CWC Energy Services Corp. Announces Third Quarter 2015 Operational and Financial Results
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 11/11/15 -- CWC Energy Services Corp. ("CWC" or the "Company") (TSX VENTURE: CWC) announces the release of its operational and financial results for the three and nine months ended September 30, 2015.
Highlights for the Three Months Ended September 30, 2015
Highlights for the Nine Months Ended September 30, 2015
(1) Please refer to the "Reconciliation of Non-IFRS Measures" section for further information.
Financial and Operational Highlights
Operational Overview
The acquisition of Ironhand Drilling Inc. ("Ironhand") on May 15, 2014 resulted in the aggregation of the well servicing and other oilfield services segments into the Production Services segment, as this acquisition shifted the Company''s internal financial reporting and operational management structure. Management concluded that the well servicing and other oilfield services segments share similar economic characteristics and are also similar in other respects in accordance with IFRS 8.12.
Contract Drilling
Ironhand was acquired on May 15, 2014 and renamed CWC Ironhand Drilling representing our Contract Drilling segment. Our Contract Drilling segment has a fleet of nine telescopic double drilling rigs with depth ratings from 3,200 to 4,500 metres, eight of nine rigs have top drives and the rig fleet has an average age of six years. In Q2 2015 Rig #3 was upgraded to include a Pad Rig Walking System. All of the drilling rigs are well 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.
Contract Drilling revenue of $9.4 million for the quarter and $23.0 million year-to-date 2015 was achieved with a utilization rate of 46% and 34% respectively comparable to the CAODC industry average of 24% for each of the same periods. Drilling activity levels continue to be affected by the global oversupply of crude oil and corresponding collapse in oil prices of 55% which has led our E&P customers to reduce drilling, completions and production maintenance programs to conserve their cash resources until commodity prices recover.
Production Services
CWC is the third largest service rig provider in the WCSB, having a modern fleet of 74 service rigs as at September 30, 2015. The Company''s service rig fleet consists of 41 single, 27 double, and 6 slant rigs. CWC''s fleet is amongst the newest in the WCSB. Rig services include completions, maintenance, workovers and abandonments with depth ratings from 1,500 to 5,000 metres. Given the current downturn in the industry, CWC has chosen to park nine of its service rigs and focus its sales and operational efforts on the remaining 65 service rigs.
CWC''s Class I, II and III coil tubing units have depth ratings from 1,500 to 4,000 metres. As at September 30, 2015, the Company''s fleet of nine coil tubing units consist of five Class I, three Class II and one Class III coil tubing units. The market for the Class III deep coil tubing unit has become extremely competitive with an increased supply of new deep coil tubing units over the last several years having an adverse affect on industry utilization and pricing. In light of these competitive challenges for CWC''s one Class III coil tubing unit, the Company has chosen to focus its sales and operational efforts on its eight Class I and II coil tubing units which are better suited at servicing steam-assisted gravity drainage ("SAGD") wells, which are shallower in depth and more appropriate for these coil tubing units.
Production Services revenue was $11.8 million for the quarter, $39.5 million year-to-date, down $11.8 million (50%) and $39.7 million (50%) respectively year-over-year. Service rig revenue was severely impacted by a reduction in Q3 2015 activity levels to 27% compared to 42% in Q3 2014. E&P customers asked for and were given significant pricing reductions to help them become more competitive given the current commodity price environment and our competitors are working at lower rates to maintain or increase utilizations. Service rig average hourly rates have decreased approximately 13% compared to Q3 2014. Coil tubing utilization was 14% in Q3 2015 compared to 29% in Q3 2014 as lower demand and wet weather conditions delayed start dates on planned customer projects. The decrease of 14% in coil tubing units'' average hourly rate is a function of less SAGD work in Q3 2015 compared to Q3 2014 and overall pricing pressures from our E&P customers. In September 2014, the Company sold its Snubbing assets and business which contributed year-to-date 2014 revenue of $3.0 million and EBITDAS of $0.8 million with no corresponding amounts in year-to-date 2015. In March 2015, CWC suspended its non-core Well Testing business, which contributed year-to-date 2014 revenue of $1.1 million and EBITDAS of ($53) thousand. These Well Testing assets along with other non-core Production Services assets were disposed of in October 2015 resulting in a write down to fair market value and were reclassified on CWC''s balance sheet as assets held for sale.
Capital Expenditures
Year-to-date growth capital spending of $4.4 million was primarily incurred to complete slant service rigs #505 and #506 and supporting equipment in order to further expand our growth in heavy oil and SAGD wells. Additional growth capital was incurred to complete upgrades to Drilling Rig #2 and settle longer lead items on Drilling Rig #10. Maintenance capital spending of $3.9 million has been primarily directed at adding new drill pipe, a Pad Rig Walking System for Drilling Rig #3, required drilling and service rig recertification costs and upgrades, additions to field equipment for the service rig and coil tubing divisions and information technology infrastructure.
CWC revised 2015 capital expenditure budget is expected to be $8.8 million, a 19% decrease from the previously disclosed budget of $10.8 million. The revised capital expenditure budget is comprised of $4.4 million of growth capital and $4.4 million of maintenance and infrastructure capital. The following table summarizes the 2015 revised capital expenditure budget, the capital spending incurred for the nine months ended September 30, 2015 and the remaining capital expenditure budget expected to be incurred for the remainder of 2015:
Outlook
Activity levels in the Canadian oil and natural gas industry continue to be affected by low commodity price as a result of global and regional oversupply of both crude oil and natural gas respectively. WTI started July 2015 at approximately US$60/bbl before dropping to a six year low of approximately US$38/bbl in August 2015 before recovering to approximately US$45/bbl by the end of September 2015. The drop in oil prices during Q3 2015 resulted in reduced activity for drilling and well servicing as our E&P customers delayed their drilling, completions, maintenance and abandonment programs. As oil prices are still approximately US$45/bbl today, Q4 2015 activity levels are not experiencing the traditional ramp up in winter activity as we would normally see at this time of year. Unless crude oil prices increase to the US$60/bbl level over the winter, CWC anticipates Q4 2015 and Q1 2016 activity levels to be similar to Q3 2015. On November 3, 2015 PSAC released its 2016 Canadian Drilling Activity Forecast of 5,150 wells, down 190 wells (3.5%) from its 2015 forecast of 5,340 wells, confirming a relatively flat outlook for 2016.
In response to the lower activity levels and pricing pressures from our E&P customers, CWC has been proactive in reducing our cost structure and cash requirements throughout 2015. Compared to 2014, annualized cash savings initiatives of approximately $32.2 million have been implemented comprised of dividend reductions and DRIP/SDP programs ($12.9 million); capital expenditure reductions ($13.6 million); employee layoffs and compensation reductions ($5.4 million) and reduced selling and administrative expense and interest expense ($0.3 million). These cash saving initiatives are significant and will ensure CWC is able to withstand the current slowdown in our industry.
The Company is currently in discussions with its banking syndicate to relax certain financial covenants in its credit facility for Q4 2015 and 2016. CWC expects these changes to be finalized by late November 2015 and expect our banking syndicate will continue to be supportive of CWC during these challenging times in our industry.
While CWC maintains focus on its cost structure in a lower oilfield services activity environment, it is also mindful of taking advantage of opportunities that may be created during these times in the commodity cycle. Management will continue to evaluate strategic growth opportunities and pursue those it believes will fundamentally position CWC well for the future with the overriding criteria of being able to create long-term shareholder value.
The Interim Financial Statements ("Financial Statements") and Management Discussion and Analysis ("MD&A") for the three and nine month periods ended September 30, 2015 are expected to be finalized, approved by the Company''s Board of Directors and filed on SEDAR at on or about November 25, 2015, the date discussions with the Company''s banking syndicate are expected to be concluded. Given that the Financial Statements and MD&A have not been finalized, readers are cautioned that the financial information contained in this press release may be subject to change and, accordingly, should be treated as preliminary.
About CWC Energy Services Corp.
CWC Energy Services Corp. is a premier contract drilling and well servicing company operating in the Western Canadian Sedimentary Basin with a complementary suite of oilfield services including drilling rigs, service rigs, and coil tubing. The Company''s corporate office is located in Calgary, Alberta, with operational locations in Nisku, Grande Prairie, Slave Lake, Red Deer, Drayton Valley, Lloydminster, Provost, and Brooks, Alberta. The Company''s shares trade on the TSX Venture Exchange under the symbol "CWC".
READER ADVISORY - Neither 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.
This news release contains certain forward-looking information and statements within the meaning of applicable Canadian securities legislation. Certain statements contained in this news release including most of 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 information or 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 activity levels, expectations on the sustainability of future cash flow and earnings and the ability to pay dividends, expectations with respect to oil and natural gas prices, activity levels in various areas, continuing focus on cost saving measures, expectations regarding the level and type of drilling and production and related drilling and well services activity in the WCSB, expectations regarding entering into long term drilling contracts and expanding its customer base, expectations with respect to the potential relaxation of financial covenants in the Company''s credit facility, the timing for the filing of the Financial Statements and MD&A and expectations regarding the business, operations and revenue of the Company in addition to general economic conditions. Although the Company believes that the expectations and assumptions on which such forward-looking information and statements are based are reasonable, undue reliance should not be placed on the forward-looking information and statements because the Company can give no assurances that they will prove to be correct. Since forward-looking information and statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks.
These include, but are not limited to, the risks associated with the drilling and oilfield services sector (ie. demand, pricing and terms for oilfield drilling and services; current and expected oil and 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 and environmental regulations, stock market volatility and the inability to access sufficient capital from external and internal sources and the inability to pay dividends. 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 financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through SEDAR at . The forward-looking information and statements 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 information or statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. Any forward-looking statements made previously may be inaccurate now.
Reconciliation of Non-IFRS Measures
Contacts:
CWC Energy Services Corp.
610, 205 - 5th Avenue SW
Calgary, Alberta T2P 2V7
(403) 264-2177
Duncan T. Au, CPA, CA, CFA
President & Chief Executive Officer
Craig Flint, CPA, CA
Chief Financial Officer
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Datum: 11.11.2015 - 15:35 Uhr
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