CALGARY,
AB, July 29, 2022 /CNW/ - (TSXV: CWC) CWC
Energy Services Corp. ("CWC" or the "Company") announces the
release of its operational and financial results for the three and
six months ended June 30, 2022. The
Financial Statements and Management Discussion and Analysis
("MD&A") for the three and six months ended June 30, 2022 are filed on SEDAR at
www.sedar.com.
Financial Highlights
$ thousands, except
shares, per share
amounts, and margins
|
|
Three months
ended
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|
Six months
ended
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
2022
|
|
2021
|
Change
%
|
|
2022
|
|
2021
|
Change
%
|
|
FINANCIAL
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Contract
Drilling
|
|
22,718
|
|
3,424
|
563 %
|
|
39,430
|
|
10,742
|
267 %
|
|
Production
Services
|
|
19,963
|
|
13,073
|
53 %
|
|
44,082
|
|
30,424
|
45 %
|
|
|
|
42,681
|
|
16,497
|
159 %
|
|
83,512
|
|
41,166
|
103 %
|
|
Other income
|
|
-
|
|
(2,579)
|
(100 %)
|
|
-
|
|
(3,644)
|
(100 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1)
|
|
7,600
|
|
2,489
|
205 %
|
|
16,026
|
|
7,343
|
118 %
|
|
Adjusted EBITDA margin
(%)(1)
|
|
18 %
|
|
15 %
|
|
|
19 %
|
|
18 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
2,664
|
|
(759)
|
n/m(3)
|
|
6,103
|
|
(312)
|
n/m(3)
|
|
Net income (loss)
margin (%)(2)
|
|
6 %
|
|
(5 %)
|
11 %
|
|
7 %
|
|
(1 %)
|
8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
12,682
|
|
1,434
|
784 %
|
|
15,473
|
|
2,709
|
471 %
|
|
|
|
|
|
|
|
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|
Per share
information:
|
|
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|
|
|
|
|
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|
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Weighted average number
of shares outstanding
– basic
|
|
509,786,609
|
|
504,534,525
|
|
509,459,831
|
505,286,936
|
|
|
Weighted average number
of shares outstanding
- diluted
|
|
523,123,662
|
|
504,534,525
|
|
520,768,461
|
505,286,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1) per share - basic and diluted
|
$
|
0.01
|
$
|
0.00
|
|
$
|
0.03
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share -
basic and diluted
|
$
|
0.01
|
$
|
(0.00)
|
|
$
|
0.01
|
$
|
(0.00)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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$ thousands, except
ratios
|
|
|
|
|
June 30,
2022
|
|
|
|
December 31,
2021
|
|
FINANCIAL POSITION
AND LIQUIDITY
|
|
|
|
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|
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|
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Working capital
(excluding debt)(1)
|
|
|
|
|
23,305
|
|
|
|
|
18,966
|
|
Working capital
(excluding debt) ratio(1)
|
|
|
|
|
3.2:1
|
|
|
|
|
3.1:1
|
|
Total assets
|
|
|
|
|
241,827
|
|
|
|
|
226,645
|
|
Total long-term debt
(including current portion)
|
|
|
|
|
49,773
|
|
|
|
|
45,847
|
|
Shareholders'
equity
|
|
|
|
|
170,976
|
|
|
|
|
163,269
|
|
(1) Please
refer to the "Non-GAAP and Other Financial Measures" section for
further information.
|
(2) Net
income margin is a Non-GAAP Measure which is calculated as net
income divided by total revenue.
|
(3) Not
meaningful.
|
|
|
|
|
|
|
|
|
|
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Working capital (excluding debt) for June
30, 2022 has increased $4.3
million (23%) since December 31,
2021 driven by increases in accounts receivable
($6.4 million (24%)) offset by
decreases in prepaid expenses and deposits ($0.4 million (26%)) and increases in accounts
payable ($1.6 million (17%)).
Long-term debt (including current portion) of $49.8 million has increased $3.9 million (9%) from December 31, 2021 primarily due to the purchase
of three (3) triple drilling rigs in June
2022 and partially offset by the payment of long-term debt
from operating cash flows in the first six months of 2022.
Highlights for the Three Months Ended June 30, 2022
- Record Q2 2022 revenue in CWC's seventeen (17) year history of
$42.7 million, an increase of
$26.2 million (159%) compared to
$16.5 million in Q2 2021. Revenue
increased $19.3 million (563%) in the
Contract Drilling segment and $6.9
million (53%) in the Production Services segment in Q2 2022
compared to Q2 2021.
- Record Q2 2022 Adjusted EBITDA(1) of $7.6 million, an increase of $5.1 million (205%) compared to $2.5 million in Q2 2021, which was the previous
Q2 record.
- Record Q2 2022 net income of $2.7
million, an increase of $3.5
million compared to net loss of $0.8
million in Q2 2021.
- Purchase of three (3) triple drilling rigs and critical spare
components for US$7.4 million
(approximately C$9.6 million) on
June 24, 2022.
- Drilled Alberta's first
lithium evaluation well showing the diversity and versatility of
our equipment.
- First Canadian drilling and well services company to publicly
report our Scope 1 and 2 emissions in our 2022 ESG Report.
(1) Please refer to
the "Non-GAAP and Other Financial Measures" section for further
information.
Highlights for the Six Months Ended June 30, 2022
- Record revenue for the first six months of 2022 in CWC's
seventeen (17) year history of $83.5
million, an increase of $42.3
million (103%) compared to $41.2
million in the first six months of 2021. Revenue increased
$28.7 million (267%) in the Contract
Drilling segment and $13.7 million
(45%) in the Production Services segment compared to the first six
months of 2021.
- Record Adjusted EBITDA(1) for the first six months
of 2022 of $16.0 million, an increase
of $8.7 million (118%) compared to
$7.3 million in the first six months
of 2021.
- Record net income for the first six months of 2022 of
$6.1 million, an increase of
$6.4 million compared to a net loss
of $0.3 million in the first six
months of 2021.
(1) Please
refer to the "Non-GAAP and Other Financial Measures" section for
further information.
Credit Facilities
On July 29, 2022, the Company
exercised the accordion feature to expand the Credit Facility to an
$80.3 million Bank Loan comprised of
a $50.7 million Canadian syndicated
facility, a US$12.0 million
(C$15.6 million) U.S. syndicated
facility, a $7.5 million Canadian
operating facility and a US$5.0
million (C$6.5 million) U.S.
operating facility. The company further amended the Credit Facility
to extend the maturity to July 31,
2025.
Industry Overview
Average crude oil and natural gas prices
|
Three months
ended
|
|
Jun.
30,
2022
|
Mar.
31,
2022
|
Dec.
31,
2021
|
Sep. 30,
2021
|
Jun.
30,
2021
|
Mar.
31,
2021
|
Dec.
31,
2020
|
Sep.
30,
2020
|
Crude
oil
|
|
|
|
|
|
|
|
|
West Texas
Intermediate (US$/bbl)
|
108.41
|
94.29
|
77.19
|
70.56
|
66.12
|
57.79
|
42.75
|
40.92
|
Western Canadian
Select (US$/bbl)
|
93.05
|
81.49
|
60.44
|
57.64
|
54.68
|
45.39
|
33.48
|
31.79
|
|
|
|
|
|
|
|
|
|
Natural
gas
|
|
|
|
|
|
|
|
|
AECO
(C$/mcf)
|
6.92
|
4.66
|
4.89
|
3.75
|
3.05
|
2.91
|
2.84
|
2.25
|
Source: GLJ Ltd price forecasts.
Russia's invasion of
Ukraine and the western world's
response with trade sanctions against Russia, including sanctions on crude oil and
natural gas by certain countries, have resulted in a significant
increase in crude oil and natural gas prices in the first six
months of 2022. In addition, the continued re-opening of the global
economy after being significantly slowed down in 2020 and 2021 due
to the COVID-19 health pandemic, has resulted in a steady rise in
global demand without a significant corresponding increase in
global supply for crude oil and natural gas, further justifying the
higher prices experienced in the first six months of 2022. However,
significant inflationary increases and rising interest rates have
sparked fears of a global recession, which has recently pulled WTI
back to a range of US$95 to
US$100/bbl. Despite recessionary
fears, discussion about energy security is on the top of many
governmental agendas, which should bode well for North American oil
and gas activity and oilfield service companies for the foreseeable
future.
Corporate Overview
CWC Energy Services Corp. is a premier contract drilling and
well servicing company operating in Canada and the
United States with a complementary suite of oilfield
services including drilling rigs and service rigs. The Company's
corporate office is located in Calgary,
Alberta, with operational locations in Nisku, Grande
Prairie, Slave Lake,
Sylvan Lake, Drayton Valley, Lloydminster, Provost and Brooks,
Alberta and U.S. offices in Denver, Colorado and Casper, Wyoming. The Company's shares trade on
the TSX Venture Exchange under the symbol "CWC".
The Contract Drilling division operates under the trade name CWC
Ironhand Drilling and is comprised of thirteen (13) electric triple
drilling rigs with depth ratings from 3,600 to 7,600 metres and
nine (9) telescopic double drilling rigs with depth ratings from
3,200 to 5,000 metres. All twenty-two (22) rigs have top drives,
seventeen (17) have pad rig moving systems, eight (8) have 7,500
psi pumping systems, three (3) have carbon reduction bi-fuel
capabilities, and two (2) have high line power capabilities. All of
the drilling rigs are ideally suited for the most active depths for
horizontal drilling in the Western Canadian Sedimentary Basin
("WCSB"), including the Montney,
Cardium, Duvernay and other deep
basin horizons, and select United
States basins including the Permian, Eagle Ford,
Niobrara, Denver-Julesburg ("DJ"), Powder River and Bakken.
The Production Services division operates under the trade name
CWC Well Services. With a fleet of 143 service rigs, CWC is one of
Canada's largest well servicing
companies as measured by active fleet and operating hours. CWC's
service rig fleet consists of 75 single, 54 double and 14 slant
rigs providing services which include completions, maintenance,
workovers and well decommissioning with depth ratings from 1,500 to
5,000 metres. In 2022, CWC chose to park 79 of its service rigs and
focus its sales and operational efforts on the remaining 64 active
service rigs due to the reduction in the number of service rigs
currently required to service the WCSB and the tight labour market
experienced in the industry for service rig crews.
Results of Operations
|
Three months
ended
June 30,
|
Change
|
Change
|
Six months
ended
June 30,
|
Change
|
Change
|
$ thousands, except
per share amounts
|
2022
|
2021
|
$
|
%
|
2022
|
2021
|
$
|
%
|
|
|
|
|
|
|
|
|
|
Revenue
|
42,681
|
16,497
|
26,184
|
159 %
|
83,512
|
41,166
|
42,346
|
103 %
|
Direct operating
expenses
|
30,262
|
13,116
|
17,146
|
131 %
|
57,575
|
30,664
|
26,911
|
88 %
|
Gross margin
(1)
|
12,419
|
3,381
|
9,038
|
267 %
|
25,937
|
10,502
|
15,435
|
147 %
|
|
|
|
|
|
|
|
|
|
Other income
|
-
|
2,579
|
(2,579)
|
(100 %)
|
-
|
3,644
|
(3,644)
|
(100 %)
|
|
|
|
|
|
|
|
|
|
Selling and
administrative expenses
|
4,819
|
3,471
|
1,348
|
39 %
|
9,911
|
6,803
|
3,108
|
46 %
|
Adjusted
EBITDA(1)
|
7,600
|
2,489
|
5,111
|
205 %
|
16,026
|
7,343
|
8,683
|
118 %
|
|
|
|
|
|
|
|
|
|
Stock based
compensation
|
231
|
167
|
64
|
38 %
|
462
|
343
|
119
|
35 %
|
Finance
costs
|
605
|
246
|
359
|
146 %
|
993
|
505
|
488
|
97 %
|
Depreciation and
amortization
|
2,982
|
2,581
|
401
|
16 %
|
5,908
|
5,277
|
631
|
12 %
|
Loss on disposal of
equipment
|
227
|
418
|
(191)
|
(46 %)
|
564
|
206
|
358
|
174 %
|
Impairment of
assets
|
-
|
-
|
-
|
n/m(2)
|
-
|
1,296
|
(1,296)
|
(100 %)
|
Income (loss) before
income taxes
|
3,555
|
(923)
|
4,478
|
(485 %)
|
8,099
|
(284)
|
8,383
|
n/m(2)
|
|
|
|
|
|
|
|
|
|
Deferred income tax
expense
(recovery)
|
891
|
(164)
|
1,055
|
n/m(2)
|
1,996
|
28
|
1,968
|
n/m(2)
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
2,664
|
(759)
|
3,423
|
n/m(2)
|
6,103
|
(312)
|
6,415
|
n/m(2)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
per share
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
$
0.01
|
$
(0.00)
|
$
0.00
|
n/m(2)
|
$ 0.01
|
$
(0.00)
|
$
0.01
|
n/m(2)
|
(1)
|
Please refer to the
"Non-GAAP and Other Financial Measures" section for further
information.
|
(2)
|
Not
meaningful.
|
Contract Drilling – Canada
and United States
$ thousands, except
margins,
number of rigs, revenue per
operating day, and utilization
|
Three months
ended
June 30,
|
Change
|
Change
|
Six months
ended
June 30,
|
Change
|
Change
|
2022
|
2021
|
$
|
%
|
2022
|
2021
|
$
|
%
|
Revenue
|
|
|
|
|
|
|
|
|
Canada
|
7,784
|
1,323
|
6,461
|
488 %
|
20,573
|
8,465
|
12,108
|
143 %
|
United
States
|
14,934
|
2,101
|
12,833
|
611 %
|
18,857
|
2,277
|
16,580
|
728 %
|
|
22,718
|
3,424
|
19,294
|
563 %
|
39,430
|
10,742
|
28,688
|
267 %
|
Direct operating
expenses
|
|
|
|
|
|
|
|
|
Canada
|
5,848
|
1,417
|
4,431
|
313 %
|
14,832
|
6,663
|
8,169
|
123 %
|
United
States
|
11,009
|
1,701
|
9,308
|
547 %
|
13,769
|
1,848
|
11,921
|
645 %
|
|
16,857
|
3,118
|
13,739
|
441 %
|
28,601
|
8,511
|
20,090
|
236 %
|
Gross margin
(1)
|
|
|
|
|
|
|
|
|
Canada
|
1,936
|
(94)
|
2,030
|
n/m(4)
|
5,741
|
1,802
|
3,939
|
219 %
|
United
States
|
3,925
|
400
|
3,525
|
881 %
|
5,088
|
429
|
4,659
|
1,086 %
|
|
5,821
|
306
|
5,555
|
1,815 %
|
10,829
|
2,231
|
8,598
|
385 %
|
Gross margin
percentage (1)
|
|
|
|
|
|
|
|
|
Canada
|
25 %
|
(7 %)
|
n/a
|
32 %
|
28 %
|
21 %
|
n/a
|
7 %
|
United
States
|
26 %
|
19 %
|
n/a
|
7 %
|
27 %
|
19 %
|
n/a
|
8 %
|
|
26 %
|
9 %
|
n/a
|
17 %
|
27 %
|
21 %
|
n/a
|
6 %
|
Total drilling rigs,
end of period
|
|
|
|
|
|
|
|
|
Canada
|
7
|
7
|
-
|
0 %
|
7
|
7
|
-
|
0 %
|
United
States
|
15
|
2
|
13
|
650 %
|
15
|
2
|
13
|
650 %
|
|
22
|
9
|
13
|
144 %
|
22
|
9
|
13
|
144 %
|
Revenue per
operating day(2)
|
|
|
|
|
|
|
|
|
Canada
|
$28,693
|
$22,817
|
$5,876
|
26 %
|
$28,513
|
$24,500
|
$4,013
|
16 %
|
United States
(US$)
|
US$28,920
|
US$29,790
|
US$(870)
|
(3 %)
|
US$29,347
|
US$28,450
|
US$897
|
3 %
|
|
|
|
|
|
|
|
|
|
Drilling rig
operating days
|
|
|
|
|
|
|
|
|
Canada
|
273
|
54
|
219
|
406 %
|
717
|
371
|
346
|
93 %
|
United
States
|
398
|
60
|
338
|
563 %
|
511
|
62
|
449
|
724 %
|
|
671
|
114
|
557
|
489 %
|
1,228
|
433
|
795
|
184 %
|
Drilling rig
utilization %(3)
|
|
|
|
|
|
|
|
|
Canada
|
43 %
|
9 %
|
n/a
|
34 %
|
57 %
|
29 %
|
n/a
|
28 %
|
United
States
|
21 %
|
33 %
|
n/a
|
(12 %)
|
24 %
|
17 %
|
n/a
|
7 %
|
|
39 %
|
14 %
|
n/a
|
25 %
|
36 %
|
27 %
|
n/a
|
9 %
|
(1)
|
Please refer to the
"Non-GAAP and Other Financial Measures" section for further
information.
|
(2)
|
Revenue per operating
day is calculated based on operating days (i.e. spud to rig release
basis). New or inactive drilling rigs are added based on the first
day of field service.
|
(3)
|
Drilling rig
utilization is calculated based on operating days (i.e. spud to rig
release basis). Drilling rigs requiring their Level IV
recertification, refurbishment or have been otherwise removed from
service for greater than 90 days are excluded from the utilization
calculation until their first day back in field service.
|
Canadian Contract Drilling revenue of $7.8 million for Q2 2022 (Q2 2021: $1.3 million) was achieved with a utilization
rate of 43% (Q2 2021: 9%), compared to the CAOEC industry average
of 23% (Q2 2021: 15%). CWC completed 273 Canadian drilling rig
operating days in Q2 2022, an increase of 219 operating days (406%)
compared to 54 Canadian drilling rig operating days in Q2 2021.
Gross margin in the Canadian Contract Drilling segment was
$1.9 million, an increase of
$2.0 million from a negative gross
margin of $0.1 million in Q2 2021.
The gross margin increase is a result of a 406% increase in
Canadian drilling rig operating days and a 26% increase in average
revenue per operating day while the increase in direct operating
expenses, primarily related to inflationary increases in field
labour, fuel and supplies cost, was successfully recovered from
customers.
U.S. Contract Drilling revenue of $14.9
million for Q2 2022 (Q2 2021: $2.1
million) was achieved with 398 U.S. drilling rig operating
days (Q2 2021: 60 U.S. drilling rig operating days). During Q2
2022, CWC had five (5) triple drilling rigs and two (2) double
drilling rigs working in the U.S.
Gross margin in the U.S. Contract Drilling segment was
$3.9 million, an increase of
$3.5 million from $0.4 million in Q2 2021. The gross margin
increase is a result of a 563% increase in U.S. drilling rig
operating days partially offset by a 3% decrease in average revenue
per operating day.
Total Contract Drilling's gross margin percentage of 26% in Q2
2022 is higher than the 9% gross margin percentage in Q2 2021 as
the Company was successful in increasing pricing and recovering
inflationary increases for field labour, fuel and supplies costs
from customers.
Production Services – Canada
$ thousands, except
margins,
number of rigs, revenue per
operating hour, and utilization
|
Three months
ended
June 30,
|
Change
|
Change
|
Six months
ended
June 30,
|
Change
|
Change
|
2022
|
2021
|
$
|
%
|
2022
|
2021
|
$
|
%
|
|
|
|
|
|
|
|
|
|
Revenue
|
19,963
|
13,073
|
6,890
|
53 %
|
44,082
|
30,424
|
13,658
|
45 %
|
|
|
|
|
|
|
|
|
|
Direct operating
expenses
|
13,405
|
9,998
|
3,407
|
34 %
|
28,974
|
22,153
|
6,821
|
31 %
|
|
|
|
|
|
|
|
|
|
Gross margin
(1)
|
6,558
|
3,075
|
3,483
|
113 %
|
15,108
|
8,271
|
6,837
|
83 %
|
Gross margin
percentage (1)
|
33 %
|
24 %
|
n/a
|
9 %
|
34 %
|
27 %
|
n/a
|
7 %
|
|
|
|
|
|
|
|
|
|
Service rigs, end of
period
|
|
|
|
|
|
|
|
|
Active service
rigs
|
64
|
68
|
(4)
|
(6 %)
|
64
|
68
|
(4)
|
(6 %)
|
Inactive service
rigs
|
79
|
77
|
2
|
3 %
|
79
|
77
|
2
|
3 %
|
Total service
rigs
|
143
|
145
|
(2)
|
(1 %)
|
143
|
145
|
(2)
|
(1 %)
|
|
|
|
|
|
|
|
|
|
Revenue per
hour
|
$848
|
$623
|
$225
|
36 %
|
$813
|
$627
|
$186
|
30 %
|
|
|
|
|
|
|
|
|
|
Service rig
operating hours
|
23,536
|
20,463
|
3,073
|
15 %
|
54,192
|
47,550
|
6,642
|
14 %
|
|
|
|
|
|
|
|
|
|
Service rig
utilization %(2)
|
57 %
|
47 %
|
n/a
|
10 %
|
65 %
|
55 %
|
n/a
|
10 %
|
(1)
|
Please refer to the
"Non-GAAP and Other Financial Measures" section for further
information.
|
(2)
|
In accordance with
CAOEC methodology, service rig utilization is calculated based on
10 operating hours a day x number of days per quarter x 5 days a
week divided by 7 days in a week to reflect maximum utilization
available due to hours of service restrictions on rig crews.
Service rigs requiring their 24,000-hour recertification,
refurbishment or have been otherwise removed from service for
greater than 90 days are excluded from the utilization calculation
until their first day back in field service.
|
Production Services revenue of $20.0
million in Q2 2022, an increase of $6.9 million (53%) compared to $13.1 million in Q2 2021 as both activity levels
and pricing increased. CWC's service rig utilization in Q2 2022 of
57% (Q2 2021: 47%) with 23,536 operating hours was 15% higher than
the 20,463 operating hours in Q2 2021. Average revenue per hour of
$848 in Q2 2022 was $225 (36%) higher than the $623 per hour in Q2 2021 as the Company
implemented pricing adjustments to partially offset higher
inflationary field labour, fuel and supplies costs.
During Q2 2022, the Company earned $1.3
million (Q2 2021: $1.7
million) in revenue on 59 oil and gas sites (Q2 2021: 115)
requiring well decommissioning under the Alberta Site
Rehabilitation Program ("SRP") and 6 oil and gas sites (Q2 2021:
13) under the Saskatchewan Accelerated Site Closure Program
("ASCP"). The $1.0 billion Alberta
SRP, the $400 million ASCP and the
$100 million B.C. Dormant Sites
Reclamation Program ("DSRP") provide grants to eligible oilfield
service contractors to perform well, pipeline, and oil and gas site
closure and reclamation work, creating jobs and supporting the
environment until March 31, 2023.
CWC's Production Services segment is well positioned to continue to
provide well decommissioning work on these inactive wells.
Capital Expenditures
|
Three months
ended
June 30,
|
Change
|
Change
|
Six months
ended
June 30,
|
Change
|
Change
|
$
thousands
|
2022
|
2021
|
$
|
%
|
2022
|
2021
|
$
|
%
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
Contract
drilling
|
11,227
|
1,040
|
10,187
|
980 %
|
13,129
|
1,995
|
11,134
|
558 %
|
Production
services
|
1,455
|
390
|
1,065
|
273 %
|
2,229
|
710
|
1,519
|
214 %
|
Other
equipment
|
-
|
4
|
(4)
|
(100 %)
|
115
|
4
|
111
|
2,775 %
|
|
12,682
|
1,434
|
11,248
|
784 %
|
15,473
|
2,709
|
12,764
|
471 %
|
|
|
|
|
|
|
|
|
|
Growth
capital
|
9,994
|
734
|
9,260
|
1,262 %
|
11,530
|
991
|
10,539
|
1,063 %
|
Maintenance and
infrastructure capital
|
2,688
|
700
|
1,988
|
284 %
|
3,943
|
1,718
|
2,225
|
130 %
|
Total capital
expenditures
|
12,682
|
1,434
|
11,248
|
784 %
|
15,473
|
2,709
|
12,764
|
471 %
|
Capital expenditures of $12.7
million in Q2 2022, an increase of $11.2 million compared to $1.4 million in Q2 2021. The increase in Q2 2022
is primarily due to the purchase of three (3) triple drilling rigs
for US$7.4 million (C$9.6 million) and recertifications of
equipment.
Outlook
The outlook for contract drilling and well servicing in
Canada and the U.S. continues to
improve as the removal of economic restrictions due to the COVID-19
health pandemic has created an increased demand for crude oil and
natural gas without a sufficient corresponding increase in global
supply. This supply/demand imbalance, along with Russia's invasion of Ukraine, has resulted in increases in the
crude oil and natural gas prices that we have seen for the first
half of 2022. Discussion about energy security is on the top of
many governmental agendas, which should bode well for North
American oil and gas activity and oilfield service companies for
the foreseeable future. CWC believes North American oilfield
service activity will continue to increase in the back half of 2022
and into 2023.
CWC experienced a very strong Q2 2022 with both activity and
prices increasing, which led to the Company achieving record second
quarter and first half revenue, Adjusted EBITDA and net income in
the Company's seventeen (17) year history. The Company believes
that demand for our contract drilling and well servicing will
increase for the remainder of 2022 and into 2023 buoyed by the
addition of our thirteen (13) triple drilling rigs in the U.S. CWC
currently has work for all seven (7) of seven (7) drilling rigs in
Canada and eight (8) of twelve
(12) drilling rigs in the U.S. The three (3) newly acquired U.S.
triple drilling rigs are currently undergoing Level IV
recertifications and upgrades and are expected to be marketable in
Q4 2022. 52 of the 64 active service rigs in Canada are crewed and have work for the back
half of 2022 and into 2023. CWC has been successful in recruiting
new field employees and crewing both our drilling and service rigs.
The Company now employs over 640 employees; a higher employee count
than our February 2020 pre-COVID-19
employment level. However, the primary constraint for how quickly
the industry and CWC can grow continues to be the available labour
market for rig crews, which remains extremely tight. This limited
availability of rig crews has resulted in inflationary pressure on
field labour costs as well as fuel and supplies, which have been
and will continue to be, passed on to our E&P customers through
further price increases in the back half of 2022.
While CWC expects a continuation of the strong operational and
financial results for the remainder of 2022, various global
uncertainties may derail the Company's expected positive path.
Russia's invasion of Ukraine has elicited a strong global response
of sanctions against Russia from
many western countries. Such sanctions may have a negative effect
on the global economy through supply chain disruptions and volatile
commodity prices. In addition, many global economies are
experiencing high levels of inflation resulting in central banks
increasing interest rates at a rapid pace, which is intended to
slow the pace of inflation. If interest rates increase too rapidly,
or rise to a high enough level whereby economic activity slows
significantly resulting in a global recession, CWC may be
negatively impacted.
In June 2022, CWC released its
2022 Environmental, Social and Governance ("ESG") Report. Since the
release of our inaugural report last year, we've made numerous
strides in our ESG journey, including being leaders in the Canadian
drilling and well services sector by publicly reporting our Scope 1
and 2 emissions. We are committed to advancing these efforts
further in future years as we work on emission reductions and
setting targets with our customers to reduce our collective
environmental impact. One of the initial steps CWC has taken
towards meeting its ESG targets has been to convert some of our
field equipment to have carbon reduction bi-fuel capabilities and
converting a service rig to a Tier 4 engine. As we progress
through 2022, we are deepening our commitment to ESG excellence and
look forward to sharing our initiatives and progress with our
stakeholders. CWC is honoured to have worked with one of our
customers on drilling Alberta's first lithium evaluation well.
We are proud of the versatility of our equipment and are not just
limited to working strictly in the oil and gas fields. CWC has
worked on carbon capture, helium, potash and saltwater disposal
wells in the past, thereby reflecting the diversity and versatility
of the nature of work for our drilling rigs. Management is
confident that CWC will continue to be regarded as a leader in
ESG and sustainability matters in the oilfield services industry as
the nature of the work for our equipment evolves.
About CWC Energy Services
Corp.
CWC Energy Services Corp. is a premier contract drilling and
well servicing company operating in Canada and the
United States with a complementary suite of oilfield
services including drilling rigs and service rigs. The Company's
corporate office is located in Calgary,
Alberta, with operational locations in Nisku, Grande
Prairie, Slave Lake,
Sylvan Lake, Drayton Valley, Lloydminster, Provost and Brooks,
Alberta and U.S. offices in Denver, Colorado and Casper, Wyoming. The Company's shares trade on
the TSX Venture Exchange under the symbol "CWC".
Forward-Looking
Information
This News Release contains certain forward-looking
information and statements (collectively, "forward-looking
statements") within the meaning of applicable Canadian securities
legislation. Certain statements contained in this News Release,
including those contained in the section titled "Outlook" and
including statements which may contain such words as "anticipate",
"could", "continue", "should", "seek", "may", "intend", "likely",
"plan", "estimate", "believe", "expect", "will", "objective",
"ongoing", "project" and similar expressions are intended to
identify forward-looking statements. In particular, this News
Release contains forward-looking statements including management's
assessment of future plans and operations, planned levels of
capital expenditures, expectations as to industry and Company
activity levels in various areas, expectations on the
sustainability of future cash flow and earnings, expectations with
respect to crude oil and natural gas prices, expectations regarding
the level and type of drilling and production and related drilling
and well services activity in the WCSB and U.S. basins,
expectations regarding entering into long term drilling contracts
and expanding our customer base, and expectations regarding the
business, operations, revenue and debt levels of the Company in
addition to general economic conditions including industry labor
shortages, inflationary pressures and a rising interest rate
environment and the impact of those conditions on the Company.
Although the Company believes that the expectations and assumptions
on which such forward-looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking
statements because the Company can give no assurances that they
will prove to be correct. Since forward-looking statements address
future events and conditions, by their very nature they involve
inherent risks and uncertainties. Factors that could
cause actual results to vary from forward-looking statements or may
affect the operations, performance, development and results of
CWC's businesses include, among other things: risks and assumptions
associated with operations, such as CWC's ability to successfully
implement its strategic initiatives and achieve expected benefits
therefrom; assumptions concerning operational reliability; the
ability to access sufficient capital from internal and external
sources including debt and equity capital; risks inherent in CWC's
Canadian and U.S. operations; CWC's ability to generate sufficient
cash flow from operations to meet its current and future
obligations; risks associated with the failure to finalize formal
agreements with counterparties in certain circumstances; CWC's
ability to make capital investments and the amounts of capital
investments; increases in maintenance, operating or financing
costs; the realization of the anticipated benefits of transactions;
the possibility that CWC is unable to identify or consummate any
acceptable strategic alternatives; the availability and price of
labour, equipment and construction materials; the status, credit
risk and continued existence of customers having contracts with CWC
and its affiliates; availability of energy commodities; volatility
of and assumptions regarding prices of energy commodities;
competitive factors, including competition from third parties in
the areas in which CWC operates or intends to operate, pricing
pressures and supply and demand in the drilling and service rig
business; fluctuations in currency and interest rates; inflation;
risks of war (including the war in Ukraine), hostilities, civil insurrection,
pandemics (including COVID-19), instability and political and
economic conditions in or affecting jurisdictions in which CWC and
its affiliates operate; severe weather conditions and risks related
to climate change; terrorist threats; risks associated with
technology; changes in laws and regulations, including
environmental, regulatory and taxation laws, and the interpretation
of such changes to CWC's business; the risks associated with
existing and potential or threatened future lawsuits, legal
proceedings and regulatory actions against CWC and its affiliates;
availability of adequate levels of insurance; difficulty in
obtaining necessary regulatory approvals or land access rights and
maintenance of support of such approvals and rights; the effects
and impacts of the COVID-19 pandemic on CWC's business and general
economic and business conditions and markets; and such other risks
and uncertainties described in the Annual MD&A under the
section entitled "Risk Factors" and from time to time in CWC's
reports and filings with the Canadian securities authorities. The
impact of any one assumption, risk, uncertainty or other factor on
a forward-looking statement cannot be determined with certainty, as
these are interdependent and CWC's future course of action depends
on management's assessment of all information available at the
relevant time. You can find a discussion of those risks and
uncertainties in the Annual MD&A under the section entitled
"Risk Factors" and in CWC's other securities filings at
www.sedar.com.
Readers are cautioned that the foregoing list of assumptions,
risks, uncertainties and factors is not exhaustive. See also the
section entitled "Risks and Uncertainties" for further risk
factors. The forward-looking statements contained in this News
Release are made as of the date of this News Release and, except to
the extent expressly required by applicable securities laws and
regulations, CWC assumes no obligation to update or revise
forward-looking statements made herein or otherwise, whether as a
result of new information, future events, or otherwise. The
forward-looking statements contained in this News Release and all
subsequent forward-looking statements, whether written or oral,
attributable to CWC or persons acting on CWC's behalf are expressly
qualified in their entirety by these cautionary statements. Any
forward-looking statements made previously may be inaccurate
now.
Non-GAAP and Other Financial Measures
|
Three months
ended
|
Six months
ended
|
$ thousands, except
shares, per share amounts and margins
|
June
30,
|
June
30,
|
2022
|
2021
|
2022
|
2021
|
NON-GAAP
MEASURES
|
|
|
|
|
Adjusted
EBITDA:
|
|
|
|
|
Net income
(loss)
|
2,664
|
(759)
|
6,103
|
(312)
|
Add:
|
|
|
|
|
Stock based
compensation
|
231
|
167
|
462
|
343
|
Finance
costs
|
605
|
246
|
993
|
505
|
Depreciation and
amortization
|
2,982
|
2,581
|
5,908
|
5,277
|
Impairment of
assets
|
-
|
-
|
-
|
1,296
|
Loss on sale of
equipment
|
227
|
418
|
564
|
206
|
Income tax expense
(recovery)
|
891
|
(164)
|
1,996
|
28
|
Adjusted
EBITDA(1)
|
7,600
|
2,489
|
16,026
|
7,343
|
Adjusted EBITDA per
share – basic and diluted(1)
|
$
0.01
|
$
0.00
|
$
0.03
|
$
0.01
|
Adjusted EBITDA
margin (Adjusted EBITDA/Revenue)(1)
|
18 %
|
15 %
|
19 %
|
18 %
|
Weighted average number
of shares outstanding - basic
|
509,786,609
|
504,534,525
|
509,459,831
|
505,286,936
|
Weighted average number
of shares outstanding - diluted
|
523,123,662
|
504,534,525
|
520,768,461
|
505,286,936
|
Gross
margin:
|
|
|
|
|
Revenue
|
42,681
|
16,497
|
83,512
|
41,166
|
Less: Direct operating
expenses
|
30,262
|
13,116
|
57,575
|
30,664
|
Gross
margin(2)
|
12,419
|
3,381
|
25,937
|
10,502
|
Gross margin
percentage(2)
|
29 %
|
20 %
|
31 %
|
26 %
|
|
|
|
|
|
$
thousands
|
June 30,
2022
|
December 31,
2021
|
Working capital
(excluding debt):
|
|
|
Current
assets
|
33,803
|
27,911
|
Less: Current
liabilities
|
(11,233)
|
(9,709)
|
Add: Current
portion of long-term debt
|
735
|
764
|
Working capital
(excluding debt) (3)
|
23,305
|
18,966
|
Working capital
(excluding debt) ratio(3)
|
3.2:1
|
3.1:1
|
Net debt:
|
|
|
|
Long-term
debt
|
49,038
|
45,083
|
Less: Current
assets
|
(33,803)
|
(27,911)
|
Add: Current
liabilities
|
11,233
|
9,709
|
Net debt
(4)
|
26,468
|
26,881
|
(1)
|
Adjusted EBITDA
(earnings before interest and finance costs, income tax expense,
depreciation, amortization, gain or loss on disposal of asset,
impairment of assets, goodwill impairment, transaction costs, stock
based compensation and other one-time non-cash gains and losses) is
not a recognized measure under IFRS. Management believes that in
addition to net income, Adjusted EBITDA is a useful supplemental
measure as it provides an indication of the Company's ability to
generate cash flow in order to fund working capital, service debt,
pay current income taxes, repurchase common shares under the Normal
Course Issuer Bid, and fund capital programs. Investors should be
cautioned, however, that Adjusted EBITDA should not be construed as
an alternative to net income (loss) determined in accordance with
IFRS as an indicator of the Company's performance. CWC's method of
calculating Adjusted EBITDA may differ from other entities and
accordingly, Adjusted EBITDA may not be comparable to measures used
by other entities. Adjusted EBITDA margin is calculated as Adjusted
EBITDA divided by revenue and provides a measure of the percentage
of Adjusted EBITDA per dollar of revenue. Adjusted EBITDA per share
is calculated by dividing Adjusted EBITDA by the weighted average
number of shares outstanding as used for the calculation of
earnings per share.
|
(2)
|
Gross margin is
calculated from the statement of comprehensive income (loss) as
revenue less direct operating costs and is used to assist
management and investors in assessing the Company's financial
results from operations excluding fixed overhead costs. Gross
margin percentage is calculated as gross margin divided by revenue.
The Company believes the relationship between revenue and costs
expressed by the gross margin percentage is a useful measure when
compared over different financial periods as it demonstrates the
trending relationship between revenue, costs and margins. Gross
margin and gross margin percentage are non-GAAP measures and do not
have any standardized meaning prescribed by IFRS and may not be
comparable to similar measures provided by other
companies.
|
(3)
|
Working capital
(excluding debt) is calculated based on current assets less current
liabilities excluding the current portion of long-term debt.
Working capital (excluding debt) is used to assist management and
investors in assessing the Company's liquidity. Working capital
(excluding debt) does not have any meaning prescribed under IFRS
and may not be comparable to similar measures provided by other
companies. Working capital (excluding debt) ratio is calculated as
current assets divided by the difference of current liabilities
less the current portion of long-term debt.
|
(4)
|
Net debt is calculated
based on long-term debt less current assets plus current
liabilities. Net debt is not a recognized measure under IFRS and
does not have any standardized meaning prescribed by IFRS and may
not be comparable to similar measures provided by other companies.
Management believes net debt is a useful indicator of a company's
debt position.
|
SOURCE CWC Energy Services Corp.