NISKU, AB, May 11, 2017 /CNW/ - Hyduke Energy Services Inc.
("Hyduke" or the "Company") (HYD – TSX) announced operating results
for the three months ended March 31,
2017 and 2016. Hyduke's Financial Statements and Management
Discussion & Analysis have been filed with regulators and are
available at www.sedar.com.
SELECTED FINANCIAL INFORMATION
|
|
|
|
|
Three months
ended
March 31,
2017
|
Year-over-year
change (%)
|
Three months
ended
March 31,
2016
(restated)(1)
|
Revenue
|
6,033
|
107.0%
|
2,914
|
Cost of goods
sold
|
5,328
|
74.6%
|
3,051
|
Gross
margin(2)
|
705
|
|
(137)
|
Gross margin
%
|
11.7%
|
|
(4.7%)
|
Selling, general
& administrative
|
1,526
|
0.8%
|
1,538
|
|
|
|
|
EBITDAS – continuing
operations
|
(582)
|
57.8%
|
(1,380)
|
Net profit
(loss)
from continuing
operations
|
(937)
|
45.3%
|
(1,712)
|
Net loss
|
(935)
|
54.5%
|
(2,055)
|
Per share – basic
& diluted
|
(0.03)
|
|
(0.27)
|
|
|
|
|
|
|
|
|
|
March 31,
2017
|
|
December 31,
2016
|
Total
assets
|
37,233
|
104.4%
|
18,214
|
Total
liabilities
|
18,093
|
77.1%
|
10,218
|
(1)
|
Prior year numbers
have been restated due to reclassification of entities to
discontinued operations
|
Revenue
|
|
|
|
|
|
December 31,
2016
|
December 31,
2015
|
Change (%)
|
Manufacturing &
Fabrication
|
5,694
|
11,144
|
(48.9%)
|
Supply &
Service
|
7,076
|
10,941
|
(35.3%)
|
Elimination
Entries
|
(102)
|
(413)
|
(75.3%)
|
Total
Revenue
|
12,667
|
21,671
|
(41.5%)
|
|
|
|
|
For the three months ended March 31,
2017, the Manufacturing & Fabrication segment generated
$2,840 of revenue, a 109.1% increase
over the same quarter in the prior year. Through the
diversification of its products and services to include the
manufacture and repair of storage tanks and custom steel
fabrication, the Company was able to grow revenues during the
quarter with the increase in oil and gas activity in the
conventional and oil sands sectors.
Consistent with the increase in operating drilling and service
rigs, Supply & Service revenue increased 107.6% in the first
quarter of 2017 compared to the first quarter of 2016. The Canadian
Association of Oilwell Drilling Contractors reports active drilling
rig counts in the Western Canadian sedimentary basin increased
64.7% and service rig utilization has increased 40.5% in the first
quarter of 2017 compared to the same period in
2016.
Gross margin (see "Non-GAAP Measures") was $705 or 11.7% compared to negative gross margin
of $137 (4.7% of revenue) in the
first quarter of 2016. The increased gross margin reflects a
combination of increased revenues, operating efficiencies, and
price improvements offset by some increases in SG&A costs.
SG&A expenses for the three months ended March 31, 2017 were $1,526, a decrease of 0.8% compared to
$1,538 for the three months ended
March 31, 2016.
Negative EBITDAS for continuing operations was $582 for the first quarter of 2017, an
improvement from a negative EBITDAS of $1,380 in the first quarter of 2016.
Depreciation and amortization of $153 decreased from $173 in the first quarter of 2016. The decrease
in the expense is due to the continued decline in net book value of
the underlying assets.
Stock based compensation was $42
compared to $16 in 2016. During the
first quarter of 2017 the Company granted 2,000,000 stock options
and 325,000 deferred share units.
The Company recorded $165 in
interest charges during the first quarter of 2017, an increase of
$47 from 2016. The increase is due to
an increase in the rate of interest on its term loan facility.
Continuing operations net loss of $937 improved from a loss of $1,712 in 2016 as a result of increased revenues
and gross margins partially offset by an increase in SG&A
costs.
As at March 31, 2017 the Company
had working capital of $5,750 which
includes its term debt of $6,866
which becomes due in August 2017 and
thus is classified as current. The Company is unable to draw on its
revolving debt facility as it was in breach of financial covenants.
The Company recognizes that to stabilize its capital structure in
the long term it also needs to assess the replacement of its
long-term debt facility and amendment of its revolving facility to
remove any covenant breaches and is in discussions with lenders to
do so. There is however no certainty that these discussions will be
successful.
MANAGEMENT REVIEW AND OUTLOOK
Over the last three years ago Hyduke began to execute a
turnaround and restructuring strategy. One year into that
strategy, the oilfield services industry entered one of the most
severe down cycles it has experienced in recent times. This
downturn slowed the pace but not progress of the turnaround
plan. Non-core and non-relevant businesses have been divested or
shut down. The Company has bolstered its safety, quality, sales and
engineering capabilities. Product lines like Swift Environmental
fluid management equipment have been added and our customer base
has been expanded within the upstream oil and gas industry and
into additional industries. The Company also recently entered into
a construction contract with a major mid-stream customer to provide
steel fabrication and construction services for the assembly and
completion of a 95,000 cubic meter propane storage tank.
More recently, in anticipation of a reversal of the oilfield
services down cycle, Hyduke has focused on the growth elements
of our turnaround plan particularly product and market
diversification. This has included the acquisitions of Western
Manufacturing Ltd. and Avalanche Metal Industries Ltd. to expand
our manufacturing capacity and geographic footprint. We expanded
manufacturing capabilities in Nisku to build pressure vessels by
obtaining ABSA, ASME and U stamp certifications. The recent
accreditation by the American Petroleum Institute allows Hyduke to
use the APU Standard 650 Monogram on field constructed storage
tanks.
Late in 2016 and into the first quarter of 2017 the exploration
and production industry began to show signs of increased activity
as commodity prices increased and stabilized. Drilling rig activity
in Q1 2017 averaged 252 up from 172 in Q4 2016 and 153 in Q1 2016.
Hyduke has seen the impact of these improvements with a significant
increase in our first quarter revenue compared to both Q1 2016 and
Q4 2016. Overall indications are that 2017 rig activity should
remain above 2016 levels. The revenues of BW Rig has been directly
impacted by this increased industry activity. Revenues of our
Manufacturing & Fabrication division also tend to be related to
rig activity but the correlation is less direct and typically is
delayed one to two quarters as rig activity drives the midstream
activities which increases demand for the Company's
manufactured products such as tanks and pressure vessels. The
Company believes that the diversification of our product line and
expansion of our geographic footprint and manufacturing capacity
will allow us to offer unique solutions to the customer base and
grow revenues and leverage our fixed cost base in this more stable
business cycle.
As discussed earlier in this MD&A, the Company recognizes
that to stabilize its capital structure it will need to replace its
long-term debt which is maturing August 15,
2017 and renegotiate certain of the covenants in its
operating credit facility. The Company is exploring a number of
options in this regard and understands that there is no certainty
of success and that achieving improved financial results will be
critical to executing on these options. The results for the first
quarter of 2017, while not yet demonstrating positive EBITDAS, show
a positive trend in both revenues and margins.
Additional information relating to Hyduke is available under the
Company's profile on SEDAR website at www.sedar.com and
www.hyduke.com
Forward looking information
This news release contains forward-looking information
relating to the expectations of management that the integration
process will lead to improvements in operations and efficiency for
both Western and Hyduke. Such forward-looking information is
subject to important risks, uncertainties and assumptions. The
results or events predicated in this forward-looking information
may differ materially from actual results or events. As a result,
you are cautioned not to place undue reliance on this
forward-looking information.
Forward-looking information is based on certain factors and
assumptions regarding, among other things, general assumptions
respecting the business and operations of Hyduke and economic
factors. While the Company considers these assumptions to be
reasonable based on information currently available to it, they may
prove to be incorrect.
Forward looking-information is subject to certain factors,
including risks and uncertainties that could cause actual results
to differ materially from what is currently expected. These factors
include but are not limited to risks associated with the failure of
the Company to obtain the benefits of integration; volatility in
market prices for oil and natural gas; and the general economic
conditions in Canada.
You should not place undue importance on forward-looking
information and should not rely upon this information as of any
other date. While the Company may elect to, the Company is under no
obligation and does not undertake to update this information at any
particular time, except as required by law.
About Hyduke
Trading on the TSX under the symbol "HYD," Hyduke Energy
Services Inc. is a supplier of equipment and services to the oil
and gas drilling and well servicing industry.
The TSX has not reviewed and does not accept responsibility for
the adequacy or accuracy of this News Release.
SOURCE Hyduke Energy Services Inc.