Leader Energy Services Reports First Quarter 2011 Results
23 Junio 2011 - 6:01PM
Marketwired Canada
Leader Energy Services Ltd. ("Leader" or the "Company") (TSX VENTURE:LEA) has
released its financial and operating results for the three months ended March
31, 2011. As of January 1, 2011, Leader began preparing its interim consolidated
financial statements and comparative information based on international
financial reporting standards (IFRS). Previously, the Company's financial
statements were prepared in accordance with Canadian generally accepted
accounting principles (GAAP).
Highlights for the Three Months Ended March 31, 2011
-- Revenue from continuing operations were the highest since the first
quarter of 2007, increasing 23% to $10.1 million for the three months
ended March 31, 2011, as compared with $8.2 million in the comparable
period of the prior year.
-- Gross profit from continuing operations increased 25% to $5.0 million
for the three months ended March 31, 2011, as compared with $4.0 million
in the comparable period of the prior year.
-- EBITDA(1) increased 26% to $4.0 million, as compared with $3.2 million
in the comparable period of the prior year. As a percentage of revenue,
an EBITDA(1) margin of 39% remained constant as compared with the
comparable period last year.
-- Profit from continuing operations decreased 30% to $1.3 million for the
three months ended March 31, 2011, as compared with $1.8 million in the
comparable period of the prior year. Excluding a one-time loss on
settlement of convertible debentures, the Company reported a profit of
$2.7 million representing a 47% improvement over the comparable period
last year.
-- The Company obtained a new $15 million three-year secured debt facility
and repurchased 95.4% of its convertible subordinated debentures,
eliminating the likelihood of significant dilution in the number of
shares outstanding. More than 31 million shares could have been issued
at a conversion price of 40 cents had these remaining debentures been
converted.
Selected Quarterly Financial Information
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(000's except per share amounts)
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Three months ended March 31,
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2011 2010
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Revenue - continuing operations $ 10,138 $ 8,219
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Profit - continuing operations 1,275 1,815
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Net Profit 1,291 1,866
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Profit per share (basic) - continuing
operations 0.07 0.14
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Profit per share (diluted) - continuing
operations 0.05 0.05
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Net Profit per share (basic) 0.07 0.14
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Net Profit per share (diluted) 0.05 0.05
------------------------------
EBITDA (1) 3,997 3,173
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Total Assets 33,950 31,354
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Long Term Debt (2) 23,853 26,240
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Equity $ 6,624 $ 1,620
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Weighted average shares outstanding 18,399 13,265
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Shares outstanding, end of period 19,455 13,265
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1. EBITDA means earnings from continuing operations before finance costs,
loss on settlement of convertible debenture, taxes, amortization, other
(gains) losses, and share based compensation. Readers are cautioned that
EBITDA is generally regarded as an indirect measure of operating cash
flow, and, as such, the Company believes it is a significant indicator
of success of public companies, and is particularly relevant to readers
within the investment community. EBITDA is not a measure that has a
standardized meaning prescribed by IFRS, and accordingly may not be
comparable to similar measures used by other companies.
2. Includes loans and borrowings and obligations under finance lease.
Overview
In the first quarter of 2011 revenues were 23% higher than the prior year's
first quarter and exceeded the Company's expectations. In conjunction with the
first quarter of the year typically being the most active quarter for the
Company, the results from the 2011 first quarter were further improved due to
the Company focusing its service activities on larger diameter coil work on
deeper wells combined with the Company capitalizing on the economic turnaround
in the WCSB.
The Company's profit from continuing operations of $1.3 million for the first
quarter of 2011 includes a one-time loss on the settlement of its convertible
debenture in the amount of $1.4 million. Excluding this loss, the Company
reported a profit of $2.7 million representing a 47% improvement over the prior
year's first quarter profit from continuing operations of $1.8 million. This
improvement reflects an increase in activity in the field resulting in higher
revenues, partially offset by an increase in general and administrative
expenses.
Profit for the quarter ended March 31, 2011 was $1.3 million with basic and
diluted earnings per share being $0.07 and $0.05 respectively.
During the first quarter, the Company closed a secured debt facility with a
second lender. The $15 million secured debt facility bears interest at an annual
rate of 12% compounded and payable quarterly and is repayable at any time
without penalty subject to the approval of its senior lender. The Company is not
required to make principal payments during the three year term of the agreement.
Under the terms of the agreement, the Company paid a commitment fee and issued 4
million purchase warrants exercisable at $0.65 for three years. In addition to
the commitment fee and purchase warrants issued to the lender, the Company paid
cash compensation of $0.3 million and issued 250,000 share purchase warrants
exercisable at $0.60 for two years to an organization that provided financial
advisory services to Leader concerning this transaction.
As of February 18, 2011, just prior to the closing of the $15.0 million secured
debt facility noted above, a total of $2.14 million in convertible debentures
were converted to 5.35 million common shares in the Company.
In conjunction with the closing of the $15.0 million secured debt facility, the
Company entered into an agreement with its convertible debenture holders to
repurchase $12.56 million of debenture principal plus $1.4 million of deferred
interest at 110% of face value for a total payment of $15.4 million.
Additionally, the Company paid interest owing per the debentures up until
February 18, 2011 totalling approximately $0.8 million. Subsequent to closing,
$0.3 million of debenture principal remained outstanding. These outstanding
debentures have since been converted to 750,000 common shares in the Company.
Results of Continuing Operations
Well Stimulation Services (000's)
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Year over Year over
March 31, March 31, Year Year
Quarter ended 2011 2010 $ Change % Change
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Revenue $ 10,138 $ 8,219 $ 1,919 23%
Operating Expenses 5,131 4,213 918 22%
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Gross profit(i) $ 5,007 $ 4,006 $ 1,001 25%
(i) Gross profit is a measure not recognized under IFRS. Management believes
that gross profit provides investors with an indication of profit before
administrative costs, amortization, finance costs, taxes and other. Readers are
cautioned that gross profit should not be considered as an alternative to net
profit determined in accordance with IFRS as an indicator of the Company's
performance.
Revenues from well stimulation services increased 23% in the first quarter of
2011 as compared to the first quarter of 2010. The $10.1 million in revenue
reported in the first quarter of 2011 represents the highest quarterly revenue
reported since the first quarter of 2007. The $1.9 million increase in revenue
over the first quarter of 2010 reflects the continued increase in horizontal
drilling activity in northwest Alberta and northeast British Columbia requiring
deeper and larger diameter coil applications which translates into higher day
rates. Leader's focus on a larger area within the WCSB along with a general
increase in economic activity has also contributed to higher revenues. The
Company exited the quarter with five coil units plus one reel trailer capable of
2 3/8" coil applications, seven nitrogen pumpers and one fluid pumper.
Operating costs totalled $5.1 million during the first quarter of 2011 versus
$4.2 million during the comparable period in 2010. Operating costs as a
percentage of revenues remained stable at approximately 51% of revenue.
Increases in field wage rates, costs incurred to clean-up a flood at the vacant
Brooks facility and the requirement to rent a higher amount of specialty
equipment to complete certain jobs was offset by an increase in higher margin
deeper coil applications. Although the gross profit stayed consistent at 49% of
revenue, the increase in revenue resulted in the Company contributing an
additional $1.0 million towards overall profitability from field operations.
Outlook
Western Canadian petroleum exploration and production operations remain focused
on horizontal wells, multistage completions and extended-reach drilling in oil
and liquids-rich gas plays. With a 10-year history in the premium coiled tubing
market, Leader is well positioned to provide large diameter coiled tubing,
nitrogen and fluid pumping services through the very active corridor from
northeastern BC through south-central Alberta.
As the price of crude oil and natural gas liquids is anticipated to remain
strong, Leader expects capital spending by many of its customers will accelerate
through the fall and busy winter drilling seasons. Energy companies spent a
record $842 million at the most recent Alberta oil and gas land sale. The
Canadian Association of Oilwell Drilling Contractors predicts 13,128 wells will
be drilled in western Canada this year, up from 11,587 in 2010 and 8,278 in
2009. Coiled tubing is increasingly being used for high-end completion activity
and growing demands are creating an environment of better pricing for our
services.
The Company's 2011 capital expenditure budget will approximate $4.0 million,
which will be financed by internally generated cash flow. Each of the Company's
three service lines will benefit from this expansion, with all of the new
equipment becoming operational during the third quarter. We anticipate a growing
number of horizontal wells drilled in the foreseeable future; these deeper
drilling activities require each of Leader's service offerings. As a result, the
Company expects to see higher levels of equipment utilization and strong EBITDA
margins in 2011 and is confident that this momentum will continue into 2012. A
larger capital expenditure program will be initiated for 2012 with a focus on
deep coiled tubing units.
Other
Mr. Jason Krueger has been appointed as an executive of the Company and has
assumed the role of Executive Vice President effective June 1, 2011. Mr. Krueger
has been a member of Leader's board of directors since 2003. Mr. Krueger has
extensive experience in finance, strategic planning and corporate development.
Prior to this appointment, Mr. Krueger was President of Redwood Capital
Corporation. Mr. Krueger holds the Chartered Financial Analyst designation and a
Bachelor of Commerce degree from the University of Calgary.
Additional information can be found on SEDAR at www.sedar.com or the Company web
site at www.leaderenergy.com. The number of common shares issued and outstanding
at the date hereof was 19,461,355 which does not include 1,705,834 unexercised
stock options and 4,250,000 share purchase warrants.
Certain statements contained in this press release, including statements which
may contain words such as "could", "should", "expect", "estimate", "believe",
"likely", "will", or estimates of business activity, and similar expressions and
statements relating to matters that are not historical facts, are forward
looking statements. Such statements involve known and unknown risks and
uncertainties that may cause the actual results, performance or achievements of
Leader to be materially different from any future results, performance or
achievements expressed or implied by such forward looking statements. Factors
include commodity prices, demand for oil and gas related products and service,
competition, political and economic conditions, demand and acceptance of new
products and ways of doing business, changes in laws and regulations to which
Leader is subject, and the ability to attract and retain key personnel.
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