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Questor Technology earns $85,696 in Q2 2015

2015-08-31 15:15 ET - News Release

Ms. Audrey Mascarenhas reports

QUESTOR TECHNOLOGY INC. ANNOUNCES SECOND QUARTER 2015 FINANCIALRESULTS

Questor Technology Inc. has released its financial and operating results for the second quarter of 2015. Revenue this quarter was $1.7-million, 61 per cent lower than the prior-year second quarter as the significant decline in commodity prices, for oil in particular, has caused customers to defer capital expenditures and place projects on hold to conserve capital. Revenue for the first six months was $4.1-million, down 47 per cent from the prior year. In this current economic environment, the option to rent equipment is attractive to both clients and the company. Questor has seen a rental revenue increase of 88 per cent in the second quarter and 126 per cent in the first half of 2015 versus 2014 respectively. Incinerator and combustion service revenue for the six months ended June 30 was up by 115 per cent, with the majority of the revenue growth in the United States. There are strong indications that this increased trend in rental demand will continue into the second half of 2015 and into 2016. The company will continue to invest in the rental fleet to meet this trend and has recently added two new Q5000 units to the rental inventory which are scheduled for an Alberta well test in the third quarter and then relocation to Colorado in early 2016 to address the continuing demand in that region.

The company generated a profit of $85,696 (0.3 cent per share) in the second quarter of 2015 down from the $1,394,323 (5.5 cents per share) in the second quarter of the prior year due primarily to lower revenues arising out of the lower volume of incinerators sold. Profit for the six months ended June 30 was $577,678 or 2.2 cents per share. Higher net foreign exchange gains and other income recorded in 2015 compared to the same period of 2014 contributed positively to the company's overall financial performance.

                                                      
                   FINANCIAL HIGHLIGHTS SUMMARY                
                                                           
                                   For the three months ended
                                                      June 30,
                                          2015           2014
                                                            
Revenue                             $1,733,562     $4,502,651   
Gross profit(1)                        648,753      2,545,152   
Adjusted EBITDA(1)                     352,240      1,966,338   
Profit for the period(2)                85,696      1,394,323   
Cost of sales as a per cent of                                
revenue(1)                               62.6%          43.5%
Cash generated from operations                                
before movements in non-cash                                 
working capital(1)                    $125,734     $2,087,203  
Earnings per share                                           
Basic                                    0.003          0.055 
Diluted                                  0.003          0.053

                                     For the six months ended
                                                      June 30,
                                          2015           2014
                                                             
Revenue                             $4,102,648     $7,718,088    
Gross profit(1)                      1,848,292      3,987,693   
Adjusted EBITDA(1)                   1,276,397      3,121,207  
Profit for the period(2)               577,678      2,196,073  
Cost of sales as a per cent of                                
revenue(1)                               54.9%          48.3%
Cash generated from operations                               
before movements in non-cash                                  
working capital(1)                    $992,833     $3,342,268  
Earnings per share                                            
Basic                                    0.022          0.087  
Diluted                                  0.022          0.083   
Total assets                        16,506,953     16,156,941  
Non-current liabilities                221,864        230,922 
                                                             
(1) Non-IFRS financial measure. Please see discussion in the
non-IFRS financial measures section of this management's
discussion and analysis.                                    
(2) Weighted average number of shares.

In the U.S., state and federal regulations on emissions and the fines being imposed for non-compliance have made it essential for clients to find cost-effective solutions to address air quality issues associated with tank and gas dehydration emissions. New rules recently introduced in the U.S. for methane emissions due to their heightened impact on climate change will also create an opportunity for Questor's incineration technology. The superior performance of Questor's products and demonstrated operational success has led certain customers to specify the company's equipment as a best practice. The successful completion of the EPA's Quad O testing for combustion devices earlier this year positions Questor as a reliable choice for eliminating fugitive emissions. The marketing strategy is focused on highlighting the value of Questor's unique ability to meet the regulations while reducing operating costs.

The company has invested in product development in two main areas to provide customers with an integrated site solution to meet their needs to reduce operating costs. Questor acquired ClearPower Systems Inc. in early 2014, and has invested funds to further develop the technology that transforms waste heat from any source into power. Testing of the revised prototype unit was completed this quarter with results that exceeded expectations. The unit generated in excess of 65 kilowatts of power making it a very competitive solution. The company is currently preparing to move this unit to its Grande Prairie facility in preparation for further testing integrated with an incinerator. Later this year, with the valued support of SDTC funding from the Canadian federal government, the company will demonstrate this technology in the field. Questor is now marketing this technology and, based on the early interest, the first sale is anticipated prior to year-end. The ClearPower options not only serve oil and gas clients, but allow Questor to diversify product offerings to industries outside of oil and gas.

The company has also designed a means to compliantly vaporize produced water at site, using heat from the incineration process, which will significantly reduce the operating expense for water disposal. The company is in the process of submitting a patent application. A pilot demonstration is planned for early in the fourth quarter with full commercialization to follow. The solution will be aggressively marketed to those regions where water handling costs are prohibitive, water disposal is difficult or unavailable, and to areas where there is a heighted concern with seismic activity at water disposal wells. This technology is applicable to many wells in Western Canada and the U.S. that are currently uneconomic because of low oil prices and the cost of produced water disposal. These wells will be the focus for this technology.

"The downturn in the market has created an opportunity to attract new talent, and the company has recently added staff to its sales and marketing team who will focus on increasing incinerator sales and rentals in the U.S. and Canada," said Audrey Mascarenhas, Questor's president and chief executive officer. "We are actively recruiting sales representatives in the U.S. in our key markets especially in areas where newer regulations are being enforced. We believe the market to be substantial for all our technologies and anticipate revenue generation from the new technologies in late 2015." In addition to growing its own sales team, Questor is also looking at partnerships with other companies that have a sales presence in the areas that clients are active in to add to this sales initiative.

Despite the reduction in activity in the industry, as a whole, Questor continues to see opportunities to provide significant value. As commodity prices remain lower for an extended period, it is becoming even more critical to lower operating costs, and Questor provides cost-effective solutions for companies to cleanly combustion flow-back gases, ultimately lowering the costs to comply with regulatory requirements. Questor's solutions have helped customers reduce their costs at gas dehydration facilities and by consolidating waste gas combustion into one stack at facilities that formerly required more complicated, unreliable equipment. Adding new commercial technologies, such as generating power from waste heat and vaporizing wastewater, are also expense-lowering solutions, which will allow industry to profit compliantly in low-commodity-price periods.

Questor will continue to market these non-traditional solutions that the industry is gradually realizing are a unique combination of cost-savings, reliability, social acceptance and regulatory compliance. The key is ensuring that this marketing message is delivered to the appropriate personnel in the industry. Having experienced a curtailment in activity in sales revenue over the first half of 2015, Questor has now focused its rental strategy and presence in the U.S. in those select regions where demand and regulatory requirements are greatest. Despite the slowdown in activity, Questor is excited with the opportunities to move forward with its unique cost-saving solutions and new technologies that will add further value to industry's bottom line.

Further to this release, Questor announces today that Richard Pinder resigned from the board of directors. Questor would like to thank Mr. Pinder for his time and mentorship and wish him well in his future endeavours. The board has initiated the search for a replacement.

Questor's unaudited condensed consolidated financial statements and notes thereto and management's discussion and analysis for the six months ended June 30, 2015, will be available shortly on the company's website and through SEDAR.

                         
           CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                         For the three months ended     For the six months ended
                                            June 30,                     June 30,
                                   2015        2014             2015        2014

Revenue                      $1,733,562  $4,502,651       $4,102,648  $7,718,088
Cost of sales                (1,084,809) (1,957,499)      (2,254,356) (3,730,395)
Gross profit                    648,753   2,545,152        1,848,292   3,987,693
Administration
expenses                       (655,959)   (605,724)      (1,464,235) (1,092,880)
Net foreign
exchange gains
(losses)                        172,522     (34,047)         473,274     109,107
Depreciation of
property and
equipment                       (11,318)    (13,973)         (22,775)    (25,937)
Amortization of
intangible
assets                             (905)     (1,332)          (1,809)     (1,637)
Other income                      9,801      11,179           40,567      13,878
Profit before tax               162,894   1,901,255          873,314   2,990,224
Income tax expense              (77,198)   (506,932)        (295,636)   (794,151)
Profit for the
period                           85,696   1,394,323          577,678   2,196,073
Exchange
differences on
translating
foreign
operations                       57,427       8,235           79,178       6,585
Total
comprehensive
income                          143,123   1,402,558          656,856   2,202,658
Earnings per share
Basic                             0.003       0.055            0.022       0.087
Diluted                           0.003       0.053            0.022       0.083

We seek Safe Harbor.

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