NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES ("U.S.")
The news release contains "forward-looking information and statements" within
the meaning of applicable securities laws. For full disclosure of the
forward-looking information and statements and the risks to which they are
subject, see the "Cautionary Statement Regarding Forward-Looking Information and
Statements" later in this news release.
Strad Energy Services Ltd., ("Strad" or the "Company") (TSX:SDY), a North
American-focused, energy services company, today announced its financial results
for the three months ended March 31, 2014. All amounts are stated in Canadian
dollars unless otherwise noted.
SELECTED FINANCIAL AND OPERATIONAL HIGHLIGHTS:
-- First quarter EBITDA(1) of $11.0 million increased 3% compared to $10.7
million for the same period in 2013;
-- First quarter revenue of $51.9 million, a 16% increase compared to $44.7
million for the same period in 2013;
-- Capital additions totaled $8.9 million during the first quarter.
Reported capital expenditures, net of $0.5 million rental asset
disposals, were $8.4 million during the quarter;
-- Total funded debt (2) to twelve month trailing EBITDA ratio of 1.1 to 1
at the end of the first quarter of 2014;
-- First quarter earnings per share of $0.11 compared to $0.03 for the same
period in 2013;
-- The quarterly dividend payable to shareholders of record on June 30,
2014, will be 7.0 cents per share, a 27% increase from the previous
quarterly dividend of 5.5 cents per share; and
-- Strad has approved a total of $25.0 million in budgeted capital spending
for 2014.
Notes:
(1) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS
Measures Reconciliation".
(2) Funded debt includes bank indebtedness plus long-term debt plus current
and long-term obligations under finance lease less cash. EBITDA is based
on trailing twelve months. See "Non-IFRS Measures Reconciliation".
"This quarter, we are pleased to announce an increase to Strad's quarterly
dividend, from 5.5 cents per share to 7.0 cents per share" said Andy Pernal,
President and CEO of Strad. "Since first establishing our dividend in 2012,
Strad has paid eight consecutive quarterly dividends of 5.5 cents per share. The
dividend increase reflects our confidence in Strad's future growth prospects and
the stability of our cash flows."
"Strad's increased dividend continues to represent a manageable level of payout
of free cash flow," said Greg Duerr, CFO of Strad. "Further, management
continues to seek strategic growth opportunities for the Company and sees
opportunity to add to assets in its key product lines in both Canada and the US.
The current free cash flow and borrowing capacity are capable of supporting the
ongoing investment in the Company."
FIRST QUARTER FINANCIAL HIGHLIGHTS
(in thousands of Canadian
Dollars, except per share
amounts) Three months ended March 31,
---------------------------------------------
2014 2013 % Chg.
-------------- -------------- ---------------
Revenue 51,888 44,723 16
----------------------------------------------------------------------------
EBITDA (1) 10,988 10,659 3
EBITDA as a % of revenue 21% 24%
Per share ($), basic 0.30 0.29 3
Per share ($), diluted 0.29 0.29 -
----------------------------------------------------------------------------
Net income 4,141 1,063 290
Per share ($), basic 0.11 0.03 267
Per share ($), diluted 0.11 0.03 267
----------------------------------------------------------------------------
Funds from operations(2) 10,533 10,752 (2)
Per share ($), basic 0.29 0.29 -
Per share ($), diluted 0.28 0.29 (3)
----------------------------------------------------------------------------
Capital expenditures 8,902 5,912 51
Dispositions of rental
assets(3) (497) (3,247) (85)
Net capital expenditures(4) 8,405 2,665 215
----------------------------------------------------------------------------
Total assets 224,010 226,563 (1)
Return on average total
assets(5) 21% 18%
Long-term debt 38,400 55,500 (31)
Total long-term liabilities 48,077 66,729 (28)
----------------------------------------------------------------------------
Common shares - end of period
('000's) 37,253 37,253
Weighted avg common shares
('000's)
Basic 36,730 36,533
Diluted 37,476 37,344
Notes:
(1) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS
Measures Reconciliation".
(2) Funds from operations is cash flow from operating activities before
changes in working capital. Funds from operations is not a recognized
measure under IFRS; see "Non-IFRS Measures Reconciliation".
(3) Dispositions reported at net book value.
(4) Includes assets acquired under finance lease and purchases of intangible
assets. Net capital expenditures are net of rental asset disposals.
(5) Return on average total assets is not a recognized measure under IFRS;
see "Non-IFRS Measures Reconciliation".
FINANCIAL POSITION AND RATIOS
As at March 31,
------------------------------
($000's except ratios) 2014 2013
------------------------------
Working capital (1) 10,825 19,143
Funded debt (2) 45,004 63,150
Total assets 224,010 226,563
Funded debt to EBITDA(2) 1.1 1.5
Notes:
(1) Working capital is calculated as current assets less current
liabilities, excluding assets held for sale. See "Non-IFRS Measures
Reconciliation".
(2) Funded debt includes bank indebtedness plus long-term debt plus current
and long-term obligations under finance lease less cash. EBITDA is based
on trailing twelve months. See "Non-IFRS Measures Reconciliation".
FIRST QUARTER RESULTS
Strad reported an increase in revenue and EBITDA of 16% and 3%, respectively,
during the three months ended March 31, 2014, compared to the same period in
2013. Increased revenue during the first quarter was a result of higher
utilization and product sales compared to the prior year. In the Western
Canadian Sedimentary Basin ("WCSB") region, drilling rig activity increased at a
quicker pace early in the quarter compared to 2013 and averaged 5% higher during
the first quarter in 2014. Despite higher revenue during the first quarter,
EBITDA as a percentage of revenue declined to 21% compared to 24% in 2013.
EBITDA margins were impacted by a number of factors including cold weather
conditions in the WCSB during March, which delayed the deployment of Strad's
matting fleet, and higher trucking and service costs.
Strad's Canadian Operations reported higher revenue and EBITDA during the three
months ended March 31, 2014, compared to the same period in 2013. Increased
revenue was a result of a larger rental asset base and higher drilling activity
in the WCSB during the quarter, which resulted in higher utilization of Strad's
Canadian drill pipe and surface equipment fleets. Cold weather conditions in
March delayed the typical seasonal deployment of Strad's matting fleet, which
had an impact on product mix during the quarter.
During the first quarter, rig counts in Strad's targeted U.S. resource plays
remained similar to levels in the first quarter of 2013. Rig counts in the
Bakken declined by 5% year-over-year, offset by a 7% rig count increase in the
Rockies region, while the Marcellus remained flat at an average of 122 active
drilling rigs. Overall, Strad's U.S. operations reported higher revenue and
lower EBITDA during the first quarter of 2014 compared to the prior year. EBITDA
as a percentage of revenue declined from 32% to 24% year-over-year, due to a
shift in product and revenue type mix. During the first quarter of 2014, product
mix shifted from higher margin drill pipe rental revenue to lower margin solids
control rental revenue.
During the first quarter, capital expenditures were $6.5 million in Canada and
$1.9 million in the U.S., net of $0.3 million and $0.2 million in rental asset
disposals. Capital expenditures are reported net of the net book value of rental
assets sold in the period. Strad has spent $8.9 million on a gross basis, or
$8.4 million, net of $0.5 million in rental asset disposals, of its budgeted
$17.0 million first half of 2014 capital program. Strad has to date approved a
further $8.0 million in budgeted capital for the balance of the year. The
Company continues to invest in equipment which is in high demand in both Canada
and the U.S.
Dividend Increase
Strad's Board of Directors has approved an increase to the quarterly dividend
from a rate of 5.5 cents per share to 7.0 cents per share, payable on July 11,
2014, to shareholders of record at the close of business on June 30, 2014. The
ex dividend date is June 26, 2014.
Strad's increase in earnings over the last two quarters is a reflection of
modest improvements in operating activity as well as a depreciation policy that
is more reflective of the durability of the asset base. Strad also continues to
efficiently convert EBITDA to free cash flow. This free cash flow along with a
solid balance sheet with ample borrowing capacity, both serve to support ongoing
investment in growth areas of our business. Since establishing the dividend on
June 29, 2012, Strad has paid eight consecutive quarters of dividend payments at
the initial 5.5 cents per share rate. The increase of 1.5 cents per share to 7.0
cents per share is a reflection of the current level of free cash flow and
earnings in the business and its sustainability. The quarterly cash payment
after the increase will be approximately $2.6 million. As a payout ratio of free
cash flow and net income benchmarks, the Company is comfortable with the
sustainability of this distribution. The $2.6 million quarterly dividend
represents 24% of Q1 2014 EBITDA, 25% of Q1 2014 Funds from Operations and 63%
of Q1 2014 net income. Strad also continues to believe that the Company is well
positioned to access an array of additional growth opportunities and sustain a
regular dividend, opening multiple value creation avenues for shareholders.
RESULTS OF OPERATIONS
Canadian Operations
Three months ended March 31,
---------------------------------------------
($000's) 2014 2013 % chg.
---------------------------------------------
Revenue 21,384 17,742 21
EBITDA (1) 5,604 4,794 17
EBITDA as a % of revenue 26% 27%
Capital expenditures 6,792 2,587 163
Dispositions of rental
assets(2) (300) (2,390) (87)
Net capital expenditures (3) 6,492 197 3,195
Gross capital assets 111,306 108,199 3
Total assets 113,476 108,133 5
Notes:
(1) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS
Measures Reconciliation".
(2) Dispositions represented at net book value.
(3) Includes assets acquired under finance lease and purchases of intangible
assets. Net capital expenditures are net of rental asset sales.
Revenue generated for the three months ended March 31, 2014, was $21.4 million,
a 21% increase compared to $17.7 million for the same period in 2013. Increased
revenue during the quarter was a result of a larger rental asset base and higher
drilling activity in the WCSB, which resulted in higher utilization of Strad's
Canadian drill pipe and surface equipment fleets. First quarter revenue was also
impacted by higher matting service and trucking revenue. The increase in matting
service revenue is a result of Strad performing more service only work for
customers who predominantly own their matting fleets and source new matting
purchases from Strad. Trucking revenue increased during the quarter due to the
increased use of third party transport suppliers to move Strad's equipment
throughout the WCSB. However, lower matting rental revenue partially offset the
overall revenue increase due to colder weather conditions late in the quarter,
which delayed the typical seasonal deployment of Strad's matting fleet compared
to the same period in 2013.
EBITDA for the three months ended March 31, 2014, of $5.6 million, increased
17%, compared to $4.8 million for the same period in 2013. EBITDA as a
percentage of revenue for the three months ended March 31, 2014, was 26%
compared to 27% for the same period in 2013.
U.S. Operations
Three months ended March 31,
---------------------------------------------
($000's) 2014 2013 % chg.
---------------------------------------------
Revenue 14,851 13,979 6
EBITDA (1) 3,605 4,506 (20)
EBITDA as a % of revenue 24% 32%
Capital expenditures 2,077 3,005 (31)
Dispositions of rental assets (2) (196) (857) (77)
Net capital expenditures (3) 1,881 2,148 (12)
Gross capital assets 111,581 106,014 5
Total assets 107,933 112,512 (4)
Notes:
(1) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS
Measures Reconciliation".
(2) Dispositions represented at net book value.
(3) Includes assets acquired under finance lease and purchases of intangible
assets. Net capital expenditures are net of rental asset sales.
Revenue for the three months ended March 31, 2014, increased 6% to $14.9 million
from $14.0 million for the same period in 2013. Increased revenue during the
quarter was due to higher utilization of Strad's surface equipment and matting
rental fleets compared to the prior year. During the first quarter, rig counts
decreased by 5% in the Bakken, increased by 7% in the Rockies and remained
relatively flat in the Marcellus compared to the same period in 2013.
Year-over-year, competition and pricing pressure continued in the Bakken, which
impacted first quarter results, but was offset by market share gains in the
Marcellus resulting from an increased field sales presence compared to the prior
year. The Bakken continues to be the most active basin for Strad's U.S.
Operations, accounting for 49% of total revenue during the quarter.
EBITDA for the three months ended March 31, 2014, decreased 20% to $3.6 million
compared to $4.5 million for the same period in 2013. EBITDA as a percentage of
revenue for the three months ended March 31, 2014, was 24% compared to 32% for
the same period in 2013. The decrease in both EBITDA and EBITDA as a percentage
of revenue, despite the year-over-year increase in revenue, is due to a shift in
product mix during the quarter from high margin drill pipe rental revenue to
lower margin solids control rental revenue. In addition to the product mix
shift, Strad also incurred increased trucking expenses during the first quarter
as a result of transferring equipment to a higher utilization environment in the
Marcellus region from other regions in the U.S. and Canada.
Product Sales
Three months ended March 31,
---------------------------------------------
($000's) 2014 2013 % chg.
---------------------------------------------
Revenue 15,653 13,002 20
EBITDA (1) 2,719 2,352 16
EBITDA as a % of revenue 17% 18%
Capital expenditures (2) - 203 (100)
Total assets 658 1,724 (62)
Notes:
(1) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is not a recognized measure under IFRS; see "Non-IFRS
Measures Reconciliation".
(2) Includes assets acquired under finance lease and purchases of intangible
assets.
Product Sales are comprised of in-house manufactured products sold to external
customers, third party equipment sales to existing customers, and sales of
equipment from Strad's existing fleet to customers.
Revenue for the three months ended March 31, 2014, increased 20% to $15.7
million from $13.0 million for the same period in 2013, resulting primarily from
higher in-house manufactured product and third party equipment sales offset by
lower used equipment sales. During the first quarter, Product Sales consisted of
$8.5 million of in-house manufactured products, $6.5 million of third party
equipment sales and $0.7 million of rental fleet sales compared to $6.9 million,
$1.9 million and $4.2 million, respectively, during the same period in 2013.
Manufactured product sales increased due to a significant matting order from an
existing customer. Third party equipment sales increased year-over-year due to
more wood access mat sales, which are dependent on the timing of capital
spending by Strad's customers. Sales of Strad's rental fleet equipment fluctuate
quarter-over-quarter and are primarily dependent on strategic opportunities to
monetize underutilized rental assets.
EBITDA for the three months ended March 31, 2014, of $2.7 million increased by
16% compared to $2.4 million for the same period in 2013. The increase in EBITDA
was due to higher sales revenue during the first quarter of 2014 compared to the
same period in the prior year. EBITDA as a percentage of revenue for the three
months ended March 31, 2014, decreased to 17% compared to 18% for the same
period in 2013. EBITDA as a percentage of revenue tends to vary
quarter-over-quarter depending on the mix of sales, as realized margins on third
party equipment sales and sales of equipment from Strad's existing fleet
fluctuate more compared to sales of in-house manufactured products.
OUTLOOK
Industry conditions during the first quarter were slightly improved on a
year-over-year basis in Canada, whereas overall drilling activity in Strad's
U.S. operating regions was either flat or slightly down from the prior year.
Although growth in the WCSB was limited, driven by a continuation of broader
constraints relating to oil transportation bottlenecks, producer cash flows
continue to be supported by crude oil and natural gas prices that have
strengthened year-over-year. Activity increases have also been supported by
early stage activity related to delineation of Liquified Natural Gas ("LNG")
projects. Strad continued to participate in this activity increase with
multi-well equipment packages deployed to key customers in northeast British
Columbia through the first quarter. U.S. drilling activity in Strad's Bakken and
Marcellus regions has been impacted by the ongoing maturation and increased
drilling efficiency of the Bakken, as well as natural gas prices, which despite
recent increases, have not yet been sustained at levels to spur a significant
increase in Marcellus activity. However, initial signs of activity increases in
the Marcellus region continued to be evident in the first quarter.
In the WCSB, active drilling rigs in the first quarter of 2014 remained
relatively level, averaging 521 compared with 496 for the same period in 2013.
In the United States, drilling rig activity continued to vary by region, with
the total active U.S. rig count in Q1 2014 declining by 2% on a year-over-year
basis. The majority of Strad's U.S. fleet continues to operate in the Bakken and
Marcellus resource plays. The active rig count in the Bakken averaged 180 rigs
in the first quarter of 2014, down from 191 in the prior year period. In the
gas-weighted Marcellus play, the active rig count, including the Utica play,
averaged 122 rigs during the first quarter of 2014, consistent with the prior
year period.
Bakken operations are also in close proximity to the Rockies region, consisting
of Colorado, Wyoming and Utah, where an average of 139 rigs were drilling during
the first quarter, up from 130 rigs in the prior year. Both the Utica Shale and
Rockies region represent platforms to grow utilization of rental assets from
existing operating regions. In addition to drilling activity, the long-term
build out of LNG infrastructure in Canada could result in increased demand for
Strad's products and services.
The fundamentals for Strad's rental business continue to be sound with commodity
prices supporting capital spending by producers along with the associated
drilling activity. Oilsands and energy infrastructure investment are also
expected to increasingly drive results over the upcoming years and will provide
stability of demand through commodity price cycles.
Strad remains focused on improving operational efficiency, maximizing
utilization on its existing asset base and disciplined deployment of capital
targeted at opportunities in select areas such as matting in Canada and the
Marcellus, solids control in the Bakken, and rental assets deployed to LNG
related drilling activity in Canada. Strad remains on track with respect to its
$17.0 million capital program for the first half of 2014. Strad has to date
approved a further $8.0 million in budgeted capital for the balance of the year.
The Company's free cash flow and financial position provide Strad with
significant flexibility to pursue additional opportunities in the second half of
the year.
LIQUIDITY AND CAPITAL RESOURCES
December 31,
($000's) March 31, 2014 2013
------------------------------
Current assets 54,687 43,519
Current liabilities 43,862 32,004
------------------------------
Working capital (1) 10,825 11,515
Banking facilities
Operating facility 4,448 1,879
Syndicated revolving facility 38,400 38,500
------------------------------
Total facility borrowings 42,848 40,379
Total credit facilities (2) 110,000 110,000
------------------------------
Unused credit capacity 67,152 69,621
------------------------------
Notes:
(1) Working capital is calculated as current assets less current
liabilities, excluding assets held for sale. See "Non-IFRS Measures
Reconciliation".
(2) Facilities are subject to certain limitations on accounts receivable,
inventory, and net book value of fixed assets and are secured by a
general security agreement over the Company's assets. As at March 31,
2014, Strad had access to the full $110 million credit facility.
At March 31, 2014, working capital was $10.8 million compared to $11.5 million
at December 31, 2013. The change in current assets is consistent with the
increase in revenue from the fourth quarter of 2013 to the first quarter of
2014. The increase in current liabilities is due to increased activity levels
during the first quarter compared to the fourth quarter of 2013.
Funds from operations for the three months ended March 31, 2014, increased to
$10.5 million compared to $10.4 million for the three months ended December 31,
2013. Capital expenditures totaled $8.9 million for the three months ended March
31, 2014, and $9.5 million for the three months ended December 31, 2013. Capital
expenditures were offset by asset disposals totaling $0.5 million in the first
quarter of 2014 compared to $1.6 million during the fourth quarter of 2013.
Strad's total facility borrowing increased by $2.5 million during the first
quarter of 2014 due to an increase in the asset base from growth in working
capital and growth in the rental fleet. Management monitors funds from
operations and the timing of capital additions to ensure adequate capital
resources are available to fund Strad's capital program.
The Company's syndicated banking facility consists of an operating facility with
a maximum principal amount of $15.0 million CAD and $10.0 million USD, and an
$85.0 million revolving facility, both of which are subject to certain
limitations on accounts receivable, inventory and net book value of fixed assets
and are secured by a general security agreement over the Company's assets. The
syndicated banking facility bears interest at bank prime plus a variable rate,
which is dependent on the Company's funded debt to EBITDA ratio. The Company's
syndicated banking facility matures on July 25, 2016.
Based on the Company's funded debt to twelve month trailing EBITDA ratio of 1.1
to 1 at the end of the first quarter of 2014, the interest rate on the
syndicated banking facility is bank prime plus 1.25% on prime rate advances and
at the prevailing rate plus a stamping fee of 2.25% on bankers' acceptances. For
the three months ended March 31, 2014, the overall effective rates on the
operating facility and revolving facility were 4.20% and 3.48%, respectively. As
of March 31, 2014, $4.4 million was drawn on the operating facility and $38.4
million was drawn on the revolving facility. Required payments on the revolving
facility are interest only.
As at March 31, 2014, the Company was in compliance with all of the syndicated
banking facility covenants.
NON-IFRS MEASURES RECONCILIATION
Certain supplementary measures in this press release do not have any
standardized meaning as prescribed under IFRS and, therefore, are considered
non-IFRS measures. These measures are described and presented in order to
provide shareholders and potential investors with additional information
regarding the Company's financial results, liquidity and its ability to generate
funds to finance its operations. These measures are identified and presented,
where appropriate, together with reconciliations to the equivalent IFRS measure.
However, they should not be used as an alternative to IFRS, because they may not
be consistent with calculations of other companies. These measures are further
explained below.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not
a recognized measure under IFRS. Management believes that in addition to net
income, EBITDA is a useful supplemental measure as it provides an indication of
the results generated by the Company's principal business activities prior to
consideration of how those activities are financed or how the results are taxed.
EBITDA is calculated as net income plus interest, finance fees, taxes,
depreciation and amortization, loss on disposal of property, plant and
equipment, loss on foreign exchange, loss on assets held for sale, less gain on
foreign exchange and gain on disposal of property, plant and equipment.
Segmented EBITDA is based upon the same calculation for defined business
segments, which are comprised of Canadian Operations, U.S. Operations, Product
Sales and Corporate.
Funds from operations are cash flow from operating activities excluding changes
in working capital and share-based payments. It is a supplemental measure to
gauge performance of the Company before non-cash items. Working capital is
calculated as current assets minus current liabilities, excluding assets held
for sale. Working capital, cash forecasting and banking facilities are used by
Management to ensure funds are available to finance growth opportunities.
Annualized return on average total assets for the three months ended March 31,
2014, is calculated as annualized year-to-date EBITDA divided by the average of
total assets over the fourth quarter of 2013, including a three month lag. The
three month lag represents the time between the purchase of capital assets and
when they are deployed in the field and earning revenue.
Funded debt is calculated as bank indebtedness plus long-term debt plus current
and long-term portion of finance lease obligations, less cash.
Reconciliation of EBITDA and Funds from Operations
($000's)
Three months ended March 31,
2014 2013
------------------------------
Net income 4,141 1,063
Add:
Depreciation and amortization 5,487 7,626
(Gain)/loss on disposal of PP&E (758) 586
Loss on disposal of assets held for sale 38 158
Share-based payments 138 188
Deferred income tax expense 864 345
Financing fees 88 72
Interest expense 535 714
------------------------------
Funds from operations 10,533 10,752
------------------------------
Add:
Gain on foreign exchange (67) (121)
Current income tax expense 660 216
------------------------------
Subtotal 11,126 10,847
------------------------------
Deduct:
Share-based payments 138 188
------------------------------
EBITDA 10,988 10,659
------------------------------
Reconciliation of quarterly non-IFRS measures
($000's)
Three months ended
(unaudited)
Mar 31, Dec 31, Sept 30, Jun 30,
2014 2013 2013 2013
----------------------------------------
Net income 4,141 1,923 2,373 13
Add:
Depreciation and amortization 5,487 5,265 7,259 8,824
(Gain)/loss on disposal of PP&E (758) 477 162 76
Loss on disposal of assets held for
sale 38 637 - 17
Gain on foreign exchange (67) (5) (63) (18)
Current income tax expense 660 466 627 94
Deferred income tax
expense/(recovery) 864 (225) (808) (1,099)
Interest expense 535 665 784 791
Restructuring reversal - (514) - -
Impairment loss - 1,901 - -
Finance fees 88 88 88 71
----------------------------------------
EBITDA 10,988 10,678 10,422 8,769
----------------------------------------
Three months ended
(unaudited)
Mar 31, Dec 31, Sept 30, Jun 30,
2013 2012 2012 2012
----------------------------------------
Net income (loss) 1,063 (3,490) 2,937 2,772
Add:
Depreciation and amortization 7,626 7,667 7,362 7,003
Loss/(gain) on disposal of PP&E 586 226 22 (11)
(Gain)/loss on foreign exchange (121) (195) 510 (32)
Non-controlling interest - - 22 (187)
Current income tax
expense/(recovery) 216 (13) 788 (104)
Deferred income tax
expense/(recovery) 345 (3,804) (528) 748
Interest expense 714 739 854 638
Finance fees 72 66 63 58
----------------------------------------
EBITDA 10,659 7,675 12,030 10,885
Communications operating loss - 679 610 556
----------------------------------------
EBITDA (Adjusted) 10,659 8,354 12,640 11,441
----------------------------------------
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
Certain statements and information contained in this press release constitute
forward-looking statements. More particularly, this press release contains
forward-looking statements concerning an increase in dividend to be paid by
Strad, future capital expenditures of the Company, changes in margin to be
experienced by Strad, debt, dividends, demand for the Company's products and
services, drilling activity in North America, pricing of the Company's products
and services, introduction of new products and services, manufacturing capacity
to meet anticipated demand for the Company's products, and expected exploration
and production industry activity including the effects of industry trends on
demand for the Company's products. These statements relate to future events or
to the Company's future financial performance and involve known and unknown
risks, uncertainties and other factors that may cause the Company's actual
results, levels of activity, performance or achievements to be materially
different from future results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements.
The use of any of the words "expect", "plan", "continue", "estimate",
"anticipate", "potential", "targeting", "intend", "could", "might", "should",
"believe", "may", "predict", or "will" and similar expressions are intended to
identify forward-looking information or statements. Various assumptions were
used in drawing the conclusions or making the projections contained in the
forward-looking statements throughout this press release. The forward-looking
information and statements included in this press release are not guarantees of
future performance and should not be unduly relied upon. Forward-looking
statements are based on current expectations, estimates and projections that
involve a number of risks and uncertainties, which could cause actual results to
differ materially from those anticipated and described in the forward-looking
statements. Such information and statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or events to
differ materially from those anticipated in such forward-looking information or
statements. These factors include, but are not limited to, such things as the
impact of general industry conditions, fluctuation of commodity prices, industry
competition, availability of qualified personnel and management, stock market
volatility and timely and cost effective access to sufficient capital from
internal and external sources. The risks outlined above should not be construed
as exhaustive. Although management of the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Accordingly,
readers should not place undue reliance upon any of the forward-looking
information set out in this press release. All of the forward-looking statements
of the Company contained in this press release are expressly qualified, in their
entirety, by this cautionary statement. The various risks to which the Company
is exposed are described in this press release under the heading "Risk Factors"
above and in additional detail in the Company's Annual Information Form ("AIF").
Except as required by law, the Company disclaims any intention or obligation to
update or revise any forward-looking information or statements, whether the
result of new information, future events or otherwise.
This press release shall not constitute an offer to sell, nor the solicitation
of an offer to buy, any securities in the United States, nor shall there be any
sale of securities mentioned in this press release in any state in the United
States in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
FIRST QUARTER EARNINGS CONFERENCE CALL
Strad Energy Services Ltd. has scheduled a conference call to begin promptly at
8:00 a.m. MT (10:00 am. ET) on Thursday, May 8, 2014.
The conference call dial in number is 1-866-225-0198
The conference call will also be accessible via webcast at www.stradenergy.com
A replay of the call will be available approximately one hour after the
conference call ends until Thursday May 8th, 2014, at 11:59pm ET. To access the
replay, call 1-800-408-3053, followed by pass code 2485731.
Strad Energy Services Ltd.
Interim Consolidated Statement of Financial Position
(Unaudited)
----------------------------------------------------------------------------
(in thousands of Canadian dollars) As at March As at December
31, 2014 31, 2013
$ $
Assets
Current assets
Trade receivables 46,984 35,569
Inventories 5,746 5,788
Prepaids and deposits 1,693 1,772
Note receivable 264 350
Income taxes receivable - 40
------------------------------
54,687 43,519
Assets held for sale 3,156 3,167
Non-current assets
Property, plant and equipment 147,200 142,108
Intangible assets 1,546 1,685
Goodwill 17,277 17,277
Deferred income tax assets 144 164
------------------------------
Total assets 224,010 207,920
------------------------------
Liabilities
Current liabilities
Bank indebtedness 4,448 1,879
Accounts payable and accrued liabilities 33,075 25,403
Income taxes payable 638 -
Deferred revenue 2,377 785
Current portion of obligations under finance
lease 1,274 1,887
Dividend payable 2,050 2,050
------------------------------
43,862 32,004
Non-current liabilities
Long-term debt 38,400 38,500
Obligations under finance lease 882 770
Deferred income tax liabilities 8,795 7,797
------------------------------
Total liabilities 91,939 79,071
Equity
Share capital 117,832 117,824
Contributed surplus 11,693 11,612
Accumulated other comprehensive income 1,645 603
Retained earnings (deficit) 901 (1,190)
------------------------------
Total equity 132,071 128,849
------------------------------
Total liabilities and equity 224,010 207,920
------------------------------
Strad Energy Services Ltd.
Interim Consolidated Statement of Income and Comprehensive Income
For the three months ended March 31, 2014 and 2013
(Unaudited)
----------------------------------------------------------------------------
(in thousands of Canadian dollars, except per share amounts)
2014 2013
$ $
Revenue 51,888 44,723
Expenses
Operating expenses 35,206 28,727
Depreciation 5,301 7,187
Amortization of intangible assets 186 439
Selling, general and administration 5,556 5,149
Share-based payments 138 188
(Gain) loss on disposal of property, plant and
equipment (758) 586
Foreign exchange gain (67) (121)
Finance fees 88 72
Interest expense 535 714
Loss on assets held for sale 38 158
------------------------------
Income before income tax 5,665 1,624
Income tax expense 1,524 561
------------------------------
Net income for the period 4,141 1,063
------------------------------
Other comprehensive income
Items that may be reclassified subsequently to
net income
Cumulative translation adjustment 1,042 608
------------------------------
Comprehensive income for the period 5,183 1,671
------------------------------
------------------------------
Earnings per share:
Basic $0.11 $0.03
Diluted $0.11 $0.03
Strad Energy Services Ltd.
Interim Consolidated Statement of Cash Flow
For the three months ended March 31, 2014 and 2013
(Unaudited)
----------------------------------------------------------------------------
(in thousands of Canadian dollars)
2014 2013
Cash flow provided by (used in) $ $
Operating activities
Net income for the period 4,141 1,063
Adjustments for items not affecting cash:
Depreciation and amortization 5,487 7,626
Deferred income tax expense 864 345
Share-based payments (net of cash settlements
on share option exercises) 84 158
Interest expense and finance fees 623 786
(Gain) loss on disposal of property, plant and
equipment (758) 586
Loss on assets held for sale 38 158
Changes in items of non-cash working capital (1,483) (4,439)
------------------------------
Net cash generated from operating activities 8,996 6,283
------------------------------
Investing activities
Purchase of property, plant and equipment (8,377) (2,302)
Proceeds from sale of property, plant and
equipment 1,717 695
Purchase of intangible assets (28) (363)
Proceeds from assets held for sale 81 1,802
Changes in items of non-cash working capital (129) (2,433)
------------------------------
Net cash used in investing activities (6,736) (2,601)
------------------------------
Financing activities
Proceeds on issuance of long-term debt - 2,000
Repayment of long-term debt (100) (2,000)
Repayment of finance lease obligations (net) (501) (536)
Interest expense and finance fees (623) (786)
Payment of dividends (2,050) (2,048)
Changes in items of non-cash working capital 346 -
------------------------------
Net cash used in financing activities (2,928) (3,370)
------------------------------
Effect of exchange rate changes on cash and
cash equivalents (1,901) (990)
------------------------------
Decrease in cash and cash equivalents (2,569) (678)
------------------------------
Cash and cash equivalents (bank indebtedness)
- beginning of year (1,879) (2,488)
------------------------------
Cash and cash equivalents (bank indebtedness)
- end of period (4,448) (3,166)
------------------------------
Cash paid for income tax - 235
Cash paid for interest 516 674
------------------------------
ABOUT STRAD ENERGY SERVICES LTD.
Strad is a North American energy services company that focuses on providing
well-site infrastructure solutions to the oil and natural gas industry. Strad
focuses on providing complete customer solutions in well-site-related oilfield
equipment for producers active in unconventional resource plays.
Strad is headquartered in Calgary, Alberta, Canada. Strad is listed on the
Toronto Stock Exchange under the trading symbol "SDY".
FOR FURTHER INFORMATION PLEASE CONTACT:
Strad Energy Services Ltd.
Andy Pernal
President and Chief Executive Officer
(403) 775-9202
(403) 232-6901 (FAX)
apernal@stradenergy.com
Strad Energy Services Ltd.
Greg Duerr
Chief Financial Officer
(403) 705-4333
(403) 232-6901 (FAX)
gduerr@stradenergy.com
www.stradenergy.com
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