Three months
ended
|
|
|
Year
ended
|
|
|
|
December
31,
|
Change
|
Change
|
December
31,
|
Change
|
Change
|
$
thousands
|
2019
|
2018
|
$
|
%
|
2019
|
2018
|
$
|
%
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
Contract
drilling
|
24
|
414
|
(390)
|
(94%)
|
1,477
|
7,116
|
(5,639)
|
(79%)
|
Production
services
|
1,156
|
1,569
|
(413)
|
(26%)
|
3,616
|
4,609
|
(993)
|
(22%)
|
Other
equipment
|
5
|
-
|
5
|
n/m(1)
|
256
|
28
|
228
|
814%
|
|
1,185
|
1,983
|
(798)
|
(40%)
|
5,349
|
11,753
|
(6,404)
|
(54%)
|
|
|
|
|
|
|
|
|
|
Growth
capital
|
-
|
-
|
-
|
n/m(1)
|
386
|
5,859
|
(5,473)
|
(93%)
|
Maintenance and
infrastructure capital
|
1,185
|
1,983
|
(798)
|
(40%)
|
4,963
|
5,894
|
(931)
|
(16%)
|
Total capital
expenditures
|
1,185
|
1,983
|
(798)
|
(40%)
|
5,349
|
11,753
|
(6,404)
|
(54%)
|
Capital expenditures of $1.2
million in Q4 2019, a decrease of $0.8 million (40%) compared to $2.0 million in Q4 2018.
Capital expenditures were $5.3
million for the year ended December
31, 2019, a decrease of $6.4
million (54%) compared to $11.8
million in 2018. The Company met its 2019 capital
expenditure budget of $5.4 million
which was announced on January 16,
2019.
The 2020 capital expenditure budget of $6.7 million was approved by the Board of
Directors on December 12, 2019 and is
comprised of $6.0 million of
maintenance and infrastructure capital related to recertifications,
additions and upgrades to field equipment for the drilling rig and
service rig divisions as well as information technology
infrastructure, and $0.7 million
related to growth capital to upgrade one of the drilling rigs.
Outlook
Crude oil, as represented by WTI, averaged US$56.85/bbl in Q4 2019, an increase of 1%
compared to Q3 2019 average price of US$56.40/bbl (Q4 2018: US$59.32/bbl). The price differential in Q4 2019
between Canadian heavy crude oil, as represented by WCS, and WTI
widened to over US$20.00/bbl. The
Government of Alberta
announcements in Q3 2019 reducing the production curtailment to
125,000 bbls/day and extending the curtailment end date to
December 31, 2020 while increasing
the exemption limit from 10,000 to 20,000 bbls/day starting
October 1, 2019, effectively reduced
the number of Alberta E&P companies affected by the production
curtailment. The widening price differential between WTI and WCS is
partially a result of this increased crude oil supply which saw an
increase in Alberta crude oil
storage levels in November 2019
nearing all-time highs last achieved in 2018. As more pipeline
space gets freed up on existing pipelines, crude-by-rail continues
to grow and once construction of the Enbridge Line 3 Replacement
Project is completed, the WTI – WCS differential should begin to
narrow, thereby allowing increased activity level for oilfield
services in the WCSB. Natural gas prices, as measured by AECO,
increased 141% from an average of $0.97/GJ in Q3 2019 to $2.34/GJ in Q4 2019 (Q4 2018 $1.53/GJ); a result of the Canadian Energy
Regulator's approval of the TSP application which caused the
differential between Alberta gas
prices and other North American natural gas prices, such as NYMEX,
to narrow. The TSP was enacted with the goal of providing TC Energy
more flexibility in how they deal with curtailments on the Nova Gas
Transmission System during times of maintenance.
In Q1 2020, CWC is currently experiencing higher utilization
than at any point in 2019 for both drilling rigs and service rigs
which we believe will continue through to spring breakup.
The Canadian Association of Petroleum Producers ("CAPP")
has recently stated that it expects $37
billion, about $2 billion (6%)
more than 2019, will be invested in the Canadian upstream energy
sector in 2020; the first increase since 2014 when investment
levels were $81 billion. In addition,
on January 30, 2020, the Petroleum
Services Association of Canada
("PSAC") increased its forecast for the number of wells to be
drilled in Canada for 2020 by 300
wells (7%) to 4,800 wells. These industry forecasts suggest that
CWC's Canadian activity levels should be stronger throughout 2020
with its only significant constraint being able to find sufficient
field labour. However, CWC cautions that the current global
uncertainty with respect to the spread of the COVID-19 virus (the
"coronavirus") and its effect on the disruption of supply and
demand for products and services to the broader global economy,
including its effect on oil and natural gas produced by our E&P
customers, may have a significant negative effect to oilfield
service activity levels in Canada
and the U.S.
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. 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 with a complementary
suite of oilfield services including drilling rigs, service rigs
and coil tubing units. The Company's corporate office is located in
Calgary, Alberta, with operational
locations in Nisku, Grande Prairie, Slave 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, 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 (i.e. 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
|
Year
ended
|
$ thousands,
except shares, per share amounts and margins
|
December
31,
|
December
31,
|
2019
|
2018
|
2019
|
2018
|
2017
|
NON-IFRS
MEASURES
|
|
|
|
|
|
Adjusted
EBITDA:
|
|
|
|
|
|
Net (loss)
income
|
(854)
|
(157)
|
(1,700)
|
(1,702)
|
4,861
|
Add:
|
|
|
|
|
|
Depreciation
|
3,183
|
3,853
|
13,168
|
16,441
|
17,103
|
Finance
costs
|
516
|
857
|
2,431
|
2,756
|
2,054
|
Transaction
costs
|
-
|
-
|
-
|
-
|
1,549
|
Income tax
expense
|
(51)
|
140
|
(2,944)
|
(150)
|
(1,285)
|
Stock based
compensation
|
329
|
339
|
921
|
1,102
|
869
|
Gain on
acquisition
|
-
|
-
|
-
|
-
|
(9,128)
|
Loss (gain) on sale of
equipment
|
368
|
(54)
|
290
|
42
|
40
|
Adjusted
EBITDA(1)
|
3,491
|
4,978
|
12,166
|
18,489
|
16,063
|
Adjusted EBITDA
per share – basic and diluted (1)
|
$
|
0.01
|
$
|
0.01
|
$
|
0.02
|
$
|
0.04
|
$
|
0.04
|
Adjusted EBITDA
margin (Adjusted
EBITDA/Revenue)(1)
|
11%
|
14%
|
11%
|
13%
|
14%
|
Weighted average
number of shares outstanding - basic
|
510,443,613
|
518,513,776
|
511,106,531
|
520,576,582
|
399,008,915
|
Weighted average
number of shares outstanding - diluted
|
510,443,613
|
518,513,776
|
511,106,531
|
520,576,582
|
403,359,537
|
Gross
margin:
|
|
|
|
|
|
Revenue
|
30,667
|
35,478
|
108,446
|
144,762
|
112,215
|
Less: Direct operating
expenses
|
22,803
|
25,788
|
79,609
|
107,984
|
82,361
|
Gross margin
(2)
|
7,864
|
9,690
|
28,837
|
36,778
|
29,854
|
Gross margin
percentage (2)
|
26%
|
27%
|
27%
|
25%
|
27%
|
|
|
|
|
|
|
$
thousands
|
December 31,
2019
|
December 31,
2018
|
December 31,
2017
|
Working capital
(excluding debt):
|
|
|
|
Current
assets
|
26,642
|
26,893
|
31,745
|
Less: Current
liabilities
|
(9,249)
|
(8,793)
|
(12,378)
|
Add: Current
portion of long term debt
|
1,141
|
928
|
176
|
Working capital
(excluding debt) (3)
|
18,534
|
19,028
|
19,543
|
Working capital
(excluding debt) ratio(3)
|
3.3:1
|
3.4:1
|
2.6:1
|
Net debt:
|
|
|
|
Long term
debt
|
39,411
|
43,968
|
49,634
|
Less: Current
assets
|
(26,642)
|
(26,893)
|
(31,745)
|
Add: Current
liabilities
|
9,249
|
8,793
|
12,378
|
Net debt
(4)
|
22,018
|
25,868
|
30,267
|
(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,
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.