ACT Energy Technologies Ltd. press release
/C O R R E C T I O N from Source -- Cathedral Energy Services Ltd./
TSX - Toronto Stock Exchange · Canada
In c2633 transmitted at 16:15e today, a typographical error occurred in the Condensed Consolidated Statement of Comprehensive Income. Total income tax recovery (expense) was deducted twice in arriving at Net earnings (loss) from continuing operations. This error also carried forward into the amounts for Net earnings (loss) and Total comprehensive income (loss). This error was isolated to the Condensed Consolidated Statement of Comprehensive Income and amounts listed elsewhere in the news release were correct. Corrected copy follows:
Cathedral Energy Services Ltd. reports results for 2011 Q2 and 2011 Q3 dividend
/NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA/
CALGARY, Aug. 9, 2011 /CNW/ - Cathedral Energy Services Ltd. (the "Company" or "Cathedral") (TSX: CET) is pleased to report its results for 2011 Q2 and 2011 Q3 dividend. Dollars are in '000's except for day rates and per share amounts
FINANCIAL HIGHLIGHTS Dollars in 000's except per share amounts
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended June 30 | | | | Six months ended June 30 | | | | | | | | | | | | | | | | | 2011 | | | | 2010 | | | | 2011 | | | | 2010 | | | Revenues | | | | $ | | 31,746 | | $ | | 25,417 | | $ | | 86,595 | | | $ | 64,698 | | | Adjusted gross margin % (1) | | | | | | 21% | | | | 26% | | | | 29% | | | | 33% | | | EBITDAS from continuing operations (1) | | | | $ | | 2,477 | | $ | | 2,566 | | $ | | 17,002 | | | $ | 14,571 | | | | Diluted per share | | | | $ | | 0.07 | | $ | | 0.07 | | $ | | 0.45 | | | $ | 0.40 | | EBITDAS (1) | | | | $ | | 2,643 | | $ | | 1,824 | | $ | | 17,451 | | | $ | 12,790 | | | | Diluted per share | | | | $ | | 0.07 | | $ | | 0.05 | | $ | | 0.46 | | | $ | 0.35 | | Funds from continuing operations (1) | | | | $ | | 1,563 | | $ | | 1,135 | | $ | | 15,496 | | | $ | 12,625 | | | Diluted per share | | | | $ | | 0.04 | | $ | | 0.03 | | $ | | 0.41 | | | $ | 0.34 | | | Earnings (loss) from continuing operations before income taxes | | | | $ | | (1,986) | | $ | | (1,805) | | $ | | 8,705 | | | $ | 7,601 | | | Net earnings (loss) | | | | $ | | (1,609) | | $ | | (1,894) | | $ | | 6,508 | | | $ | 3,472 | | | | Basic per share | | | | $ | | (0.04) | | $ | | (0.05) | | $ | | 0.18 | | | $ | 0.10 | | | Diluted per share | | | | $ | | (0.04) | | $ | | (0.05) | | $ | | 0.17 | | | $ | 0.09 | | Dividends declared per share | | | | $ | | 0.06 | | $ | | 0.06 | | $ | | 0.12 | | | $ | 0.12 | | | Property and equipment additions | | | | $ | | 12,709 | | $ | | 8,458 | | $ | | 25,567 | | | $ | 16,172 | | | Weighted average shares outstanding | | | | | | | | | | | | | | | | | | | | | | Basic (000s) | | | | | | 37,071 | | | | 36,408 | | | | 36,953 | | | | 36,404 | | | Diluted (000s) | | | | | | 38,011 | | | | 36,773 | | | | 38,085 | | | | 36,834 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 30 2011 | | | | December 31 2010 | | | Working capital | | | | | | | | | | | | $ | | 14,985 | | | $ | 19,516 | | | Loans and borrowings excluding current portion | | | | | | | | | | | | $ | | 40,533 | | | $ | 35,435 | | | Total shareholders' equity | | | | | | | | | | | | $ | | 116,049 | | | $ | 112,191 | |
(1) Refer to news release see "NON-IFRS MEASUREMENTS"
Effective January 1, 2011, Cathedral began reporting its results in accordance with International Financial Reporting Standards ("IFRS)". Prior year comparative amounts have been restated to reflect results as if the Company had always prepared its financial results using IFRS. This news release for the three and six months ended June 30, 2011 should be read in conjunction with the disclosures made in the March 31, 2011 Management's Discussion and Analysis related to the transition to IFRS and notes 3, 4 and 15 for the three months ended March 31, 2011 which discuss the transition to IFRS.
FORWARD LOOKING STATEMENTS
This news release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "achieve", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "outlook", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. In particular, this news release contains forward-looking statements relating to, among other things: access to capital; projected capital expenditures and commitments and the financing thereof; equipment delivery and deployment dates; area of further growth; customer commitments; financial results; activity levels; U.S. expansion; expected increased utilization and dividends. The Company believes the expectations reflected in such forward-looking statements are reasonable as of the date hereof but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon.
Various material factors and assumptions are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking statements. Those material factors and assumptions are based on information currently available to the Company, including information obtained from third party industry analysts and other third party sources. In some instances, material assumptions and material factors are presented elsewhere in this news release in connection with the forward-looking statements. You are cautioned that the following list of material factors and assumptions is not exhaustive. Specific material factors and assumptions include, but are not limited to:
the performance of the Company's businesses, including current business and economic trends; oil and natural gas commodity prices and production levels; capital expenditure programs and other expenditures by the Company and its customers; the ability of the Company to retain and hire qualified personnel; the ability of the Company to obtain parts, consumables, equipment, technology, and supplies in a timely manner to carry out its activities; the ability of the Company to maintain good working relationships with key suppliers; the ability of the Company to market its services successfully to existing and new customers; the ability of the Company to obtain timely financing on acceptable terms; currency exchange and interest rates; risks associated with foreign operations including Venezuela; the ability of the Company to realize the benefit of its conversion from an income trust to a corporation; risks associated with the formation of Cathedral's joint venture company in Venezuela which is required prior to commencement of Venezuela operations, some of which are out of the control of Cathedral; risks associated with Venezuela joint venture company being awarded work by the Venezuela state run oil and natural gas corporation; changes under governmental regulatory regimes and tax, environmental and other laws in Canada, United States ("U.S.") and Venezuela; and a stable competitive environment.
Forward-looking statements are not a guarantee of future performance and involve a number of risks and uncertainties some of which are described herein. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause the Company's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks identified in this news release and in the Company's Annual Information Form under the heading "Risk Factors". Any forward-looking statements are made as of the date hereof and, except as required by law, the Company assumes no obligation to publicly update or revise such statements to reflect new information, subsequent or otherwise.
All forward-looking statements contained in this news release are expressly qualified by this cautionary statement. Further information about the factors affecting forward-looking statements is available in the Company's current Annual Information Form and Annual Report which have been filed with Canadian provincial securities commissions and are available on www.sedar.com.
NON-IFRS MEASUREMENTS
This news release refers to certain non-IFRS measurements that do not have any standardized meaning within IFRS and therefore may not be comparable to similar measures provided by other companies. Management utilizes these non-IFRS measurements to evaluate Cathedral's performance.
The specific measures being referred to include the following:
i) "Adjusted gross margin" - calculated as gross margin plus non-cash items (depreciation and share-based compensation); is considered a primary indicator of operating performance (see tabular calculation on the following page);
ii) "Adjusted gross margin %" - calculated as adjusted gross margin divided by revenues; is considered a primary indicator of operating performance (see tabular calculation on the following page);
iii) "EBITDAS" - defined as earnings before finance costs, unrealized foreign exchange on intercompany balances, unrealized foreign exchange due to hyper-inflation accounting, taxes, depreciation and share-based compensation; is considered an indicator of the Company's ability to generate funds flow from operations prior to consideration of how activities are financed, how the results are taxed and measured and non-cash expenses (see tabular calculation on the following page);
iv) "EBITDAS from continuing operations" - defined as earnings before finance costs, unrealized foreign exchange on intercompany balances, unrealized foreign exchange due to hyper-inflation accounting, taxes, depreciation and share-based compensation excluding the portion due from discontinued operations in each component of the calculation; is considered an ongoing indicator of the Company's ability to generate funds flow from operations prior to consideration of how activities are financed, how the results are taxed and measured and non-cash expenses (see tabular calculation on the following page);
v) "EBITDAS from discontinued operations" - defined as earnings before finance costs, unrealized foreign exchange on intercompany balances, unrealized foreign exchange due to hyper-inflation accounting, taxes, depreciation and share-based compensation from discontinued operations of the Company's former wireline division in each component of the calculation;
vi) "Maintenance capital expenditures" - refers to capital expenditures required to maintain existing levels of service but excludes replacement cost of lost-in-hole equipment to the extent the replacement equipment is financed from the proceeds on disposal of the equipment lost-in-hole; and
vii) "Funds from continuing operations" - calculated as cash provided by operating activities before changes in non-cash working capital, cash flow from discontinued operations and income taxes paid less current tax expense; is considered an indicator of the Company's ability to generate funds flow from operations on an after tax basis but excluding changes in non-cash working capital which is financed using the Company's operating loan (see tabular calculation on the following page).
The following tables provide reconciliations from IFRS measurements to non-IFRS measurements referred to in this news release:
| Adjusted gross margin | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended June 30 | | | | | | Six months ended June 30 | | | | | | | | | | | | | | | | | | | | | | | 2011 | | | | 2010 | | | | | | 2011 | | | | | 2010 | | | Gross margin | | | | | | | | | $ | | 2,752 | | | $ | 4,021 | | | | $ | | 17,651 | | | $ | | 16,331 | | | Add non-cash items included in cost of sales: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation | | | | | | | | | | | 3,688 | | | | 2,559 | | | | | | 7,067 | | | | | 4,862 | | | Share-based compensation | | | | | | | | | | | 99 | | | | 75 | | | | | | 163 | | | | | 153 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted gross margin | | | | | | | | | $ | | 6,539 | | | $ | 6,655 | | | | $ | | 24,881 | | | $ | | 21,346 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted gross margin % | | | | | | | | | | | 21% | | | | 26% | | | | | | 29% | | | | | 33% | |
| EBITDAS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended June 30 | | | | | | Six months ended June 30 | | | | | | | | | | | | | | | | | | 2011 | | | | 2010 | | | | | | 2011 | | | | | 2010 | | | Earnings (loss) from continuing operations before income taxes | | | | $ | | (1,986) | | | $ | (1,805) | | | | $ | | 8,705 | | | $ | | 7,601 | | | Add (deduct): | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation included in cost of sales | | | | | | 3,688 | | | | 2,559 | | | | | | 7,067 | | | | | 4,862 | | | Depreciation included in selling, general and administrative expenses | | | | | | 28 | | | | 83 | | | | | | 77 | | | | | 163 | | | Share-based compensation included in cost of sales | | | | | | 99 | | | | 75 | | | | | | 163 | | | | | 153 | | | Share-based compensation included in selling, general and administrative expenses | | | | | | 370 | | | | 600 | | | | | | 748 | | | | | 1,261 | | | Unrealized foreign exchange gain on intercompany balances | | | | | | (103) | | | | 696 | | | | | | (574) | | | | | 233 | | | Unrealized foreign exchange gain due to hyper-inflation accounting | | | | | | - | | | | - | | | | | | - | | | | | (510) | | | Finance costs | | | | | | 381 | | | | 358 | | | | | | 816 | | | | | 808 | | | | | | | | | | | | | | | | | | | | | | | | | | EBITDAS from continuing operations | | | | | | 2,477 | | | | 2,566 | | | | | | 17,002 | | | | | 14,571 | | | EBITDAS from discontinued operations | | | | | | 166 | | | | (742) | | | | | | 449 | | | | | (1,781) | | | | | | | | | | | | | | | | | | | | | | | | | | | EBITDAS | | | | $ | | 2,643 | | | $ | 1,824 | | | | $ | | 17,451 | | | $ | | 12,790 | |
| Funds from continuing operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Six months ended June 30 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2011 | | | | | | 2010 | | | Cash flow from operating activities | | | | | | | | | | | | | | | | | | | $ | | 20,766 | | | | $ | | 12,821 | | | Add (deduct): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flow from discontinued operations | | | | | | | | | | | | | | | | | | | | | - | | | | | | 1,719 | | | Changes in non-cash operating working capital | | | | | | | | | | | | | | | | | | | | | (6,043) | | | | | | (882) | | | Income taxes paid | | | | | | | | | | | | | | | | | | | | | 671 | | | | | | (299) | | | Current tax recovery (expense) | | | | | | | | | | | | | | | | | | | | | 102 | | | | | | (734) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Funds from continuing operations | | | | | | | | | | | | | | | | | | | $ | | 15,496 | | | | $ | | 12,625 | |
OVERVIEW
The Company completed 2011 Q2 with quarterly revenues of $31,746 and year-to-date revenues of $86,595 compared to 2010 Q2 revenues of $25,417 and 2010 year-to-date revenues of $64,698. Year-to-date revenues have increased 34% from 2010. The 2011 Q2 revenues were comprised of 69% (2010 Q2 - 75%) from the directional drilling division and 31% (2010 Q2 - 25%) from the production testing division.
2011 Q2 EBITDAS was $2,643 ($0.07 per share diluted) which represents an $819 increase from 2010 Q2 EBITDAS of $1,824 ($0.05 per share diluted). For the three months ended June 30, 2011, the Company's loss was $1,609 (($0.04) per share diluted) as compared to a $1,894 loss (($0.05) per share diluted) in 2010.
2011 year-to-date EBITDAS was $17,451 ($0.46 per share diluted) which represents a $4,661 or 36% increase from $12,790 ($0.35 per share diluted) in 2009. On a 2011 year-to-date basis, the Company's net income was $6,508 ($0.17 per share diluted) as compared to a $3,472 ($0.09 per share diluted) in 2010.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2011
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended June 30, 2011 | | | | | Three months ended June 30, 2010 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Directional | | | | Production | | | | | | | | | | Directional | | | | Production | | | | | | | Revenues | | | | | | | | | drilling | | | | testing | | | | | Total | | | | | drilling | | | | testing | | | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Canada | | | | | | | | $ | 10,059 | | | $ | 3,685 | | | $ | | 13,744 | | | | $ | 8,864 | | | $ | 2,511 | | | $ | | 11,375 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | United States | | | | | | | | | 11,940 | | | | 6,062 | | | | | 18,002 | | | | | 10,300 | | | | 3,742 | | | | | 14,042 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | $ | 21,999 | | | $ | 9,747 | | | $ | | 31,746 | | | | $ | 19,164 | | | $ | 6,253 | | | $ | | 25,417 |
Revenues and gross margin2011 Q2 revenues were $31,746 which represented an increase of $6,329 or 25% from 2010 Q2 revenues of $25,417. The extended spring breakup and significant rainfall limited growth of Canadian revenues on a year-over-year basis. Most of the Q2 increases relate to the U.S. production testing division and is primarily due to the increase in number of units in the U.S., the expansion into new markets and greater overall utilization of the existing units.
The directional drilling division revenues have increased from $19,164 in 2010 Q2 to $21,999 in 2011 Q2. This increase is the result of: i) a 7% increase in activity days from 1,955 in 2010 to 2,084 in 2011; and ii) an 8% increase in the average day rate from $9,574 in 2010 Q2 to $10,348 in 2011 Q2. For 2011 Q1, the average day rate was $10,221. On year-over-year basis, Canadian day rates have increased 12% and this increase is attributable to a combination of passing on increased field labour rates to customers and general rate increases. U.S. day rates have increased 6% and are attributed to the types of directional services provided in the current year. The day rates disclosed in this news release reflect revenue as classified under IFRS - see notes to financial statements for explanation of changes in revenue classifications. Canadian activity days increased from 877 to 893 and U.S. activity days increased from 1,078 to 1,191.
The Company's production testing division contributed $9,747 in revenues during 2011 Q2 which is a 56% increase over 2010 revenues of $6,253. This increase is attributable to the overall increase in testing units from 39 at the end of 2010 Q2 to 59 at the end of 2011 Q2, plus an increase in oilfield service activities on a year-over-year basis.
The gross margin for 2011 Q2 was 9% compared to 16% in 2010 Q2. Under IFRS, cost of sales includes the non-cash expenses for a portion of depreciation and share-based compensation and these non-cash expenses total $3,787 for 2011 Q2 and $2,634 for 2010 Q2. Adjusted gross margin for 2011 Q2 is $6,539 (21%) compared to $6,655 (26%) for 2010 Q2.
The decline in adjusted gross margin of 5% is attributed to the combined effects of:
| i) | | increase in labour costs. Field labour rates have increased and such increases have not been fully compensated for by revenue increases. Startup costs have been incurred with respect to Houston operations facility and training of field staff for future Venezuela operations. Additional operating administrative staff positions were added to accommodate growth; | | ii) | | increase in field supplies and consumables due to the increase in the number of production testing units and the timing of these purchases; | | iii) | | an increase in accommodation costs for field employees as in the prior year much of the U.S. testing division's work was performed at locations with camps to house the employees. In the current quarter, more jobs were added outside of camp locations; and | | iv) | | net of a decrease in repairs and maintenance. These declines were due to a number of factors including the introduction of certain new drilling equipment and operation in less demanding operating environments than in 2010 Q2. |