Calfrac Well Services Ltd. (“Calfrac” or
“the Company”) (TSX: CFW) announces its financial and
operating results for the three and nine months ended
September 30, 2023. The following press release should be read
in conjunction with the management’s discussion and analysis and
interim consolidated financial statements and notes thereto as at
September 30, 2023. Readers should also refer to the
“Forward-looking statements” legal advisory and the section
regarding “Non-GAAP Measures” at the end of this press release. All
financial amounts and measures are expressed in Canadian dollars
unless otherwise indicated. Additional information about Calfrac is
available on the SEDAR website at www.sedarplus.ca, including the
Company’s Annual Information Form for the year ended
December 31, 2022.
CEO’S MESSAGECalfrac overcame
lower than expected utilization in North America to make
significant progress on its key strategic objectives during the
third quarter. The Company leveraged its diverse geographic
footprint in North America and Argentina to generate Adjusted
EBITDA from continuing operations of $91.3 million. Calfrac’s
strong execution in the field combined with its disciplined
approach to capital allocation resulted in the generation of $48.1
million of free cash flow during the quarter, which was used to
strengthen its balance sheet through a $43.7 million reduction in
net debt and the deployment of an additional nine Tier IV dynamic
gas blend (“DGB”) fracturing pumps. Consequently, Calfrac exited
the third quarter of 2023 with a net debt to EBITDA ratio of 0.92
to 1, the lowest in recent history. This strong execution leaves
the Company well-positioned to capitalize on the current oilfield
services market up cycle. Calfrac is currently collaborating with
its customers to optimize completions schedules and anticipates
that steady utilization throughout next year will drive further
improvements in financial performance.
Calfrac’s Chief Executive Officer, Pat Powell
commented: “The Calfrac team took additional steps towards
accomplishing our long-term goals this quarter and I am excited
about our future as we continue to execute on our brand promise to
generate strong returns for our shareholders, reduce debt, and
improve our asset quality in the field.”
SELECT FINANCIAL HIGHLIGHTS – CONTINUING
OPERATIONS
|
Three Months Ended Sep. 30, |
|
Nine Months Ended Sep. 30, |
|
|
2023 |
|
2022 |
|
Change |
|
2023 |
|
2022 |
|
Change |
|
(C$000s, except per share amounts) |
($) |
|
($) |
|
(%) |
|
|
($) |
|
($) |
|
(%) |
|
(unaudited) |
|
|
Revised (1) |
|
|
|
|
Revised (1) |
|
|
|
Revenue |
483,093 |
|
438,338 |
|
10 |
|
|
1,442,879 |
|
1,051,373 |
|
37 |
|
Adjusted EBITDA(1)(2)(3) |
91,286 |
|
94,289 |
|
(3 |
) |
|
262,865 |
|
157,787 |
|
67 |
|
Consolidated cash flows
provided by operating activities |
101,264 |
|
13,753 |
|
636 |
|
|
160,350 |
|
38,694 |
|
314 |
|
Capital expenditures |
50,825 |
|
24,745 |
|
105 |
|
|
116,017 |
|
52,130 |
|
123 |
|
Net income |
97,523 |
|
45,352 |
|
115 |
|
|
184,367 |
|
20,546 |
|
797 |
|
Per share – basic |
1.20 |
|
1.15 |
|
4 |
|
|
2.28 |
|
0.53 |
|
330 |
|
Per share – diluted |
1.09 |
|
1.10 |
|
(1 |
) |
|
2.12 |
|
0.53 |
|
300 |
|
|
|
|
|
|
|
As at |
Sep. 30, |
|
Dec. 31, |
|
Change |
|
|
2023 |
|
2022 |
|
|
(C$000s) |
($) |
|
($) |
|
(%) |
|
(unaudited) |
|
|
|
|
|
Cash and cash equivalents |
23,308 |
|
8,498 |
|
174 |
|
Working capital, end of period |
283,680 |
|
183,580 |
|
55 |
|
Total assets, end of period |
1,178,071 |
|
995,753 |
|
18 |
|
Long-term debt, end of period |
308,849 |
|
329,186 |
|
(6 |
) |
Total consolidated equity, end of period |
596,141 |
|
422,972 |
|
41 |
|
(1) Adjusted EBITDA reflects a change in
definition and excludes all foreign exchange gains and losses.(2)
Refer to “Non-GAAP Measures” on page 6 for further information.(3)
Effective January 1, 2023, the Company recorded expenditures
related to fluid end components as an operating expense rather than
as a capital expenditure. This change in accounting estimate was
recorded on a prospective basis.
During the quarter, Calfrac:
- generated
revenue of $483.1 million, an increase of 10 percent from the third
quarter in 2022 resulting primarily from higher activity in all
operating divisions;
- reported
third-quarter Adjusted EBITDA of $91.3 million, which included
$11.9 million of maintenance expense related to fluid end
components, versus $94.3 million in the third quarter of 2022 ($8.0
million of fluid end components capitalized);
- reported net
income from continuing operations of $97.5 million or $1.09 per
share diluted, which included a reversal of impairment of property,
plant and equipment of $41.6 million and a deferred tax recovery of
$9.0 million related to the improved business outlook in Canada,
compared to net income of $45.4 million or $1.10 per share diluted
during the third quarter in 2022;
- amended and
restated its $250.0 million credit facilities, which included an
extension of the maturity date to the earlier of July 1, 2026 or
six months prior to the maturity of the Company’s Second Lien Notes
on March 15, 2026;
- reduced its net
debt by $43.7 million, further reducing its Net Debt to EBITDA to
0.92:1:00;
- increased
period-end working capital to $283.7 million from $183.6 million at
December 31, 2022 due to a combination of higher revenue and
geographical mix; and
- incurred
capital expenditures from continuing operations of $50.8 million,
which included approximately $33.2 million related to the Company’s
fracturing fleet modernization program.
FINANCIAL OVERVIEW – CONTINUING
OPERATIONSTHREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2023 VERSUS
2022
NORTH AMERICA
|
Three Months Ended Sep. 30, |
|
|
Nine Months Ended Sep. 30, |
|
|
2023 |
|
2022 |
|
Change |
|
|
2023 |
|
2022 |
|
Change |
|
(C$000s, except operational and exchange rate information) |
($) |
|
($) |
|
(%) |
|
|
($) |
|
($) |
|
(%) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
401,291 |
|
374,157 |
|
7 |
|
|
1,190,660 |
|
879,021 |
|
35 |
|
Adjusted EBITDA(1) |
83,023 |
|
91,491 |
|
(9 |
) |
|
234,793 |
|
155,595 |
|
51 |
|
Adjusted EBITDA (%) |
20.7 |
|
24.5 |
|
(16 |
) |
|
19.7 |
|
17.7 |
|
11 |
|
Fracturing revenue per job
($) |
43,633 |
|
44,832 |
|
(3 |
) |
|
43,480 |
|
38,390 |
|
13 |
|
Number of fracturing jobs |
8,870 |
|
8,092 |
|
10 |
|
|
26,472 |
|
22,025 |
|
20 |
|
Active pumping horsepower, end
of period (000s) |
1,035 |
|
871 |
|
19 |
|
|
1,035 |
|
871 |
|
19 |
|
US$/C$
average exchange rate(2) |
1.3411 |
|
1.3056 |
|
3 |
|
|
1.3456 |
|
1.2830 |
|
5 |
|
(1) Refer to “Non-GAAP Measures” on page 6 for
further information.(2) Source: Bank of Canada.
OUTLOOKCalfrac benefited from
the superior execution enabled by its centralized organizational
structure in North America as it successfully navigated schedule
gaps to generate one of its highest third-quarter Adjusted EBITDA
margins since 2012. The Company increased the number of active Tier
IV DGB units which are achieving significant diesel replacement
rates. For the fourth quarter, the Company anticipates a decrease
in activity across its operations in Canada driven by typical
seasonality and customer budget exhaustion. However, Calfrac
expects an increase in utilization across its United States
operations due to the reallocation of customer capital programs
from the third quarter to the fourth quarter stemming from recent
strength in crude oil prices. Calfrac believes that its capital
discipline and solid activity for its 15 fracturing fleets next
year will support further fleet modernization investments and a
continued reduction in long-term debt.
The industry-wide discipline demonstrated thus
far in 2023 has been a welcome change compared to previous oilfield
services cycles as companies idled underutilized equipment rather
than sacrificing margins to gain market share. Calfrac expects
similar fracturing activity across North America next year as
operators maintain production. The Company believes that its strong
customer relationships across all of its operating areas and
growing fleet of next-generation fracturing equipment will drive
improved shareholder returns over the long term.
THREE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 2022
REVENUERevenue from Calfrac’s
North American operations increased to $401.3 million during the
third quarter of 2023 from $374.2 million in the comparable quarter
of 2022. The 7 percent increase in revenue was due to a 10 percent
increase in the number of completed fracturing jobs, offset
partially by a 3 percent period-over-period decrease in average job
revenue. The increase in job count was mainly due to the Company
operating 15 fracturing fleets during the quarter with more
consistent utilization compared to an average of 13 operating
fleets in the respective quarter of 2022. The slightly lower
revenue per job was mainly a result of job mix as pricing remained
relatively consistent with the same period in 2022. Coiled tubing
revenue increased by 25 percent as compared to the third quarter in
2022 mainly due to higher utilization of Calfrac’s six deep coiled
tubing units. The 3 percent appreciation in the U.S. dollar also
contributed to the higher reported revenue.
ADJUSTED EBITDAThe Company’s
operations in North America generated Adjusted EBITDA of $83.0
million or 21 percent of revenue during the third quarter of 2023
compared to $91.5 million or 24 percent of revenue in the same
period in 2022. This decrease was primarily due to the change in
accounting estimate that was adopted for fluid ends at the
beginning of 2023. In the third quarter of 2023, Calfrac incurred
$10.5 million of maintenance expense related to fluid end
components versus $7.7 million of capital expenditures in the same
quarter of 2022. However, utilization during the third quarter of
2023 was impacted by a reduction in activity, mainly in the United
States, as a result of lower natural gas prices and lower crude oil
prices during the second quarter of 2023, which resulted in the
deferral of planned capital programs by some of the Company’s
clients.
NINE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 2022
REVENUERevenue from Calfrac’s
North American operations increased significantly to $1.2 billion
during the first nine months of 2023 from $879.0 million in the
comparable period of 2022. The 35 percent increase in revenue can
be attributed to a 20 percent increase in the number of fracturing
jobs completed combined with a 13 percent increase in revenue per
job period-over-period. The increase in job count was mainly due to
the Company operating 15 fleets during the period with more
consistent utilization compared to an average of 13.5 operating
fleets in the comparable period in 2022. The higher revenue per job
was mainly the result of job mix and improved pricing. Coiled
tubing revenue also increased by 21 percent as compared to the
first nine months in 2022 due to increased utilization for its six
crewed units.
ADJUSTED EBITDAThe Company’s
operations in North America generated Adjusted EBITDA of $234.8
million during the first nine months of 2023 compared to $155.6
million in the same period in 2022. This increase in Adjusted
EBITDA was largely driven by higher utilization of its fracturing
and coiled tubing crews. The Company generated an Adjusted EBITDA
margin of 20 percent versus 18 percent in the comparable period in
2022 through higher utilization combined with better realized
pricing. In 2023, Calfrac’s Adjusted EBITDA included $26.3 million
of maintenance expense related to fluid ends versus $18.1 million
of capital expenditures that were recorded in the comparable period
in 2022.
ARGENTINA
|
Three Months Ended Sep. 30, |
|
Nine Months Ended Sep. 30, |
|
|
2023 |
|
2022 |
|
Change |
|
|
2023 |
|
2022 |
|
Change |
|
(C$000s, except operational and exchange rate information) |
($) |
|
($) |
|
(%) |
|
|
($) |
|
($) |
|
(%) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
Revenue |
81,802 |
|
64,181 |
|
27 |
|
|
252,219 |
|
172,352 |
|
46 |
|
Adjusted EBITDA(1) |
14,331 |
|
8,706 |
|
65 |
|
|
43,623 |
|
16,363 |
|
167 |
|
Adjusted EBITDA (%) |
17.5 |
|
13.6 |
|
29 |
|
|
17.3 |
|
9.5 |
|
82 |
|
Fracturing revenue per job
($) |
78,634 |
|
84,843 |
|
(7 |
) |
|
83,242 |
|
70,133 |
|
19 |
|
Number of fracturing jobs |
582 |
|
471 |
|
24 |
|
|
1,784 |
|
1,415 |
|
26 |
|
Active pumping horsepower, end
of period (000s) |
139 |
|
140 |
|
(1 |
) |
|
139 |
|
140 |
|
(1 |
) |
US$/C$ average exchange rate(2) |
1.3411 |
|
1.3056 |
|
3 |
|
|
1.3456 |
|
1.2830 |
|
5 |
|
(1) Refer to “Non-GAAP Measures” on page 6 for
further information.(2) Source: Bank of Canada.
OUTLOOKCalfrac’s Argentina
division continues to leverage its strong market position to
produce significant year-over-year Adjusted EBITDA growth. The
Company expects its recently demonstrated profitability to continue
into the fourth quarter and throughout 2024 driven by robust
utilization across all service lines in the Vaca Muerta shale play
and the conventional basins of southern Argentina.
THREE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 2022
REVENUECalfrac’s Argentinean
operations generated revenue of $81.8 million during the third
quarter of 2023 versus $64.2 million in the comparable quarter in
2022 primarily due to higher activity across all service lines. The
significant increase in revenue was due to the strategic
repositioning of certain fracturing and cementing equipment from
southern Argentina into the Vaca Muerta shale play during the first
half of 2023. Coiled tubing revenue also increased due to an
increase in overall activity with both existing and new
customers.
ADJUSTED EBITDAThe Company’s
operations in Argentina generated Adjusted EBITDA of $14.3 million
during the third quarter of 2023 compared to $8.7 million in the
comparable quarter of 2022, while the Company’s Adjusted EBITDA
margins also improved to 18 percent from 14 percent. This
improvement in Adjusted EBITDA was primarily due to the higher
revenue base and changes in the Company’s customer and geographic
mix which resulted in higher profitability relative to the
comparable period in 2022.
NINE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 2022
REVENUECalfrac’s Argentinean
operations generated revenue of $252.2 million during the first
nine months of 2023 compared to $172.4 million in the comparable
period in 2022. Activity in the Vaca Muerta shale play continued to
increase while activity in southern Argentina also achieved
significant growth compared to the first nine months of 2022.
Overall fracturing activity increased by 26 percent compared to the
first nine months in 2022 while revenue per job was 19 percent
higher primarily due to overall inflation in operating costs and
better pricing that commenced during the second half of 2022
combined with a stronger U.S. dollar. Higher coiled tubing and
cementing revenue also contributed to the overall increase in
revenue. The number of coiled tubing jobs increased by 32 percent
as activity increased in Neuquén and southern Argentina while
revenue per job was 6 percent higher primarily due to job mix and
inflation. Cementing activity increased by 5 percent and revenue
per job increased by 12 percent due to changes in job mix as a
greater number of pre-fracturing projects, which are typically
larger job sizes, were completed during the first nine months of
2023.
ADJUSTED EBITDAThe Company’s
operations in Argentina generated Adjusted EBITDA of $43.6 million
or 17 percent of revenue during the first nine months in 2023
versus $16.4 million or 9 percent of revenue in the comparable
period in 2022 primarily due to higher utilization and pricing
across all service lines. Adjusted EBITDA in 2023 included $4.7
million of maintenance expense related to fluid end components that
would have been recorded as capital expenditures in 2022.
CAPITAL EXPENDITURES
|
Three Months Ended Sep. 30, |
|
|
Nine Months Ended Sep. 30, |
|
|
2023 |
|
2022 |
|
Change |
|
|
2023 |
|
2022 |
|
Change |
|
(C$000s) |
($) |
|
($) |
|
(%) |
|
|
($) |
|
($) |
|
(%) |
|
North America |
47,463 |
|
21,943 |
|
116 |
|
|
108,041 |
|
46,289 |
|
133 |
|
Argentina |
3,362 |
|
2,802 |
|
20 |
|
|
7,976 |
|
5,841 |
|
37 |
|
Continuing Operations |
50,825 |
|
24,745 |
|
105 |
|
|
116,017 |
|
52,130 |
|
123 |
|
Capital expenditures were $50.8 million for the
three months ended September 30, 2023 versus $24.7 million in
the comparable period in 2022. Calfrac’s Board of Directors have
approved a 2023 capital budget of approximately $160.0 million,
which excludes expenditures related to fluid end components as
these have been recorded as maintenance expenses beginning in
January 2023 for all continuing reporting segments. This change in
accounting estimate was based on new information surrounding the
useful life of these components.
SUMMARY OF QUARTERLY RESULTS – CONTINUING
OPERATIONS
Three Months Ended |
Dec. 31, |
|
Mar. 31, |
|
Jun. 30, |
|
Sep. 30, |
|
Dec. 31, |
|
Mar. 31, |
|
Jun. 30, |
|
Sep. 30, |
|
|
2021 |
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2023 |
|
2023 |
|
2023 |
|
(C$000s, except per share and operating data) |
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
(unaudited) |
Revised (1) |
|
|
Revised (1) |
|
|
Revised (1) |
|
|
Revised (1) |
|
|
|
|
|
|
|
|
|
Financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
229,661 |
|
|
294,524 |
|
|
318,511 |
|
|
438,338 |
|
447,847 |
|
493,323 |
|
466,463 |
|
483,093 |
|
Adjusted EBITDA(1)(2)(3) |
8,382 |
|
|
22,763 |
|
|
40,734 |
|
|
94,289 |
|
75,954 |
|
83,794 |
|
87,785 |
|
91,286 |
|
Net income (loss) |
(29,132 |
) |
|
(18,030 |
) |
|
(6,776 |
) |
|
45,352 |
|
14,757 |
|
36,313 |
|
50,531 |
|
97,523 |
|
Per share – basic |
(0.77 |
) |
|
(0.47 |
) |
|
(0.18 |
) |
|
1.15 |
|
0.27 |
|
0.45 |
|
0.62 |
|
1.20 |
|
Per share – diluted |
(0.77 |
) |
|
(0.47 |
) |
|
(0.18 |
) |
|
1.10 |
|
0.17 |
|
0.41 |
|
0.58 |
|
1.09 |
|
Capital
expenditures(3) |
14,868 |
|
|
12,145 |
|
|
15,240 |
|
|
24,745 |
|
35,810 |
|
34,474 |
|
30,718 |
|
50,825 |
|
(1) Adjusted EBITDA reflects a change in
definition and excludes all foreign exchange gains and losses.(2)
Refer to “Non-GAAP Measures” on page 6 for further information.(3)
Effective January 1, 2023, recorded expenditures related to fluid
end components as an operating expense rather than as a capital
expenditure. This change in accounting estimate was recorded on a
prospective basis.
NON-GAAP MEASURES
Certain supplementary measures presented in this
press release do not have any standardized meaning under IFRS and,
because IFRS have been incorporated as Canadian generally accepted
accounting principles (GAAP), these supplementary measures are also
non-GAAP measures. These measures have been described and presented
to provide shareholders and potential investors with additional
information regarding the Company’s financial results, liquidity
and ability to generate funds to finance its operations. These
measures may not be comparable to similar measures presented by
other entities, and are explained below.
Adjusted EBITDA is defined as net income or loss
for the period less interest, taxes, depreciation and amortization,
foreign exchange losses (gains), non-cash stock-based compensation,
and gains and losses that are extraordinary or non-recurring.
Adjusted EBITDA is presented because it gives an indication of the
results from the Company’s principal business activities prior to
consideration of how its activities are financed and the impact of
foreign exchange, taxation and depreciation and amortization
charges. Adjusted EBITDA for the period was calculated as
follows:
|
Three Months Ended Sep. 30, |
|
|
Nine Months Ended Sep. 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
(C$000s) |
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
(unaudited) |
|
|
|
|
Net income from continuing
operations |
97,523 |
|
|
45,352 |
|
|
184,367 |
|
|
20,546 |
|
Add back (deduct): |
|
|
|
|
Depreciation |
27,387 |
|
|
29,394 |
|
|
86,206 |
|
|
89,733 |
|
Foreign exchange losses (gains)(2) |
1,415 |
|
|
(7,106 |
) |
|
7,884 |
|
|
(6,704 |
) |
(Gain) loss on disposal of property, plant and equipment |
(706 |
) |
|
(406 |
) |
|
(5,667 |
) |
|
4,382 |
|
Reversal of impairment of property, plant and equipment |
(41,563 |
) |
|
— |
|
|
(41,563 |
) |
|
— |
|
Litigation settlements |
— |
|
|
8,258 |
|
|
(6,805 |
) |
|
11,258 |
|
Restructuring charges |
1,059 |
|
|
597 |
|
|
2,991 |
|
|
1,563 |
|
Stock-based compensation |
1,469 |
|
|
366 |
|
|
2,810 |
|
|
2,319 |
|
Interest |
7,262 |
|
|
10,804 |
|
|
23,023 |
|
|
31,537 |
|
Income taxes |
(2,560 |
) |
|
7,030 |
|
|
9,619 |
|
|
3,153 |
|
Adjusted EBITDA from continuing operations (1) |
91,286 |
|
|
94,289 |
|
|
262,865 |
|
|
157,787 |
|
(1) For bank covenant purposes, EBITDA includes
the deduction of an additional $9.3 million of lease payments for
the nine months ended September 30, 2023 (nine months ended
September 30, 2022 – $7.5 million) that would have been recorded as
operating expenses prior to the adoption of IFRS 16.(2) Adjusted
EBITDA reflects a change in definition effective October 1, 2022,
and excludes all foreign exchange gains and losses.
The definition and calculation of the ratio of
net debt to Adjusted EBITDA for the year ended December 31, 2022,
is disclosed in Note 15 to the Company’s year-end consolidated
financial statements. The definition and calculation of this ratio
for the twelve months ended September 30, 2023, is disclosed
in Note 11 to the Company’s interim financial statements for the
corresponding period.
ADVISORIESFORWARD-LOOKING
STATEMENTSThis press release contains forward-looking
statements within the meaning of applicable securities laws. The
use of any of the words “seek”, “anticipate”, “plan”, “continue”,
“estimate”, “expect”, “may”, “will”, “project”, “predict”,
“potential”, “targeting”, “intend”, “could”, “might”, “should”,
“believe”, “forecast” or similar words suggesting future outcomes,
are forward-looking statements.
In particular, forward-looking statements in
this press release include, but are not limited to, statements with
respect to activity, demand, utilization and outlook for the
Company’s operating divisions in North America and Argentina; the
supply and demand fundamentals of the pressure pumping industry;
input costs, margin and service pricing trends and strategies;
operating and financing strategies, performance, priorities,
metrics and estimates, such as the Company’s strategic priorities
to maximize free cash flow, repay debt and capital investment
plans, including the Company's fleet modernization plan and timing
thereof; the Company’s debt, liquidity and financial position; the
Company’s service quality and the Company’s intentions and
expectations with respect to the foregoing.
These statements are derived from certain
assumptions and analyses made by the Company based on its
experience and perception of historical trends, current conditions,
expected future developments and other factors that it believes are
appropriate in the circumstances, including, but not limited to,
the economic and political environment in which the Company
operates, including the current state and anticipated length of the
pressure pumping market upcycle; the Company’s expectations for its
customers’ capital budgets, demand for services and geographical
areas of focus; the effect of unconventional oil and gas projects
have had on supply and demand fundamentals for oil and natural gas;
the effect of environmental factors on customer and investor
preferences and capital deployment; the effect of the military
conflict in the Ukraine and related international sanctions and
counter-sanctions and restrictions by Russia on the Company’s
ownership and planned sale of the Russian division; industry
equipment levels including the number of active fracturing fleets
marketed by the Company’s competitors and the timing of deployment
of the Company’s fleet upgrades; the Company’s existing contracts
and the status of current negotiations with key customers and
suppliers; the continued effectiveness of cost reduction measures
instituted by the Company; and the likelihood that the current tax
and regulatory regime will remain substantially unchanged.
Forward-looking statements are subject to a
number of known and unknown risks and uncertainties that could
cause actual results to differ materially from the Company’s
expectations. Such risk factors include but are not limited to: (A)
industry risks, including but not limited to, global economic
conditions and the level of exploration, development and production
for oil and natural gas in North America and Argentina; excess
equipment levels; impacts of conservation measures and
technological advances on the demand for the Company’s services;
hazards inherent in the industry; the actions of activist
shareholders and the increasing reluctance of institutional
investors to invest in the industry in which the Company operates;
and an intensely competitive oilfield services industry; (B)
business operations risks, including but not limited to, fleet
reinvestment risk, including the ability of the Company to finance
the capital necessary for equipment upgrades to support its
operational needs while meeting government and customer
requirements and preferences; difficulty retaining, replacing or
adding personnel; failure to improve and adapt equipment,
proprietary fluid chemistries and other products and services;
reliance on equipment suppliers and fabricators for timely delivery
and quality of equipment; a concentrated customer base; seasonal
volatility and climate change; cybersecurity risks, and activism;
(C) financial risks, including but not limited to, price escalation
and availability of raw materials, diesel fuel and component parts;
restrictions on the Company’s access to capital, including the
impacts of covenants under the Company’s lending documents; direct
and indirect exposure to volatile credit markets, including
interest rate risk; fluctuations in currency exchange rates and
increased inflation; actual results which are materially different
from management estimates and assumptions; insufficient internal
controls; and possible impacts on the Company’s access to capital
and common share price given a significant number of common shares
are controlled by two directors of the Company; (D) geopolitical
risks, including but not limited to, foreign operations exposure,
including risks relating to unsettled political conditions, war,
including the ongoing Russia and Ukraine conflict and any expansion
of that conflict, foreign exchange rates and controls, and
international trade and regulatory controls and sanctions; the
impacts of a delay of sale or failure to sell the Company's
discontinued operations in Russia, including failure to receive any
applicable regulatory approvals and reputational risks; foreign
legal actions and unknown consequences of such actions; and risk
associated with compliance with applicable law; (E) legal and
regulatory risks, including but not limited to, federal, provincial
and state legislative and regulatory initiatives; health, safety
and environmental laws and regulations; and legal and
administrative proceedings; and (F) environmental, social and
governance risks, including but not limited to, failure to
effectively and timely address the energy transition; legal and
regulatory initiatives to limit greenhouse gas emissions; and the
direct and indirect costs of various existing and proposed climate
change regulations. Further information about these and other risks
and uncertainties are set forth in the Company’s most recently
filed Annual Information Form under the heading “Risk Factors”
which is available on the SEDAR website at www.sedarplus.ca under
Company’s profile.
Consequently, all of the forward-looking
statements made in this press release are qualified by these
cautionary statements and there can be no assurance that actual
results or developments anticipated by the Company will be
realized, or that they will have the expected consequences or
effects on the Company or its business or operations. These
statements speak only as of the respective date of this press
release or the document by reference herein. The Company assumes no
obligation to update publicly any such forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required pursuant to applicable securities laws.
BUSINESS RISKSThe business of
Calfrac is subject to certain risks and uncertainties. Prior to
making any investment decision regarding Calfrac, investors should
carefully consider, among other things, the risk factors set forth
in the Company’s most recently filed Annual Information Form under
the heading “Risk Factors” which is available on the SEDAR website
at www.sedarplus.ca under the Company’s profile. Copies of the
Annual Information Form may also be obtained on request without
charge from Calfrac at Suite 500, 407 - 8th Avenue S.W., Calgary,
Alberta, Canada, T2P 1E5, or at www.calfrac.com.
ADDITIONAL INFORMATIONCalfrac's common shares
and warrants are publicly traded on the Toronto Stock Exchange
under the trading symbols "CFW" and “CFW.WT”, respectively.
Calfrac provides specialized oilfield services
to exploration and production companies designed to increase the
production of hydrocarbons from wells with continuing operations
focused throughout western Canada, the United States and Argentina.
During the first quarter of 2022, management committed to a plan to
sell the Company’s Russian division, resulting in the associated
assets and liabilities being classified as held for sale and
presented in the Company’s financial statements as discontinued
operations. The results of the Company’s discontinued operations
are excluded from the discussion and figures presented above unless
otherwise noted. See Note 3 to the Company's interim consolidated
financial statements for the three and nine months ended September
30, 2023 and Note 4 to the Company’s audited consolidated financial
statements for the year ended December 31, 2022 for additional
information on the Company’s discontinued operations.
Further information regarding Calfrac Well
Services Ltd., including the most recently filed Annual Information
Form, can be accessed on the Company’s website at www.calfrac.com
or under the Company’s public filings found at
www.sedarplus.ca.
THIRD QUARTER CONFERENCE CALLCalfrac will be
conducting a conference call for interested analysts, brokers,
investors and news media representatives to review its 2023
third-quarter results at 10:00 a.m. (Mountain Time) on Wednesday,
November 8, 2023. To participate in the conference call, please
register at the URL link below. Once registered, you will receive a
dial-in number and a unique PIN, which will allow you to ask
questions.
https://register.vevent.com/register/BI9b50099938704de9bce508123d789223
The call will also be webcast and can be
accessed through the link below. A replay of the webcast call will
also be available on Calfrac’s website for at least 90 days.
https://edge.media-server.com/mmc/p/wga26h28
CONSOLIDATED BALANCE SHEETS
|
September 30, |
|
December 31, |
|
|
2023 |
|
2022 |
|
(C$000s) (unaudited) |
($) |
|
($) |
|
ASSETS |
|
|
Current assets |
|
|
Cash and cash equivalents |
23,308 |
|
8,498 |
|
Accounts receivable |
331,429 |
|
238,769 |
|
Inventories |
121,446 |
|
108,866 |
|
Prepaid expenses and deposits |
14,476 |
|
12,297 |
|
|
490,659 |
|
368,430 |
|
Assets classified as held for sale |
30,932 |
|
45,940 |
|
|
521,591 |
|
414,370 |
|
Non-current assets |
|
|
Property, plant and equipment |
604,386 |
|
543,475 |
|
Right-of-use assets |
23,094 |
|
22,908 |
|
Deferred income tax assets |
29,000 |
|
15,000 |
|
|
656,480 |
|
581,383 |
|
Total assets |
1,178,071 |
|
995,753 |
|
LIABILITIES AND EQUITY |
|
|
Current liabilities |
|
|
Accounts payable and accrued liabilities |
189,408 |
|
171,603 |
|
Income taxes payable |
4,492 |
|
964 |
|
Current portion of long-term debt |
2,594 |
|
2,534 |
|
Current portion of lease obligations |
10,485 |
|
9,749 |
|
|
206,979 |
|
184,850 |
|
Liabilities directly associated with assets classified as held for
sale |
17,410 |
|
18,852 |
|
|
224,389 |
|
203,702 |
|
Non-current liabilities |
|
|
Long-term debt |
308,849 |
|
329,186 |
|
Lease obligations |
12,364 |
|
13,443 |
|
Deferred income tax liabilities |
36,328 |
|
26,450 |
|
|
357,541 |
|
369,079 |
|
Total liabilities |
581,930 |
|
572,781 |
|
Capital stock |
867,523 |
|
865,059 |
|
Conversion rights on
convertible notes |
212 |
|
212 |
|
Contributed surplus |
72,629 |
|
70,141 |
|
Warrants |
35,384 |
|
36,558 |
|
Accumulated deficit |
(402,374 |
) |
(580,544 |
) |
Accumulated other comprehensive income |
22,767 |
|
31,546 |
|
Total equity |
596,141 |
|
422,972 |
|
Total liabilities and equity |
1,178,071 |
|
995,753 |
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
Three Months Ended Sep. 30, |
|
Nine Months Ended Sep. 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
(C$000s, except per share data) (unaudited) |
($) |
|
($) |
|
($) |
|
($) |
|
|
|
|
|
|
Revenue |
483,093 |
|
438,338 |
|
1,442,879 |
|
1,051,373 |
|
Cost of
sales |
403,803 |
|
365,536 |
|
1,222,373 |
|
956,526 |
|
Gross profit |
79,290 |
|
72,802 |
|
220,506 |
|
94,847 |
|
Expenses |
|
|
|
|
Selling, general and administrative |
17,919 |
|
17,128 |
|
42,843 |
|
41,933 |
|
Foreign exchange losses (gains) |
1,415 |
|
(7,106 |
) |
7,884 |
|
(6,704 |
) |
(Gain) loss on disposal of property, plant and equipment |
(706 |
) |
(406 |
) |
(5,667 |
) |
4,382 |
|
Reversal of impairment of property, plant and equipment |
(41,563 |
) |
— |
|
(41,563 |
) |
— |
|
Interest |
7,262 |
|
10,804 |
|
23,023 |
|
31,537 |
|
|
(15,673 |
) |
20,420 |
|
26,520 |
|
71,148 |
|
Income before income tax |
94,963 |
|
52,382 |
|
193,986 |
|
23,699 |
|
Income tax expense (recovery) |
|
|
|
|
Current |
3,240 |
|
1,647 |
|
13,747 |
|
2,633 |
|
Deferred |
(5,800 |
) |
5,383 |
|
(4,128 |
) |
520 |
|
|
(2,560 |
) |
7,030 |
|
9,619 |
|
3,153 |
|
Net income from continuing operations |
97,523 |
|
45,352 |
|
184,367 |
|
20,546 |
|
Net
(loss) income from discontinued operations |
(10,951 |
) |
4,746 |
|
(6,197 |
) |
(28,178 |
) |
Net income (loss) for the period |
86,572 |
|
50,098 |
|
178,170 |
|
(7,632 |
) |
|
|
|
|
|
Earnings (loss) per share –
basic |
|
|
|
|
Continuing operations |
1.20 |
|
1.15 |
|
2.28 |
|
0.53 |
|
Discontinued operations |
(0.14 |
) |
0.12 |
|
(0.08 |
) |
(0.73 |
) |
|
1.07 |
|
1.27 |
|
2.20 |
|
(0.20 |
) |
|
|
|
|
|
Earnings (loss) per share –
diluted |
|
|
|
|
Continuing operations |
1.09 |
|
1.10 |
|
2.12 |
|
0.53 |
|
Discontinued operations |
(0.14 |
) |
0.10 |
|
(0.08 |
) |
(0.73 |
) |
|
0.97 |
|
1.21 |
|
2.05 |
|
(0.07 |
) |
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Three Months Ended Sep. 30, |
|
Nine Months Ended Sep. 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
(C$000s) (unaudited) |
($) |
|
($) |
|
($) |
|
($) |
|
CASH FLOWS PROVIDED BY
(USED IN) |
|
|
|
|
OPERATING
ACTIVITIES |
|
|
|
|
Net income (loss) for the period |
86,572 |
|
50,098 |
|
178,170 |
|
(7,632 |
) |
Adjusted for the following: |
|
|
|
|
Depreciation |
27,387 |
|
29,394 |
|
86,206 |
|
89,932 |
|
Stock-based compensation |
1,469 |
|
366 |
|
2,810 |
|
2,319 |
|
Unrealized foreign exchange (gains) losses |
(2,650 |
) |
(9,629 |
) |
724 |
|
(18,697 |
) |
(Gain) loss on disposal of property, plant and equipment |
(709 |
) |
(409 |
) |
(5,694 |
) |
4,378 |
|
(Reversal of) impairment of property, plant and equipment |
(41,024 |
) |
— |
|
(41,024 |
) |
5,634 |
|
Impairment of inventory |
985 |
|
1,201 |
|
3,677 |
|
28,749 |
|
Impairment of other assets |
14,768 |
|
(2,312 |
) |
17,454 |
|
7,336 |
|
Interest |
7,171 |
|
10,801 |
|
22,841 |
|
31,534 |
|
Interest paid |
(9,254 |
) |
(13,229 |
) |
(20,739 |
) |
(27,693 |
) |
Deferred income taxes |
(5,800 |
) |
5,383 |
|
(4,128 |
) |
520 |
|
Changes in items of working capital |
22,349 |
|
(57,911 |
) |
(79,947 |
) |
(77,686 |
) |
Cash flows provided by operating activities |
101,264 |
|
13,753 |
|
160,350 |
|
38,694 |
|
FINANCING ACTIVITIES |
|
|
|
|
Bridge loan proceeds |
— |
|
— |
|
— |
|
15,000 |
|
Issuance of long-term debt, net of debt issuance costs |
22,029 |
|
12,825 |
|
73,485 |
|
19,782 |
|
Bridge loan repayments |
— |
|
— |
|
— |
|
(15,000 |
) |
Long-term debt repayments |
(50,000 |
) |
(15,000 |
) |
(100,000 |
) |
(15,000 |
) |
Lease obligation principal repayments |
(2,613 |
) |
(2,328 |
) |
(8,412 |
) |
(6,587 |
) |
Proceeds on issuance of common shares from the exercise of warrants
and stock options |
610 |
|
621 |
|
967 |
|
1,884 |
|
Cash flows (used in) provided by financing activities |
(29,974 |
) |
(3,882 |
) |
(33,960 |
) |
79 |
|
INVESTING ACTIVITIES |
|
|
|
|
Purchase of property, plant and equipment |
(50,121 |
) |
(18,479 |
) |
(128,447 |
) |
(45,588 |
) |
Proceeds on disposal of property, plant and equipment |
695 |
|
882 |
|
22,383 |
|
1,657 |
|
Proceeds on disposal of right-of-use assets |
138 |
|
716 |
|
1,247 |
|
1,627 |
|
Cash flows used in investing activities |
(49,288 |
) |
(16,881 |
) |
(104,817 |
) |
(42,304 |
) |
Effect of exchange rate changes on cash and cash equivalents |
1,841 |
|
7,388 |
|
(9,369 |
) |
27,811 |
|
Increase in cash and cash equivalents |
23,843 |
|
378 |
|
12,204 |
|
24,280 |
|
Cash
and cash equivalents (bank overdraft), beginning of period |
6,754 |
|
22,551 |
|
18,393 |
|
(1,351 |
) |
Cash and cash equivalents, end of period |
30,597 |
|
22,929 |
|
30,597 |
|
22,929 |
|
Included in the cash and cash equivalents per the balance
sheet |
23,308 |
|
|
23,308 |
|
|
Included in the assets held
for sale/discontinued operations |
7,289 |
|
|
7,289 |
|
|
For further information, please contact:
Pat Powell, Chief Executive OfficerMike Olinek,
Chief Financial Officer
Telephone:
403-266-6000
www.calfrac.com
Calfrac Well Services (TSX:CFW)
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