Essential Energy Services Ltd. (TSX:ESN) ("Essential" or the
"Company") announces first quarter EBITDA(1) of $33.4 million
compared to $32.8 million in the first quarter of 2012. "These
results validate Essential's business model with our focus on
horizontal completions and oil production work. Well servicing and
downhole tools both had a very strong winter," said Garnet
Amundson, President and CEO. "Our 2013 first quarter EBITDA record
was especially rewarding considering that general oilfield service
conditions were slower than last year and our current results
exclude the benefit of our former drilling division which
historically had strong EBITDA performance in the first
quarter."
SELECTED INFORMATION
For the three months
ended March 31,
(Thousands of dollars, except per share amounts
and percentages) 2013 2012(i)
----------------------------------------------------------------------------
Revenue $ 120,519 $ 118,182
Gross margin $ 37,832 $ 36,740
Gross margin % 31% 31%
EBITDA(1) from continuing operations $ 33,426 $ 32,755
EBITDA % (1) 28% 28%
Funds flow from continuing operations (1) $ 29,278 $ 29,060
Per share - basic (1) $ 0.24 $ 0.24
Per share - diluted (1) $ 0.23 $ 0.23
Total assets $ 436,301 $ 430,674
Total long-term debt $ 35,603 $ 57,238
Utilization
Deep coil tubing rigs 110% 102%
Service rigs 69% 68%
Equipment fleet (ii)
Deep coil tubing rigs 25 25
Service rigs 56 58
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(i) Certain comparative amounts have been reclassified to conform to the
current period's presentation.
(ii) Fleet data represents the number of units at the end of a period.
(iii) Essential committed to a plan to divest of its Colombian operations.
This resulted in various changes to the presentation of financial
information for the current and comparative periods. The operating
results and cash flows from continuing operations do not include the
results of the Colombian operations. Operating results for the
Colombian operations have been reclassified as discontinued operations
and cash flows have been reclassified as net cash flows incurred by
discontinued operations for the current and all comparative periods.
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(1) Refer to "Non-IFRS Measures" section for further information.
Q1 2013 HIGHLIGHTS - ESSENTIAL
-- Coil Well Service - Essential's coil well service business experienced
strong demand for deep coil tubing and pumping services relative to the
prior year. The significant growth in revenue was attributable to
increased demand for Essential's coil well services working on the
Bakken and Montney plays. Deep coil tubing utilization of 110% increased
8 percentage points quarter-over-quarter from the prior year,
outperforming industry completion statistics which showed flat well
completion activity quarter-over-quarter.
-- Service Rigs - Service rig utilization remained strong at 69% which was
consistent with 2012 performance. Demand for services remained high,
particularly for Essential's three service rigs operating 24 hours a day
on steam-assisted gravity drainage ("SAGD") wells.
-- Downhole Tools & Rentals - The downhole tools & rentals segment had a
very strong first quarter as the Tryton multi-stage fracturing system
("Tryton MSFS") benefited from continued growth quarter-over-quarter
from the new tools introduced in the latter part of 2012.
-- Capital - Equipment fabricators made significant progress during the
quarter in building the equipment planned for 2013 delivery. In March
2013, Essential commissioned one mobile free standing, all-period double
service rig purpose-built to work on SAGD wells. Essential took delivery
of two nitrogen pumpers in the earlier part of the second quarter.
INDUSTRY OVERVIEW
During the first quarter of 2013, activity in the Canadian oil
and gas industry was below the first quarter of 2012, but improved
sequentially from the fourth quarter of 2012 as a result of the
seasonally busy winter drilling period. Well completion count and
drilling rig utilization, both indicators of overall oilfield
service activity levels in the Western Canadian Sedimentary Basin
("WCSB"), were down year-over-year. Well completion counts were
relatively flat with a 1 percentage point decline compared to 2012
and drilling rig utilization was 61% compared to 68% in 2012. Much
of the uncertainty surrounding macroeconomic factors which impacted
the latter part of 2012 still existed in the first quarter of 2013
as fundamentals were largely unchanged. The price differential
between the Western Canadian Select ("WCS") crude oil and West
Texas Intermediate ("WTI") benchmark remained high for the current
quarter. 2013 activity in the first quarter benefited from a longer
winter operating season due to colder weather extending beyond
mid-March and sustained crude oil prices averaging above
US$90/bbl.
Well service activity in the WCSB continues to be driven by
horizontal drilling, completion and stimulation of oil and
liquids-rich natural gas plays. The industry continues to focus on
horizontal wells which typically require more investment capital
and increased rig time per well due to their depth and complexity
compared to conventional vertical wells.
SEGMENT RESULTS - WELL SERVICING
Three months ended
March 31,
(Thousands of dollars, except percentages) 2013 2012
----------------------------------------------------------------------------
Revenue
Coil Well Service(i) $ 49,621 $ 42,414
Service Rigs (ii) 33,556 33,311
Other (iii) - 7,206
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Total revenue 83,177 82,931
Operating expenses 56,042 56,437
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Gross margin $ 27,135 $ 26,494
Gross margin % 33% 32%
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Utilization (iv)
Deep Coil Tubing Rigs
Utilization 110% 102%
Operating hours 24,765 23,236
Service Rigs
Utilization 69% 68%
Operating hours 34,364 35,188
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(i) Includes revenue from coil tubing rigs, nitrogen and fluid pumpers and
other ancillary equipment.
(ii) Includes revenue from service rigs and rod rigs. Comparative amounts
have been reclassified to conform to current period's presentation.
(iii) Other revenue included revenue from Essential's hybrid drilling
operation until it was disposed of in November 2012.
(iv) Utilization is calculated using a 10 hour day.
Coil well service revenue experienced improved operating
performance during the first quarter of 2013 as compared to the
same period in the prior year as the demand for services was
particularly strong in the Bakken oil play in Saskatchewan and
Manitoba and in the Montney play in northern Alberta and British
Columbia. Masted coil tubing revenue increased quarter-over-quarter
as a result of the deep coil tubing reel trailer commissioned in
the latter part of 2012 and an increase in coil tubing cycle
charges and ancillary charges. Deep conventional coil tubing
revenue increased as customers took advantage of the prolonged cold
weather and continued service work in northern Alberta and British
Columbia. Coil well service pumper revenue also increased from the
addition of six new pumpers since the first quarter in 2012 and the
training and recruiting initiatives undertaken in the latter part
of 2012 which enabled Essential to crew additional pumpers. Revenue
per hour for coil well service equipment increased due to the mix
of services provided.
Service rigs maintained strong utilization during the first
quarter of 2013 consistent with the same period in the prior year
as demand for services remained high, particularly for Essential's
three service rigs operating 24 hours a day on SAGD wells and
service rigs operating in northern Alberta. Revenue per hour in the
first quarter of 2013 increased due to the mix of services provided
including the increase in SAGD work and associated rentals.
SEGMENT RESULTS - DOWNHOLE TOOLS & RENTALS
Three months ended
March 31,
(Thousands of dollars, except percentages) 2013 2012
----------------------------------------------------------------------------
Revenue
Downhole Tools & Rentals $ 37,342 $ 33,570
Other(i) - 1,681
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Total revenue 37,342 35,251
Operating expenses 24,374 23,738
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Gross margin $ 12,968 $ 11,513
Gross margin % 35% 33%
Downhole Tools & Rentals Revenue - % of total
Tryton MSFS 60% 47%
Conventional Tools & Rentals 40% 53%
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(i) Other revenue includes Essential's wireline business which was
disposed of in February 2012.
Essential's downhole tools & rentals business focuses on oil
and liquids-rich natural gas plays by providing production and
completion tools and rentals for horizontal and vertical wells.
Operations for this segment are well placed geographically across
many of the active oil plays in the WCSB.
Downhole tools & rentals revenue increased during the first
quarter as compared to the same period in the prior year due to the
continued growth of the Tryton MSFS business and strong customer
acceptance of the new MSFS tools introduced in the last half of
2012. The new tools provide an innovative, cost effective
alternative to customers completing long reach horizontal
wells.
Gross margin increased on a quarter-over-quarter basis due to
improved tool procurement efficiencies and the disposal of the
wireline business, which historically generated lower margins
compared to the ongoing operations of the segment.
General and administrative
Three months ended
March 31,
(Thousands of dollars, except percentages) 2013 2012
----------------------------------------------------------------------------
General and administrative expenses $4,406 $3,985
As a% of revenue 4% 3%
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General and administrative expenses are comprised of wages,
professional fees, office space and other administrative costs
incurred at the corporate and operations level. General and
administrative expenses were higher in the first quarter of 2013
due to increased staffing costs, professional fees and
infrastructure costs compared to the first quarter of 2012.
COLOMBIA OPERATIONS
In March 2013 Essential announced it is in the process of
disposing of its Colombian operations. Essential continues to seek
buyers for the assets. Two rod rigs will continue to operate until
their contracts expire in the second quarter 2013.
FINANCIAL RESOURCES AND LIQUIDITY
WORKING CAPITAL(1)
As at As at
March 31 December 31
(Thousands of dollars, except ratios) 2013 2012
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Current assets $ 125,931 $ 95,840
Current liabilities, excluding current portion of
long-term debt (49,221) (37,594)
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Working capital $ 76,710 $ 58,246
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Working capital ratio 2.6:1 2.5:1
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EQUIPMENT EXPENDITURES AND FLEET
Three months ended
March 31,
(Thousands of dollars) 2013 2012
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Well Servicing $ 6,142 $ 8,903
Downhole Tools & Rentals 444 823
Corporate 238 464
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Total equipment expenditures 6,824 10,190
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Less proceeds on disposal of property and
equipment (540) (7,318)
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Net equipment expenditures(1) $ 6,284 $ 2,872
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During the first quarter of 2013, Essential's equipment
expenditures of $6.8 million were primarily directed towards
progress payments for the 2013 capital builds and maintenance
capital expenditures. During the first quarter of 2013, Essential
commissioned one mobile free standing, all-period double service
rig purpose-built to work on SAGD wells.
Three months ended
March 31,
(Thousands of dollars) 2013 2012
----------------------------------------------------------------------------
Growth capital(1) $ 4,766 $ 6,088
Maintenance capital(1) 2,048 4,102
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Total equipment expenditures $ 6,824 $ 10,190
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Essential's 2013 capital spending budget of $45 million is
comprised of $32 million of growth (1) capital and $13 million of
maintenance (1) capital.
The following table shows the expected in-service dates of the
major equipment being built over the remainder of 2013:
Expected In-Service Date
Quantity 2013
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Deep masted coil tubing rigs 4 Q3(2),Q4(2)
Deep coil tubing rig converted from
intermediate 1 Q2
Nitrogen pumpers 2 Q2 (2)
Double rod rig 1 Q4
Double service rigs - mobile free
standing, all-period 3 Q2(1), Q4(2)
(two of these are purpose-built for SAGD
wells)
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Compared to the capital budget announced in December 2012,
Essential has cancelled one double service rig and will build one
double rod rig.
During the first quarter, Essential removed two masted coil
tubing rigs from service. These two rigs, the last rigs of their
kind in Essential's fleet, were among the first masted coil tubing
rigs built for use in the WCSB. These rigs have nominal net book
value and/or sales proceeds, and Essential expects to dismantle
this equipment. The remainder of the deep coil tubing fleet is
relatively new and, as of March 31, 2013, the average age of the
deep coil tubing fleet is 4 years from construction or most recent
recertification date.
OUTLOOK
After spring break-up, Essential expects that oilfield service
activity will be similar to 2012. Global economic concerns are
still prevalent, impacting the stability of oil prices, and while
there has been some recent improvement in the oil price
differential, longer-term infrastructure solutions are still
required. A colder winter has reduced natural gas storage levels
and the NYMEX price for natural gas has recently risen above US
$4/mmbtu. There is longer-term optimism with certain foreign
investment focused on the Montney and Horn River natural gas basins
to develop the reserves to provide gas to the proposed liquefied
natural gas ("LNG") export facilities in British Columbia. Such
development would increase the demand for oilfield services to
complete these wells.
Essential's $45 million capital spending budget is focused on
building deep masted coil tubing rigs and double service rigs
capable of SAGD operations to meet customer demand. Essential has
four deep masted coil tubing rigs under construction, expected to
be delivered in 2013. These rigs will have an increased reel
capacity for longer and larger diameter coil. Two of these are
classified as Generation III and two are Generation IV rigs. While
Essential's current masted rigs can reach up to 5,500 meters with
2" coil, the Generation III rigs are designed to reach 5,700 meters
with 2 3/8" coil and the Generation IV rigs will reach 6,400 meters
with 2 5/8" coil. Essential's deep coil tubing reel trailer is a
non-masted prototype of the Generation IV rig and has been
successfully operating on deeper wells since the end of 2012. These
state-of-the-art rigs are being built to meet the growing demand
for oilfield service equipment to complete and produce longer,
deeper and more complex wells.
While Essential remains focused on the WCSB, it has recently
started exploring prospects to organically expand operations into
the United States with downhole tools. The United States offers the
opportunity for continued growth with services that Essential has a
unique expertise and strong reputation with customers for
completing and producing horizontal wells.
Essential has a very strong balance sheet with $36 million of
debt outstanding on May 7, 2013 and debt to EBITDA of 0.5x.
Management remains focused on the core services of well servicing
with coil tubing, service rigs and downhole tools and rentals.
QUARTERLY DIVIDEND
The cash dividend for the period April 1, 2013 to June 30, 2013
has been set at $0.025 per share. The dividend will be paid on July
15, 2013 to shareholders of record on June 28, 2013. The
ex-dividend date is June 26, 2013.
The first quarter Management's Discussion and Analysis and
Financial Statements are available on Essential's website at
www.essentialenergy.ca and on SEDAR at www.sedar.com.
SUMMARY OF QUARTERLY DATA
(Thousands of dollars, except Mar 31, Dec 31, Sep 30, Jun 30,
per share amounts and percentages) 2013 2012 2012 2012
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Well Servicing:
Coil Well Service 49,621 41,228 33,857 18,697
Service Rigs 33,556 26,012 20,552 15,564
Other(i) - 786 2,762 1,069
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Total well servicing 83,177 68,026 57,171 35,330
Downhole Tools & Rentals(ii) 37,342 27,989 26,342 15,540
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Total revenue 120,519 96,015 83,513 50,870
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Gross margin 37,832 27,039 23,012 3,904
Gross margin % 31% 28% 28% 8%
EBITDA(1) 33,426 22,368 19,261 (42)
EBITDA %(1) 28% 23% 23% 0%
Continuing operations
Net income (loss) 19,205 8,050 8,343 (5,453)
Per share - basic and diluted $0.15 $0.06 $0.07 $(0.04)
Net income (loss) attributable to
shareholders of Essential 18,627 678 8,660 (5,923)
Per share - basic and diluted $0.15 $0.01 $0.07 $(0.05)
Total assets 436,301 406,853 415,653 393,377
Total long-term debt 35,603 35,563 50,474 41,198
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Utilization (iii)
Coil tubing rigs - deep 110% 95% 79% 32%
Coil tubing rigs - other 15% 16% 15% 7%
Pumpers 73% 57% 50% 33%
Service rigs 69% 54% 45% 34%
Operating Hours
Coil tubing rigs - deep 24,765 22,777 18,301 7,262
Coil tubing rigs - other 2,511 2,757 2,819 1,596
Pumpers 20,481 15,328 11,919 7,504
Service rigs 34,364 27,310 22,632 16,183
Downhole Tools & Rentals - revenue % of total
Tryton MSFS 60% 51% 52% 40%
Conventional Tools & Rentals 40% 49% 48% 60%
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Equipment fleet (iv)
Canada
Coil tubing rigs - deep 25 27 26 25
Coil tubing rigs - other 19 19 19 20
Service rigs 56 55 55 53
Nitrogen pumpers 13 13 10 10
Fluid pumpers 18 18 16 16
Rod rigs 14 14 14 14
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SUMMARY OF QUARTERLY DATA
(Thousands of dollars, except Mar 31, Dec 31, Sep 30, June 30,
per share amounts and percentages) 2012 2011 2011 2011
----------------------------------------------------------------------------
Well Servicing:
Coil Well Service 42,414 43,945 36,349 9,871
Service Rigs 33,311 28,118 23,939 11,835
Other(i) 7,206 4,677 4,178 1,297
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Total well servicing 82,931 76,740 64,466 23,003
Downhole Tools & Rentals(ii) 35,251 32,115 33,316 17,115
----------------------------------------------------------------------------
Total revenue 118,182 108,855 97,782 40,118
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Gross margin 36,740 35,498 31,203 3,334
Gross margin % 31% 33% 32% 8%
EBITDA(1) 32,755 31,733 27,570 449
EBITDA %(1) 28% 29% 28% 1%
Continuing operations
Net income (loss) 19,823 17,082 14,020 (5,388)
Per share - basic and diluted $0.16 $0.14 $0.11 $(0.06)
Net income (loss) attributable to
shareholders of Essential 18,893 17,559 13,678 (6,364)
Per share - basic and diluted $0.15 $0.14 $0.11 $(0.07)
Total assets 430,674 421,500 411,204 371,017
Total long-term debt 57,238 63,486 79,230 63,459
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Utilization (iii)
Coil tubing rigs - deep 102% 111% 104% 37%
Coil tubing rigs - other 25% 30% 25% 18%
Pumpers 69% 71% 50% 23%
Service rigs 68% 59% 54% 27%
Operating Hours
Coil tubing rigs - deep 23,236 23,524 21,938 3,638
Coil tubing rigs - other 5,494 6,778 5,813 3,805
Pumpers 13,865 13,008 9,594 2,978
Service rigs 35,188 31,005 28,201 13,229
Downhole Tools & Rentals - revenue %
of total
Tryton MSFS 47% 47% 54% 45%
Conventional Tools & Rentals 53% 53% 46% 55%
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Equipment fleet (iv)
Canada
Coil tubing rigs - deep 25 25 23 23
Coil tubing rigs - other 24 24 25 25
Service rigs 58 57 57 58
Nitrogen pumpers 10 10 9 8
Fluid pumpers 15 15 12 6
Rod rigs 14 14 14 14
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(i) Other revenue included revenue from Essential's hybrid drilling
operation until it was disposed of in November 2012.
(ii) Revenue for Downhole Tools & Rentals included revenue from Essential's
wireline business which was disposed of in February 2012.
(iii) Utilization is calculated using a 10 hour day.
(iv) Fleet data represents the number of units at the end of the period.
Over the past two years, Essential has improved its fleet
through the acquisition of Technicoil, the purchase of new
equipment, the disposal of under-utilized equipment and ongoing
maintenance of its existing fleet. Spending has focused primarily
on expanding the depth capacity and service capabilities of the
well servicing operations.
ESSENTIAL ENERGY SERVICES LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
As at As at
March 31 December 31
(Thousands) 2013 2012
----------------------------------------------------------------------------
Assets
Current
Trade and other accounts receivable $ 101,822 $ 71,835
Inventories 21,461 20,699
Prepayments 2,648 3,306
----------------------------------------------------------------------------
125,931 95,840
----------------------------------------------------------------------------
Non-current
Property and equipment 212,215 211,304
Intangible assets 34,990 36,555
Goodwill 55,014 55,014
----------------------------------------------------------------------------
302,219 302,873
Assets held for sale 8,151 8,140
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Total assets $ 436,301 $ 406,853
----------------------------------------------------------------------------
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Liabilities
Current
Bank indebtedness $ 4,403 $ 1,835
Trade and other payables 39,616 32,354
Dividends payable 3,102 3,100
Income taxes payable 2,100 305
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49,221 37,594
Non-current
Long-term debt 35,603 35,563
Deferred tax liabilities 31,726 29,560
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67,329 65,123
Liabilities held for sale 1,458 1,731
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Total liabilities 118,008 104,448
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Equity
Share capital 258,886 258,772
Retained earnings 53,801 38,276
Other reserves 5,642 5,363
----------------------------------------------------------------------------
Equity attributable to shareholders of Essential 318,329 302,411
Non-controlling interest (36) (6)
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Total equity 318,293 302,405
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Total liabilities and equity $ 436,301 $ 406,853
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ESSENTIAL ENERGY SERVICES LTD.
CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME
(Unaudited)
For the three months
ended March 31
(Thousands, except per share amounts) 2013 2012
----------------------------------------------------------------------------
Revenue $ 120,519 $ 118,182
Operating expenses 82,687 81,442
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Gross margin 37,832 36,740
General and administrative expenses 4,406 3,985
----------------------------------------------------------------------------
33,426 32,755
Depreciation and amortization 7,044 7,079
Share-based compensation 343 491
Other income (133) (1,243)
----------------------------------------------------------------------------
Operating profit from continuing operations 26,172 26,428
Finance costs 376 632
----------------------------------------------------------------------------
Net income before income tax from continuing
operations 25,796 25,796
Current income tax expense 4,425 3,716
Deferred income tax expense 2,166 2,257
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Total income tax expense 6,591 5,973
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Net income from continuing operations 19,205 19,823
----------------------------------------------------------------------------
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Net loss from discontinued operations, net of tax (607) (1,093)
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Net income 18,598 18,730
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Unrealized foreign exchange gain (loss) on
discontinued operations (31) 1,009
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Other comprehensive income (loss) from
discontinued operations (31) 1,009
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Comprehensive income 18,567 19,739
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Net income (loss) attributable to:
Shareholders of Essential $ 18,627 $ 18,893
Non-controlling interest (29) (163)
----------------------------------------------------------------------------
$ 18,598 $ 18,730
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Comprehensive income (loss) attributable to:
Shareholders of Essential $ 18,597 $ 19,758
Non-controlling interest (30) (19)
----------------------------------------------------------------------------
$ 18,567 $ 19,739
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Net income per share from continuing operations
Basic and diluted, attributable to shareholders
of Essential $ 0.15 $ 0.16
Net income per share
Basic and diluted, attributable to shareholders
of Essential $ 0.15 $ 0.15
Comprehensive income per share
Basic and diluted, attributable to shareholders
of Essential $ 0.15 $ 0.16
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ESSENTIAL ENERGY SERVICES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months
ended March 31
(Thousands) 2013 2012
----------------------------------------------------------------------------
Operating activities:
Net income from continuing operations $ 19,205 $ 19,823
Non-cash adjustments to reconcile net income for
the year to operating cash flow:
Depreciation and amortization 7,044 7,079
Deferred income tax expense 2,166 2,257
Share-based compensation 343 491
Provision (recovery) for impairment of trade
accounts receivable 250 (342)
Finance costs 376 632
Gain on disposal of assets (106) (880)
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Operating cash flow before changes in working
capital 29,278 29,060
Change in non-cash operating working capital:
Trade and other accounts receivable before
provision (31,159) (7,825)
Inventories (762) (2,200)
Prepayments 658 288
Trade and other accounts payable 7,262 (6,485)
Current taxes payable 1,795 (1,620)
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Net cash provided by operating activities from
continuing operations 7,072 11,218
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Investing activities:
Purchase of property and equipment & intangibles (6,824) (10,190)
Proceeds on disposal of equipment 540 7,318
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Net cash used in investing activities from
continuing operations (6,284) (2,872)
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Financing activities:
Increase (decrease) in long-term debt 40 (5,575)
Proceeds on exercise of share options 88 445
Common shares repurchase (8) -
Dividends paid (3,100) -
Finance costs (376) (632)
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Net cash used in financing activities from
continuing operations (3,356) (5,762)
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Net increase (decrease) in cash (2,568) 2,584
Net decrease in cash, discontinued operations - (987)
Cash, beginning balance, discontinued operations - 1,268
Bank indebtedness, beginning of the period (1,835) (1,105)
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Cash (bank indebtedness), end of the period $ (4,403) $ 1,760
----------------------------------------------------------------------------
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Supplemental cash flow information
Cash taxes paid $ 2,630 $ 5,336
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(1) Non-IFRS Measures
Throughout this news release, certain terms that are not
specifically defined in IFRS are used to analyze Essential's
operations. In addition to the primary measures of net earnings and
net earnings per share in accordance with IFRS, Essential believes
that certain measures not recognized under IFRS assist both
Essential and the reader in assessing performance and understanding
Essential's results. Each of these measures provides the reader
with additional insight into Essential's ability to fund principal
debt repayments and capital programs. As a result, the method of
calculation may not be comparable with other companies. These
measures should not be considered alternatives to net earnings and
net earnings per share as calculated in accordance with IFRS.
EBITDA (Earnings before finance costs, income taxes, equity
taxes, depreciation, amortization, transaction costs,
non-controlling interest earnings, losses or gains on disposal of
equipment, results of discontinued operations and share-based
compensation) - This measure is considered an indicator of
Essential's ability to generate funds flow in order to fund
required working capital, service debt and fund capital
programs.
EBITDA % - This measure is considered an indicator of
Essential's ability to generate funds flow as calculated by EBITDA
divided by revenue.
Funds flow or funds flow from operations - This measure is an
indicator of Essential's ability to generate funds flow in order to
fund working capital, principal debt repayments and capital
programs. Funds flow or funds flow from operations is defined as
cash flow from operations before changes in non-cash operating
working capital. This measure is useful in assessing Essential's
operational cash flow as it provides cash generated in the period
excluding the timing of non-cash operating working capital. This
reflects the ability of the operations of Essential to meet the
above noted funding requirements.
Working capital - Working capital is calculated as current
assets less current liabilities.
Growth capital - Growth capital is capital spending which is
intended to result in incremental increases in revenue. Growth
capital is considered to be a key measure as it represents the
total expenditures on equipment expected to add incremental
revenues and funds flow to Essential.
Maintenance capital - Equipment additions that are incurred in
order to refurbish or replace previously acquired equipment less
proceeds on the disposal of retired equipment. Such additions do
not provide incremental increases in revenue. Maintenance capital
is a key component in understanding the sustainability of
Essential's business as cash resources retained within Essential
must be sufficient to meet maintenance capital needs to replenish
the assets for future cash generation.
Net equipment expenditures - This measure is equipment
expenditures less proceeds on the disposal of equipment. Essential
uses net equipment expenditures to assess net cash flows related to
the financing of Essential's oilfield services equipment.
ABOUT ESSENTIAL
Essential is a growth-oriented, dividend paying corporation that
provides oilfield services to producers in western Canada for
producing wells and new drilling activity. Essential operates the
largest coil tubing well service fleet in Canada with 44 coil
tubing rigs and a fleet of 56 service rigs. Essential also sells,
rents and services downhole tools and equipment including the
Tryton Multi-Stage Fracturing System. Further information can be
found at www.essentialenergy.ca.
FORWARD-LOOKING STATEMENTS AND INFORMATION
This news release contains forward-looking statements and
forward-looking information within the meaning of applicable
securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "objective", "ongoing",
"may", "will", "project", "should", "believe", "plans", "intends"
and similar expressions are intended to identify forward-looking
information or statements. In particular, this news release
contains forward-looking statements including expectations
regarding capital spending, in-service timing of new equipment,
demand for new equipment, expectations of future cash flow and
earnings, expectations with respect to the demand for and price of
oil and liquids-rich natural gas, expectations regarding the future
areas of development in the WCSB, the level and type of drilling
activity, completion activity, work-over activity, production
activity and required oilfield services in the WCSB, expectations
regarding the business, operations and revenues of the Company in
addition to general economic conditions, expectations regarding
Essential's ability to meet the changing needs of the WCSB market,
expectations regarding the capital spending plans of E&P
companies, expectations for Essential's positioning for the future,
expectations that oilfield service activity after spring break-up
will be similar to 2012, expectations related to infrastructure
uncertainties, expectations that development of possible LNG
projects on the West Coast will increase the demand for oilfield
services, expectations to operate Essential's rod rigs in Colombia
until their current contracts expire, expectations of 2013
financial performance in Colombia, anticipated timing of the
shut-down of Colombian operations, anticipated proceeds from asset
sales in Colombia, anticipated shut-down and disposal costs of
Colombian operations, expectations of the opportunity for growth
through expansion into the United States and expectations for the
payment of a dividend on July 15, 2013.
Although the Company believes that the expectations and
assumptions on which such forward-looking statements and
information are reasonable, undue reliance should not be placed on
the forward-looking statements and information because the Company
can give no assurance that such statements and information will
prove to be correct. Since forward-looking statements and
information address future events and conditions, by their very
nature they involve inherent risks and uncertainties.
Actual results could differ materially from those currently
anticipated due to a number of factors and risks. These include,
but are not limited to: the risks associated with the oilfield
services sector (e.g. demand, pricing and terms for oilfield
services; current and expected oil and natural gas prices;
exploration and development costs and delays; reserves discovery
and decline rates; pipeline and transportation capacity; weather,
health, safety and environmental risks); integration of
acquisitions, competition, and uncertainties resulting from
potential delays or changes in plans with respect to acquisitions,
development projects or capital expenditures and changes in
legislation, including but not limited to tax laws, royalties,
incentive programs and environmental regulations; stock market
volatility and the inability to access sufficient capital from
external and internal sources; the ability of the Company's
subsidiaries to enforce legal rights in foreign jurisdictions;
general economic, market or business conditions; global economic
events; changes to Essential's financial position and cash flow;
the availability of qualified personnel, management or other key
inputs; currency exchange fluctuations; changes in political and
security stability; risks and other unforeseen conditions
associated with the sale of the Colombian business; risks
associated with government regulations and environmental health and
safety matters and other unforeseen conditions which could impact
the use of equipment and services supplied by Essential in
Colombia; risks and uncertainty related to distribution and
pipeline constraints; and other unforeseen conditions which could
impact the use of services supplied by the Company. Accordingly,
readers should not place undue reliance on the forward-looking
statements. Readers are cautioned that the foregoing list of
factors is not exhaustive.
Additional information on these and other factors that could
affect the Company's financial results are included in reports on
file with applicable securities regulatory authorities and may be
accessed through the SEDAR website (www.sedar.com) for the Company.
The forward-looking statements and information contained in this
news release are made as of the date hereof and the Company
undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by
applicable securities laws.
FIRST QUARTER 2013 EARNINGS CONFERENCE CALL AND WEBCAST
Essential has scheduled a conference call and webcast to begin
at 10:00 am MT (12:00 pm ET) on Wednesday, May 8, 2013.
The conference call dial in numbers are 416-340-2217 or
866-696-5910, passcode 9707065.
An archived recording of the conference call will be available
approximately one hour after the completion of the call until May
22, 2013 by dialing 905-694-9451 or 800-408-3053, passcode
3011022.
A live webcast of the conference call will be accessible on
Essential's website at www.essentialenergy.ca by selecting
"Investors" and "Events and Presentations". Shortly after the live
webcast, an archived version will be available for approximately 30
days.
The TSX has neither approved nor disapproved the contents of
this news release.
Contacts: Essential Energy Services Ltd. Garnet K. Amundson
President and CEO (403) 513-7272service@essentialenergy.ca
Essential Energy Services Ltd. Karen Perasalo Investor Relations
(403) 513-7272service@essentialenergy.ca www.essentialenergy.ca
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