CALGARY, ALBERTA--(Marketwired - Nov. 5, 2014) - Essential Energy Services Ltd. (TSX:ESN) ("Essential" or the "Company") announces third quarter results.
SELECTED INFORMATION
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Three months ended, Nine months ended,
(in thousands of dollars September 30, September 30,
except per share, percentages
and fleet data) 2014 2013 2014 2013
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Revenue $ 96,136 $ 84,510 $ 252,618 $ 243,445
Gross margin 27,515 21,414 60,064 57,935
Gross margin % 29% 25% 24% 24%
EBITDAS (1) 22,657 17,132 45,604 45,386
EBITDAS % (1) 24% 20% 18% 19%
Net income attributable to
shareholders of Essential 10,777 3,843 15,501 10,969
Per share - basic 0.09 0.03 0.12 0.09
Per share - diluted 0.08 0.03 0.12 0.09
Utilization
Masted coil tubing rigs 105% 112% 85% 93%
Service rigs 48% 50% 49% 49%
Equipment fleet
Masted coil tubing rigs 17 15 17 15
Service rigs 54 54 54 54
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(1) Refer to Non-IFRS Measures section for further informationTHIRD QUARTER 2014 OVERVIEW
Revenue for the third quarter of 2014 was $96.1 million, 14% higher than the third quarter of 2013.
-- Coil Well Service - Coil well service revenue increased $6.2 million or
19% from the same quarter in 2013 due to incremental revenue from the
two new Generation III masted coil tubing rigs and higher utilization of
the fluid and nitrogen pumper fleet.
-- Service Rigs - Service rig utilization was 48% for the quarter compared
to the Canadian Association of Oil Drilling Contractors ("CAODC")
service rig industry utilization of 47%. On October 8, 2014 Essential
sold its rod rig assets for $6.1 million. These assets were part of the
service rig business and Essential used the proceeds to reduce bank
debt.
-- Downhole Tools & Rentals - Essential's downhole tools & rentals revenue
increased $7.1 million or 25% from the same quarter in 2013 due to
increased rental revenue, demand for Tryton Multi-Stage Fracturing
System ("MSFS(R)") products, and revenue from Essential's U.S. downhole
tool operations.EBITDAS for the third quarter of 2014 was $22.7 million, an improvement of 32% from the same quarter in 2013. The increase was driven by higher revenue for coil well service and downhole tools & rentals.
At September 30, 2014, Essential had $65.0 million of debt outstanding, an increase of $26.6 million from June 30, 2014. The increase is due to funding working capital, primarily accounts receivable, as activity increased in the third quarter.
YEAR-TO-DATE 2014 OVERVIEW
Revenue for the nine months ended September 30, 2014 was $252.6 million or 4% higher than the same period in 2013. EBITDAS for nine months ended September 30, 2014 was $45.6 million, consistent with the prior year. Well servicing revenue increased over prior year as Essential generated incremental revenue from the deployment of two new Generation III masted coil tubing rigs in the third quarter 2013 and first quarter 2014, respectively, and increased fluid and nitrogen pumper utilization. This was offset by higher costs in well servicing, primarily in the first quarter. Downhole tools & rentals revenue and margin exceeded prior year results due to growth in conventional downhole tools, greater contributions from Essential's rental operation and higher revenue from Essential's U.S. downhole tool operation.
INDUSTRY OVERVIEW
Well service activity in the Western Canadian Sedimentary Basin ("WCSB") continues to be driven by horizontal drilling and the completion and stimulation of oil and liquids-rich natural gas wells. Horizontal wells typically require more investment capital and increased rig time per well due to their depth and complexity compared to vertical wells.
Compared to 2013, the third quarter of 2014 benefited from improved industry demand for oilfield services as exploration and production ("E&P") companies had better access to capital markets. Canadian E&P companies also benefited from a decrease in the value of the Canadian dollar, relative to the U.S. dollar, which helped to offset the decrease in the price of U.S. dollar denominated West Texas Intermediate crude oil.
With continued customer demand to drill long-reach horizontal wells, drilling rig utilization was 47% for the third quarter 2014 compared to 41% for the same period in 2013. Well completion counts and the total number of wells drilled remained consistent for the third quarter of 2014 compared to the same quarter last year. The higher drilling rig utilization and consistent well count activity reflects a trend in recent years where overall meterage continues to increase as E&P companies drill deeper, longer-reach horizontal wells. These are indicators of overall oilfield activity in the WCSB.
SEGMENT RESULTS - WELL SERVICING
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Three months ended Nine months ended
September 30, September 30,
(in thousands of dollars, except
percentages, fleet, and hours) 2014 2013 2014 2013
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Revenue
Coil Well Service (i) $ 39,233 $ 33,037 $ 98,130 $ 92,091
Service Rigs 22,105 23,870 71,041 72,158
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Total revenue 61,338 56,907 169,171 164,249
Operating expenses 45,309 42,383 133,959 126,723
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Gross margin $ 16,029 $ 14,524 $ 35,212 $ 37,526
Gross margin % 26% 26% 21% 23%
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Utilization (ii)
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Masted coil tubing rigs
Utilization 105% 112% 85% 93%
Operating hours 15,524 14,738 36,930 35,881
Service rigs
Utilization 48% 50% 49% 49%
Operating hours 23,997 25,084 73,520 73,682
Equipment fleet (iii)
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Masted coil tubing rigs 17 15 17 15
Service rigs 54 54 54 54
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(i) Includes revenue from coil tubing rigs, nitrogen and fluid pumpers and
other ancillary equipment.
(ii) Utilization is calculated using a 10 hour day.
(iii) Fleet data represents the number of units at the end of the period.Coil well service third quarter revenue increased $6.2 million or 19% from the same quarter in 2013 due to incremental revenue generated from Essential's two new Generation III masted coil tubing rigs. Demand for the remainder of the masted coil tubing fleet continued to be strong. Also contributing to the revenue increase was higher utilization for fluid and nitrogen pumpers, driven by better integration with the masted coil tubing fleet.
Service rig utilization for the third quarter was 48%, consistent with the CAODC utilization of 47%, but slightly lower than 50% for the same quarter in 2013. Essential had two service rigs working on steam-assisted gravity drainage wells. Due to the nature of this work, utilization for these rigs was higher than the rigs doing conventional work.
Gross margin increased over the prior quarter due to higher revenue in coil well service.
On a year-to-date basis, well servicing revenue increased over prior year as Essential generated incremental revenue from the deployment of two new Generation III masted coil tubing rigs in the third quarter of 2013 and first quarter of 2014, respectively, and increased pumper utilization. Gross margin for the nine months ended September 30, 2014 was negatively impacted by higher costs, primarily in the first quarter. Revenue per hour for coil well service and service rigs was consistent with the prior year.
SEGMENT RESULTS - DOWNHOLE TOOLS
& RENTALS
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Three months ended Nine months ended
September 30, September 30,
(in thousands of dollars, except
percentages) 2014 2013 2014 2013
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Revenue $ 35,261 $ 28,185 $ 85,068 $ 79,779
Operating expenses 22,212 19,524 56,350 54,539
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Gross margin $ 13,049 $ 8,661 $ 28,718 $ 25,240
Gross margin % 37% 31% 34% 32%
Downhole Tools & Rentals revenue
- % of revenue
Tryton MSFS(R) 53% 55% 42% 54%
Conventional Tools & Rentals 47% 45% 58% 46%
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----------------------------------------------------------------------------Downhole tools & rentals third quarter revenue increased $7.1 million or 25% from the same period in 2013. Tryton MSFS(R) revenue increased due to improved demand for both the ball & seat products and new MSFS(R) tools that were introduced earlier in the year. Customer preference for a particular completion technology is determined by well-bore conditions, economics and customer confidence in a technology. Conventional tools revenue increased due to higher contribution from the U.S. operations. Rental revenue increased largely from specialty drill pipe rentals targeted toward long-reach horizontal wells and pressure control equipment.
Gross margin in the third quarter increased to 37% of revenue due to revenue growth in the Canadian operations, including greater contributions from the higher margin rentals business and improved margins related to Essential's U.S. operations which operated at a loss in 2013.
On a year-to-date basis, downhole tools & rentals revenue and gross margin exceeded prior year due to growth in conventional downhole tools, increased activity from Essential's higher margin rental business and improved performance from the U.S. operations. Compared to prior year, revenue and gross margin in the second and third quarter have more than offset the shortfall experienced in the first quarter of 2014.
On April 30, 2014, Essential acquired all of the issued and outstanding shares of Sam's Packer & Supply LLC, a private downhole tool company that provides tool sales, rentals and services to a diversified customer base in Oklahoma, Kansas and Texas. The purchase price was U.S. $5.6 million.
GENERAL AND ADMINISTRATIVE
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Three months ended Nine months ended
September 30, September 30,
(in thousands of dollars, except
percentages) 2014 2013 2014 2013
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General and administrative
expenses $ 4,858 $ 4,282 $ 14,460 $ 12,549
As a % of revenue 5% 5% 6% 5%
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----------------------------------------------------------------------------General and administrative expenses are comprised of wages, professional fees, office space and other administrative costs incurred at corporate and operational levels. General and administrative expense for the three and nine months ended September 30, 2014 increased compared to the same period in 2013 due to employee costs, facility lease costs and legal fees.
FINANCIAL RESOURCES AND LIQUIDITY
FUNDS FLOW FROM OPERATIONS(1)
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Three months ended Nine months ended
September 30, September 30,
(in thousands of dollars, except
per share amounts) 2014 2013 2014 2013
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Net cash provided by (used in)
operating activities $ (16,515) $ (10,112) $ 20,240 $ 35,102
Add:
Changes in non-cash working
capital 36,477 26,276 20,644 6,151
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Funds flow provided by
operations(1) $ 19,962 $ 16,164 $ 40,884 $ 41,253
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Per share - basic $ 0.16 $ 0.13 $ 0.33 $ 0.33
Per share - diluted $ 0.16 $ 0.13 $ 0.32 $ 0.33
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WORKING CAPITAL
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As at As at
September 30, December 31,
(in thousands of dollars, except ratios) 2014 2013
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Current assets $ 128,941 $ 107,945
Current liabilities, excluding current
portion of long-term debt (43,681) (45,419)
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Working capital (1) $ 85,260 $ 62,526
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Working capital ratio (1) 3.0:1 2.4:1
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EQUIPMENT EXPENDITURES AND FLEET
ADDITIONS
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Three months ended Nine months ended
September 30, September 30,
(in thousands of dollars) 2014 2013 2014 2013
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Well Servicing $ 8,629 $ 11,180 $ 21,786 $ 27,688
Downhole Tools & Rentals 1,695 584 7,011 2,325
Corporate 313 490 1,012 945
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Total equipment expenditures 10,637 12,254 29,809 30,958
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Less proceeds on disposal of
property and equipment (1,150) (874) (3,052) (1,601)
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Net equipment expenditures(1) $ 9,487 $ 11,380 $ 26,757 $ 29,357
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Essential classifies its equipment expenditures as growth capital(1) and
maintenance capital(1):
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Three months ended Nine months ended
September 30, September 30,
(in thousands of dollars) 2014 2013 2014 2013
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Growth capital(1) $ 6,538 $ 8,047 $ 20,752 $ 21,399
Maintenance capital(1) 4,099 4,207 9,057 9,559
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Total equipment expenditures $ 10,637 $ 12,254 $ 29,809 $ 30,958
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----------------------------------------------------------------------------Essential's capital forecast for 2014 has been reduced from $53 million to $47 million. The $47 million is expected to be comprised of $33 million of growth capital and $14 million of maintenance capital. The growth capital consists primarily of costs related to the Generation III and Generation IV masted coil tubing rig build program, the purchase of rental equipment and a new quintiplex fluid pumper that is expected in service by the end of 2014.
The $6 million decrease from the most recent capital forecast primarily consists of $2 million of growth capital that will be carried into 2015, recognizing the delay in the masted coil tubing delivery and a $3 million reduction in maintenance capital.
Essential's long-term capital program is intended to increase the depth and coil diameter capability of its masted coil tubing fleet. Customers are requesting coil tubing rigs that can operate beyond 6,000 meters with large diameter coil. Essential expects to spend approximately $63 million through 2016 to build a total of four Generation III and eight Generation IV masted coil tubing rigs. At September 30, 2014, Essential had spent $35 million on this capital program. Essential's first Generation IV and third Generation III masted coil tubing rigs went into service in October 2014 and the Company expects to commence operations with its second Generation IV masted coil tubing rig prior to the end of the year. While the Generation IV rigs are designed as masted rigs, due to a design issue with the mast, Essential removed the mast from the first rig and is operating it as a conventional rig with a crane for the winter drilling season. Essential has received a favorable third party engineering report and confirms that subsequent Generation IV rigs, including the second rig expected prior to the end of 2014, will be completed with the mast intact. The first rig will be retrofitted for the mast in the coming months.
The following table shows the expected in-service dates of the major equipment as at November 5, 2014:
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Total Rigs Total Rigs Expected In-Service
Capital Program In-Service Dates
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Masted coil tubing rigs:
Generation III 4 3 Q3'15
Generation IV 8 1 Q4'14, Q1'15,
Q3'15(2), 2016(3)
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----------------------------------------------------------------------------OUTLOOK
Recent changes in oil and gas supply and demand fundamentals and declining commodity prices have created longer term uncertainty in the Canadian oil and gas industry. To date, drilling rig utilization in the fourth quarter of 2014 is tracking ahead of the same period in 2013. As E&P companies set their 2015 budgets, there should be greater clarity for anticipated oilfield service activity. Essential will monitor industry conditions and customer activity and will react accordingly.
While acknowledging the macro uncertainty, Essential continues to focus on long-reach horizontal wells within its masted coil tubing, pumping and downhole tools and rentals operations. Demand for these services is expected to carry on to the extent customers execute their drilling, fracturing and completion programs.
Essential is progressing on its capital program focused on building Generation III and Generation IV masted coil tubing rigs that are capable of servicing these deep, longer-reach horizontal wells. Essential put its third Generation III masted coil tubing rig into service in October 2014. The first Generation IV masted coil tubing rig went to work in October 2014 and Essential expects to take delivery of its second Generation IV masted coil tubing rig prior to the end of the year.
Essential has a strong balance sheet with $59.6 million of debt at November 5, 2014 and a debt to EBITDAS ratio of 0.9.
QUARTERLY DIVIDEND
The cash dividend for the period October 1, 2014 to December 31, 2014 has been set at $0.03 per share. The dividend will be paid on January 15, 2015 to shareholders of record on December 31, 2014. The ex-dividend date is December 29, 2014. This dividend is an eligible dividend for Canadian income tax purposes.
(1)Non-IFRS Measures
Throughout this news release, certain terms that are not specifically defined in IFRS are used to analyze Essential's operations. In addition to the primary measures of net earnings and net earnings per share in accordance with IFRS, Essential believes that certain measures not recognized under IFRS assist both Essential and the reader in assessing performance and understanding Essential's results. Each of these measures provides the reader with additional insight into Essential's ability to fund principal debt repayments, capital programs and pay dividends. As a result, the method of calculation may not be comparable with other companies. These measures should not be considered alternatives to net earnings and net earnings per share as calculated in accordance with IFRS.
EBITDAS (Earnings before finance costs, income taxes, depreciation, amortization, transaction costs, non-controlling interest earnings, losses or gains on disposal of equipment, foreign exchange gains or losses, results of discontinued operations and share-based compensation, which includes both equity-settled and cash-settled transactions) - These adjustments are relevant as they provide another measure which is considered an indicator of Essential's ability to generate funds flow in order to fund required working capital, service debt, investing in capital programs and pay dividends.
EBITDAS % - This measure is considered an indicator of Essential's ability to generate funds flow as calculated by EBITDAS divided by revenue.
Funds flow or funds flow provided by (used in) operations - This measure is an indicator of Essential's ability to generate funds flow in order to fund working capital, principal debt repayments, capital programs and pay dividends. Funds flow or funds flow from operations is defined as cash flow from operations before changes in non-cash operating working capital. This measure is useful in assessing Essential's operational cash flow as it provides cash generated in the period excluding the timing of non-cash operating working capital. This reflects the ability of the operations of Essential to meet the above noted funding requirements.
Working capital - Working capital is calculated as current assets less current liabilities, excluding the current portion of long-term debt.
Growth capital - Growth capital is capital spending which is intended to result in incremental increases in revenue. Growth capital is considered to be a key measure as it represents the total expenditures on equipment expected to add incremental revenue and funds flow to Essential.
Maintenance capital - Equipment additions that are incurred in order to refurbish or replace previously acquired equipment. Such additions do not provide incremental increases in revenue. Maintenance capital is a key component in understanding the sustainability of Essential's business as cash resources retained within Essential must be sufficient to meet maintenance capital needs to replenish the assets for future cash generation.
Net equipment expenditures - This measure is equipment expenditures less proceeds on the disposal of equipment. Essential uses net equipment expenditures to assess net cash flows related to the financing of Essential's oilfield services capital program for equipment.
SUMMARY OF QUARTERLY DATA
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(in thousands of dollars, except per
share Sept 30, Jun 30, Mar 31, Dec 31,
amounts, percentages and fleet data) 2014 2014 2014 2013
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Well Servicing:
Coil Well Service 39,233 17,398 41,499 36,150
Service Rigs 22,105 16,437 32,499 25,593
Other (i) - - - -
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Total well servicing 61,338 33,835 73,998 61,743
Downhole Tools & Rentals 35,261 19,521 30,286 31,560
Inter-segment eliminations (463) (604) (554) (480)
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Total revenue 96,136 52,752 103,730 92,823
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Gross margin 27,515 5,222 27,327 25,332
Gross margin % 29% 10% 26% 27%
EBITDAS(1) 22,657 440 22,507 20,705
EBITDAS %(1) 24% 1% 22% 22%
Net income (loss) attributable to
shareholders of Essential 10,777 (5,425) 10,149 11,126
Per share - basic $0.09 $(0.04) $0.08 $0.09
Per share - diluted $0.08 $(0.04) $0.08 $0.09
Total assets 454,745 408,964 439,745 423,963
Long-term debt 65,043 38,433 50,821 39,027
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Utilization (ii)
Masted coil tubing rigs 105% 42% 109% 107%
Pumpers (iii) 66% 34% 69% 55%
Service rigs 48% 34% 66% 53%
Operating Hours
Masted coil tubing rigs 15,524 6,094 15,312 14,699
Pumpers (iii) 19,397 9,861 19,995 16,612
Conventional coil tubing rigs 4,426 2,942 6,959 6,612
Service rigs 23,997 16,907 32,616 26,557
Downhole Tools & Rentals - % of revenue
Tryton MSFS(R) 53% 25% 39% 55%
Conventional Tools & Rentals 47% 75% 61% 45%
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Equipment fleet (iv)
Masted coil tubing rigs 17 17 16 15
Fluid pumpers 18 18 18 18
Nitrogen pumpers 14 14 14 14
Conventional coil tubing rigs 29 30 30 30
Service rigs 54 55 55 55
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SUMMARY OF QUARTERLY DATA
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(in thousands of dollars, except per
share Sept 30, Jun 30, Mar 31, Dec 31,
amounts, percentages and fleet data) 2013 2013 2013 2012
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Well Servicing:
Coil Well Service 33,037 9,433 49,621 41,228
Service Rigs 23,870 14,732 33,556 26,012
Other (i) - - - 786
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Total well servicing 56,907 24,165 83,177 68,026
Downhole Tools & Rentals 28,185 14,252 37,342 27,989
Inter-segment eliminations (582) - - -
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Total revenue 84,510 38,417 120,519 96,015
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Gross margin 21,414 (1,310) 37,832 27,039
Gross margin % 25% (3)% 31% 28%
EBITDAS(1) 17,132 (5,171) 33,426 22,368
EBITDAS %(1) 20% (13)% 28% 23%
Net income (loss) attributable to
shareholders of Essential 3,843 (11,501) 18,627 678
Per share - basic $0.03 $(0.09) $0.15 $0.01
Per share - diluted $0.03 $(0.09) $0.15 $0.01
Total assets 409,613 380,728 436,301 406,853
Long-term debt 40,484 14,592 35,603 35,563
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Utilization (ii)
Masted coil tubing rigs 112% 19% 148% 113%
Pumpers (iii) 47% 14% 73% 57%
Service rigs 50% 28% 69% 54%
Operating Hours
Masted coil tubing rigs 14,738 2,477 18,666 16,557
Pumpers (iii) 14,418 4,241 20,481 15,328
Conventional coil tubing rigs 5,002 2,832 8,609 8,957
Service rigs 25,084 14,234 34,364 27,310
Downhole Tools & Rentals - % of revenue
Tryton MSFS(R) 55% 40% 60% 51%
Conventional Tools & Rentals 45% 60% 40% 49%
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Equipment fleet (iv)
Masted coil tubing rigs 15 14 14 16
Fluid pumpers 18 18 18 18
Nitrogen pumpers 15 15 13 13
Conventional coil tubing rigs 30 30 30 30
Service rigs 54 56 56 55
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(i) Other revenue included revenue from Essential's drilling operation
until its disposal in November 2012.
(ii) Utilization is calculated using a 10 hour day.
(iii) Pumpers include both fluid and nitrogen pumpers.
(iv) Fleet data represents the number of units at the end of the period.The Management's Discussion and Analysis and Financial Statements are available on Essential's website at
www.essentialenergy.ca and on SEDAR at
www.sedar.com.
ESSENTIAL ENERGY SERVICES LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
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As at As at
September 30 December 31
(in thousands of dollars) 2014 2013
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Assets
Current
Trade and other accounts receivable $ 86,594 $ 76,640
Inventories 38,975 27,979
Prepayments 3,372 3,326
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128,941 107,945
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Non-current
Property and equipment 232,558 230,292
Intangible assets 29,056 30,712
Goodwill 58,090 55,014
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319,704 316,018
Assets held for sale 6,100 -
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Total assets $ 454,745 $ 423,963
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Liabilities
Current
Bank indebtedness $ 1,655 $ 2,112
Trade and other accounts payable 38,247 36,161
Dividends payable 3,779 3,765
Income taxes payable - 3,381
Current portion of long-term debt - 7,603
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43,681 53,022
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Non-current
Long-term debt 65,043 31,424
Deferred taxes 27,513 26,360
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92,556 57,784
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Total liabilities 136,237 110,806
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Equity
Share capital 263,278 262,177
Retained earnings 50,802 46,622
Other reserves 4,428 4,358
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Total equity 318,508 313,157
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Total liabilities and equity $ 454,745 $ 423,963
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ESSENTIAL ENERGY SERVICES LTD.
CONSOLIDATED INTERIM STATEMENT OF NET INCOME AND COMPREHENSIVE INCOME
(Unaudited)
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For the three months For the nine months
ended ended
September 30 September 30
(in thousands of dollars, except
per share amounts) 2014 2013 2014 2013
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Revenue $ 96,136 $ 84,510 $ 252,618 $ 243,445
Operating expense 68,621 63,096 192,554 185,510
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Gross margin 27,515 21,414 60,064 57,935
General and administrative
expenses 4,858 4,282 14,460 12,549
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22,657 17,132 45,604 45,386
Depreciation and amortization 6,827 6,515 20,188 19,565
Share-based compensation 484 585 1,813 1,197
Other expense 145 3,493 998 3,546
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Operating profit from continuing
operations 15,201 6,539 22,605 21,078
Finance costs 453 375 1,367 1,153
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Income before income tax from
continuing operations 14,748 6,164 21,238 19,925
Current income tax expense 3,268 1,396 4,584 4,852
Deferred income tax expense 703 476 1,153 534
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Total income tax expense 3,971 1,872 5,737 5,386
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Net income from continuing
operations $ 10,777 $ 4,292 $ 15,501 $ 14,539
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Loss from discontinued
operations, net of tax - (473) - (3,758)
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Net income $ 10,777 $ 3,819 $ 15,501 $ 10,781
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Unrealized foreign exchange gain
from continuing operations 236 - 70 -
Unrealized foreign exchange loss
from discontinued operations - (56) - (243)
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Other comprehensive income
(loss) 236 (56) 70 (243)
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Comprehensive income $ 11,013 $ 3,763 $ 15,571 $ 10,538
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Net income (loss) attributable
to:
Shareholders of Essential $ 10,777 $ 3,843 $ 15,501 $ 10,969
Non-controlling interest - (24) - (188)
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$ 10,777 $ 3,819 $ 15,501 $ 10,781
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Comprehensive income (loss)
attributable to:
Shareholders of Essential $ 11,013 $ 3,783 $ 15,571 $ 10,730
Non-controlling interest - (20) - (192)
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$ 11,013 $ 3,763 $ 15,571 $ 10,538
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Net income per share from
continuing operations
Basic, attributable to
shareholders of Essential $ 0.09 $ 0.03 $ 0.12 $ 0.12
Diluted, attributable to
shareholders of Essential $ 0.08 $ 0.03 $ 0.12 $ 0.12
Net income per share
Basic, attributable to
shareholders of Essential $ 0.09 $ 0.03 $ 0.12 $ 0.09
Diluted, attributable to
shareholders of Essential $ 0.08 $ 0.03 $ 0.12 $ 0.09
Comprehensive income per share
Basic, attributable to
shareholders of Essential $ 0.09 $ 0.03 $ 0.12 $ 0.09
Diluted, attributable to
shareholder of Essential $ 0.09 $ 0.03 $ 0.12 $ 0.09
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ESSENTIAL ENERGY SERVICES LTD.
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
(Unaudited)
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For the nine months ended
September 30
(in thousands of dollars) 2014 2013
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Operating activities:
Net income from continuing operations $ 15,501 $ 14,539
Non-cash adjustments to reconcile net
income for the period to operating cash
flow:
Depreciation and amortization 20,188 19,565
Deferred income tax expense 1,153 534
Share-based compensation 592 919
Provision for impairment of trade
accounts receivable 400 660
Finance costs 1,367 1,153
Loss on disposal and retirement of
assets 1,683 3,883
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Operating cash flow before changes in
non-cash working capital 40,884 41,253
Change in non-cash operating working
capital:
Trade and other accounts receivable
before provision (8,292) 4,167
Inventories (10,448) (4,746)
Prepayments (47) (614)
Trade and other accounts payable 2,673 (3,438)
Current income taxes payable (4,530) (1,520)
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Net cash provided by operating
activities from continuing operations 20,240 35,102
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Investing activities:
Purchase of property, equipment and
intangibles (29,809) (30,958)
Business acquisition, net of cash
acquired (6,043) -
Non-cash investing working capital in
trade and other accounts payable (625) (512)
Proceeds on disposal of equipment 3,052 1,601
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Net cash used in investing activities
from continuing operations (33,425) (29,869)
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Financing activities:
Issuance of long-term debt 26,016 4,921
Proceeds from exercise of share options 1,011 2,897
Repurchase of shares (500) (1,226)
Dividends paid (11,307) (9,328)
Finance costs (1,367) (1,153)
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Net cash provided by (used in) financing
activities from continuing operations 13,853 (3,889)
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Foreign exchange gain on cash held in a
foreign currency (211) (12)
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Net increase in cash 457 1,332
Bank indebtedness, beginning of period (2,112) (1,835)
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Bank indebtedness, end of period $ (1,655) $ (503)
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Supplemental cash flow information
Cash taxes paid $ 9,104 $ 6,370
Cash interest and standby fees paid $ 1,229 $ 970
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----------------------------------------------------------------------------2014 THIRD QUARTER EARNINGS CONFERENCE CALL AND WEBCAST
Essential has scheduled a conference call and webcast at 10:00 am MT (12:00 pm ET) on November 6, 2014.
The conference call dial in numbers are 416-340-2217 or 866-696-5910, passcode 5866800.
An archived recording of the conference call will be available approximately one hour after completion of the call until November 23, 2014 by dialing 905-694-9451 or 800-408-3053, passcode 2944027.
A live webcast of the conference call will be accessible on Essential's website at
www.essentialenergy.ca by selecting "Investors" and "Events and Presentations". Shortly after the live webcast, an archived version will be available for approximately 30 days.
ABOUT ESSENTIAL
Essential is a growth-oriented, dividend paying corporation that provides oilfield services to producers in western Canada for producing wells and new drilling activity. Essential operates the largest coil tubing well service fleet in Canada with 46 coil tubing rigs and has a fleet of 54 service rigs. Essential also sells, rents and services downhole tools and equipment including the Tryton Multi-Stage Fracturing System (Tryton MSFS(R)). Further information can be found at
www.essentialenergy.ca.
(R) MSFS is a registered trademark of Essential Energy Services Ltd.
FORWARD-LOOKING STATEMENTS AND INFORMATION
This news release contains forward-looking statements and forward-looking information (collectively the "Forward-Looking Statements") within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "may", "will", "believe", "intends", "budget" and similar expressions are intended to identify Forward-Looking Statements. In particular, this news release contains forward-looking statements, including, among other things, expectations regarding: capital spending; in-service timing, the timing of completion and delivery of new equipment, future Generation IV masted coil tubing rigs being completed with a mast intact, and the first Generation IV masted coil tubing rig being retrofitted for a mast in the coming months; customer demands and the demand for new equipment; development of new products and technology; demand for new products and technology; growth opportunities and sources of such growth opportunities; future cash flow and earnings; access to sufficient funding; the level and type of drilling activity; completion activity; work-over activity; production activity and required oilfield services in the WCSB; the impact of general economic conditions; the business, operations and revenues of the Company; Essential's ability to meet the changing needs of the WCSB market; Essential's positioning for the future; and the future operations of the coil well service and downhole tools & rentals segments. In addition, this news release contains Forward-Looking Statements, including expectations regarding the Company's future outlook including: customer activity; greater clarity for oilfield service activity as E&P customers set their 2015 budgets; oilfield service activity and demand for Essential's services; Essential's ability to react to changing industry and customer activity; Essential's improved service capacity; the Company's segment growth; Essential's future operating, investing or financing activities; and the impact of financial resources or liquidity thereon.
Although the Company believes that the expectations and assumptions on which such Forward-Looking Statements are reasonable, undue reliance should not be placed on the Forward-Looking Statements because the Company can give no assurance that such statements and information will prove to be correct. Since Forward-Looking Statements address future events and conditions, by their very nature they involve inherent risks and uncertainties.
Actual performance and results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: known and unknown risks, including those set forth in the Company's annual information form ("AIF") (a copy of which can be found under Essential's profile on SEDAR at
www.sedar.com); the risks associated with the oilfield services sector (e.g. demand, pricing and terms for oilfield services; current and expected oil and natural gas prices; exploration and development costs and delays; reserves discovery and decline rates; pipeline and transportation capacity; weather, health, safety and environmental risks); integration of acquisitions, competition, and uncertainties resulting from potential delays or changes in plans with respect to acquisitions, development projects or capital expenditures and changes in legislation, including but not limited to tax laws, royalties, incentive programs and environmental regulations; stock market volatility and the inability to access sufficient capital from external and internal sources; the ability of the Company's subsidiaries to enforce legal rights in foreign jurisdictions; general economic, market or business conditions; global economic events; changes to Essential's financial position and cash flow; the availability of qualified personnel, management or other key inputs; currency exchange fluctuations; changes in political and security stability; risks and uncertainty related to distribution and pipeline constraints; and other unforeseen conditions which could impact the use of services supplied by the Company. Accordingly, readers should not place undue reliance on the Forward-Looking Statements. Readers are cautioned that the foregoing list of factors is not exhaustive.
Additional information on these and other factors that could affect the Company's operations and financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website at
www.sedar.com for the Company. The forward-looking statements and information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any Forward-Looking Statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
The TSX has neither approved nor disapproved the contents of this news release.