CALGARY, AB, Nov. 6, 2020
/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, 2020. The Financial Statements and
Management Discussion and Analysis ("MD&A") for the three and
nine months ended September 30, 2020
are filed on SEDAR at www.sedar.com.
Financial and Operational Highlights
|
|
Three months
ended
|
|
Nine months
ended
|
$ thousands,
except shares, per share
amounts, and margins
|
|
September
30,
|
|
September
30,
|
|
2020
|
|
2019
|
Change
%
|
|
2020
|
|
2019
|
Change
%
|
FINANCIAL
RESULTS
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
Contract
Drilling
|
|
543
|
|
8,284
|
(93%)
|
|
14,532
|
|
20,792
|
(30%)
|
Production
Services
|
|
9,779
|
|
19,491
|
(50%)
|
|
33,296
|
|
56,987
|
(42%)
|
|
|
10,322
|
|
27,775
|
(63%)
|
|
47,828
|
|
77,779
|
(39%)
|
Other
income
|
|
2,635
|
|
-
|
n/m(2)
|
|
4,423
|
|
-
|
n/m(2)
|
Adjusted
EBITDA(1)
|
|
1,953
|
|
3,868
|
(50%)
|
|
6,064
|
|
8,675
|
(30%)
|
Adjusted EBITDA
margin (%)(1)
|
|
19%
|
|
14%
|
|
|
13%
|
|
11%
|
|
Impairment of
assets
|
|
-
|
|
-
|
n/m(2)
|
|
(25,451)
|
|
-
|
n/m(2)
|
Net loss
|
|
(810)
|
|
(234)
|
n/m(2)
|
|
(23,721)
|
|
(612)
|
n/m(2)
|
Net loss margin
(%)(1)
|
|
(8%)
|
|
(1%)
|
(7%)
|
|
(50%)
|
|
(1%)
|
(49%)
|
Capital
expenditures
|
|
1,022
|
|
968
|
6%
|
|
4,547
|
|
4,164
|
9%
|
Per share
information:
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares
outstanding – basic and diluted
|
507,543,333
|
510,358,460
|
|
509,239,883
|
511,329,933
|
|
Adjusted
EBITDA(1) per share - basic and diluted
|
$
|
0.00
|
$
|
0.01
|
|
$
|
0.01
|
$
|
0.02
|
|
Net loss per share -
basic and diluted
|
$
|
(0.00)
|
$
|
(0.00)
|
|
$
|
(0.05)
|
$
|
(0.00)
|
|
|
|
|
|
|
|
|
|
|
|
|
$ thousands,
except ratios
|
|
|
|
|
September 30,
2020
|
December 31,
2019
|
FINANCIAL POSITION
AND LIQUIDITY
|
|
|
|
|
|
Working capital
(excluding debt)(1)
|
|
|
5,920
|
|
18,534
|
Working capital
(excluding debt) ratio(1)
|
|
|
1.9:1
|
|
3.3:1
|
Total
assets
|
|
|
|
|
199,421
|
|
243,398
|
Total long-term debt
(including current portion)
|
|
|
27,960
|
|
40,552
|
Shareholders'
equity
|
|
|
|
|
158,959
|
|
182,032
|
(1) Please refer to the
"Reconciliation of Non-IFRS Measures" section for further
information
|
(2) Not
meaningful
|
Working capital (excluding debt) for September 30, 2020 has decreased $12.6 million (68%) since December 31, 2019 driven by decreases in accounts
receivable ($13.1 million (55%)),
prepaid expenses and deposits ($0.7
million (25%)) offset by decrease in account payable
($1.2 million (15%)). Long-term debt
(including current portion) has decreased $12.6 million (31%) from December 31, 2019 driven primarily by the
collection of accounts receivable. Both working capital and
long-term debt are lower in Q3 2020 compared to Q4 2019 due to the
significantly reduced operating activity as a result of the
COVID-19 global health pandemic. Shareholders' equity has decreased
$23.1 million (13%) since
December 31, 2019 primarily due to
the net loss for the nine months ended September 30, 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 $1.2 million.
Highlights for the Three Months Ended September 30, 2020
- During Q3 2020, the Company received 300 application approvals
under the Alberta Site Rehabilitation Program ("SRP") worth
approximately $4.8 million in future
work with a further $14.5 million
under review or awaiting future government application rounds to
open. The $1.0 billion Alberta SRP,
the $400 million Saskatchewan
Accelerated Site Closure Program ("ASCP") and the $100 million B.C. Dormant Sites Reclamation
Program ("DSRP") provides grants to eligible oilfield service
contractors to perform well, pipeline, and oil and gas site closure
and reclamation work, creating jobs and supporting the environment.
CWC's Production Services segment is well positioned to provide
well decommissioning work on these inactive wells.
- Average Q3 2020 crude oil price, as measured by West Texas
Intermediate ("WTI"), of US$40.90/bbl
was 46% higher than the Q2 2020 average price of US$27.95/bbl (Q3 2019: US$56.40/bbl) and the price differential between
Canadian heavy crude oil, as represented by Western Canadian Select
("WCS"), and WTI maintained a differential in the range of
US$7.85/bbl to US$11.18/bbl during the third quarter of 2020.
Natural gas prices, as measured by AECO, increased 13% from an
average of $1.90/GJ in Q2 2020 to
$2.14/GJ in Q3 2020 (Q3 2019
$0.97/GJ).
- CWC's Canadian drilling rig utilization in Q3 2020 of 4% (Q3
2019: 19%) was lower than the Canadian Association of Oilwell
Drilling Contractors ("CAODC") industry average of 9%. Canadian
activity levels in Q3 2020 of 28 drilling rig operating days (Q3
2019: 130 drilling rig operating days) from seven Canadian drilling
rigs were lower as a result of the decline in demand for crude oil
driven by the global health solutions to slow the spread of the
COVID-19 virus. Average revenue per operating day of $19,214 resulted in revenue of $0.5 million (Q3 2019: $2.7 million) from the Canadian drilling
operations. As a result of the COVID-19 health pandemic and the
travel restrictions implemented between Canada and the U.S., CWC's two U.S. drilling
rigs, which operate with Canadian rig crews, did not see any
operating days in Q3 2020 (Q3 2019: 155 drilling rig operating
days) and, therefore, did not generate any revenue in the quarter
(Q3 2019: $5.6 million). Service rig
utilization in Q3 2020 of 29% (Q3 2019: 52%) was driven by 15,859
operating hours which were 46% lower than the 29,528 operating
hours in Q3 2019; a result of the significant drop off in activity
levels due to COVID-19 and the corresponding steep drop in oil
prices.
- Revenue of $10.3 million, a
decrease of $17.5 million (63%)
compared to $27.8 million in Q3
2019.
- Other income of $2.6 million in
Q3 2020 consists of Government of Canada grants, which the Company received
under the Canada Emergency Wage
Subsidy ("CEWS").
- Adjusted EBITDA(1) of $2.0
million, a decrease of $1.9
million compared to $3.9
million in Q3 2019.
- Net loss of $0.8 million, an
increase of $0.6 million compared to
$0.2 million in Q3 2019.
- During Q3 2020, 2,405,000 (Q3 2019: 405,000) common shares were
purchased under the Normal Course Issuer Bid ("NCIB") and 2,349,000
(Q3 2019: 524,500) common shares 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, 2020
- The oil and gas sector was hit particularly hard amid the
global economic downturn as a result of the COVID-19 health
pandemic and the measures put in place to slow the spread of the
virus. Demand for crude oil collapsed at a time when global supply
was ramping up, fueled by rising shale oil output in the U.S. As a
result, global oil prices collapsed. The Company's exploration and
production ("E&P") customers, struggling with declining demand
and business stability, cut their capital expenditure programs
leading to reduced demand for the Company's services. The duration
of the negative impact from the COVID-19 health pandemic on the
Company's operations is unknown and will depend on future economic
developments, which cannot be predicted with confidence at this
time. Therefore, the Company continues to pursue cash saving
initiatives to preserve cash resources and maintain balance sheet
strength as well as to retain its most valuable asset – its key
employees. The Company has also enacted new safety protocols to
protect the health and safety of its employees so that the Company
can operate with confidence that its employees and customers are
taking the necessary precautions.
- CWC's Canadian drilling rig utilization for the first nine
months of 2020 of 23% (2019: 23%) exceeded the Canadian Association
of Oilwell Drilling Contractors ("CAODC") industry average of 16%.
Canadian activity levels for the first nine months of 2020
decreased 25% to 440 drilling rig operating days (2019: 583
drilling rig operating days) from seven Canadian drilling rigs.
Average revenue per operating day of $22,073 resulted in revenue of $9.7 million from the Canadian drilling
operations. U.S. drilling rig activity levels for the first nine
months of 2020 were 144 drilling rig operating days (2019: 180
drilling rig operating days) from two U.S. drilling rigs for a
utilization of 26% (2019: 33%). U.S. Contract Drilling revenue of
$4.8 million represented 33% of CWC's
total Contract Drilling revenue in the first nine months of 2020
with the average revenue per operating day of US$25,139 from U.S. operations. CWC's service rig
utilization for the first nine months of 2020 of 31% (2019: 48%)
was driven by 50,338 operating hours which were 40% lower than the
83,531 operating hours in 2019; a result of the significant drop
off in activity levels due to COVID-19 and the corresponding steep
drop in oil prices.
- Revenue of $47.8 million, a
decrease of $30.0 million (39%)
compared to $77.8 million in the
first nine months of 2019.
- Adjusted EBITDA(1) of $6.1
million, a decrease of $2.6
million (30%) compared to $8.7
million in the first nine months of 2019.
- Net loss of $23.7 million, an
increase of $22.9 million compared to
$0.8 million in the first nine months
of 2019. The increase in net loss is primarily due to a charge for
impairment of assets of $25.5 million
taken in Q1 2020.
- For the nine months ended September 30,
2020, the Company purchased 7,787,500 (2019: 3,078,500)
common shares under the Normal Course Issuer Bid ("NCIB") and
7,831,000 (2019: 3,060,500) common shares were cancelled and
returned to treasury.
(1) Please
refer to the "Reconciliation of Non-IFRS Measures" section for
further information
|
Operational Overview
Contract Drilling
CWC Ironhand Drilling, the Company's Contract Drilling segment,
has a fleet of nine telescopic double drilling rigs with depth
ratings from 3,200 to 5,000 metres. Eight of nine rigs have top
drives and three have pad rig walking systems. All of the drilling
rigs are well suited for the most active depths for horizontal
drilling in the Western Canadian Sedimentary Basin ("WCSB"),
including the Montney, Cardium,
Duvernay and other deep basin
horizons. The Company also operates in 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.
|
Three months
ended
|
OPERATING
HIGHLIGHTS
|
Sep. 30,
2020
|
Jun. 30,
2020
|
Mar. 31,
2020
|
Dec. 31,
2019
|
Sep. 30,
2019
|
Jun. 30,
2019
|
Mar. 31,
2019
|
Dec. 31,
2018
|
Drilling Rigs –
Canada
|
|
|
|
|
|
|
|
|
Total drilling rigs,
end of period
|
7
|
7
|
7
|
7
|
7
|
7
|
9
|
9
|
|
|
|
|
|
|
|
|
|
Revenue per operating
day(1)
|
$19,214
|
$19,382
|
$22,849
|
$22,161
|
$20,685
|
$22,750
|
$23,895
|
$26,642
|
Drilling rig operating
days
|
28
|
68
|
344
|
232
|
130
|
72
|
382
|
491
|
Drilling rig
utilization %(2)
|
4%
|
11%
|
54%
|
36%
|
19%
|
11%
|
47%
|
59%
|
CAODC industry average
utilization %
|
9%
|
4%
|
35%
|
23%
|
23%
|
18%
|
29%
|
28%
|
|
|
|
|
|
|
|
|
|
Wells
drilled
|
4
|
4
|
26
|
18
|
12
|
10
|
39
|
34
|
Average days per
well
|
7.1
|
17.1
|
13.2
|
12.9
|
10.9
|
8.0
|
9.8
|
14.4
|
Meters drilled
(thousands)
|
13.7
|
20.2
|
99.6
|
75.6
|
39.6
|
26.7
|
119.8
|
127.8
|
Meters drilled per
day
|
483
|
295
|
290
|
326
|
304
|
373
|
314
|
261
|
Average meters per
well
|
3,412
|
5,053
|
3,831
|
4,199
|
3,300
|
2,966
|
3,070
|
3,708
|
Drilling Rigs –
United States
|
|
|
|
|
|
|
|
|
Total drilling rigs,
end of period
|
2
|
2
|
2
|
2
|
2
|
2
|
-
|
-
|
Revenue per operating
day (US$)(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 $0.5 million for Q3 2020 (Q3 2019: $2.7 million) was achieved with a utilization
rate of 4% (Q3 2019: 19%), compared to the CAODC industry average
of 9%. CWC completed 28 Canadian drilling rig operating days in Q3
2020, 78% lower than 130 Canadian drilling rig operating days in Q3
2019.
As a result of the COVID-19 health pandemic and the travel
restrictions implemented between Canada and the U.S., CWC's two U.S. drilling
rigs, which operate with Canadian rig crews, did not see any
operating days in Q3 2020 (Q3 2019: 155 drilling rig operating
days) and, therefore, did not generate any revenue in the quarter
(Q3 2019: $5.6 million).
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 63 of its service rigs and focus its sales and
operational efforts on the remaining 82 active service rigs due to
the reduction in the number of service rigs currently required to
service the WCSB.
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.
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. On March 17, 2020, 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.
|
Three months
ended
|
OPERATING
HIGHLIGHTS
|
Sep.
30,
2020
|
Jun.
30,
2020
|
Mar.
31,
2020
|
Dec.
31,
2019
|
Sep.
30,
2019
|
Jun.
30,
2019
|
Mar.
31,
2019
|
Dec.
31,
2018
|
Service
Rigs
|
|
|
|
|
|
|
|
|
Active service rigs,
end of period
|
82
|
82
|
83
|
84
|
84
|
92
|
93
|
92
|
Inactive service rigs,
end of period
|
63
|
63
|
62
|
62
|
64
|
56
|
55
|
56
|
Total service rigs,
end of period
|
145
|
145
|
145
|
146
|
148
|
148
|
148
|
148
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
15,859
|
4,037
|
30,442
|
33,656
|
29,528
|
23,129
|
30,875
|
31,232
|
Revenue per
hour
|
$605
|
$619
|
$666
|
$664
|
$644
|
$646
|
$671
|
$663
|
Revenue per hour
excluding top volume customers
|
$623
|
$653
|
$673
|
$682
|
$660
|
$687
|
$690
|
$696
|
Service rig
utilization %(1)
|
29%
|
8%
|
56%
|
62%
|
52%
|
39%
|
53%
|
51%
|
|
|
|
|
|
|
|
|
|
Swabbing
Rigs
|
|
|
|
|
|
|
|
|
Active swabbing rigs,
end of period
|
5
|
5
|
5
|
5
|
5
|
8
|
8
|
8
|
Inactive swabbing
rigs, end of period
|
7
|
7
|
7
|
8
|
8
|
5
|
5
|
5
|
Total swabbing rigs,
end of period
|
12
|
12
|
12
|
13
|
13
|
13
|
13
|
13
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
686
|
513
|
1,088
|
1,141
|
865
|
661
|
1,655
|
2,313
|
Revenue per
hour
|
$271
|
$288
|
$300
|
$282
|
$284
|
$262
|
$288
|
$283
|
Swabbing rig
utilization %(1)
|
21%
|
16%
|
33%
|
35%
|
28%
|
13%
|
47%
|
41%
|
|
|
|
|
|
|
|
|
|
(1)
|
Effective September
1, 2019, the CAODC changed its methodology on how it calculates
service rig utilization. Service rig 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
|
Production Services revenue of $9.8
million in Q3 2020, down $9.7
million (50%) compared to $19.5
million in Q3 2019. The revenue decrease in Q3 2020 was a
direct result of the rapid decrease in crude oil prices, which
started 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 Q3 2020 of 29% (Q3 2019: 52%)
was driven by 15,859 operating hours being 46% lower than the
29,528 operating hours in Q3 2019. In addition, the Q3 2020 average
revenue per hour of $605 was
$39 per hour (5%) lower than
the $644 per hour in Q3 2019 as a
result of customer requested discounts during the quarter. Q3 2020
average revenue per hour of $623
excluding the Company's top volume customers was $37 per hour (6%) lower than Q3 2019 average
revenue per hour of $660.
CWC swabbing rig utilization in Q3 2020 of 21% (Q3 2019: 28%)
with 686 operating hours was 21% lower than the 865 operating hours
in Q3 2019. Average revenue per hour for swabbing rigs of
$271 in Q3 2020 was 5% lower compared
to $284 in Q3 2019.
As a result of the 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 coil tubing division
contributed year-to-date 2020 revenue of $0.3 million and negative Adjusted EBITDA of
($0.1 million). The Company will look
at monetizing the coil tubing assets when market conditions in the
oil and gas industry stabilize.
Capital Expenditures
|
Three months
ended
|
|
|
Nine months
ended
|
|
|
|
September
30,
|
Change
|
Change
|
September
30,
|
Change
|
Change
|
$
thousands
|
2020
|
2019
|
$
|
%
|
2020
|
2019
|
$
|
%
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
Contract
drilling
|
620
|
195
|
425
|
218%
|
1,714
|
1,453
|
261
|
18%
|
Production
services
|
402
|
583
|
(181)
|
(31%)
|
2,807
|
2,460
|
347
|
14%
|
Other
equipment
|
-
|
190
|
(190)
|
(100%)
|
26
|
251
|
(225)
|
(90%)
|
|
1,022
|
968
|
54
|
6%
|
4,547
|
4,164
|
383
|
9%
|
|
|
|
|
|
|
|
|
|
Growth
capital
|
472
|
-
|
472
|
n/m(1)
|
1,489
|
-
|
1,489
|
n/m(1)
|
Maintenance and
infrastructure capital
|
550
|
968
|
(418)
|
(43%)
|
3,058
|
4,164
|
(1,106)
|
(27%)
|
Total capital
expenditures
|
1,022
|
968
|
54
|
6%
|
4,547
|
4,164
|
383
|
9%
|
Capital expenditures of $1.0
million in Q3 2020, an increase of $nil compared to
$1.0 million in Q3 2019.
Capital expenditures of $4.6
million for the nine months ended September 30, 2020, an increase of $0.4 million (9%) compared to $4.2 million in the same period of 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
capital expenditure budget by $1.6
million (24%) to $5.3
million.
Outlook
In March 2020, the World Health
Organization declared a global health pandemic due to COVID-19. In
response to the COVID-19 outbreak, governments around the world
implemented measures to control the spread of the virus during Q2
2020 including closure of non-essential businesses, restricting
travel and encouraging its citizens to stay-at-home. These
government actions contributed to a significant deterioration in
the global economy including a material decline in the demand for
crude oil, which resulted in a significant decrease in oil prices.
The decline in oil prices negatively affected current and
forecasted drilling and production service activities in
Canada and the United States. In response to the decline
in oil prices, OPEC+ and G20 oil producing nations agreed to cut
crude oil production by 12.6 million bbls/day for a targeted global
average crude oil supply of 87.4 million bbls/day. As such crude
oil prices rebounded from the low US$20/bbl in April
2020 to the low US$40/bbl in
October 2020 as governments around
the world loosened their economic restrictions related to COVID-19
and gradually re-opened businesses. The International Energy Agency
("IEA") reports that global average crude oil supply was 91.3
million bbls/day in Q3 2020 and forecasts it to rise to 92 million
bbls/day in Q4 2020 with a 2021 forecast of 97.2 million bbls/day.
In addition, the IEA reports that Canadian oil supply was 4.9
million bbls/day in August 2020 and
expected to gradually recover to pre COVID-19 levels of 5.8 million
bbls/day by the end of 2021. As consumer demand and business
confidence increases for the remainder of 2020 and 2021, so too
will be the demand for crude oil and a return to increased oilfield
service activity in Canada and the
U.S.
Since March 2020, CWC has made
significant changes to its cost structure including laying off
employees, reducing compensation, eliminating discretionary
expenses and reducing capital expenditures, to better match our
cost structure to current operating activity levels resulting in
approximately $11.5 million in
annualized cash savings. The Company's head count bottomed at 286
employees in May 2020 and has
steadily increased to 395 employees in October 2020, but is still 36% below the pre
COVID-19 levels of 617 employees in February
2020. In addition, CWC has applied for and received
$4.4 million in grants from the
Government of Canada CEWS program to date. With the recent
Government of Canada announcement
that the CEWS program will be extended to June 2021, the Company believes that the CEWS
program will further enhance our ability to manage through the
current slowdown in oilfield services activity with an estimated
$3.5 million in additional
grants.
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. To date CWC has received 300 Alberta SRP
application approvals amounting to $4.8 million with a further $1.3 million of applications currently under
review. Additionally, CWC has secured contracts and expects to
apply for a further $13.2 million in
additional grants in future rounds of the various provincial
programs. This work started in Q3 2020 and will be completed
through the remainder of 2020 and 2021 with all work under
these grant programs to be completed by December 31, 2022. The Company currently has over
30 service rigs and four drilling rigs working in Q4 2020 and
expects to see the rig count increase into Q1 2021.
The Company continues to be in regular contact with its four
member banking syndicate and has received positive indications that
they will continue to support CWC through these turbulent
times.
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 2021, 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. With the current reduction
in Canadian crude oil production of approximately 0.9 million
bbls/day as a result of lower global demand from the COVID-19
economic restrictions and the announcement on October 23, 2020 by the Government of
Alberta to remove the 125,000
bbls/day mandated production curtailments as of December 2020, Canada may have inadvertently solved its
issues of insufficient capacity on its existing pipeline
infrastructure until the three additional pipelines are completed
and operational. As such, CWC will remain focused on its
operational and financial performance in the short-term, but
recognizes 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 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 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
|
Nine months
ended
|
$ thousands,
except shares, per share amounts and margins
|
September
30,
|
September
30,
|
2020
|
2019
|
2020
|
2019
|
NON-IFRS
MEASURES
|
|
|
|
|
Adjusted
EBITDA:
|
|
|
|
|
Net loss
|
(810)
|
(234)
|
(23,721)
|
(846)
|
Add:
|
|
|
|
|
Stock based
compensation
|
137
|
166
|
409
|
592
|
Finance
costs
|
362
|
525
|
1,826
|
1,915
|
Depreciation and
amortization
|
2,582
|
3,250
|
8,349
|
9,985
|
Impairment of
assets
|
-
|
-
|
25,451
|
-
|
Loss (gain) on sale of
equipment
|
(114)
|
-
|
860
|
(78)
|
Income tax
expense
|
(204)
|
161
|
(7,110)
|
(2,893)
|
Adjusted
EBITDA(1)
|
1,953
|
3,868
|
6,064
|
8,675
|
Adjusted EBITDA
per share – basic and diluted(1)
|
$
|
0.00
|
$
|
0.01
|
$
|
0.01
|
$
|
0.02
|
Adjusted EBITDA
margin (Adjusted EBITDA/Revenue)(1)
|
19%
|
14%
|
13%
|
11%
|
Weighted average
number of shares outstanding - basic and diluted
|
507,543,333
|
510,358,460
|
509,239,883
|
511,329,933
|
Gross
margin:
|
|
|
|
|
Revenue
|
10,322
|
27,775
|
47,828
|
77,779
|
Less: Direct operating
expenses
|
7,457
|
19,545
|
35,071
|
56,806
|
Gross
margin(2)
|
2,865
|
8,230
|
12,757
|
20,973
|
Gross margin
percentage(2)
|
28%
|
30%
|
27%
|
27%
|
$
thousands
|
September 30,
2020
|
December 31,
2019
|
Working capital
(excluding debt):
|
|
|
Current
assets
|
12,825
|
26,642
|
Less: Current
liabilities
|
(7,694)
|
(9,249)
|
Add: Current
portion of long-term debt
|
789
|
1,141
|
Working capital
(excluding debt) (3)
|
5,920
|
18,534
|
Net debt:
|
|
|
Long-term
debt
|
27,171
|
39,411
|
Less: Current
assets
|
(12,825)
|
(26,642)
|
Add: Current
liabilities
|
9,161
|
9,249
|
Net debt
(4)
|
22,040
|
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.