ClearStream Energy Services Inc. (“ClearStream” or the "Company")
(TSX: CSM) today announced its results for the three and twelve
months ended December 31, 2020. All amounts are in Canadian
dollars and expressed in thousands of dollars unless otherwise
noted.
“EBITDAS” and “Adjusted EBITDAS” are not
standard measures under IFRS. Please refer to the Advisory
regarding Non-Standard Measures at the end of this press release
for a description of these items and limitations of their use.
“With the arrival of the second wave of the
COVID-19 pandemic in the fourth quarter, activity levels returned
to a level similar to the second quarter when economic activity was
constrained by the public health measures as governments responded
and caused customers to remain cautious regarding their spending
plans,” said Yves Paletta, Chief Executive Officer.
“With the recent recovery in both oil and
natural gas prices that accelerated in the first two months of 2021
and the expected global roll out of vaccinations for COVID-19 this
year, we believe that activity levels will start to recover in the
second half of 2021. However, as a sector, we can expect to be in a
lower growth operating model for the conceivable future and, as
such, many of our customers have moved to an operational mindset
that focuses on production optimization, reliability and
environmental considerations through operational excellence.
ClearStream is very well-positioned to support such trends,” said
Mr. Paletta.
“As previously announced, we were deeply
saddened by the incident that occurred on December 28, 2020 at the
Suncor Fort Hills mine that resulted in the death of two valued
members of our ClearStream family. We are actively working with
Occupational Health and Safety with respect to the incident
investigation. ClearStream’s strong HSE Management System and
leadership’s commitment to the safety of our people is more than
ever our most important core value," added Mr. Paletta.
HIGHLIGHTS
- Revenues for the
year ended December 31, 2020 were $393.1 million, representing a
decrease of $71.2 million or 15.3% from 2019.
- Adjusted EBITDAS
for the year ended December 31, 2020 was $10.5 million,
representing a decrease of $15.8 million or 60% from 2019.
- Selling, general
and administrative expenses for the year ended December 31, 2020
were $24.0 million, representing a decrease of $2.2 million or 8.6%
from 2019.
- Liquidity
remained strong with total cash and available credit facilities of
$71.7 million at December 31, 2020, up from $66.2 million at
September 30, 2020.
- New project
awards and contract renewals were $46 million for the three
months ended December 31, 2020 and approximately $100 million
for 2021 year-to-date (as announced in the press release dated
February 24, 2021). Most of the work will be completed in 2021 with
the balance scheduled for 2022-2025.
- Completed a
corporate reorganization at year-end 2020 to simplify the corporate
legal structure with the closing and consolidation of various
legacy entities in order to reduce compliance costs going
forward.
- Established a
multi-disciplinary team to oversee the implementation of internal
and external digitization strategies to transform ClearStream into
a low cost, efficient and differentiated service provider.
Maintenance and Construction Services
Activity levels for maintenance and construction
services slowed in the fourth quarter after a busy third quarter
that saw the completion of 7 turnaround projects, many of which had
originally been scheduled for the first half of 2020. Revenues from
maintenance and construction services in 2020 were only down 11.1%
from 2019, which shows the resiliency of our business. We benefited
from a diverse customer base in the energy sector as those
customer’s focussed on natural gas production experienced less
volatility in their operations.
With the continuing recovery in world oil prices
combined with on-going strength in North American natural gas
prices, bidding activity for new work accelerated towards the end
of 2020 and has continued to be very active in 2021. We remain
focussed on consolidating various scopes of work with existing
customers by adding additional services to enable more efficient
execution and lower costs for our customers on each work site.
Wear Technology Overlay Services
In 2020, activity levels for wear technology
overlay services remained well below historical levels as customers
scaled back their production output and spending on consumables in
response to weak oil prices. With the recovery in world oil prices,
we are seeing customers increase their production outlook for 2021,
which has resulted in a modest increase in demand for wear
technology overlay services in the first quarter of 2021.
Environmental
We are actively pursuing opportunities with our
customers to secure funding under the federal and provincial
programs for the closure and reclamation of oil and gas wells,
pipelines and facilities in British Columbia, Alberta and
Saskatchewan. We expect the pace at which funding under these
programs is released to accelerate in 2021. In addition, we are
seeing oil and gas companies increase their own expenditures for
reclamation and remediation activities.
FOURTH QUARTER AND ANNUAL 2020 FINANCIAL
RESULTS
($ millions, except per share amounts) |
Three months ended December 31, |
Twelve months ended December 31, |
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance and Construction Services |
77.6 |
|
124.4 |
|
(37.6) |
% |
361.8 |
|
407.1 |
|
(11.1) |
% |
Wear Technology Overlay Services |
7.6 |
|
12.7 |
|
(40.2) |
% |
33.4 |
|
61.0 |
|
(45.3) |
% |
Total |
84.5 |
|
137.1 |
|
(38.3) |
% |
393.1 |
|
464.3 |
|
(15.3) |
% |
Gross Profit |
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance and Construction Services |
7.1 |
|
10.2 |
|
(30.7) |
% |
28.0 |
|
32.1 |
|
(12.6) |
% |
Wear Technology Overlay Services |
1.3 |
|
4.6 |
|
(72.4) |
% |
5.6 |
|
18.3 |
|
(69.2) |
% |
Total |
8.4 |
|
14.9 |
|
(43.7) |
% |
33.7 |
|
50.4 |
|
(33.2) |
% |
% of revenue |
9.9 % |
|
10.8 % |
|
(0.9) |
% |
8.6 % |
|
10.9 % |
|
(2.3) |
% |
Selling, general and administrative expenses |
7.9 |
|
9.9 |
|
(20.1) |
% |
24.0 |
|
26.2 |
|
(8.6) |
% |
% of revenue |
9.4 |
|
7.2 % |
|
2.1 |
% |
6.1 % |
|
5.7 % |
|
0.4 |
% |
Adjusted EBITDAS |
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance and Construction Services. |
7.0 |
|
10.4 |
|
(32.7) |
% |
27.8 |
|
31.6 |
|
(12.1) |
% |
Wear Technology Overlay Services |
1.2 |
|
4.5 |
|
(74.7) |
% |
5.5 |
|
17.7 |
|
(69.1) |
% |
Corporate |
(7.7) |
|
(9.6) |
|
(19.8) |
% |
(22.7) |
|
(23.0) |
|
(1.4) |
% |
Total |
0.5 |
|
5.4 |
|
(91.1) |
% |
10.5 |
|
26.3 |
|
(60.0) |
% |
% of revenue |
0.6 % |
|
3.9 % |
|
(3.4) |
% |
2.7 % |
|
5.7 % |
|
(3.0) |
% |
Income (loss) from continuing operations |
1.8 |
|
(10.4) |
|
(116.8) |
% |
3.5 |
|
(6.7) |
|
(152.1) |
% |
Net income (loss) per share from continuing operations (basic and
diluted) |
0.02 |
|
(0.09) |
|
(116.8) |
% |
0.03 |
|
(0.06) |
|
(152.1) |
% |
Note:
(1) “Adjusted
EBITDAS” is not a standard measure under IFRS. Please refer to the
Advisory regarding Non-Standard Measures at the end of this press
release for a description of this measure and limitations of its
use.
2020 RESULTS COMMENTARY
Revenue for the year ended December 31, 2020 was
$393,121 compared to $464,252 for the same period in 2019, a
decrease of 15.3%. The decrease in 2020, in comparison to 2019, was
driven by overall reduced customer spending and the postponement of
a portion of scheduled maintenance and turnaround activities as a
result of macro-economic uncertainty and the economic impact of the
COVID-19 pandemic.
Gross profit for the year ended December 31,
2020 was $33,686 compared to $50,396 for the same period in 2019, a
decrease of 33%. Gross profit margin for the year ended December
31, 2020 was 8.6% compared to 10.9% for the same period in 2019.
The decrease in 2020, in comparison to 2019, was due to a reduction
in both the total volume and the volume of higher margin work in
the Wear Technology Overlay Services segment where certain fixed
costs are required to operate the facilities in addition to
downward pressure on margins by customers in response to market
uncertainty. As it became clear that the COVID-19 outbreak and
other market conditions were going to have longer term impacts on
our activity levels and margins across the whole business, we took
immediate steps to adjust our cost structures. During the third
quarter, we closed ClearStream Wear's locations in Nisku and
Edmonton and consolidated all operations into the Sherwood Park
location. By eliminating these two facilities, we have
significantly improved production flexibility and reduced the fixed
costs associated with ClearStream Wear's operations.
Selling, general and administrative (“SG&A”)
expenses for the year ended December 31, 2020 were $23,986, in
comparison to $26,240 in 2019, a decrease of 8.6%. As a percentage
of revenue, SG&A expenses for the year ended December 31, 2020
were 6.1% compared to 5.7% in 2019. The increase in SG&A
expenses as a percentage of revenue was due to the decline in
revenue resulting from macro-economic uncertainty and the economic
impact of the COVID-19 pandemic. Given the market uncertainty, we
continued to right size our SG&A cost structures compared to
the prior year as shown by the decrease in total SG&A expenses
in 2020 compared to the same period 2019.
For the year ended December 31, 2020, Adjusted
EBITDAS was $10,524 compared to $26,282 in 2019. As a percentage of
revenue, Adjusted EBITDAS was 2.7% for the year ended December 31,
2020 compared to 5.7% for the same period in 2019. Adjusted EBITDAS
as a percentage of revenue decreased due to gross profit decreases
in both the Maintenance and Construction Services segment and the
Wear Technology Overlay Services segment.
Income from government subsidies represents the
Canada Emergency Wage Subsidy ("CEWS") and the Canada Emergency
Rent Subsidy ("CERS") received from the Government of Canada to
assist with the payment of employee wages and rent as a result of
the impact of the COVID-19 pandemic. During the year ended
December 31, 2020, the Company qualified for both CEWS and
CERS and recorded total grants of $33,521 in the Consolidated
Interim Statements of Income (Loss) and Comprehensive Income
(Loss).
Income from continuing operations for the year
ended December 31, 2020 was $3,469 compared to a loss of $6,652 in
2019. The income variance was driven by the government subsidies
received, the recovery of the share-based compensation and other
long-term incentive plans, and the recovery of contingent
consideration liability offset by the goodwill impairment loss and
decrease to gross profit for the 2020 period as well as the bargain
purchase gain in 2019.
FOURTH QUARTER RESULTS
COMMENTARY
Revenues for the three months ended December 31,
2020 were $84,530 compared to $137,066 for the same period in 2019,
a decrease of 38.3% on a year-over-year basis. This decrease for
the three months ended December 31, 2020 in comparison to the same
period in 2019, was driven by overall reduced customer spending as
a result of the volatility in crude oil prices due to
macro-economic uncertainty and the economic impact of the COVID-19
pandemic.
Gross profit for the three months ended December
31, 2020 was $8,372 compared to $14,868 for the same period in
2019. Gross margins were 9.9% for the three months ended December
31, 2020 compared to 10.8% in the same period in 2019. The decrease
in gross margin in 2020 was due to a reduction in both the total
volume and the volume of higher margin work in the Wear Technology
Overlay Services segment where certain fixed costs are required to
operate the facilities in addition to downward pressure on margins
by customers in response to market uncertainty. As it became clear
that the COVID-19 outbreak and other market conditions were going
to have longer term impacts on our activity levels and margins
across the whole business, we took immediate steps to adjust our
cost structure as shown by the gross margin increasing to 9.9% for
the three months ended December 31, 2020 from 8.6% for the year
ended December 31, 2020.
SG&A expenses for the three months ended
December 31, 2020 were $7,923 compared to $9,912 for the same
period in 2019. As a percentage of revenue, SG&A expenses for
the three months ended December 31, 2020 were 9.4% compared to
7.2% for the same period in 2019 due to the decline in revenue
resulting from macro-economic uncertainty and the economic impact
of the COVID-19 pandemic.
ASSET-BASED LENDING
FACILITY
On March 3, 2021, the Company received
confirmation from the lead lender under the ABL Facility that it
had agreed to extend the maturity date of the Revolving Facility to
March 23, 2022. The Company and the lead lender under the ABL
Facility are preparing an amending agreement to effect the
extension of the maturity date and certain other amendments. Due to
the Company's current cash position, it was able to reduce the
maximum borrowings available under the Revolving Facility to $15
million effective March 23, 2021.
OUTLOOK
The second wave of the COVID-19 pandemic
continues to impact both the local and global economy. The public
health measures to limit the spread of the virus, including
business restrictions, travel restrictions, border closures,
quarantines and social distancing, will remain in place for the
near-term to allow for the global distribution of vaccines for
COVID-19. As the rate of vaccinations increases, we expect that
governments will start to re-open their economies.
With the recovery in world oil prices, we expect
that our customers who are involved in the energy sector will
realize higher cash flows, begin to increase their spending and
address maintenance projects that have been deferred. We expect
that activity levels will recover in the second half of 2021 as
customers prioritize asset management and integrity services to
increase operational reliability.
With energy transition and environmental
considerations becoming increasingly important for all stakeholders
in the energy sector, our customers will focus on improving their
operational processes for greater efficiencies and reliability.
To better support our customers, ClearStream has
continued to add new service offerings that encompass the full
asset lifecycle and is now offering a suite of more than 40
services. Through the extensive regional coverage provided by our
15 operating facilities, we believe that ClearStream is
well-positioned to consolidate further multiple services required
at various operating sites while generating efficiencies and cost
reductions for its customers.
ClearStream's business model continues to prove
its resilience as we are working closely with our customers every
day in managing their operations.
Additional Information
Our consolidated financial statements for the
year ended December 31, 2020 and the related Management's
Discussion and Analysis of the operating and financial results can
be accessed on our website at www.clearstreamenergy.ca and
will be available shortly through SEDAR at www.sedar.com.
About ClearStream Energy Services
Inc.
With a legacy of excellence and experience
stretching back more than 50 years, ClearStream provides solutions
for the Energy and Industrial markets including: Oil & Gas,
Petrochemical, Mining, Power, Agriculture, Forestry, Infrastructure
and Water Treatment. With offices strategically located across
Canada and a dedicated workforce, we provide maintenance,
construction and environmental services that keep our clients
moving forward. For more information about ClearStream, please
visit www.clearstreamenergy.ca or contact:
Randy Watt |
Yves Paletta |
Chief Financial Officer |
Chief Executive Officer |
ClearStream Energy Services Inc. |
ClearStream Energy Services Inc. |
(587) 318-0997 |
(587) 318-0997 |
rwatt@clearstreamenergy.ca |
ypaletta@clearstreamenergy.ca |
Advisory regarding Forward-Looking
Information
Certain information included in this press
release may constitute “forward-looking information” within the
meaning of Canadian securities laws. In some cases, forward-looking
information can be identified by terminology such as “may”, “will”,
“should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”,
“predict”, “potential”, “continue” or the negative of these terms
or other similar expressions concerning matters that are not
historical facts. This press release contains forward-looking
statements relating to but not limited to: our business plans,
strategies and objectives; the effects of the COVID-19 pandemic on
global commerce and oil prices; that customers will remain cautious
regarding their spending plans; that activity levels will recover
in the second half of 2021; that we will be in a lower growth
operating model for the conceivable future; that customers will
focus on production optimization, reliability and environmental
considerations through operational excellence; the estimated value
of contract renewals and project awards; that the implementation of
internal and external digitization strategies will transform us
into a low cost, efficient and differentiated service provider;
that there will be a modest increase in demand for wear technology
overlay services in the first quarter of 2021; that the pace at
which funding under federal and provincial programs for the closure
and reclamation of oil and gas wells, pipelines and facilities is
released will accelerate in 2021; that the consolidation of our
wear technology overlay facilities has improved our production
flexibility and reduced our fixed costs; that the COVID-19 pandemic
will continue to impact both the local and global economy; the
duration of public health measures; that governments will start to
re-open their economies as the rate of vaccinations increases; that
our customers who are involved in the energy industry will begin to
increase their spending and address maintenance projects that have
been deferred as they realize higher cash flows from the recovery
in world oil prices; that activity levels will recover in the
second half of 2021 as customers prioritize asset management and
integrity services to increase operational reliability; that our
customers will focus on improving their operational processes; and
that we are well-positioned to consolidate further multiple
services while generating efficiencies and cost reductions for our
customers.
Forward-looking information involves significant
risks and uncertainties. A number of factors could cause actual
events or results to differ materially from the events and results
discussed in the forward-looking information including, but not
limited to, the success of our response to the COVID-19 global
pandemic, risks related to the integration of acquired businesses,
conditions of capital markets, economic conditions, commodity
prices, dependence on key personnel, interest rates, regulatory
change, ability to meet working capital requirements and capital
expenditure needs, factors relating to the weather and availability
of labour. These factors should not be considered exhaustive. Risks
and uncertainties about ClearStream’s business are more fully
discussed in ClearStream’s disclosure materials, including its
annual information form and management’s discussion and analysis of
the operating and financial results, filed with the securities
regulatory authorities in Canada and available at www.sedar.com. In
formulating the forward-looking information, management has assumed
that business and economic conditions affecting ClearStream will
continue substantially in the ordinary course, including, without
limitation, with respect to general levels of economic activity,
regulations, taxes and interest rates. Although the forward-looking
information is based on what management of ClearStream consider to
be reasonable assumptions based on information currently available
to it, there can be no assurance that actual events or results will
be consistent with this forward-looking information, and
management’s assumptions may prove to be incorrect.
This forward-looking information is made as of
the date of this press release, and ClearStream does not assume any
obligation to update or revise it to reflect new events or
circumstances except as required by law. Undue reliance should not
be placed on forward-looking information. Forward-looking
information is provided for the purpose of providing information
about management's current expectations and plans relating to the
future. Readers are cautioned that such information may not be
appropriate for other purposes.
Advisory regarding Non-Standard
Measures
The terms ‘‘EBITDAS’’ and “Adjusted EBITDAS”
(collectively, the ‘‘Non-standard measures’’) are financial
measures used in this press release that are not standard measures
under IFRS. ClearStream’s method of calculating Non-standard
measures may differ from the methods used by other issuers.
Therefore, ClearStream’s Non-standard measures, as presented may
not be comparable to similar measures presented by other
issuers.
EBITDAS refers to net earnings determined in
accordance with IFRS, before depreciation and amortization,
interest expense, income tax expense (recovery), share-based
compensation, and other long-term incentive plans. EBITDAS is used
by management and the directors of ClearStream as well as many
investors to determine the ability of an issuer to generate cash
from operations. Management also uses EBITDAS to monitor the
performance of ClearStream’s reportable segments and believes that
in addition to net income or loss and cash provided by operating
activities, EBITDAS is a useful supplemental measure from which to
determine ClearStream’s ability to generate cash available for debt
service, working capital, capital expenditures and income taxes.
ClearStream has provided a reconciliation of income (loss) from
continuing operations to EBITDAS in its management's discussion and
analysis of the operating and financial results for the year ended
December 31, 2020.
Adjusted EBITDAS refers to EBITDAS excluding the
gain on sale of assets held for sale, impairment of goodwill and
intangible assets, restructuring costs, gain on sale of property
plant and equipment, recovery of contingent consideration
liability, other loss, one time incurred expenses, impairment of
right-of-use assets, bargain purchase gain, gain on remeasurement
of right-of-use assets, and government subsidies. ClearStream has
used Adjusted EBITDAS as the basis for the analysis of its past
operating financial performance. Adjusted EBITDAS is used by
ClearStream and management believes it is a useful supplemental
measure from which to determine ClearStream’s ability to generate
cash available for debt service, working capital, capital
expenditures, and income taxes. Adjusted EBITDAS is a measure that
management believes facilitates the comparability of the results of
historical periods and the analysis of its operating financial
performance which may be useful to investors. ClearStream has
provided a reconciliation of income (loss) from continuing
operations to Adjusted EBITDAS its management's discussion and
analysis of the operating and financial results for the year ended
December 31, 2020.
Investors are cautioned that the Non-standard
measures are not alternatives to measures under IFRS and should
not, on their own, be construed as an indicator of performance or
cash flows, a measure of liquidity or as a measure of actual return
on the shares. These Non-standard measures should only be used with
reference to ClearStream’s Interim Financial Statements and Annual
Financial Statements available on SEDAR at www.sedar.com or on
ClearStream’s website at www.clearstreamenergy.ca.
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