DIVERGENT Energy Services Announces the Release of Q2 2021 Financial Results
August 12 2021 - 8:00AM
DIVERGENT Energy Services Corp.
(“Divergent”, the "
Company", or
“
DVG”
) announces the release of
its financial results for the three and six months ended June 30,
2021. All amounts are in thousands (000’s) of United States
Dollars, unless otherwise noted.
HIGHLIGHTS FOR THE QUARTER
- Revenues of
$1,991, an increase of 427% over Q2 2020.
- Operating income
of ($57) and adjusted EBITDA of ($13) in Q2 2021 as compared to
($316) and ($201) in Q2 2020 demonstrated improved operating
performance year over year.
- Cash flow in the
quarter was sufficient to pay interest on debentures in cash, and
not in shares of the Company as done in previous quarters.
INDUSTRY OUTLOOK
The continuous increases in the oil and gas
commodity prices are expected to increase submersible pump sales
across the United States in 2021. Both markets demonstrated strong
pricing over the 2020/2021 winter months, a trend which has
continued into the third quarter 2021. The amount of work available
for the remainder of the year is dependent on the price of gas and
how each client makes its internal decisions for the use of its
working capital such as improving its balance sheet versus
increasing production.
In the ongoing COVID-19 pandemic, the Company
continues to maintain its health and safety protocols, working from
home when necessary and where practical, and actively monitoring
the health of our employees.
The Company’s largest client has indicated that
it intends to perform workovers for the remainder of the year at a
pace similar to H1 2021, with the expectation that activity could
increase should commodity prices continue on their current
trend.
During the second quarter, the Small Business
Administration (the “SBA”) was accepting applications for
forgiveness of loans under its Paycheck Protection Program (the
“PPP”). As previously announced, the Company anticipates that its
$226 PPP loan will be forgiven as the funds had been used in
accordance with the SBA guidelines for the loan. The Company has
completed its application through its banking institution and has
received notification from the bank that its use of funds meets the
SBA guidelines for forgiveness. The bank has passed the application
on to the SBA for final approval, for which we are still awaiting.
Should the loan receive final approval, its forgiveness will have a
positive impact on the Company’s working capital.
FINANCIAL AND OPERATING HIGHLIGHTS –
THREE AND SIX MONTHS ENDED JUNE 30, 2021
Select Financial Information for the three and
six month period ended June 30, 2021 have been summarized below.
Tables contain first quarter results for 2021 and 2020. Refer to
the Company’s unaudited condensed consolidated financial statements
and related management’s discussion and analysis (“MD&A”) for a
full description.
(All figures in ‘000’s of US dollars except
number of shares and per share data, unless otherwise stated)
Unaudited Interim Condensed Consolidated Statements of
Net Income (Loss) and Comprehensive Income (Loss)
|
|
Three months ended June 30, |
Six months ended June 30, |
|
|
|
2021 |
|
|
2020 |
|
2021 |
|
|
2020 |
Revenue |
|
|
$1,991 |
|
|
$378 |
|
$3,712 |
|
|
$2,142 |
Cost of sales |
|
|
(1,678) |
|
|
(203) |
|
(2,961) |
|
|
(1,702) |
Provision for slow moving
inventory |
|
|
36 |
|
|
- |
|
160 |
|
|
(195) |
Gross profit |
|
|
349 |
|
|
175 |
|
911 |
|
|
245 |
General and
administration |
|
|
(397) |
|
|
(439) |
|
(843) |
|
|
(1,062) |
Depreciation and
amortization |
|
|
(3) |
|
|
(50) |
|
(5) |
|
|
(62) |
Stock based compensation |
|
|
(6) |
|
|
(2) |
|
(7) |
|
|
(8) |
Results from operating
activities |
|
|
(57) |
|
|
(316) |
|
56 |
|
|
(887) |
|
|
|
|
|
|
Finance (expense) income |
|
|
(251) |
|
|
(550) |
|
1,883 |
|
|
213 |
Net income
(loss) |
|
|
(308) |
|
|
(866) |
|
1,939 |
|
|
(674) |
|
|
|
|
|
|
Other comprehensive income
(loss) |
|
|
95 |
|
|
224 |
|
186 |
|
|
(281) |
Total comprehensive
income (loss) for the period |
|
|
($213) |
|
|
($642) |
|
$2,125 |
|
|
($955 |
|
|
|
|
|
|
Income (loss) per
share |
|
|
|
|
|
Net income (loss) – basic and
dilutive |
|
|
($0.01) |
|
|
($0.01) |
|
$0.06 |
|
|
($0.01) |
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Interim Condensed Consolidated Statements of
Financial Position
|
|
June 30, 2021 |
|
|
December 31, 2020 |
ASSETS |
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash |
|
$403 |
|
$63 |
Prepaid expenses, deposits and advances |
|
|
38 |
|
|
77 |
Receivables, net of allowance |
|
|
789 |
|
|
975 |
Inventories |
|
|
880 |
|
|
1,261 |
|
|
|
2,110 |
|
|
2,376 |
Non-current assets |
|
|
|
Property and equipment |
|
|
151 |
|
|
171 |
Right-of-use assets |
|
|
589 |
|
|
630 |
Total
Assets |
|
$2,850 |
|
$3,177 |
LIABILITIES |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued liabilities |
|
$1,322 |
|
$1,401 |
Current portion of lease obligations |
|
|
191 |
|
|
170 |
Interest payable |
|
|
158 |
|
|
91 |
Paycheck protection program loan |
|
|
226 |
|
|
53 |
Promissory notes |
|
|
357 |
|
|
156 |
Debentures |
|
|
- |
|
|
4,356 |
|
|
$2,254 |
|
|
6,227 |
Non-current liabilities |
|
|
|
Lease obligations |
|
|
371 |
|
|
452 |
Promissory notes |
|
|
2,084 |
|
|
2,300 |
Government loan |
|
|
25 |
|
|
186 |
Debentures |
|
|
624 |
|
|
- |
Total
Liabilities |
|
$5,358 |
|
$9,165 |
SHAREHOLDERS’
DEFICIT |
|
|
|
Share capital |
|
$19,613 |
|
$18,364 |
Contributed surplus |
|
|
5,807 |
|
|
5,800 |
Warrants |
|
|
240 |
|
|
141 |
Accumulated other comprehensive loss |
|
|
(859) |
|
|
(1,045) |
Accumulated deficit |
|
|
(27,309) |
|
|
(29,248) |
Total Shareholders’
Deficit |
|
($2,508) |
|
($5,988) |
Total Liabilities and
Shareholders’ Deficit |
|
$2,850 |
|
$3,177 |
|
|
|
|
The Company’s complete set of June 30, 2021
quarter end filings have been filed on the SEDAR website at
www.sedar.com and are also available on the Company’s website at
www.divergentenergyservices.com.
For Further Information:
Ken Berg, President and Chief Executive Officer,
kberg@divergentenergyservices.com
Ken Olson, Interim Chief Financial Officer,
ken.olson@divergentenergyservices.com
ABOUT DIVERGENT ENERGY SERVICES CORP.
Headquartered in Calgary, Alberta, Divergent
provides fluids management products and services for the water, gas
and oil industries through its wholly owned subsidiary Extreme Pump
Solutions LLC. Product lines including Electric Submersible Pumps
and the future development of an Electromagnetic Pump
technology.
DIVERGENT Energy Services Corp., 2020, 715 – 5th Ave SW,
Calgary, AB T2P 2X6, (403) 543-0060, (403) 543-0069 (fax),
www.divergentenergyservices.com
FORWARD LOOKING STATEMENTSThis
press release contains forward-looking statements, including,
without limitation, statements pertaining to anticipated future
operational activity levels of Divergent and of a majority of its
customers, and statements pertaining to interest payments on the
Company’s debentures. All statements included herein, other than
statements of historical fact, are forward-looking information and
such information involves various risks and uncertainties,
including: the risk that the anticipated slowdown in sales and
service of submersible pumps by Divergent’s customers lasts longer
than expected or impacts Divergent’s revenues more severely than
expected, the risk that the COVID-19 pandemic and the low oil and
gas price environment cause additional negative effects on
Divergent’s business, the risk that the suspension of trading of
the Company’s common shares by the TSXV cannot be lifted in a
timely manner or at all, and the risk that the Company cannot
remedy the outstanding interest payments under the terms of its
debenture indenture in a timely manner or at all . There can be no
assurance that such information will prove to be accurate, and
actual results and future events could differ materially from those
anticipated in such information. A description of assumptions used
to develop such forward-looking information and a description of
risk factors that may cause actual results to differ materially
from forward-looking information can be found in the Company's
disclosure documents on the SEDAR website at www.sedar.com.
Forward-looking statements are based on estimates and opinions of
management of the Company at the time the information is presented,
including expectations provided to Divergent by its customers. The
Company may, as considered necessary in the circumstances, update
or revise such forward-looking statements, whether as a result of
new information, future events or otherwise, but the Company
undertakes no obligation to update or revise any forward-looking
statements, except as required by applicable securities laws.
This press release contains financial outlook
information ("FOFI") about prospective revenue reductions, which
are subject to the same assumptions, risk factors, limitations, and
qualifications as set forth in the above paragraphs. FOFI contained
in this press release was made as of the date hereof and was
provided for the purpose of providing an update regarding an
anticipated material reduction in near-term revenue. Divergent
disclaims any intention or obligation to update or revise any FOFI
contained in this press release, whether as a result of new
information, future events or otherwise, unless required pursuant
to applicable law. Readers are cautioned that the FOFI contained in
this press release should not be used for purposes other than for
which it is disclosed herein.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
(Not for dissemination in the United States of
America)
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