SIKANNI SERVICES LTD. (TSX VENTURE:SKI)("Sikanni" or the "Corporation") is
pleased to announce its operating results for the year ended December 31, 2007.
Consolidated revenues increased to $ $25.9 million for 2007 from $4.4 million in
2006. This increase reflects the strategic additions of Twilight Oilfield
Hauling and Northwell Oilfield Hauling as at January 31(st) and June 18(th),
respectively and increased revenues attributable to the internal expansion of
the equipment fleet. The Company generated $4.4 million of Ebitda during a year
that was significantly impacted by reduced capital spending by the Company's
resource customers. Despite the positive Ebitda, Sikanni generated a net loss of
$15.5 million, after providing for goodwill impairment of $14.0 million.
"Our 2007 results were certainly below our early expectations but they were
consistent with our industry peers. This has been a difficult time in the
services sector and no one is immune to industry trends. We are pleased to have
finished the year with positive Ebitda and the expectation of improved
performance in 2008." reported Rod MacDonald, President and CEO of Sikanni.
"With the expansion into the US markets and the recently announced amalgamation
with Irontree Oilfield Services, our operations are positioned to provide long
term value to our shareholders."
Consolidated Highlights 2007 2006 2005
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Revenues $ 25,936,066 $ 4,400,857 $ 1,170,402
Operating costs 18,080,195 3,337,750 991,705
------------------------------------------------------------------------
7,855,871 1,063,107 178,697
------------------------------------------------------------------------
30.3% 24.2% 15.3%
General and administrative
expenses 3,481,787 1,033,168 168,178
------------------------------------------------------------------------
EBITDAS (1) 4,374,084 29,939 10,519
------------------------------------------------------------------------
------------------------------------------------------------------------
16.9% 0.7% 0.9%
Interest expense 534,124 272,594 102,635
Interest revenue on short term
deposits (160,057) - -
Depreciation and amortization 5,304,667 760,407 164,832
Impairment of goodwill 14,000,000 - -
Loss on sale of property and
equipment 128,762 48,781 -
Net (loss) (15,481,493) (562,843) (232,382)
------------------------------------------------------------------------
Funds from (used in)
operations (2) 4,000,017 (242,655) (80,566)
------------------------------------------------------------------------
Purchase of property and
equipment $ 8,639,985 $ 8,739,925 $ 2,850,411
------------------------------------------------------------------------
(1) EBITDAS is calculated from the statement of income (loss) as revenue
less operating costs and general and administrative expenses and is
used to assist management and investors in assessing the Company's
ability to generate cash from operations. EBITDAS is a non-GAAP
measure and does not have any standardized meaning prescribed by
GAAP and may not be comparable to similar measures provided by other
companies.
(2) Funds from (used in) operations is defined as cash from operating
activities before changes in non-cash working capital. Funds from
operations is a measure that provides investors additional information
regarding the Company's liquidity and its ability to generate funds to
finance its operations. Funds from operations does not have any
standardized meaning prescribed by GAAP and may not be comparable to
other companies.
2007 Operational Highlights
- Generated annual revenues of $25.9 million (2006: $1.0 million) and positive
Ebitdas of $4.4 million (2006: $0.0 million) during a period of challenging
industry activity levels and increased competitive pricing pressures;
- Completed a reverse-take-over of Durham Capital Ltd. and listed the Company's
shares for trading on the TSX Venture Exchange.
- Completed a $42.7 million prospectus financing, realizing cash proceeds, net
of offering and marketing costs, of $39.1 million, providing the Company with
the funds to close the Twilight and Northwell acquisitions;
- Acquired Twilight Oilfield Hauling Ltd., adding a successful operation with a
20 year track record and a strategic location in Grande Prairie;
- Acquired Northwell Oilfield Hauling Ltd., a business operation with an
enviable growth trend and strategic locations in Swan Hills, Whitecourt and Fox
Creek. The management and operating teams were retained in tact and continue to
operate the business;
- Expanded the geographic footprint and diversified its exposure to the Canadian
market with two long term contracts to supply 90 wheeled frac tanks to a US
based energy services company on a 100% take-or-pay basis;
- Established a new branch location in Slave Lake to provide customers with an
oilfield hauling alternative in that market area. Equipment was re-deployed from
existing branches to the new location, resulting in an increase in overall
equipment utilization across the organization.
- Consolidated components of the administration infrastructure into the
Company's head office resulting in lower costs and better overall control.
Outlook
Oilfield service activity remains cyclically low and below levels seen for the
last few years in Western Canada as reflected in reduced drilling activity and
support services. Although management acknowledges that there will continue to
be volatility in the sector, there are early signs that signal a gradual return
to more buoyant activity levels during 2008. US gas storage levels have trended
lower during Q1 2008 and storage levels are lower on a year-over-year basis. Gas
pricing has reflected these trends and has increased on a year-over-year basis.
Oil pricing has remained strong and established new highs during 2008.
The industry was plagued by the uncertainty surrounding the royalty review
during the year and is still being impacted by perceived inequities in the
resulting legislation, particularly as it relates to certain gas wells.
Subsequent to year end, Sikanni announced a strategic amalgamation with Irontree
Oilfield Services Corp. The Irontree transaction will profoundly alter the
composition of the Company's revenue stream as on a post-amalgamation basis,
over 80% of the combined business revenues will now be sourced in the United
States and the combined operation will have a geographic breadth that extends
from the Gulf of Mexico to the Alaska border.
SIKANNI SERVICES LTD.
Consolidated Balance Sheets
For the Years Ended December 31, 2007 and 2006
---------------------------------------------------------------------------
2007 2006
---------------------------------------------------------------------------
ASSETS
Current assets
Cash $ - $ 88,083
Accounts receivable 4,990,135 1,275,975
Future income taxes - 727,249
Inventory 342,965 55,943
Prepaids and deposits 332,126 182,616
------------------------------------------------------------ --------------
5,665,226 2,329,866
Property and equipment 36,318,861 11,419,543
Intangibles 14,500,859 -
Goodwill 5,688,823 -
Other 160,097 -
------------------------------------------------------------ --------------
$ 62,333,866 $ 13,749,409
------------------------------------------------------------ --------------
------------------------------------------------------------ --------------
LIABILITIES
Current liabilities
Bank indebtedness $ 801,277 $ -
Accounts payable and accrued liabilities 2,957,652 1,197,526
Short-term advances - 1,065,828
Current portion of long-term debt 1,338,178 689,532
Current portion of obligations under capital
lease 547,644 503,058
Non-current portion of callable long-term debt 4,221,181 2,977,580
------------------------------------------------------------- -------------
9,865,932 6,433,524
Long-term debt 377,731 478,213
Obligations under capital lease 961,997 1,492,934
Future income taxes 4,907,300 235,249
------------------------------------------------------------- -------------
16,112,960 8,639,920
------------------------------------------------------------- -------------
SHAREHOLDERS' EQUITY
Share capital 56,886,771 6,454,112
Warrants 4,803,395 -
Contributed surplus 1,356,856 -
Deficit (16,826,116) (1,344,623)
------------------------------------------------------------- -------------
46,220,906 5,109,489
------------------------------------------------------------- -------------
Commitments (note 13)
Subsequent event (note 18)
------------------------------------------------------------- -------------
$ 62,333,866 $ 13,749,409
------------------------------------------------------------- -------------
------------------------------------------------------------- -------------
SIKANNI SERVICES LTD.
Consolidated Statements of Operations and Comprehensive Loss and Deficit
For the Years Ended December 31, 2007 and 2006
---------------------------------------------------------------------------
2007 2006
---------------------------------------------------------------------------
Revenues $ 25,936,066 $ 4,400,857
Expenses
Operating 18,080,195 3,337,750
General and administration 3,481,787 1,033,168
------------------------------------------------------------- -------------
4,374,084 29,939
------------------------------------------------------------- -------------
Depreciation 3,554,026 760,407
Amortization of intangibles 1,750,641 -
Impairment of goodwill 14,000,000 -
Stock based compensation 1,024,406 -
Interest on long-term debt 335,739 105,100
Interest on obligations under capital lease 198,385 167,494
Loss on sale of property and equipment 128,762 48,781
Interest revenue on short-term deposits (160,057) -
------------------------------------------------------------- -------------
20,831,902 1,081,782
------------------------------------------------------------- -------------
Loss before income taxes (16,457,818) (1,051,843)
Income tax (recovery)
Future (976,325) (489,000)
------------------------------------------------------------- -------------
Net Loss and comprehensive loss for the year (15,481,493) (562,843)
Deficit, beginning of year (1,344,623) (451,790)
Excess of redemption value over par value of
redeemed common shares - (29,990)
Excess of fair value over book value of
purchaseof Sikanni Waste Management Ltd. - (300,000)
------------------------------------------------------------- -------------
Deficit, end of year $ (16,826,116) $ (1,344,623)
------------------------------------------------------------- -------------
------------------------------------------------------------- -------------
Loss per share - basic and diluted $ (0.16) $ (0.03)
------------------------------------------------------------- -------------
------------------------------------------------------------- -------------
SIKANNI SERVICES LTD.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2007 and 2006
---------------------------------------------------------------------------
2007 2006
---------------------------------------------------------------------------
CASH PROVIDED BY (USED IN):
Operating
Net loss $ (15,481,493) $ (562,843)
Items not affecting cash:
Depreciation 3,554,026 760,407
Amortization of intangibles 1,750,641 -
Impairment of goodwill 14,000,000 -
Stock based compensation 1,024,406 -
Loss on sale of property and equipment 128,762 48,781
Future income tax (recovery) (976,325) (489,000)
------------------------------------------------------------- -------------
Funds from (used in) operations 4,000,017 (242,655)
Net change in non-cash working capital (3,649,415) 344,031
------------------------------------------------------------- -------------
------------------------------------------------------------- -------------
350,602 101,376
------------------------------------------------------------- -------------
Investing
Business acquisitions (34,405,498) 21,039
Cash acquired on acquisition 1,264,324 -
Purchase of property and equipment (8,639,985) (8,739,925)
Proceeds on sale of property and equipment 556,500 177,232
------------------------------------------------------------- -------------
(41,224,659) (8,541,654)
------------------------------------------------------------- -------------
Financing
Issuance of long-term debt 2,622,451 4,136,213
Repayment of long-term debt (835,275) (111,706)
Issuance of obligations under capital lease - 1,481,688
Repayment of obligations under capital lease (486,351) (363,814)
Increase of short-term advances 1,733,123 1,065,828
Repayment of short-term advances (2,157,701) -
Issuance of common shares, net of issuance
costs 39,108,450 2,000,000
Redemption of common shares - (30,000)
Shareholder loans - (100,000)
------------------------------------------------------------- -------------
39,984,697 8,078,209
------------------------------------------------------------- -------------
(Decrease) in cash (889,360) (362,069)
Cash, beginning of year 88,083 450,152
------------------------------------------------------------- -------------
(Bank indebtedness) cash, end of year $ (801,277) $ 88,083
------------------------------------------------------------- -------------
------------------------------------------------------------- -------------
Forward-Looking Statements
Certain information included herein is forward-looking. Forward-looking
statements include, without limitation, statements regarding the future
financial position, business strategy, capital expenditures, financial results,
taxes and plans and objectives of or involving the Company. Many of these
statements can be identified by looking for words such as "believe", "expects",
"expected", "will", "intends", "projects", "anticipates", "estimates",
"continues", or similar words and include but are not limited to, statements
regarding the accretive effects of the acquisition and the anticipated results
and expected benefits of the acquisition upon closing thereof. Sikanni believes
the expectations reflected in such forward-looking statements are reasonable but
no assurance can be given that these expectations will prove to be correct and
such forward-looking statements should not be unduly relied upon.
Forward-looking statements are not guarantees of future performance and involve
a number of risks and uncertainties some of which are described in Sikanni's
continuous disclosure documents. Such forward-looking statements necessarily
involve known and unknown risks and uncertainties and other factors, which may
cause Sikanni's actual performance and financial results in future periods to
differ materially from any projections of future performance or results
expressed or implied by such forward-looking statements. Such factors include,
but are not limited to: general economic, market and business conditions;
industry capacity; competitive action by other companies; refining and marketing
margins; the ability of suppliers to meet commitments; actions by governmental
authorities including increases in taxes; changes in environmental and other
regulations; and other factors, many of which are beyond the control of Sikanni.
Any forward-looking statements are made as of the date hereof and Sikanni does
not undertake any obligation, except as required under applicable law, to
publicly update or revise such statements to reflect new information, subsequent
or otherwise.
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