2011 YEAR END RESULTS
Calmena Energy Services Inc. (TSX:CEZ) ("Calmena") is pleased to announce its
financial results for the year ended December 31, 2011. All figures are reported
in Canadian dollars unless otherwise stated. Our audited consolidated financial
statements and related management's discussion and analysis for the period will
be filed separately on SEDAR (www.sedar.com), which should be reviewed in
conjunction with this press release.
SELECTED FINANCIAL INFORMATION
The tables below provide a summary of Calmena's financial and operating results
as at and for the three and twelve month periods ended December 31, 2011 and
2010.
Three months ended Twelve months ended
----------------------- -----------------------
($ thousands, except per December December December December
share amounts) 31 2011 31 2010 31 2011 31 2010
-------------------------------------------------- ------------------------
Revenue 39,408 21,677 124,704 93,005
EBITDAS(i) 6,097 527 13,967 9,295
Net loss for the period (1,974) (6,746) (8,959) (19,520)
Funds flow from (used in)
continuing operations(i) 5,493 (345) 10,718 3,556
-------------------------------------------------- ------------------------
Net loss per share - Basic
and diluted (0.01) (0.03) (0.03) (0.08)
Funds flow from (used in)
continuing operations per
share- Basic and
diluted(i) 0.02 (0.00) 0.04 0.01
-------------------------------------------------- ------------------------
(i) see non-GAAP measures section of this release for a description of this
term.
As at December 31, As at December 31,
($ thousands) 2011 2010
----------------------------------------------------------------------------
Total assets $ 221,891 $ 191,636
Borrowings and debt 51,266 55,467
Shareholders' equity $ 142,647 $ 116,979
----------------------------------------------------------------------------
2011 HEADLINES
-- Consolidated revenue of $124.7 million and EBITDAS of $14.0 million for
the year ended December 31, 2011 were $31.7 million and $4.7 million
higher respectively compared to the same period in 2010 as Canada and
United States ("US") showed substantial year over year improvements and
Mexico returned to full utilization by year end.
-- Consolidated revenue of $39.4 million and EBITDAS of $6.1 million for
the fourth quarter of 2011 were $17.7 million and $5.6 million higher
respectively compared to the same period in 2010 reflecting strength in
Canada, US and Mexico. Full EBITDAS potential remained unrealized in the
fourth quarter of 2011 as positive contributions from Brazil, Libya and
Colombia are still forthcoming.
-- Canada achieved a 42% increase in revenue and an 82% increase in EBITDAS
over 2010 with pricing and utilization increases evident in contract
drilling, equipment rentals and frac fluids management. Our service
lines in Canada are strongly driven by oilsands activity, horizontal
drilling and multi-stage fracing, all of which have seen significant
activity improvements in 2011.
-- US directional services achieved an 81% increase in revenue and a 119%
increase in EBITDAS over 2010 with improvements in both pricing and
utilization. Directional services in the US is driven by the horizontal
drilling rig count which, for the year ended December 31, 2011 was 31%
higher than the same period in 2010.
-- Mexico drilling rig utilization averaged 63% for the year, showing
substantial sequential quarterly improvements until achieving 100%
utilization in the last two months of 2011. Although industry drilling
activity in Mexico has not returned to the levels achieved in early
2010, momentum is building. Our drilling rigs rank among the best in
country and were therefore among the first to return to work. All five
drilling rigs exited 2011 under contract.
-- We made tangible progress in building our nascent Colombia contract
drilling and directional services businesses:
-- After an extended period on standby rate, our drilling rig spudded
its first well in October 2011, under contract to a major
independent Canadian operator.
-- Directional services commenced commercial operations in the fourth
quarter of 2011 after being awarded contracts from three customers,
including Ecopetrol, the Colombian national oil company. Post year
end, we signed three contracts for additional work.
-- Our startup drilling business in Brazil developed rapidly:
-- Our heli-portable drilling rig commenced operations late in the
third quarter of 2011 under an extendible four year drilling
contract with Petrobras.
-- In the third quarter of 2011 we executed extendible three year
contracts to provide four single rigs to Petrobras. Two of these
rigs were mobilized from our Canadian fleet in late 2011 and began
generating revenue in March 2012. The remaining two rigs will be
deployed from our Canadian fleet after the 2012 winter drilling
season.
-- Our Libyan operations were suspended early in 2011 as a result of the
civil unrest in that country. The political situation in Libya has
stabilized substantially in recent months and we began preparing for the
return to operations in the fourth quarter of 2011. We have physically
inspected our rigs, accounted for all equipment, and conducted the
majority of repairs necessary to re-activate the rigs. We are fortunate
that our rigs were located far from the conflict, and suffered
relatively minor damage. Discussions with our customer regarding the
resumption of operations have been initiated and recently the customer
has paid the Company $2.9 million for services performed prior to the
suspension of operations.
-- Our directional services product development center in Calgary achieved
several milestones in the commercialization of our internally
manufactured directional services equipment:
-- One Cyclone Survey Instrument ("CSI") was placed on rental in
Colombia and continues to perform well;
-- Our first three measurement while drilling ("MWD") systems were
manufactured and delivered for internal use by our US field
operations;
-- We completed our first third party sales of Cyclone(TM) pulsers late
in the third quarter and early in the fourth quarter after
demonstrating the tool's reliability and functionality during an
extended trial period.
-- In the second quarter of 2011 we solidified our financial capacity by
raising equity with net proceeds of $27.0 million and increasing
borrowing capacity by $6.0 million.
OUTLOOK
Canada's service lines are well positioned to capitalize on horizontal multi
stage fracing and activity in the oilsands. Our capital expenditure program for
2011 was targeted to enhance our ability to participate in these markets, and we
are continuing this focus in 2012. Canadian drilling industry activity in 2012
is forecasted to be similar to 2011 with continued emphasis in these areas. To
date in 2012 our drilling rig utilization is similar to 2011 but rates are
significantly higher benefitting from strong demand from heavy oil and coring
projects. Two additional single rigs will be relocated from our Canadian fleet
to Brazil in the second quarter. We are upgrading our remaining Canadian single
rigs which will result in improved capabilities and are expecting improved
utilization for the balance of 2012. Our double rig is contracted until July
2012, and we are optimistic that the contract will be renewed at least until the
end of the year. We added three trucks to our wireline technologies fleet in
late 2011 to increase our presence in horizontal completions, and we have
diversified our client base and added sales resources to this service line. We
expect to see the full impact of those changes in 2012. We are continuously
investing in equipment rentals and frac fluids management which directly service
the high fracing activity, primarily in the Cardium, and expect that activity in
these service lines will continue to grow in 2012.
US directional services experienced a very strong 2011 and will be a key growth
area for 2012. Horizontal drilling activity in the US continues to grow driven
by high oil prices. As of March 9, 2012 1,164 drilling rigs were dedicated to
horizontal wells, compared to 981 a year earlier with even greater percentage
increases in our core markets. We believe that the current horizontal drilling
activity levels are sustainable for 2012. In the fourth quarter of 2011, our
directional services utilization in the US was constrained by capacity, reaching
near optimal utilization and we were partially relying on rental kits for
periods of peak demand. In 2012 we are planning to add twelve new kits, more
than doubling capacity by the fourth quarter. This will enable further
penetration in our core mid-continent market and expansion into West Texas as
well as reduce our reliance on rental kits. All of our new 2012 positive pulse
MWD kits will be manufactured internally, lowering costs and repair turnaround
time and improving standardization of our MWD platform.
Mexico turned around fully for us and we expect high utilization to be
maintained throughout 2012. Of the five drilling rigs under contract at the end
of 2011, three are contracted to the end of 2012, the fourth is contracted to
June 2012 and the fifth is operating under a short term contract while the
customer awaits approval of additional spending from Pemex (the Mexican national
oil company). Based on the plans of our customers and other opportunities
developing in Mexico, we feel confident that contract drilling will achieve
strong utilization in 2012. Our two directional services kits remain working
under contract, which we expect will continue for 2012 and with the replacement
of rental kits in the first quarter, we expect operating margins to improve.
Colombia directional services is another strategic growth area for us in 2012.
The work performed in the fourth quarter of 2011 established credibility that
led to the contract awards in the first quarter of 2012. To support the
additional activity, we are currently deploying additional directional equipment
to Colombia and establishing a repair facility in Bogota. As we continue to
perform and build infrastructure, we will create additional opportunities. In
anticipation of growth, we are planning to build and deploy an additional four
directional kits to Colombia in the second half of 2012. Our drilling contract
in Colombia was terminated in mid-March, 2012, three months earlier than
expected, due to a scope change by the operator. Demand for this type of
drilling rig in Colombia is high and market conditions have improved since we
first entered the Colombia market. We view this as an earlier than expected
opportunity to obtain a contract with an improved dayrate.
In Brazil, our heli-portable drilling rig should generate revenue continuously
for the remainder of its four year contract term and the four single rigs will
start generating revenue continuously for the three year term of their contracts
as they spud in the first and second quarters of 2012. During the first half of
2012, operational results will be affected by continuing operational
refinements, startup costs and the staged introduction of the single rigs. Our
Brazil business should start to realize the full financial potential of these
investments during the third quarter of 2012.
Developments in Libya are positive and we are cautiously optimistic that
operations could recommence as early as the second quarter of 2012.
The fourth quarter of 2011 marked the second consecutive quarter of solid and
improving revenue and EBITDAS, further indicating stability and visibility of
financial results. As we continue to execute on our growth initiatives in 2012
we are optimistic that our financial results will reflect the additional
financial potential of our geographic and service line diversification
strategies.
ABOUT CALMENA ENERGY SERVICES INC.
Calmena is a diversified energy services company that provides well construction
services to its customers operating in Canada, the United States, Latin America
and the Middle East and North Africa. The common shares of Calmena trade on the
Toronto Stock Exchange under the symbol "CEZ".
FORWARD LOOKING STATEMENTS
This news release contains certain forward-looking statements relating to
Calmena's plans, strategies, objectives, expectations and intentions.
Expressions such as "may", "anticipate", "expect", "project", "believe", "hope",
"estimate", "intend", "will", "continue", "foresee", and "forecast" and similar
expressions and statements are intended to identify forward looking statements.
Such statements represent Calmena's internal projections, estimates or beliefs
concerning, among other things, an outlook on the estimated amounts and timing
of capital expenditures, anticipated future debt, revenues or other
expectations, beliefs, plans, objectives, assumptions, intentions or statements
about future events or performance. These statements are only predictions and
actual events or results may differ materially. Although Calmena believes that
the expectations reflected in the forward-looking statements are reasonable, it
cannot guarantee future results, levels of activity, performance or achievement
since such expectations are inherently subject to significant business,
economic, competitive, political and social uncertainties and contingencies.
Many factors could cause Calmena's actual results to differ materially from
those expressed or implied in any forward-looking statements made by, or on
behalf of, Calmena.
In particular, forward-looking statements included in this news release include,
but are not limited to, expected drilling activity in Canada in 2012;
expectations as to levels of horizontal drilling and oil well completions in
2012 in Canada and the United States; the focus of our capital expenditure
program and rig utilization rates and pricing in 2012; timing of deployment of
two drilling rigs from Canada to Brazil; expectations regarding renewal of
double rig contract; the impact on the Company in 2012 as a result of adding
three additional trucks to the wireline technologies fleet, from diversification
of the Company's client base and from added sales resources; expectations
regarding continued investment in frac fluids management and equipment rentals
and the effect thereof on activity levels and growth in these service lines;
potential for growth of directional drilling services in the United States in
2012, including the addition of new directional drilling kits and anticipated
effect of the new kits on Calmena's penetration of its core mid-continent
market, its expansion into West Texas and the Company's reliance on rental kits;
plans to manufacture the 2012 positive pulse MWD kits internally and the effect
on Calmena's costs, repair turnaround time and standardization of its MWD
platform; expectations for operations in Mexico in 2012, including contract
drilling utilization, continuation of directional services kits working under
contract; effect of establishing a repair facility in Bogota and deploying
additional directional equipment to Colombia on future opportunities and growth;
expectations as to the strength of the Colombian drilling industry, including
demand for drilling rigs and market conditions; timing of deployment of
additional directional kits to Colombia; utilization of our drilling rig in
Colombia and ability to re-contract the rig at the end of its current contract;
ability to generate revenue from the heli-portable drilling rig and four single
rigs in Brazil; effect of continuing operational refinements, startup costs and
the staged introduction of the single rigs in Brazil on the Company's results of
operations and financial performance and expected timing of realization of full
financial potential of such investments in Brazil; terms of drilling rig
contracts in Brazil; the outlook for Calmena's operations, including the
Company's strategy for the remainder of 2012; specific events and trends in the
oil and gas industry; statements with respect to benefits from the particular
forward-looking statements included in this news release; and the statements
under the heading "Outlook" in this news release.
These forward-looking statements are subject to numerous risks and
uncertainties, certain of which are beyond Calmena's control, including, but not
limited to, the impact of general economic conditions; industry conditions and
changes in industry conditions; volatility of commodity prices; decreased demand
for energy services; competition from other energy services providers; the lack
of availability of qualified personnel or management; ability of Calmena to
re-finance or extend the maturity date of its senior debt and generate positive
cash flow; failure of counter parties to perform on contracts; failure to
successfully negotiate new contracts or renew existing contracts; failure to
successfully deploy rigs; changes in income tax laws or changes in tax laws and
incentive programs relating to the oil and gas industry; risks associated with
international operations, including, but not limited to, effect of civil unrest
on the Company's operations in Libya; seasonality; loss of key customers;
fluctuations in foreign exchange or interest rates and stock market volatility;
supply and demand for oilfield services relating to the drilling, completion and
maintenance of oil and gas wells as well as services related to, oilfield
equipment rentals and production and ancillary services; liabilities and risks,
including environmental liabilities and risks inherent in oil and natural gas
operations; uncertainties in weather and temperature affecting the duration of
the service periods and the activities that can be completed; ability to access
sufficient capital from internal and external sources; failure to successfully
negotiate contracts for drilling rig operations; failure to realize the
anticipated benefits of the Company's investments; and the other risks
considered under "Risk Factors" in our annual information form for the year
ended December 31, 2011 which is available on www.sedar.com.
With respect to forward-looking statements contained in this news release,
Calmena has made assumptions regarding, but not limited to: the implementation
of the Company's international growth strategy; current commodity prices and
royalty regimes; availability of skilled labour; timing and amount of capital
expenditures; ability of Calmena to re-finance or extend the maturity date of
its senior debt; ability of Calmena to renew existing contracts and enter into
new contracts; rig utilization and pricing; future exchange rates; the impact of
increasing competition; conditions in general economic and financial markets;
industry conditions; supply and demand for oilfield services relating to the
drilling, completion and maintenance of oil and gas wells as well as services
related to oilfield equipment rentals and production and ancillary services;
effects of regulation by governmental agencies; trends in Calmena's operations;
and future operating costs.
Management has included the above summary of assumptions and risks related to
forward-looking information provided in this news release in order to provide
Shareholders with a more complete perspective on Calmena's current and future
operations and such information may not be appropriate for other purposes.
Calmena's actual results, performance or achievement could differ materially
from those expressed in, or implied by, these forward-looking statements and,
accordingly, no assurance can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of them do so,
what benefits that Calmena will derive therefrom. Readers are cautioned that the
foregoing lists of factors are not exhaustive.
These forward-looking statements are made as of the date of this news release
and Calmena disclaims any intent or obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or results or otherwise, other than as required by applicable securities
laws.
NON GAAP MEASURES
The following measure is used within this release, but not recognized under
GAAP. As a result, the method of calculation may not be comparable with other
companies. This measure should not be considered alternatives to net loss and
net loss per share as calculated in accordance with GAAP:
EBITDAS (Earnings before interest, income taxes, depreciation and amortization,
other items of income and expense and share based compensation) - Management
believes that EBITDAS as derived from information reported in the Consolidated
Statement of Operations is a useful supplemental measure as it provides an
indication of the Company's ability to generate funds by the Company's core
business activities prior to consideration of how those activities are financed,
the impact of foreign exchange, how the results are taxed, how funds are
invested or how non-cash depreciation and amortization charges affect results.
See the reconciliation of EBITDAS to net loss in the Company's management's
discussion and analysis for the year ended December 31, 2011.
Funds flow from continuing operations: Management believes that in addition to
cash generated from operations, funds flow from continuing operations is a
useful supplemental measure because it provides an indication of the funds
generated by the Corporation's principal business activities prior to the
consideration of working capital, which is primarily made up of highly liquid
balances. See the reconciliation of funds flow from continuing operations in the
Company's management's discussion and analysis for the year ended December 31,
2011.
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