CDN NEWS | 
US NEWS 
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./T/
"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./T/
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"./T/
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%/T/
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./T/
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./T/
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./T/
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./T/
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./T/
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)
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)
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)
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)
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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)
----------------------------------------------------------------------------
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)
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)
----------------------------------------------------------------------------
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)
apernal@stradenergy.com
OR
Strad Energy Services Ltd.
Michael Donovan
Chief Financial Officer
(403) 775-9221
(403) 232-6901 (FAX)
mdonovan@stradenergy.com
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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