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Enter Symbol
or Name
USA
CA



Hanwei Energy Services Corp
Symbol HE
Shares Issued 194,201,234
Close 2018-06-20 C$ 0.035
Market Cap C$ 6,797,043
Recent Sedar Documents

Hanwei Energy loses $3.01-million in fiscal 2018

2018-06-20 18:40 ET - News Release

Mr. Graham Kwan reports

HANWEI ENERGY SERVICES REPORTS YEAR END FISCAL 2018 FINANCIAL AND OPERATIONAL RESULTS

Hanwei Energy Services Corp. has released its financial results for the year ended March 31, 2018, and provided an operational update. All amounts are in Canadian dollars unless otherwise noted.

Hanwei's principal business operations are in two complementary segments of the oil and gas industry as an operator and developer of its own producing and exploratory oil and gas assets in Alberta and Manitoba and as a specialized pipe supplier to the industry, both in Canada and internationally. For the financial year ended March 31, 2018, a summary of the Company's annual financial results are as follows:

 Summary of the 2018 Fiscal Year Financial Results from Continuing Operations 
             in thousands of CDN$ except percentages and per share data        
                                        
                                 FY2018                               FY2017                              
                                 Pipe  Oil & Gas CorporateTotal       Pipe   Oil & GasCorporateTotal
      
Revenue                          9,109 1,454     -        10,563      4,947  2,528    -        7,475      
Adjusted EBITDA                  1,875 (667)     (883)    325         108    34       (942)    (800)      
Adjusted EBITDA Margin           21%   -46%      n/a      3%          2%     1%       n/a      -11%       
Adjusted EBITDA per share         0.01  0.00      0.00     0.00        (0.00) 0.00     (0.00)   (0.00)    
Net Income (loss)                176   (2,811)   (383)    (3,018)     (2,427)(1,345)  (1,512)  (5,284)    
Diluted EPS  (Basic and diluted) 0.00  (0.02)    (0.00)    (0.02)      (0.01)(0.01)   (0.01)    (0.03)    
 

The Company had revenues for the year ended March 31, 2018 of approximately $10.6 million as compared to $7.5 million for the prior year, representing a 41% increase driven by growth in FRP pipe sales, primarily in the Company's China market, offset by a decrease in oil and gas revenues due to drilling and work-over programs at the Company's Leduc Lands that shut-in production for the six months ended March 31, 2018.

Revenues from the Company's China FRP pipe market increased by 281% to $6.6 million for the year ended March 31, 2018 (driven primarily by new flow line projects and representing 73% of total Company FRP pipe revenues) as compared to $1.7 million (representing 35% of total Company FRP pipe revenues) in the prior year.

Revenues from the Canadian FRP pipe market decreased by 42% to approximately $1.8 million for the year ended March 31, 2018 due to timing of projects by end users (representing 20% of total Company FRP pipe revenues) as compared to $3.1 million (representing 63% of total Company FRP pipe revenues) in the prior year.

During the year ended March 31, 2018, the Company produced approximately 107 barrels of oil equivalent per day (boe/d), including 58 bbl/d of oil, 224 mcf/d of gas and 12 boe/d of liquids. For the year ended March 31, 2017, the Company produced approximately 218 barrels of oil equivalent per day (boe/d), including 81 bbl/d of oil, 611 mcf/d of gas and 35 boe/d of liquids.

The Company's Oil and Gas business unit generated revenues net of royalties of $1.4 million and net back of $0.3 million, equivalent to gross revenue per boe of $36.92 with a netback of $10.51 per boe (or a netback margin of 28%) for the year ended March 31, 2018. For the year ended March 31, 2017, the company generated revenues net of royalties of $2.2 million and net back of $0.8 million, equivalent to gross revenue per boe of $31.99 with a netback of $10.05 per boe (or a netback margin of 31%).

As before noted the Company's production wells on its Leduc Lands were shut-in during the six months ended March 31, 2018 so as to accommodate capital expenditures upgrading the Company's battery facility, conversion of a previously shut in vertical well to a water disposal well to reduce operating expenses, conversion of a previously shut in vertical well to a gas injection well, drilling of a new Nisku horizontal well and re-entry of four existing vertical Wabamun wells to increase both production and operating netback. The Company brought its Leduc Lands back on test production on May 19, 2018. Test production oil volume is currently at approximately 250 bbl/d.

Adjusted EBITDA from continuing operations for the year ended March 31, 2018 totalled approximately $0.3 million as compared to negative Adjusted EBITDA of $0.8 million for the prior year. The $1.1 million improvement was due to increased FRP pipe sales in the Company's China market and continued cost management in the FRP pipe business.

Oil and Gas Reserves

The oil and natural gas reserves of the Company attributable to the Leduc Lands and Entice Lands as at March 31, 2018 and March 31, 2017 were evaluated by Sproule Associates Limited ("Sproule"), an independent qualified reserves evaluator. The chart below provides a comparison of the "Proved" and "Proved Plus Probable" remaining reserves of the Company therein. The decrease in both reserves and Net Present Value of the remaining reserves is due to expiration of certain mineral rights of the Company at Leduc as well as a decrease in expected gas sales due to the Company's intention for gas injection at the Leduc Lands.

 Remaining Reserves         Net Present Values After Tax          
Mboe; After Tax (M$)   Gross   Company  Company   @ 0%     @ 5.0% @ 10.0% @ 15.0%@ 20.0%
                       100%    Gross    Net       M$       M$     M$      M$     M$     
2018 Reserves Report                                                                    
Total Proved            1,069.3  1,062.4  885.9    25,027   20,200  16,762 14,266 12,398
Total Proved + Probable 1,753.7  1,737.7  1,461.5  41,823   31,864  25,214 20,614 17,300
                                                                                        
2017 Reserves Re port                                                                   
Total Proved            1,420.1  1,366.1  1,124.7  26,544   21,083  17,381 14,773 12,865
Total Proved + Probable 2,242.7  2,161.0  1,814.4  42,892   32,621  25,934 21,341 18,042
                                                                                        
Variance                                                                                
Total Proved             (351)   (304)    (239)     (1,517)  (883)   (619)  (507)  (467)
YoY Variance %         -24.7%  -22.2%   -21.2%    -5.7%    -4.2%  -3.6%   -3.4%  -3.6%  
                                                                                        
Total Proved + Probable  (489)   (423)    (353)     (1,069)  (757)   (720)  (727)  (742)
YoY Variance %         -21.8%  -19.6%   -19.4%    -2.5%    -2.3%  -2.8%   -3.4%  -4.1%  

Short-term loan

The total principal amount of all short-term loans was $5.1 million as at March 31, 2018 representing a 38% debt to equity ratio (total debt divided by total shareholders' equity). Management believes that the Company has sufficient debt facilities to support its current operations and will continue to assess its debt structure based on the requirements of the business.

Other

General and administrative ("G&A") expenses for the year ended March 31, 2018 were $2.4 million as compared to $4.1 million for the prior year. G&A for the year ended March 31, 2018 included a one-time property tax refund received by the Company's FRP pipe business unit in the amount of $0.4 million.

As of March 31, 2018, the Company's cash and cash equivalent balance was approx. $1.0 million.

As of March 31, 2018, the Company had a Net Asset Value per share for its continuing operations of $0.13.

The Company also today announced that Mr. Yucai (Rick) Huang, CPA, CGA, the Company's Chief Financial Officer, has resigned to pursue other business opportunities, and will leave the Company on June 21, 2018. The Company wishes to thank Mr. Huang for his decade of service and wishes him success in his next endeavour. Mr. Huang's resignation is not the result of any dispute or disagreement with the Company including any matters relating to the Company's accounting practices, internal controls, or financial reporting.

Ms. Xinran (Irene) Mai, CPA, CGA will assume the role of Chief Financial Officer. Ms. Mai is currently Financial Controller for the Company and has been with the Company in various finance and accounting roles since January 2007. She has extensive hands-on experience with the Company in financial management, financial reporting, internal controls, corporate finance and regulatory reporting. She is bilingual in both English and Chinese languages and holds a detailed understanding of the Company's business and financial affairs in Canada and China. Ms. Mai holds a Bachelor of Engineering degree specializing in industrial management, and is member of the Chartered Professional Accountants in British Columbia ("CPA").

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp.'s principal business operations are in two complementary key segments of the oil and gas industry as both an equipment supplier to the industry (as a leading manufacturer of high pressure, fiberglass reinforced plastic ("FRP") pipe products and associated technologies serving major energy customers in the global energy market) and as oil and gas producer with properties in Alberta and joint venture interests in Manitoba.

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