CALGARY, April 30, 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 ended March 31, 2020. The
Financial Statements and Management Discussion and Analysis
("MD&A") for the three months ended March 31, 2020 are filed on SEDAR at
www.sedar.com.
Financial and Operational Highlights
|
|
|
|
|
Three months
ended
|
$ thousands,
except shares, per share amounts and margins
|
|
March
31,
|
|
2020
|
|
2019
|
Change
%
|
FINANCIAL
RESULTS
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
Contract
Drilling
|
|
12,671
|
|
9,120
|
39%
|
Production
Services
|
|
20,869
|
|
22,139
|
(6%)
|
|
|
33,540
|
|
31,259
|
7%
|
Adjusted EBITDA
(1)
|
|
5,508
|
|
4,694
|
17%
|
Adjusted EBITDA
margin (%) (1)
|
|
16%
|
|
15%
|
|
|
|
|
|
|
|
Impairment of
assets
|
|
(25,451)
|
|
-
|
n/m(2)
|
|
|
|
|
|
|
Net loss
|
|
(19,177)
|
|
(47)
|
n/m(2)
|
Net loss margin (%)
(1)
|
|
(57%)
|
|
(0%)
|
(55%)
|
Capital
expenditures
|
|
2,805
|
|
1,294
|
117%
|
Per share
information:
|
|
|
|
|
|
Weighted average
number of shares outstanding – basic and diluted
|
|
510,936,431
|
|
512,678,779
|
|
Adjusted EBITDA
(1) per share - basic and diluted
|
$
|
0.01
|
$
|
0.01
|
|
Net loss per share -
basic and diluted
|
$
|
(0.04)
|
$
|
(0.00)
|
|
|
|
|
|
|
|
$ thousands,
except ratios
|
March 31,
2020
|
|
December 31,
2019
|
FINANCIAL POSITION
AND LIQUIDITY
|
|
|
|
Working capital
(excluding debt) (1)
|
23,903
|
|
18,534
|
Working capital
(excluding debt) ratio (1)
|
4.9:1
|
|
3.3:1
|
Total
assets
|
221,110
|
|
243,398
|
Total long-term debt
(including current portion)
|
43,337
|
|
40,552
|
Shareholders'
equity
|
164,802
|
|
182,032
|
(1)
|
Please refer to the
"Reconciliation of Non-IFRS Measures" section for further
information
|
(2)
|
Not
meaningful
|
Working capital (excluding debt) for March 31, 2020 has increased $5.4 million (29%) since December 31, 2019 driven by increases in accounts
receivable ($3.2 million (13%)) and
decreases in account payable ($2.9
million (36%)) offset by a decrease in prepaid expenses and
deposits ($0.8 million (29%)). Due to
the seasonality of the oilfield services business in Canada, working capital typically peaks in Q1
and drops in Q2 as accounts receivable are collected. Long-term
debt (including current portion) has increased 7% from December 31, 2019 in part to fund the increase in
working capital (excluding debt) required. Shareholders' equity has
decreased $17.2 million (9%) since
December 31, 2019 primarily due to
the net loss for the quarter ended March 31,
2020 which included a charge for impairment of assets of
$25.5 million partially offset by an
unrealized gain on translation of foreign operations of
$2.2 million.
Highlights for the Three Months Ended March 31, 2020
- The COVID-19 health pandemic and the measures put in place to
slow the spread of the virus has led to significant global economic
demand deterioration for nearly all goods and services, including
the use of oil and gas. In addition, on March 6, 2020, OPEC and Russia could not agree on a decrease to crude
oil production quotas. In response to Russia's refusal to cut back on crude oil
production, Saudi Arabia increased
their oil production thereby flooding the global market and
decreasing the price of crude oil to uneconomic levels. Average Q1
2020 crude oil price, as measured by West Texas Intermediate
("WTI"), of US$45.57/bbl was 20%
lower than the Q4 2019 average price of US$56.85/bbl (Q1 2019: US$54.87/bbl) and ended the quarter at
US$20.48/bbl. The crude oil price in
Canada was even more distressed as
the price differential between Canadian heavy crude oil, as
represented by Western Canadian Select ("WCS"), and WTI of
approximately US$15.00/bbl resulted
in WCS of US$4.69/bbl on March 31, 2020. Natural gas prices, as measured
by AECO, decreased 18% from an average of $2.34/GJ in Q4 2019 to $1.93/GJ in Q1 2020 (Q1 2019 $2.44/GJ).
- The Company acted quickly to implement cash saving initiatives
to preserve cash resources and maintain balance sheet strength as
well as retaining our most valuable asset – our key employees.
Annual cash saving initiatives totaling $10.3 million are anticipated to reduce full year
direct operating expenses by $4.4
million, selling and administrative expenses by $3.3 million and capital expenditures by
$2.6 million. The Company has reduced
its head count by 43% through departures and layoffs of its
employees and contractors and incurred $0.1
million in severance costs related to these layoffs in Q1
2020. CWC now has 355 employees as at April
15, 2020. In addition, the Company expects to receive
approximately $1.3 million under the
Canada Emergency Wage Subsidy
("CEWS").
- CWC's Canadian drilling rig utilization in Q1 2020 of 54% (Q1
2019: 47%) exceeded the Canadian Association of Oilwell Drilling
Contractors ("CAODC") industry average of 35%. Canadian activity
levels in Q1 2020 decreased 10% to 344 drilling rig operating days
from seven Canadian drilling rigs (Q1 2019: 382 drilling rig
operating days from nine Canadian drilling rigs). Average revenue
per operating day of $22,849 resulted
in revenue of $7.9 million from the
Canadian drilling operations. U.S. drilling rig activity levels in
Q1 2020 were 144 drilling rig operating days from two U.S. drilling
rigs for a utilization of 79% (Q1 2019: nil). U.S. Contract
Drilling revenue of $4.8 million
represented 38% of CWC's total Contract Drilling revenue in Q1 2020
with the average revenue per operating day of US$25,139 from U.S. operations. CWC's service rig
utilization in Q1 2020 of 56% (Q1 2019: 53%) was driven by 30,442
operating hours which were 1% lower than the 30,875 operating hours
in Q1 2019; a result of the significant drop off in activity levels
in mid-March 2020 due to COVID-19 and
the corresponding steep drop in oil prices.
- Revenue of $33.5 million, an
increase of $2.2 million (7%)
compared to $31.3 million in Q1
2019.
- Adjusted EBITDA(1) of $5.5
million, an increase of $0.8
million (17%) compared to $4.7
million in Q1 2019.
- Net loss of $19.2 million, an
increase of $19.2 million compared to
a net loss of $0.05 million in Q1
2019. The increase in net loss is primarily due to a charge for
impairment of assets of $25.5
million.
- During Q1 2020, 3,674,500 common shares (Q1 2019: 2,050,500)
were purchased under the Normal Course Issuer Bid ("NCIB") and
3,764,000 common shares (Q1 2019: 1,792,000) 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 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.
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|
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Three months
ended
|
OPERATING
HIGHLIGHTS
|
Mar. 31,
2020
|
Dec. 31,
2019
|
Sep. 30,
2019
|
Jun. 30,
2019
|
Mar. 31,
2019
|
Dec. 31,
2018
|
Sep. 30,
2018
|
Jun. 30,
2018
|
Drilling Rigs –
Canada
|
|
|
|
|
|
|
|
|
Total drilling rigs,
end of period
|
7
|
7
|
7
|
7
|
9
|
9
|
9
|
9
|
|
|
|
|
|
|
|
|
|
Revenue per operating
day (1)
|
$22,849
|
$22,161
|
$20,685
|
$22,750
|
$23,895
|
$26,642
|
$21,263
|
$21,227
|
Drilling rig operating
days
|
344
|
232
|
130
|
72
|
382
|
491
|
500
|
133
|
Drilling rig
utilization % (2)
|
54%
|
36%
|
19%
|
11%
|
47%
|
59%
|
60%
|
16%
|
CAODC industry average
utilization %
|
35%
|
23%
|
23%
|
18%
|
29%
|
28%
|
30%
|
17%
|
|
|
|
|
|
|
|
|
|
Wells
drilled
|
26
|
18
|
12
|
10
|
39
|
34
|
41
|
11
|
Average days per
well
|
13.2
|
12.9
|
10.9
|
8.0
|
9.8
|
14.4
|
12.2
|
12.1
|
Meters drilled
(thousands)
|
99.6
|
75.6
|
39.6
|
26.7
|
119.8
|
127.8
|
155.2
|
41.0
|
Meters drilled per
day
|
290
|
326
|
304
|
373
|
314
|
261
|
310
|
309
|
Average meters per
well
|
3,831
|
4,199
|
3,300
|
2,966
|
3,070
|
3,708
|
3,786
|
3,724
|
|
|
|
|
|
|
|
|
|
Drilling Rigs - United States
|
|
|
|
|
|
|
|
|
Total drilling rigs,
end of period
|
2
|
2
|
2
|
2
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Revenue per operating
day (US$)(1)
|
$25,139
|
$34,448(3)
|
$27,159
|
$54,188
(3)
|
-
|
-
|
-
|
-
|
Drilling rig operating
days
|
144
|
56
|
155
|
25
|
-
|
-
|
-
|
-
|
Drilling rig
utilization % (2)
|
79%
|
31%
|
84%
|
69%
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Wells
drilled
|
10
|
5
|
16
|
1
|
-
|
-
|
-
|
-
|
Average days per
well
|
14.4
|
11.3
|
9.7
|
16.6
|
-
|
-
|
-
|
-
|
Meters drilled
(thousands)
|
40.5
|
14.5
|
50.7
|
2.9
|
-
|
-
|
-
|
-
|
Meters drilled per
day
|
282
|
258
|
327
|
177
|
-
|
-
|
-
|
-
|
Average meters per
well
|
4,053
|
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 $7.9 million for Q1 2020 (Q1 2019: $9.1 million) was achieved with a utilization
rate of 54% (Q1 2019: 47%), compared to the CAODC industry average
of 35%. CWC completed 344 Canadian drilling rig operating days with
seven drilling rigs in Q1 2020, a 10% decrease from the 382
Canadian drilling rig operating days with nine drilling rigs in Q1
2019. This decrease in drilling rig operating days in Q1 2020 was
solely due to two less drilling rigs in Canada as a result of moving two drilling rigs
to the U.S. in May 2019. The Q1 2020 average revenue per
operating day of $22,849 was a
decrease of 4% compared to $23,895 in
Q1 2019.
U.S. Contract Drilling revenue of $4.8
million for Q1 2020 (Q1 2019: nil) was achieved with a
utilization rate of 79% (Q1 2019: nil) with 144 U.S. drilling rig
operating days. Q1 2020 average revenue per operating day in the
U.S. was US$25,139. Subject to
customer contracts, the Company had planned to move two additional
drilling rigs to the United States
by the end of 2020, however, with the combined impact of COVID-19
and depressed oil prices, the timing of such moves may be
delayed.
Production Services
With a fleet of 145 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, 56 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 83 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. During the quarter, the Company discontinued
operations of its coil tubing division and wrote down the value of
the assets to their estimated disposal value. The Company will look
at monetizing the coil tubing assets when market conditions in the
oil and gas industry stabilize.
CWC's fleet of 12 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 seven of its swabbing rigs
and focus its sales and operational efforts on the remaining five
active swabbing rigs.
|
|
|
Three months
ended
|
OPERATING
HIGHLIGHTS
|
Mar.
31,
2020
|
Dec.
31,
2019
|
Sep.
30,
2019
|
Jun.
30,
2019
|
Mar.
31,
2019
|
Dec.
31,
2018
|
Sep.
30,
2018
|
Jun.
30,
2018
|
Service
Rigs
|
|
|
|
|
|
|
|
|
Active service rigs,
end of period
|
83
|
84
|
84
|
92
|
93
|
92
|
102
|
107
|
Inactive service rigs,
end of period
|
62
|
62
|
64
|
56
|
55
|
56
|
46
|
41
|
Total service rigs,
end of period
|
145
|
146
|
148
|
148
|
148
|
148
|
148
|
148
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
30,442
|
33,656
|
29,528
|
23,129
|
30,875
|
31,232
|
42,316
|
28,831
|
Revenue per
hour
|
$666
|
$664
|
$644
|
$646
|
$671
|
$663
|
$628
|
$642
|
Revenue per hour
excluding top volume customers
|
$673
|
$682
|
$660
|
$687
|
$690
|
$696
|
$664
|
$677
|
Service rig
utilization % (1)
|
56%
|
62%
|
52%
|
39%
|
53%
|
51%
|
63%
|
41%
|
|
|
|
|
|
|
|
|
|
Coil Tubing
Units
|
|
|
|
|
|
|
|
|
Active coil tubing
units, end of period
|
0
|
7
|
8
|
8
|
8
|
8
|
8
|
8
|
Inactive coil tubing
units, end of period
|
9
|
2
|
1
|
1
|
1
|
1
|
1
|
1
|
Total coil tubing
units, end of period
|
9
|
9
|
9
|
9
|
9
|
9
|
9
|
9
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
486
|
448
|
318
|
301
|
1,730
|
1,647
|
898
|
1,212
|
Revenue per
hour
|
$545
|
$646
|
$730
|
$830
|
$555
|
$625
|
$731
|
$762
|
Coil tubing unit
utilization % (1)
|
11%
|
10%
|
6%
|
6%
|
34%
|
31%
|
17%
|
23%
|
|
|
|
|
|
|
|
|
|
Swabbing
Rigs
|
|
|
|
|
|
|
|
|
Active swabbing rigs,
end of period
|
5
|
5
|
5
|
8
|
8
|
8
|
9
|
8
|
Inactive swabbing
rigs, end of period
|
7
|
8
|
8
|
5
|
5
|
5
|
4
|
5
|
Total swabbing rigs,
end of period
|
12
|
13
|
13
|
13
|
13
|
13
|
13
|
13
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
1,088
|
1,141
|
865
|
661
|
1,655
|
2,313
|
881
|
958
|
Revenue per
hour
|
$300
|
$282
|
$284
|
$262
|
$288
|
$283
|
$273
|
$265
|
Swabbing rig
utilization % (1)
|
33%
|
35%
|
19%
|
13%
|
47%
|
41%
|
15%
|
18%
|
|
|
|
|
|
|
|
|
|
(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 were removed from service for greater than 90
days were excluded from the utilization calculation until their
first day back in field service
|
Production Services revenue was $20.9
million in Q1 2020, down $1.2
million (6%) compared to $22.1
million in Q1 2019. The revenue decrease in Q1 2020 was a
direct result of the rapid decrease in crude oil prices in
March 2020 as the global health
solutions to slow the spread of the COVID-19 virus resulted in a
significant drop in demand for crude oil.
CWC's service rig utilization in Q1 2020 of 56% (Q1 2019: 53%)
was driven by 30,442 operating hours being 1% lower than the 30,875
operating hours in Q1 2019. In addition, the Q1 2020 average
revenue per hour of $666 was slightly
lower than the $671 per hour in Q1
2019 as a result of lower boiler revenue during the quarter. Q1
2020 average revenue per hour of $673
excluding the Company's top volume customers was $17 per hour (2%) lower than Q1 2019 average
revenue per hour of $690 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 Q1 2020 of 11% (Q1 2019: 34%)
with 486 operating hours was 72% lower than the 1,730 operating
hours in Q1 2019. Average revenue per hour for coil tubing services
of $545 in Q1 2020 was $10 per hour (2%) lower than $555 in Q1 2019. As a result of the continued
lower customer demand, the Company discontinued operations of its
coil tubing division on March 17,
2020 and wrote down the value of these assets to their
estimated disposal value. The Company will look at monetizing the
coil tubing assets when market conditions in the oil and gas
industry stabilize.
CWC swabbing rig utilization in Q1 2020 of 33% (Q1 2019: 32%)
with 1,088 operating hours was 34% lower than the 1,655 operating
hours in Q1 2019 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 $300 in Q1 2020 was
4% higher compared to $288 in Q1
2019. In January 2020, CWC sold one
of its inactive swabbing rigs for a current fleet of 12 swabbing
rigs.
Capital Expenditures
|
|
|
|
|
Three months
ended
|
|
|
|
March
31,
|
Change
|
Change
|
$
thousands
|
2020
|
2019
|
$
|
%
|
Capital
expenditures
|
|
|
|
|
Contract
drilling
|
786
|
94
|
692
|
736%
|
Production
services
|
1,993
|
1,185
|
808
|
68%
|
Other
equipment
|
26
|
15
|
11
|
73%
|
|
2,805
|
1,294
|
1,511
|
117%
|
|
|
|
|
|
Growth
capital
|
1,335
|
-
|
1,335
|
n/m(1)
|
Maintenance and
infrastructure capital
|
1,470
|
1,294
|
176
|
14%
|
Total capital
expenditures
|
2,805
|
1,294
|
1,511
|
117%
|
Capital expenditures of $2.8
million in Q1 2020, an increase of $1.5 million (117%) compared to $1.3 million in Q1 2019.
The 2020 capital expenditure budget of $6.7 million was approved by the Board of
Directors on December 12, 2019
comprised 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 growth capital to upgrade one of the
drilling rigs. Given the current economic environment as a
result of the COVID-19 health pandemic, the Company has reduced its
2020 captial expenditure budget by $2.6
million (39%) to $4.1 million.
As $2.8 million of the 2020 capital
expenditure budget has been incurred in Q1 2020, the Company is
effectively suspending any further capital expenditures, other than
those in progress, for the remainder of 2020.
Outlook
The COVID-19 health pandemic and the measures put in place to
slow the spread of the virus has led to an estimated 30 million
bbls/day global demand decline in crude oil from its pre COVID-19
global demand of 100 million bbls/day. To combat this demand
decline, on April 12, 2020 OPEC along
with Russia agreed to a record 9.7
million bbls/day crude oil reduction in production quotas for May
and June 2020, reducing to 7.6
million bbls/day from July to December
2020 and then to 5.6 million bbls/day from January 2021 to April
2022. Along with OPEC+, the Group of 20 democratic
countries ("G20") energy ministers met on April 10, 2020 and acknowledged that they have
already reduced or will reduce through normal market price forces
an additional 5 million bbls/day of crude oil. The U.S.,
Canada and Brazil are expected to contribute 3.7 million
bbls/day with the other G20 oil producing nations contributing 1.3
million bbls/day. Together OPEC+ and the G20 are expected to reduce
the supply of global crude oil to the market by 14.7 million
bbls/day to offset almost half of the 30 million bbls/day demand
decline. As a result, WTI dropped below US$20/bbl and WCS remains below US$10/bbl as oil storage levels quickly fill up
with the only remaining action by E&P companies is to shut in
more oil wells and further reduce capital expenditures.
Under these challenging global market conditions, CWC has acted
quickly to implement cash saving initiatives to preserve cash
resources and maintain balance sheet strength as well as retaining
our most valuable asset – our key employees. Annual cash saving
initiatives totaling $10.3 million
are anticipated to reduce full year direct operating expenses by
$4.4 million, selling and
administrative expenses by $3.3
million and capital expenditures by $2.6 million. These cash saving initiatives will
be achieved through the following actions:
- Reduction in Board of Director compensation by 25%;
- Reduction in President & CEO, senior management and all
salaried employee compensation, including suspension of bonus
programs, by 27%;
- Reduction in service rig field employee compensation by
13%;
- Reduction in 2020 capital expenditures by 39%;
- Discontinued operations of the coil tubing division;
- Reduction and deferral of rent and property tax payments on
leased facilities; and
- Deferral of Alberta Workers' Compensation Benefit ("WCB")
premiums for 2020 until 2021.
The Company has reduced its head count by 43% through departures
and layoffs of its employees and contractors and incurred
$0.1 million in severance costs
related to these layoffs in Q1 2020. CWC now has 355 employees as
at April 15, 2020. In addition, the
Company expects to receive approximately $1.3 million under the Canada Emergency Wage Subsidy ("CEWS").
Additionally, the Company has been in contact with its four
member banking syndicate and have received positive indications
that they will continue to support CWC through these turbulent
times.
On April 17, 2020, the Government
of Canada announced a $1.7 billion funding package to the Government of
Alberta, Saskatchewan, British Columbia and the Alberta Orphan Well
Association for well decommissioning and reclamation of abandoned
and inactive wells. Being the largest service rig company in
Canada, CWC will be a net
beneficiary of this funding as the Company pivots from workover and
maintenance work on producing wells to doing a greater percentage
of its work on well decommissioning in its well servicing
division.
Looking out to a medium and longer term, CWC is optimistic about
the future of the oil and gas industry in Canada. On March 31,
2020, the Government of Alberta announced they will be investing
$1.5 billion into the Keystone XL
pipeline and provide a $6.0 billion
loan guarantee to TC Energy to start construction of the pipeline
immediately, which is expected to be operational by 2023. This
pipeline will carry 830,000 bbls/day of crude oil to Gulf Coast
refineries. Along with the anticipated completion of Enbridge's
Line 3 pipeline in late 2020 which will carry 760,000 bbls/day to
Minnesota and eastern refineries
and the Trans Mountain expansion project carrying 890,000 bbls/day
by late 2022 to the west coast for oversea markets, Canada should have sufficient capacity to
resume growth in crude oil production. As such, CWC will remain
focused on its operational and financial performance in the
short-term, but recognize the need to pursue opportunities that
have inevitably been created in this heavily discounted market to
create medium and longer-term value for CWC's shareholders. With
the support of the Board of Directors, management continues to
actively pursue consolidation opportunities in North America. CWC cautions that there can be
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 Denver,
Colorado 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 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 U.S. basins,
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
including the implications of the COVID-19 health pandemic on the
Company's business, operations and personnel. These factors and
risks include, but are not limited to, the risks associated with
the COVID-19 health pandemic and their implications on the demand
and supply in 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), significant expansion measures to stop the
spread of COVID-19 further restricting or prohibiting the
operations of the Company's facilities and operations, actions to
ensure social distancing due to COVID-19, the Company's cash saving
initiatives, 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
|
$ thousands,
except shares, per share amounts and margins
|
March
31,
|
2020
|
2019
|
NON-IFRS
MEASURES
|
|
|
Adjusted
EBITDA:
|
|
|
Net loss
|
(19,177)
|
(47)
|
Add:
|
|
|
Stock based
compensation
|
133
|
229
|
Finance
costs
|
684
|
732
|
Depreciation and
amortization
|
3,172
|
3,734
|
Impairment of
assets
|
25,451
|
-
|
Loss (gain) on sale of
equipment
|
1,051
|
(22)
|
Income tax
expense
|
(5,806)
|
68
|
Adjusted
EBITDA(1)
|
5,508
|
4,694
|
Adjusted EBITDA
per share – basic and diluted (1)
|
$
|
0.01
|
$
|
0.01
|
Adjusted EBITDA
margin (Adjusted
EBITDA/Revenue)(1)
|
16%
|
15%
|
Weighted average
number of shares outstanding - basic and diluted
|
510,936,431
|
512,678,779
|
Gross
margin:
|
|
|
Revenue
|
33,540
|
31,259
|
Less: Direct operating
expenses
|
23,615
|
22,338
|
Gross margin
(2)
|
9,925
|
8,921
|
Gross margin
percentage (2)
|
30%
|
29%
|
$
thousands
|
March 31,
2020
|
December 31,
2019
|
Working capital
(excluding debt):
|
|
|
Current
assets
|
29,974
|
26,642
|
Less: Current
liabilities
|
(7,033)
|
(9,249)
|
Add: Current
portion of long term debt
|
962
|
1,141
|
Working capital
(excluding debt) (3)
|
23,903
|
18,534
|
Net debt:
|
|
|
Long term
debt
|
42,375
|
39,411
|
Less: Current
assets
|
(29,974)
|
(26,642)
|
Add: Current
liabilities
|
7,033
|
9,249
|
Net debt
(4)
|
19,434
|
22,018
|
|
|
(1)
|
Adjusted EBITDA
(Earnings before interest and finance costs, income tax expense,
depreciation, amortization, gain or loss on disposal of asset,
impairment of assets, 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 income (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
calculated based on long-term debt less current assets plus current
liabilities. 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.