FOR: STRAD ENERGY SERVICES LTD.
TSX SYMBOL: SDY
Date issue: May 10, 2017
Time in: 7:06 PM e
Attention:
CALGARY, ALBERTA–(Marketwired – May 10, 2017) –
The following press release replaces the one disseminated on May 10, 2017 at
18:08 ET. There was an error in the conference call section displaying an
incorrect number. The corrected conference call information can be found below:
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES (“U.S.”)
The news release contains “forward-looking information and statements” within
the meaning of applicable securities laws. For full disclosure of the
forward-looking information and statements and the risks to which they are
subject, see the “Cautionary Statement Regarding Forward-Looking Information
and Statements” later in this news release.
Strad Energy Services Ltd., (“Strad” or the “Company”) (TSX:SDY), a North
American-focused, energy services company, today announced its financial
results for the three months ended March 31, 2017. All amounts are stated in
Canadian dollars unless otherwise noted.
FIRST QUARTER SELECTED FINANCIAL AND OPERATIONAL HIGHLIGHTS:
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— Revenue of $27.7 million increased 81% compared to $15.3 million for the
same period in 2016;
— Adjusted EBITDA(1) of $4.5 million compared to $0.4 million for the same
period in 2016;
— Loss per share was $(0.04) compared to $(0.08) for the same period in
2016;
— On February 7, 2017, the Company closed a bought deal financing with a
syndicate of underwriters. A total of 8,928,572 Class A shares (“common
shares”) were issued, including 1,164,596 common shares issued pursuant
to the exercise of the over-allotment option, for gross proceeds of
$15.0 million. Share issue costs of $1.0 million were incurred in
relation to the financing;
— On February 15, 2017, the Company closed the strategic acquisition of
Got Mats?, a private company, located in Elkhorn, Manitoba.
Consideration of $4.5 million was paid, consisting of $1.0 million in
cash and the issuance of 2,143,375 common shares, valued at the closing
February 15, 2017, share price of $1.65;
— On February 22, 2017, the Company closed the acquisition of two private
companies, located in Fort St. John, British Columbia. Consideration of
$2.8 million was paid, consisting of $1.8 million of cash, and the
issuance of 561,798 common shares, valued at the closing February 22,
2017, share price of $1.83 per share;
— Capital additions totaled $3.5 million during the first quarter of 2017;
and
— Total funded debt(2) to EBITDA(3) ratio was 1.8 : 1 at the end of the
first quarter of 2017.
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Notes:
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(1) Earnings before interest, taxes, depreciation and amortization and other
adjustments (“adjusted EBITDA”) is not a recognized measure under IFRS;
see “Non-IFRS Measures Reconciliation”.
(2) Funded debt includes bank indebtedness plus long-term debt plus current
and long-term obligations under finance lease less cash.
(3) EBITDA is based on trailing twelve months adjusted EBITDA plus share
based payments, plus additional one time charges.
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“Improving customer sentiment during the first quarter of 2017 combined with
strategic acquisitions completed over the past nine months have resulted in a
significant improvement in our financial performance compared to the first
quarter of 2016,” said Andy Pernal, President and Chief Executive Officer. “In
Canada, our business benefited from higher utilization of our expanded surface
equipment fleet, increased rig activity levels and challenging weather
conditions which resulted in the early activation of our matting fleet. In the
U.S., market conditions continued to be challenging from a pricing perspective
in our operating regions despite increases in demand during the first quarter.”
“We improved our financial flexibility and balance sheet strength through the
successful completion of the bought deal financing as well as through cost
management to ensure efficiencies gained over the past two years are maintained
as the industry recovers and our business grows,” said Michael Donovan, Chief
Financial Officer of Strad. “During the first quarter, we allocated $3.5
million to capital additions primarily to support the growth of our matting
business and energy infrastructure customer vertical in the U.S. and Canada.”
The Company is also announcing the retirement of Mr. John Hagg from the
Company’s Board of Directors effective May 31, 2017. Strad’s Chairman of the
Board, Rob Grandfield, said, “On behalf of Strad, I would like to extend the
Company’s sincere thanks to John for his service to Strad over the last 10
years including his years as Chairman of the Board. We wish him all the best
with his retirement.”
FIRST QUARTER FINANCIAL HIGHLIGHTS
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($000’s, except per share amounts) Three months ended March 31,
————————————–
2017 2016 % Chg.
Revenue 27,660 15,258 81
—————————————————————————-
Adjusted EBITDA(1) 4,496 398 1,030
Adjusted EBITDA as a % of revenue 16% 3%
Per share ($), basic 0.08 0.01 700
Per share ($), diluted 0.08 0.01 700
—————————————————————————-
Net loss (2,347) (2,994) 22
Per share ($), basic (0.04) (0.08) 50
Per share ($), diluted (0.04) (0.08) 50
—————————————————————————-
Funds from operations(2) 5,527 1,737 218
Per share ($), basic 0.08 0.03 167
Per share ($), diluted 0.08 0.03 167
—————————————————————————-
Capital expenditures(3) 3,470 421 724
—————————————————————————-
Total assets 194,094 154,960 25
Long-term debt 15,589 15,500 1
Total long-term liabilities 27,601 22,111 25
—————————————————————————-
Common shares – end of period (‘000’s) 60,013 37,280
Weighted avg common shares (‘000’s)
Basic 55,643 36,944
Diluted 55,643 36,944
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Notes:
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(1) Earnings before interest, taxes, depreciation and amortization and other
adjustments (“adjusted EBITDA”) is not a recognized measure under IFRS;
see “Non-IFRS Measures Reconciliation”.
(2) Funds from operations is cash flow from operating activities excluding
changes in non-cash working capital. Funds from operations is not a
recognized measure under IFRS; see “Non-IFRS Measures Reconciliation”.
(3) Includes assets acquired under finance lease and purchases of intangible
assets.
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FINANCIAL POSITION AND RATIOS
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As at March 31, As at December
($000’s except ratios) 2017 2016
————— —————
Working capital(1) 17,495 15,636
Funded debt(2) 19,289 29,025
Total assets 194,094 185,321
Funded debt to EBITDA(3) 1.8 : 1.0 3.2 : 1.0
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Notes:
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(1) Working capital is calculated as current assets less current
liabilities.
(2) Funded debt includes bank indebtedness plus long-term debt plus current
and long-term obligations under finance lease less cash.
(3) EBITDA is based on trailing twelve months adjusted EBITDA plus share
based payments, plus additional one time charges. See “Non-IFRS Measures
Reconciliation”.
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FIRST QUARTER RESULTS
Strad reported an increase in revenue and adjusted EBITDA of 81% and 1,030%,
respectively during the three months ended March 31, 2017, compared to the same
period in 2016. Strad’s first quarter results were impacted by higher drilling
activity levels in the WCSB region and slightly higher revenue from the U.S.
Operations offset by lower overall Product Sales compared to the prior period.
Despite the overall increase in drilling activity and utilization of Strad’s
equipment fleets, pricing continued to be challenging across all of the
Company’s operating regions muting the impact of higher activity levels on
revenue during the three months ended March 31, 2017. Adjusted EBITDA margin
percentage increased 16% compared to 3% in the prior year, due to higher
utilization and a relatively fixed cost structure.
Strad’s Canadian Operations reported an increase in revenue and adjusted EBITDA
of 144% and 183%, respectively, during the three months ended March 31, 2017,
compared to the same period in 2016. Increased revenue was a result of higher
drilling activity throughout the first quarter and a corresponding increase in
surface equipment utilization and an increase in the surface equipment fleet
due to the acquisitions completed in the third quarter of 2016 and the first
quarter of 2017. These revenue gains were offset by lower pricing during the
first quarter of 2017 compared to the same period in 2016. Revenue during the
first quarter was further impacted by the deployment of Strad’s matting fleet
earlier in the 2017 season compared to the prior year.
Strad’s U.S. Operations reported an increase in revenue of 6% and an increase
in adjusted EBITDA of 146% compared to the same period in 2016. Rig counts in
two of Strad’s targeted U.S. resource plays were also higher during the first
three months of 2017 compared to the same period in 2016. Rig counts in the
Bakken, Rockies and Marcellus regions changed by (6)%, 56%, and 40%,
respectively.
Strad’s Product Sales operations reported a decrease in revenue of 13%,
primarily the result of a decrease in rental fleet equipment sales in the three
months ending March 31, 2017, as compared to the same period in 2016.
During the first quarter of 2017, capital expenditures were $1.3 million in
Canada and $2.2 million in the U.S. Capital expenditures related primarily to
wood matting additions in Canada and the U.S. Strad’s 2017 capital budget of
$15.0 million will be evaluated during the year based on affordability and
activity levels.
RESULTS OF OPERATIONS
Canadian Operations
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Three months ended March 31,
————————————–
($000’s) 2017 2016 % chg.
Revenue 20,946 8,575 144
Operating expenses 14,711 5,814 153
Selling, general and administrative 1,383 1,076 29
Share based payments 84 –
Net income 1,599 440 266
Adjusted EBITDA(1) 4,768 1,685 183
Adjusted EBITDA as a % of revenue 23% 20%
Capital expenditures(2) 1,260 83 1,418
Gross capital assets 157,446 114,108 38
Total assets 123,519 74,779 65
Equipment Fleet:
Surface Equipment 4,100 2,600 58
Utilization % (3) 41% 20%
Matting 64,200 48,800 32
Utilization % 39% 36%
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Notes:
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(1) Earnings before interest, taxes, depreciation and amortization and other
adjustments (“adjusted EBITDA”) is not a recognized measure under IFRS;
see “Non-IFRS Measures Reconciliation”.
(2) Includes assets acquired under finance lease and purchases of intangible
assets.
(3) Equipment utilization includes surface and matting equipment on rent
only and is calculated using gross asset value.
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Revenue for the three months ended March 31, 2017, of $20.9 million increased
144% compared to $8.6 million for the same period in 2016. Increased revenue
during the quarter was primarily a result of higher utilization in matting and
surface equipment rentals as compared to Q1 2016. The increase in utilization
is partially the result of the acquisitions that occurred in the third quarter
of 2016 (Redneck acquisition) and first quarter of 2017 (Got Mats? acquisition)
as well as an increase in drilling activity levels during the first quarter of
2017. Industry rig counts increased by approximately 89% during the three
months ended March 31, 2017, as compared to the same period in 2016. These
factors were offset by a slight decrease in prices for the three months ended
March 31, 2017, as compared to the same period in 2016.
During the first quarter, revenue from energy infrastructure projects was
approximately $7.9 million or 38% of total revenue for Canadian Operations.
This has increased from $3.1 million of 36% of total Canadian Operations
revenue in the first quarter of 2016.
During the first quarter, Strad’s matting rental fleet increased to
approximately 64,200 pieces, compared to approximately 48,800 pieces as at
March 31, 2016. Part of the increase was due to the Got Mats? acquisition that
was completed in February 2017. Utilization increased by 8% during the first
quarter of 2017, compared to the first quarter of 2016, due to the increase in
energy infrastructure projects. During the first quarter, Strad’s surface
equipment fleet increased to approximately 4,100 pieces, compared to
approximately 2,600 pieces as at March 31, 2016. A key driver to the increase
in fleet size was the Redneck acquisition in the third quarter of 2016.
Utilization increased by 105% during the first quarter of 2017, compared to the
same period in 2016, due to increased market share resulting from third quarter
2016 acquisition of Redneck and the first quarter 2017 acquisitions, as well as
an increase in drilling activity.
Adjusted EBITDA for the three months ended March 31, 2017, of $4.8 million,
increased 183% compared to $1.7 million for the same period in 2016. Adjusted
EBITDA as a percentage of revenue, for the three months ended March 31, 2017,
increased to 23% compared to 20% for the same period in 2016.
Operating expenses for the three months ended March 31, 2017, of $14.7 million
increased 153% compared to $5.8 million for the same period in 2016. The
increase in operating expenses during the first three months of 2017 is a
result of increased activity levels, utilization rates, and fleet size, as well
as an increase in repairs and maintenance costs, as compared to the same period
in 2016. An increase in repairs and maintenance is expected during periods
where utilization rates increase after a long period of lower utilization as
the Company incurs reactivation costs prior to deployment.
Selling, general and administrative costs (“SG&A”) for the three months ended
March 31, 2017, of $1.4 million increased 29% compared to $1.1 million for the
same period in 2016. SG&A costs increased as a result of the third quarter 2016
Redneck acquisition and first quarter 2017 acquisitions.
U.S. Operations
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Three months ended March 31,
—————————————-
($000’s) 2017 2016 % chg.
Revenue 5,066 4,786 6
Operating expenses 3,952 4,130 (4)
Selling, general and administrative 896 1,092 (18)
Share based payments 17 –
Net loss (2,207) (1,910) (16)
Adjusted EBITDA(1) 201 (436) (146)
Adjusted EBITDA as a % of revenue 4% (9)%
Capital expenditures(2) 2,185 296 638
Gross capital assets 141,305 142,458 (1)
Total assets 69,644 82,491 (16)
Equipment Fleet:
Surface Equipment 2,050 2,070 (1)
Utilization % (3) 25% 18%
Matting 18,600 12,550 48
Utilization % 18% 20%
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Notes:
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(1) Earnings before interest, taxes, depreciation and amortization and other
adjustments (“adjusted EBITDA”) is not a recognized measure under IFRS;
see “Non-IFRS Measures Reconciliation”.
(2) Includes assets acquired under finance lease and purchases of intangible
assets.
(3) Equipment utilization includes surface and matting equipment on rent
only and is calculated using gross asset value.
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Revenue for the three months ended March 31, 2017, increased 6% to $5.1 million
from $4.8 million for the same period in 2016. The increase in revenue is due
to a combination of higher surface equipment utilization rates and a
strengthened U.S. dollar when compared to the same period in 2016, which is
slightly offset by price declines quarter-over-quarter. The increase in surface
equipment utilization is the result of higher rig counts in the Rockies and
Marcellus resource plays. Average rig counts in the Rockies and Marcellus
regions increased by 56%, and 40%, respectively, during the first three months
of 2017 compared to the same quarter in 2016.
The U.S. matting fleet increased by 6,050 pieces to 18,600 as at March 31,
2017, compared to 12,550 pieces as at March 31, 2016, which increased revenue
generated from the matting business and was partially offset by a decrease in
utilization from 20% in the first quarter of 2016 to 18% during the first
quarter of 2017. The U.S. surface equipment fleet decreased slightly by 20
pieces of equipment to 2,050 pieces as at March 31, 2017, compared to 2,070
pieces as at March 31, 2016.
Adjusted EBITDA for the three months ended March 31, 2017, increased to $0.2
million compared to $(0.4) million for the same period in 2016. Adjusted EBITDA
as a percentage of revenue, for the three months ended March 31, 2017, was 4%
compared to (9)% for the same period in 2016. The increase in both adjusted
EBITDA and adjusted EBITDA as a percentage of revenue is primarily due to an
increase in utilization and activity levels, offset by lower pricing in the
first quarter of 2017 compared to the same period in 2016.
Operating expenses for the three months ended March 31, 2017, of $4.0 million
decreased 4% compared to $4.1 million for the same period in 2016. SG&A costs
for the three months ended March 31, 2017, of $0.9 million decreased 18%
compared to $1.1 million for the same period in 2016. The decrease in operating
and SG&A expenses is due to cost reductions implemented by management including
staff reductions and reductions in discretionary spending.
Product Sales
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Three months ended March 31,
—————————————
($000’s) 2017 2016 % chg.
Revenue 1,648 1,897 (13)
Operating expenses 1,083 1,845 (41)
Selling, general and administrative 50 – –
Share based payments – –
Net loss (270) (294)
Adjusted EBITDA(1) 515 51 910
Adjusted EBITDA as a % of revenue 31% 3%
Capital expenditures(2) 25 –
Total assets 27 67 (60)
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Notes:
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(1) Earnings before interest, taxes, depreciation and amortization and other
adjustments (“adjusted EBITDA”) is not a recognized measure under IFRS;
see “Non-IFRS Measures Reconciliation”.
(2) Includes assets acquired under finance lease and purchases of intangible
assets.
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Product Sales are comprised of in-house manufactured products sold to external
customers, third party equipment sales to existing customers and sales of
equipment from Strad’s existing fleet to customers.
Revenue for the three months ended March 31, 2017, decreased 13% to $1.6
million from $1.9 million for the same period in 2016, resulting primarily from
lower rental asset equipment sales. During the three months ended March 31,
2017, Product Sales consisted of $0.2 million of in-house manufactured
products, $0.5 million of third party equipment sales and $0.9 million of
rental fleet sales compared to $0.4 million, $0.1 million and $1.4 million,
respectively, during the same period in 2016.
Adjusted EBITDA for the three months ended March 31, 2017, increased to $0.5
million from $50 thousand for the same period in 2016. Adjusted EBITDA as a
percentage of revenue, for the three months ended March 31, 2017, was 31%
compared to 3% for the same period in 2016.
Operating expenses for the three months ended March 31, 2017, of $1.1 million
decreased 41% compared to $1.8 million for the same period in 2016. Operating
expenses vary with individual transactions and business activity levels.
OUTLOOK
The increase in drilling activity we experienced during the fourth quarter of
2016 continued into the first quarter of 2017 resulting in improved revenue and
adjusted EBITDA quarter-over-quarter. We particularly noted an increase in
demand for our services in the WCSB during the first quarter where the average
rig count increased from 158 in the first quarter of 2016 to 298 in the first
quarter of 2017. The addition of Redneck in the third quarter of 2016 had a
positive impact on our results this quarter due to our expanded equipment
offering in the Deep Basin, one of the most active oil and gas basins in North
America.
Pricing for the majority of our products and services during the first quarter
remained at levels consistent with the fourth quarter of 2016 as pricing with
the majority of our customers was agreed to in the last six months of 2016. Wet
weather conditions in the WCSB resulted in an early start to the matting
season. Stronger demand and a shortage of matting products translated into
double digit price increases at the end of the first quarter and into the
second quarter. We expect pricing in this segment to remain strong through the
2017 matting season, assuming demand levels continue. Increasing prices for all
of our products and services will continue to be a primary focus for our team
as activity levels continue to improve year-over-year.
During the first quarter, we continued to progress on our strategic priorities
being continued growth of the energy infrastructure customer vertical,
continued focus on increasing our size and scale and maintaining our lean cost
structure.
Energy infrastructure revenue accounted for 32% of total revenue, 38% of total
Canadian Operations revenue and 10% of total U.S. Operations revenue during the
first quarter of 2017. We added approximately 4,050 sheets of wood matting to
our U.S. fleet, which were subsequently deployed to various energy
infrastructure projects in the U.S. We expect this segment to increasingly
become a more significant portion of our U.S. Operations revenue as we continue
to add new customers.
Growing our size and scale using a combination of growth capital and tuck-in
acquisitions continued during the first quarter with the addition of Got Mats?
and two private companies in British Columbia along with deploying $3.5 million
in capital expenditures of the total $15.0 million 2017 capital budget. New
capital was primarily allocated to matting opportunities in the U.S. to support
the growth of the energy infrastructure customer vertical. We expect to deploy
the remainder of our 2017 capital budget primarily to matting in both Canada
and the U.S. as opportunities arise.
Looking ahead to the second quarter of 2017 and beyond, we expect the trend of
higher activity levels year-over-year and further price increases in both
Canada and the U.S. to continue, assuming current demand for our products and
services continues throughout 2017. We will continue our focus on managing our
cost structure as activity levels increase to ensure the efficiencies we gained
over the past two years are maintained driving margin improvement. Maintaining
our balance sheet strength and financial flexibility is key to ensuring we are
positioned to take advantage of further opportunities.
LIQUIDITY AND CAPITAL RESOURCES
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December 31,
($000’s) March 31, 2017 2016
————— —————
Current assets 35,930 31,852
Current liabilities 18,435 16,216
————— —————
Working capital(1) 17,495 15,636
Banking facilities
Operating facility 2,776 1,478
Syndicated revolving facility 15,589 26,501
————— —————
Total facility borrowings 18,365 27,979
Total credit facilities(2) 48,500 48,500
————— —————
Unused credit capacity 30,135 20,521
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Notes:
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(1) Working capital is calculated as current assets less current
liabilities.
(2) Facilities are subject to certain limitations on accounts receivable,
inventory, and net book value of fixed assets and are secured by a
general security agreement over all of the Company’s assets. As at March
31, 2017, Strad had access to $48.5 million of credit facilities.
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As at March 31, 2017, working capital was $17.5 million compared to $15.6
million at December 31, 2016. The change in current assets is a result of a 16%
increase in accounts receivable to $28.3 million for the first quarter of 2017
compared to $24.5 million for the fourth quarter of 2016. The increase in
accounts receivable is due to an increase in rental equipment related revenue
during the first quarter as compared to the fourth quarter of 2016. Inventory
decreased by 8% to $3.6 million at March 31, 2017, from $3.9 million at
December 31, 2016, and prepaid expenses remained consistent at $1.1 million.
The decrease in inventory relates to the normal course of business.
The change in current liabilities is a result of a 7% increase in accounts
payable and accrued liabilities to $14.9 million at March 31, 2017, compared to
$13.9 million at year end. The accounts payable increase correlates to the
increase in activity and operating expenses during the first quarter of 2017
compared to the fourth quarter of 2016. Bank indebtedness increased to $2.8
million at the end of the first quarter compared to bank indebtedness of $1.5
million for the fourth quarter of 2016.
Funds from operations for the three months ended March 31, 2017, increased to
$5.5 million compared to $1.7 million for the three months ended March 31,
2016. Capital expenditures totaled $3.5 million for the three months ended
March 31, 2017. Strad’s total facility borrowing decreased by $9.6 million for
the three months ended March 31, 2017, compared to the fourth quarter of 2016.
Management monitors funds from operations and the timing of capital additions
to ensure adequate capital resources are available to fund Strad’s capital
program.
As at March 31, 2017, the Company’s syndicated banking facility consists of an
operating facility with a maximum principal amount of $7.0 million CAD and $5.0
million USD, and a $36.5 million syndicated revolving facility, both of which
are subject to certain limitations on accounts receivable, inventory and net
book value of fixed assets and are secured by a general security agreement over
all of the Company’s assets. As at March 31, 2017, the Company has access to
the maximum credit facilities. The syndicated banking facility bears interest
at bank prime plus a variable rate, which is dependent on the Company’s funded
debt to EBITDA ratio. The Company’s syndicated banking facility matures on
September 29, 2018.
Based on the Company’s current credit facility, the interest rate will increase
to bank prime plus 3.50% on prime rate advances and at the prevailing rate plus
a stamping fee of 4.50% on bankers’ acceptances during the covenant waiver
period which continues through the first quarter of 2017. The covenant waiver
was obtained as a result of the Redneck acquisition and not as a result of any
covenant breach. For the three months ended March 31, 2017, the overall
effective rates on the operating facility and revolving facility were 5.30% and
5.60%, respectively. As of March 31, 2017, $2.8 million was drawn on the
operating facility and $15.6 million was drawn on the revolving facility.
Required payments on the revolving facility are interest only.
As at March 31, 2017, the Company was in compliance with all of the financial
covenants under its credit facilities.
The relevant definitions of financial debt covenant ratio terms as set forth in
the Company’s syndicated banking facility are as follows:
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— Funded debt includes bank indebtedness plus long-term debt plus current
and long-term obligations under finance lease less cash.
— EBITDA is based on trailing twelve months adjusted EBITDA plus share
based payments, plus charges.
— Interest expense ratio is calculated as the ratio of trailing twelve
months adjusted EBITDA plus share based payments to trailing twelve
months interest expense on loans and borrowings.
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The above noted definitions are not recognized under IFRS and are provided
strictly for the purposes of the financial debt calculation.
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As at March 31, As at December
Financial Debt Covenants 2017 31, 2016
—————————————————————————-
Funded debt to EBITDA ratio (not to exceed
5.5:1.0)
Funded debt 19,289 29,025
EBITDA 10,774 9,119
—————————————————————————-
Ratio 1.8 3.2
—————————————————————————-
—————————————————————————-
EBITDA to interest coverage ratio (no less
than 1.75:1.0)
EBITDA 10,774 9,119
Interest expense 1,584 1,557
—————————————————————————-
Ratio 6.8 5.9
—————————————————————————-
—————————————————————————-
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NON-IFRS MEASURES RECONCILIATION
Certain supplementary measures in this press release do not have any
standardized meaning as prescribed under IFRS and, therefore, are considered
non-IFRS measures. These measures are described and presented in order to
provide shareholders and potential investors with additional information
regarding the Company’s financial results, liquidity and its ability to
generate funds to finance its operations. These measures are identified and
presented, where appropriate, together with reconciliations to the equivalent
IFRS measure. However, they should not be used as an alternative to IFRS,
because they may not be consistent with calculations of other companies. These
measures are further explained below.
Earnings before interest, taxes, depreciation and amortization and other
adjustments (“adjusted EBITDA”) 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 results generated by
the Company’s principal business activities prior to consideration of how those
activities are financed or how the results are taxed. Adjusted EBITDA is
calculated as net income (loss) plus interest, finance fees, taxes,
depreciation and amortization, loss on disposal of property, plant and
equipment, loss on foreign exchange, less gain on foreign exchange and gain on
disposal of property, plant and equipment. Segmented adjusted EBITDA is based
upon the same calculation for defined business segments, which are comprised of
Canadian Operations, U.S. Operations and Product Sales.
Funds from operations are cash flow from operating activities excluding changes
in non-cash working capital. It is a supplemental measure to gauge performance
of the Company before non-cash items. Working capital is calculated as current
assets minus current liabilities. Working capital, cash forecasting and banking
facilities are used by Management to ensure funds are available to finance
growth opportunities.
Funded debt is calculated as bank indebtedness plus long-term debt plus current
and long-term portion of finance lease obligations less cash.
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Reconciliation of Funds from Operations
($000’s)
Three months ended March 31,
—————————————————————————-
2017 2016
—————————————————————————-
Net cash generated from operating activities 3,541 5,246
Less:
Changes in non-cash working capital (1,986) 3,509
—————————————————————————-
Funds from Operations 5,527 1,737
—————————————————————————-
Reconciliation of Adjusted EBITDA
($000’s)
Three months ended March 31,
—————————————————————————-
2017 2016
—————————————————————————-
Net loss $ (2,347) $ (2,994)
Add (deduct):
Depreciation and amortization 6,383 5,149
Gain on disposal of PP&E (78) (193)
Deferred income tax (recovery) expense 116 (1,201)
Financing fees 73 47
Interest expense 436 244
Gain on foreign exchange (87) (437)
Current income tax recovery – (217)
—————————————————————————-
Adjusted EBITDA 4,496 398
—————————————————————————-
Reconciliation of quarterly non-IFRS measures
($000’s)
Three months ended
—————————————————————————-
Mar 31, Dec 31, Sep 30, Jun 30,
2017 2016 2016 2016
—————————————————————————-
Net loss $ (2,347) $ (3,105) $ (3,746) $ (6,958)
Add:
Depreciation and amortization 6,383 7,610 4,930 4,516
Gain on disposal of PP&E (78) (105) (35) (268)
(Gain) loss on foreign
exchange (87) 123 17 3
Current income tax (recovery)
expense – 204 (242) (918)
Deferred income tax
(recovery) expense 116 (403) (39) 1,438
Interest expense 436 415 318 157
Finance fees 73 43 44 47
—————————————————————————-
Adjusted EBITDA 4,496 4,782 1,247 (1,983)
—————————————————————————-
Three months ended
—————————————————
Mar 31, 2016 Dec 31, 2015 Sep 30, 2015 Jun 30, 2015
—————————————————
Net loss $ (2,994) $ (8,316) $ (20,362) $ (1,887)
Add:
Depreciation and
amortization 5,149 7,126 9,616 7,020
Gain on disposal of PP&E (193) (99) (30) (80)
(Gain) loss on foreign
exchange (437) 216 380 (81)
Current income tax
recovery (217) (677) (432) (18)
Deferred income tax
recovery (1,201) (4,033) (2,776) (1,541)
Interest expense 244 427 311 391
Impairment loss – 7,822 17,277 –
Finance fees 47 34 37 50
—————————————————————————-
Adjusted EBITDA 398 2,500 4,021 3,854
—————————————————————————-
Reconciliation of funded debt
($000’s)
Three months Year Ended
ended March 31, December 31,
2017 2016
—————————————————————————-
Bank indebtedness 2,776 1,478
Long term debt 15,589 26,501
Current and long term obligations under
finance lease 924 1,046
—————————————————————————-
Total funded debt 19,289 29,025
—————————————————————————-
/T/
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
Certain statements and information contained in this press release constitute
forward-looking information and statements within the meaning of applicable
securities laws. The use of any of the words “expect”, “plan”, “continue”,
“estimate”, “anticipate”, “potential”, “targeting”, “intend”, “could”, “might”,
“should”, “believe”, “may”, “predict”, or “will” and similar expressions are
intended to identify forward-looking information or statements. More
particularly, this press release contains forward-looking statements concerning
future capital expenditures of the Company and funding thereof, changes and
expectations in margins to be experienced by Strad, anticipated cash flow,
debt, demand for the Company’s products and services, drilling activity in
North America, pricing of the Company’s products and services, introduction of
new products and services and the potential for growth and expansion of certain
components of the Company’s business, anticipated benefits from cost reductions
and timing thereof, and expected exploration and production industry activity
including the effects of industry trends on demand for the Company’s products.
These statements relate to future events or to the Company’s future financial
performance and involve known and unknown risks, uncertainties and other
factors that may cause the Company’s actual results, levels of activity,
performance or achievements to be materially different from future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements.
Various assumptions were used in drawing the conclusions or making the
projections contained in the forward-looking statements throughout this press
release. The forward-looking information and statements included in this press
release are not guarantees of future performance and should not be unduly
relied upon. Forward-looking statements are based on current expectations,
estimates and projections that involve a number of risks and uncertainties,
which could cause actual results to differ materially from those anticipated
and described in the forward-looking statements. Such information and
statements involve known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from those
anticipated in such forward-looking information or statements. In addition to
other material factors, expectations and assumptions which may be identified in
this press release and other continuous disclosure documents of the Company
referenced herein, assumptions have been made in respect of such
forward-looking statements and information regarding, among other things: the
Company will continue to conduct its operations in a manner consistent with
past operations; the general continuance of current industry conditions;
anticipated financial performance, business prospects, impact of competition,
strategies, the general stability of the economic and political environment in
which the Company operates; exchange and interest rates; tax laws; the
sufficiency of budgeted capital expenditures in carrying out planned
activities; the availability and cost of labour and services and the adequacy
of cash flow; debt and ability to obtain financing on acceptable terms to fund
its planned expenditures, which are subject to change based on commodity
prices; market conditions and future oil and natural gas prices; and potential
timing delays. Although Management considers these material factors,
expectations and assumptions to be reasonable based on information currently
available to it, no assurance can be given that they will prove to be correct.
Readers are cautioned that the foregoing lists of factors are not exhaustive.
Additional information on these and other factors that could affect the
Company’s operations and financial results are included in reports on file with
the Canadian Securities Regulatory Authorities and may be accessed through the
SEDAR website (www.sedar.com) or at the Company’s website. The forward-looking
statements and information contained in this press release are expressly
qualified by this cautionary statement. The Company does not undertake any
obligation to publicly update or revise any forward-looking statements or
information, whether as a result of new information, future events or
otherwise, except as may be required by applicable securities laws.
This press release shall not constitute an offer to sell, nor the solicitation
of an offer to buy, any securities in the United States, nor shall there be any
sale of securities mentioned in this press release in any state in the United
States in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
FIRST QUARTER EARNINGS CONFERENCE CALL
Strad Energy Services Ltd. has scheduled a conference call to begin promptly at
8:00 a.m. MT (10:00 a.m. ET) on Thursday, May 11th, 2017.
The conference call dial in number is 1-844-388-0561, followed by Conference ID
code 93452009
The conference call will also be accessible via webcast at www.stradenergy.com.
A replay of the call will be available approximately one hour after the
conference call ends until Thursday, May 18th, 2017, at 1:00pm ET. To access
the replay, call 1-855-859-2056, followed by pass code 93452009.
/T/
Strad Energy Services Ltd.
Interim Consolidated Statement of Financial Position
(Unaudited)
—————————————————————————-
As at March 31, As at December
(in thousands of Canadian dollars) 2017 31, 2016
$ $
Assets
Current assets
Cash 877 369
Trade receivables 28,303 24,460
Inventories 3,611 3,890
Prepaids and deposits 1,052 1,111
Income taxes receivable 2,087 2,022
——————————–
35,930 31,852
Non-current assets
Property, plant and equipment 155,074 150,622
Intangible assets 621 665
Long term assets 1,981 2,023
Deferred income tax assets 488 159
——————————–
Total assets 194,094 185,321
——————————–
——————————–
Liabilities
Current liabilities
Bank indebtedness 2,776 1,478
Accounts payable and accrued liabilities 14,908 13,893
Current portion of obligations under finance
lease 751 845
——————————–
18,435 16,216
Non-current liabilities
Long-term debt 15,589 26,501
Obligations under finance lease 173 201
Deferred income tax liabilities 11,839 10,321
——————————–
Total liabilities 46,036 53,239
Equity
Share capital 154,755 135,935
Contributed surplus 12,381 12,243
Accumulated other comprehensive income 26,328 26,963
Deficit (45,406) (43,059)
——————————–
Total equity 148,058 132,082
——————————–
Total liabilities and equity 194,094 185,321
——————————–
——————————–
Strad Energy Services Ltd.
Interim Consolidated Statement of Loss and Comprehensive Loss
For the three months ended March 31, 2017 and 2016
(Unaudited)
—————————————————————————-
(in thousands of Canadian dollars,
except per share amounts)
Three Months Ended
March 31,
2017 2016
$ $
Revenue 27,660 15,258
Expenses
Operating expenses 19,746 11,789
Depreciation 6,316 4,944
Amortization of intangible assets 43 181
Amortization of long term assets 24 24
Selling, general and administration 3,280 3,030
Share-based payments 138 41
Gain on disposal of property, plant and
equipment (78) (193)
Foreign exchange gain (87) (437)
Finance fees 73 47
Interest expense 436 244
————————————
Loss before income tax (2,231) (4,412)
Income tax expense (recovery) 116 (1,418)
————————————
Loss for the period (2,347) (2,994)
————————————
————————————
Other comprehensive loss
Items that may be reclassified
subsequently to net loss
Cumulative translation adjustment (635) (5,790)
————————————
Total comprehensive loss for the period (2,982) (8,784)
————————————
————————————
Loss per share:
Basic $ (0.04) $ (0.08)
Diluted $ (0.04) $ (0.08)
Strad Energy Services Ltd.
Interim Consolidated Statement of Cash Flow
For the three months ended March 31, 2017 and 2016
(Unaudited)
—————————————————————————-
Three months ended
(in thousands of Canadian dollars) March 31,
2017 2016
Cash flow provided by (used in) $ $
(revised)
Operating activities
Loss for the period (2,347) (2,994)
Adjustments for items not affecting cash:
Depreciation and amortization 6,383 5,149
Deferred income tax (recovery) expense 116 (1,201)
Share-based payments 138 41
Interest expense and finance fees 509 291
Unrealized foreign exchange loss (gain) 559 (455)
Gain on disposal of property, plant and
equipment (78) (193)
Book value of used fleet sales in operating
activities 247 1,099
Changes in items of non-cash working capital (1,986) 3,509
——————————–
Net cash generated from operating activities 3,541 5,246
——————————–
Investing activities
Purchase of property, plant and equipment (3,470) (379)
Proceeds from sale of property, plant and
equipment 145 611
Purchase of intangible assets – (42)
Cash paid on business acquisition (2,750) –
Cash assumed on business acquisition 322 –
Changes in items of non-cash working capital (549) (3)
——————————–
Net cash generated from (used in) investing
activities (6,302) 187
——————————–
Financing activities
Proceeds on issuance of long-term debt – 3,000
Repayment of long-term debt (10,912) (3,000)
Repayment of finance lease obligations (net) (258) (178)
Issuance of shareholder loan (net of
repayments) – 58
Interest expense and finance fees (509) (291)
Issuance of common shares 15,000 –
Share issue costs (1,020) –
Changes in items of non-cash working capital (148) (2)
——————————–
Net cash generated from (used in) financing
activities 2,153 (413)
——————————–
Effect of exchange rate changes on cash and
cash equivalents (182) (545)
——————————–
Increase (decrease) in cash and cash
equivalents (790) 4,475
——————————–
Cash and cash equivalents (including bank
indebtedness) – beginning of year (1,109) (2,874)
——————————–
Cash and cash equivalents (including bank
indebtedness) – end of period (1,899) 1,601
——————————–
——————————–
Cash paid for income tax – –
Cash paid for interest 262 262
——————————–
/T/
ABOUT STRAD ENERGY SERVICES LTD.
Strad is a North American energy services company that provides rental
equipment and matting solutions to the oil and gas and energy infrastructure
sectors. Strad focuses on providing complete customer solutions in Canada and
the United States.
Strad is headquartered in Calgary, Alberta, Canada. Strad is listed on the
Toronto Stock Exchange under the trading symbol “SDY”.
– END RELEASE – 10/05/2017
For further information:
Strad Energy Services Ltd.
Andy Pernal
President and Chief Executive Officer
(403) 775-9202
(403) 232-6901 (FAX)
[email protected]
OR
Strad Energy Services Ltd.
Michael Donovan
Chief Financial Officer
(403) 775-9221
(403) 232-6901 (FAX)
[email protected]
www.stradenergy.com
COMPANY:
FOR: STRAD ENERGY SERVICES LTD.
TSX SYMBOL: SDY
INDUSTRY: Energy and Utilities – Oil and Gas
RELEASE ID: 20170510CC0127
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