Calfrac Announces Fourth Quarter Results
CALGARY, Feb. 26, 2014 /CNW/ - Calfrac Well Services Ltd. ("Calfrac" or "the Company") (TSX-CFW) announces its financial and operating results for the three months and year ended December 31, 2013.
| HIGHLIGHTS | ||||||||
| Three Months Ended December 31, | Years Ended December 31, | |||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||
| (C$000s, except per share and unit data) | ($) | ($) | (%) | ($) | ($) | (%) | ||
| (unaudited) | ||||||||
| Financial | ||||||||
| Revenue | 463,054 | 367,487 | 26 | 1,563,814 | 1,595,216 | (2) | ||
| Operating income(1) | 57,416 | 43,218 | 33 | 188,076 | 257,013 | (27) | ||
| EBITDA(2) | 57,667 | 46,866 | 23 | 185,933 | 264,471 | (30) | ||
| Per share - basic | 1.25 | 1.05 | 19 | 4.07 | 5.97 | (32) | ||
| Per share - diluted | 1.24 | 1.04 | 19 | 4.04 | 5.90 | (32) | ||
| Net income attributable to | ||||||||
| the shareholders of Calfrac | ||||||||
| before foreign exchange | ||||||||
| losses (gains)(3) | 10,194 | 8,073 | 26 | 27,578 | 89,931 | (69) | ||
| Per share - basic | 0.22 | 0.18 | 22 | 0.60 | 2.03 | (70) | ||
| Per share - diluted | 0.22 | 0.18 | 22 | 0.60 | 2.01 | (70) | ||
| Net income attributable to | ||||||||
| the shareholders of Calfrac | 11,764 | 11,243 | 5 | 27,914 | 97,146 | (71) | ||
| Per share - basic | 0.25 | 0.25 | - | 0.61 | 2.19 | (72) | ||
| Per share - diluted | 0.25 | 0.25 | - | 0.61 | 2.17 | (72) | ||
| Working capital (end of period) | 319,934 | 322,857 | (1) | |||||
| Total equity (end of period) | 795,207 | 780,759 | 2 | |||||
| Weighted average common | ||||||||
| shares outstanding (000s) | ||||||||
| Basic | 46,174 | 44,694 | 3 | 45,728 | 44,335 | 3 | ||
| Diluted | 46,497 | 45,073 | 3 | 46,045 | 44,808 | 3 | ||
| Operating (end of period) | ||||||||
| Pumping horsepower (000s) | 1,194 | 977 | 22 | |||||
| Coiled tubing units (#) | 38 | 29 | 31 | |||||
| Cementing units (#) | 31 | 26 | 19 | |||||
| (1) | Operating income is defined as net income (loss) before depreciation, interest, foreign exchange gains or losses, gains or losses on disposal of property, plant and equipment, expenses and gain related to business combinations and income taxes. Management believes that operating income is a useful supplemental measure as it provides an indication of the financial results generated by Calfrac's business segments prior to consideration of how these segments are financed or how they are taxed. Operating income is a measure that does not have any standardized meaning under International Financial Reporting Standards (IFRS) and, accordingly, may not be comparable to similar measures used by other companies. |
| (2) | EBITDA is defined as net income (loss) before interest, income taxes, depreciation and amortization. EBITDA is presented because it is frequently used by securities analysts and others for evaluating companies and their ability to service debt. EBITDA is a measure that does not have any standardized meaning prescribed under IFRS and, accordingly, may not be comparable to similar measures used by other companies. |
| (3) | Net income attributable to the shareholders of Calfrac before foreign exchange gains or losses is defined as net income (loss) attributable to the shareholders of Calfrac before foreign exchange gains or losses on an after-tax basis. Management believes that net income attributable to the shareholders of Calfrac before foreign exchange gains or losses is a useful supplemental measure as it provides an indication of the financial results generated by Calfrac without the impact of foreign exchange fluctuations, which are not fully controllable by the Company. Net income attributable to the shareholders of Calfrac before foreign exchange gains or losses is a measure that does not have any standardized meaning prescribed under IFRS and, accordingly, may not be comparable to similar measures used by other companies. |
CEO's MESSAGE
I am pleased to present Calfrac's operating and financial highlights for 2013 and to discuss our prospects for 2014. During the fourth quarter, our Company:
- completed the acquisition of the operating assets of Mission Well Services, LLC ("Mission"), a privately-held hydraulic fracturing and coiled tubing services provider focused in the Eagle Ford shale play of Texas;
- experienced strong equipment utilization in the unconventional natural gas resource plays of the United States;
- began executing on its pressure pumping services contract with YPF S.A., the largest operator in Argentina; and
- announced a 2014 capital program of $120.0 million, which focuses on maintenance and support capital, further investment in logistics equipment and international growth.
Financial Highlights
For the three months ended December 31, 2013, the Company recorded:
- revenue of $463.0 million, an increase of 26 percent from the fourth quarter of 2012 driven primarily by the commencement of fracturing operations in the Eagle Ford shale play combined with increased activity in the Niobrara and Marcellus shale plays in the United States, higher fracturing activity in Russia due to an expanded customer base and increased demand for horizontal multi-stage fracturing operations, and the significant increase in fracturing activity in Argentina;
- operating income of $57.4 million versus $43.2 million in the same quarter of 2012, mainly due to higher equipment utilization in the United States offset partially by the effects of the competitive pricing environment in Canada; and
- net income attributable to shareholders of Calfrac of $11.8 million or $0.25 per share diluted, including a $1.5 million foreign exchange gain, compared to net income of $11.2 million or $0.25 per share diluted in the fourth quarter of 2012, which included a foreign exchange gain of $3.8 million.
For the year ended December 31, 2013, the Company:
- generated revenue of $1.6 billion, a 2 percent decrease from 2012 driven primarily by competitive pricing pressure in western Canada and the United States and lower fracturing activity in Mexico, offset partially by higher multi-stage fracturing activity in Western Siberia, and the commencement of fracturing operations in Argentina and the Eagle Ford shale play in Texas during the second and fourth quarters of 2013, respectively;
- reported operating income of $188.1 million versus $257.0 million in 2012, a decrease of 27 percent, mainly as a result of competitive pricing and a decline in activity in Canada and lower equipment utilization in Mexico; and
- reported net income attributable to shareholders of Calfrac of $27.9 million or $0.61 per share diluted, including a foreign exchange loss of $1.2 million, compared to net income of $97.1 million or $2.17 per share diluted, which included a $8.3 million foreign exchange gain, in 2012.
Operational Highlights
Canada
Calfrac's financial and operating results in Canada for the fourth quarter met expectations as activity significantly increased as the quarter progressed with the onset of winter. Activity was particularly strong in the Montney play as several customers were focused on completing their 2013 programs during the quarter. However, bitterly cold temperatures throughout much of December did result in higher than expected fuel and subcontractor costs and impacted the Company's ability to cost effectively complete its scheduled programs. Financial performance in the fourth quarter was also weakened by further pricing competition on callout work during the early part of the quarter. Pricing stabilized as the quarter progressed and Calfrac expects this stable pricing environment to continue throughout the first quarter of 2014, as demand for its services remains at very high levels.
United States
In the United States, Calfrac's financial performance in the fourth quarter was consistent with expectations as equipment utilization remained high in the Marcellus and Fayetteville natural gas plays combined with improved utilization in the Bakken and Niobrara oil plays. The revenue base was further bolstered by the acquisition of the assets and business of Mission at the beginning of the fourth quarter as Calfrac made its entry into the Eagle Ford shale play in Texas. While utilization remained high, pricing continued to be a challenge in the fourth quarter as the oversupply of fracturing capacity remained prevalent in the latter part of the year. Financial results for the fourth quarter were also affected by holiday disruptions and inclement weather prevalent in several regions during the latter part of the quarter. The integration of Mission proceeded as planned although operating margins were impacted by the exposure to the weak callout market and the incurrence of certain costs related to integrating Mission into the Calfrac platform. Calfrac's United States operations remained focused on proactively managing the Company's cost structure. The Company's supply chain and logistic capabilities made further progress during the quarter to enhance operating efficiencies in the midst of challenging market conditions.
Russia
Equipment utilization for Calfrac's Russian operations continued to be positively impacted by the increase in horizontal multi-stage fracturing activity in Western Siberia. While this technology is still in the early stages of development, the Company remains optimistic that it will gain further acceptance and be a driver of future growth in operating and financial performance in Russia. While equipment utilization remained high in the fourth quarter, Calfrac's financial results were lower on a quarter-over-quarter basis due to the higher cost structure resulting from the onset of winter operating conditions. Late in the third quarter, a new district was opened in the Usinsk region and the Russian fleet was increased to six fracturing spreads. The Company successfully completed its first stimulation treatment in this region during the fourth quarter.
Latin America
Calfrac's Latin American operating results during the quarter improved substantially from the third quarter mainly due to an increase in fracturing activity in Argentina offset partially by a significant reduction in drilling and completion activity in the northern region of Mexico due to budget reductions implemented by the Company's main customer. The reduction in Mexican activity is not expected to change significantly in 2014, but Calfrac is optimistic that activity will improve in the future when the use of horizontal drilling with multi-stage completions becomes more prominent. In the meantime, the Company continues to rationalize its cost structure to be more closely aligned with its short term revenue outlook. Additional measures will be undertaken if the outlook does not improve as the year progresses.
In Argentina, the aforementioned increase in fracturing activity was related to the YPF S.A. tight gas contract that was announced in October 2013. This significant increase in activity was effectively managed by Calfrac's local team and has laid the groundwork for future growth opportunities. Based on the Company's assessment of the quality of the resource base in Argentina, it is expected that the greater adoption of horizontal well technology will provide further opportunities in this country.
Challenging market conditions in Colombia persisted in the fourth quarter of 2013, resulting in lower than expected equipment utilization and financial performance. Permitting and infrastructure issues remain barriers to greater oilfield activity. The Company expects these issues to be resolved, but continues to closely manage its operating costs while focusing on expanding its customer base. Calfrac currently operates four cementing units in Colombia and does not intend to deploy additional equipment until market conditions improve.
Outlook and Business Prospects
Natural gas prices in North America have improved during the first two months of 2014, with colder-than-normal weather providing improved fundamentals for a recovery in natural gas prices. Crude oil prices also remain at levels that provide solid economics to oil producers. Calfrac expects that this will encourage higher oilfield activity in 2014 in the unconventional resource plays of Canada and the United States. In addition, current trends in service intensity in the form of larger pad designs, longer horizontal legs and greater stimulation intensity should provide the basis for higher completions activity. The benefits of higher activity will however continue to be tempered by the competitive pricing environment in North America. Internationally, Calfrac's operations are experiencing continuing momentum in the application of multi-stage completion technology within horizontal wellbores, and the Company expects this increase to drive higher equipment utilization in those markets over the near and long term.
Fracturing and coiled tubing activity in western Canada is anticipated to remain strong in the Montney, Deep Basin, Cardium and Duvernay plays for the foreseeable future. Pricing recently stabilized and Calfrac expects it to remain firm throughout the first quarter. From a cost standpoint, the weakening of the Canadian dollar is negatively impacting certain input costs which are denominated in U.S. dollars and may continue into the first quarter. The development of liquids-rich gas plays, such as the Duvernay and various plays in the Deep Basin, likely represents the most meaningful short-term driver for increased activity, with the movement towards liquefied natural gas (LNG) export capability being the primary driver of higher demand for the Company's services over the longer-term.
Calfrac expects LNG export-related activity to increase with the influx of capital from foreign entities and large multi-national companies. The Company's leadership position in the development of the Montney, Duvernay and Horn River resource plays is expected to position it to participate significantly in the development of the natural gas reserves required to support these LNG initiatives. Calfrac believes that two or three LNG projects will move forward, but the timing for these projects remains unclear. Several of the Company's long-standing customers are at the forefront of this development, which is expected to be a catalyst for a significant increase in the demand for the Company's services over the longer term. Calfrac has seen the benefit of initial LNG activity in 2013, particularly in the Montney, and expects that this source of activity will grow materially in 2014. This should gain greater momentum in 2015 and beyond as further visibility unfolds regarding the scope and timing of the LNG projects.
Calfrac expects that oil-focused activity will remain stable for the rest of the year, with the introduction of higher-rate treatments in certain plays, such as the Cardium, driving higher equipment utilization. Viking activity is expected to increase in 2014 over 2013. Calfrac also expects to achieve further operational efficiencies in the Canadian market through the expanded use of 24-hour operations and multi-well pad development.
The organizational improvements initiated in the United States in late 2012 and 2013 resulted in improved financial performance during 2013 and provide the basis for achieving reasonable financial returns amidst challenging market conditions. Calfrac remains focused on prudently managing the Company's cost structure in the United States, creating further efficiencies through supply chain and logistical initiatives and expanding customer relationships in order to maximize profitability. In the short term, uncertainty remains due to the United States' over-supplied pressure pumping market. Calfrac's equipment utilization is expected to be quite strong given the Company's active customer base, contract coverage and positioning in some of the most economic plays such as the Marcellus, Niobrara and Eagle Ford. While the Company does not expect market conditions to change significantly in the first half of 2014, it remains cautiously optimistic that activity will increase in the last six months of 2014. This may lead to improved pricing dynamics, as further unconventional development occurs in oil-producing basins and completion activity in unconventional natural gas plays increases due to higher natural gas prices resulting from colder winter weather.
Calfrac's view is supported by its strong positioning in the U.S. market. The Company services three of the most active unconventional resource plays in the United States: the Bakken oil shale play in North Dakota, the Marcellus shale natural gas play in Pennsylvania and West Virginia and most recently, the Company's entry into the Eagle Ford shale play in Texas. Calfrac believes that the Marcellus will remain very active due to its low cost structure and proximity to consuming markets. In addition, Calfrac believes that activity in the Utica shale will see meaningful growth in 2014 as well results continue to improve. Calfrac's customer base, market presence and infrastructure have provided the opportunity to participate in this development. Activity in the Fayetteville shale play is anticipated to remain stable in 2014 due to the Company's strong customer relationships and operational performance in this region. Calfrac's long-standing presence in the Rocky Mountain region provides additional growth prospects in the Niobrara shale oil play, as many producers have begun using longer-reach horizontal wells and greater stimulation intensity with encouraging results. The Company has experienced a significant increase in activity in the Niobrara play and expects further growth in 2014.
Calfrac's Russian results in 2013 met its expectations and based on the results of the 2014 contract tender process, it expects improvement in both utilization and pricing in 2014. However, activity in the early portion of 2014 has been negatively impacted by harsh weather conditions. This outlook is primarily based on the expanded use of new technologies in Western Siberia, such as horizontal drilling and multi-stage completions. The pace of adoption of this new methodology has exceeded the Company's expectations. Approximately 35 percent of Calfrac's fracturing work was focused on horizontal wells in 2013. Consequently, Calfrac expects that this trend will continue to drive demand for its services over the short and long term as Russia's producing sector gains confidence in this approach.
In Mexico, the Company expects the use of multi-stage fracturing of horizontal wellbores to become more prominent over the longer term as capital budgets recover. Based on customer feedback, the majority of future onshore activity will be focused on horizontal wells, which should spur demand for Calfrac's services. However, as discussed above, short term visibility remains poor. Calfrac remains focused on prudently managing its Mexican cost structure to align with expected near-term activity. The Company continues to monitor this environment closely and will proactively manage this segment as more information becomes available. While the short-term outlook remains quite challenging, Calfrac is encouraged by the recent legislative and constitutional changes enacted in Mexico to open this market to foreign investment. The Company believes that implementation is likely to take some time as further clarity is required surrounding the rules governing foreign energy investment. This is likely to have a more material impact on oilfield service activity after 2014.
With Calfrac's successful entry into the Argentinean fracturing market in 2013, the Company believes that it is well-positioned to take advantage of additional opportunities related to the development of the country's unconventional resource plays. Calfrac expects that horizontal drilling combined with multi-stage fracturing will be key inputs to unlocking Argentina's tight sands and shale resources. With limited industry capacity in-country to service these emerging unconventional plays, the Company's strategy is to lever its long-standing reputation for service quality and technical expertise, which is expected to provide the foundation for long-term growth in Argentina. Calfrac's recently executed contract with YPF S.A. provides a strong foundation to grow its hydraulic fracturing, coiled tubing and cementing services in Argentina.
Overall, the Company believes that positive momentum in the pressure pumping business appears to be building in 2014. Calfrac remains focused on it core principles of service quality and technology and expects that further growth opportunities will develop as the year unfolds. The Company believes that it is well-positioned to take advantage of these opportunities.
On a personal note, Doug Ramsay recently retired from his role of Chief Executive Officer at Calfrac. As I assume the CEO role, I would like to acknowledge and thank Doug for the incredible leadership that he has provided to the Company over the last fifteen years since founding Calfrac and guiding it into one of the leading pressure pumping companies in the world. I look forward to continuing to work with Doug in his new role as Vice-Chairman.
Tim Swinton recently retired from his position as a director of Calfrac. Mr. Swinton has served as a director of Calfrac since its amalgamation with Denison Energy Inc. in March of 2004. The board and management of Calfrac would like to sincerely thank Tim for his many outstanding contributions to the growth and stewardship of Calfrac over the past decade, and wish him the very best in his retirement.
On behalf of the Board of Directors,
Fernando Aguilar
President & Chief Executive Officer
February 26, 2014
2013 Overview
For the three months ended December 31, 2013, the Company recorded:
- revenue of $463.0 million, an increase of 26 percent from the fourth quarter of 2012 driven primarily by the commencement of fracturing operations in the Eagle Ford shale play combined with increased activity in the Niobrara and Marcellus shale plays, higher fracturing activity in Russia due to an expanded customer base and increased demand for horizontal multi-stage fracturing operations, and the commencement of fracturing operations in Argentina during the second quarter of 2013;
- operating income of $57.4 million versus $43.2 million in the same quarter of 2012, mainly due to higher equipment utilization in the United States offset partially by the effects of the competitive pricing environment in Canada; and
- net income attributable to shareholders of Calfrac of $11.8 million or $0.25 per share diluted, including a $1.5 million foreign exchange gain, compared to net income of $11.2 million or $0.25 per share diluted in the fourth quarter of 2012, which included a foreign exchange gain of $3.8 million.
In 2013, the Company:
- generated revenue of $1.6 billion, a 2 percent decrease from 2012 resulting primarily from competitive pricing pressure in western Canada and the United States, lower coiled tubing activity in the unconventional plays in Canada, smaller fracturing job sizes in the United States, and lower fracturing activity in Mexico, offset partially by higher multi-stage fracturing activity in Western Siberia, and the commencement of fracturing operations in Argentina and the Eagle Ford shale play in Texas during the second and fourth quarters of 2013, respectively;
- reported operating income of $188.1 million versus $257.0 million in 2012, a decrease of 27 percent, mainly as a result of competitive pricing and a decline in activity in Canada and lower equipment utilization in Mexico;
- reported net income attributable to shareholders of Calfrac of $27.9 million or $0.61 per share diluted, including a foreign exchange loss of $1.2 million, compared to net income of $97.1 million or $2.17 per share diluted, which included a $8.3 million foreign exchange gain, in 2012;
- incurred capital expenditures of $170.5 million primarily to bolster the Company's fracturing operations in Canada, the United States and Argentina;
- completed the acquisition of the operating assets of Mission, a privately-held hydraulic fracturing and coiled tubing services provider focused on the Eagle Ford shale play of Texas;
- entered the Argentinean fracturing market and announced the signing of a long-term pressure pumping services contract with YPF S.A., the largest operator in Argentina;
- reported period-end working capital of $319.9 million versus $322.9 million at December 31, 2012; and
- announced a capital budget for 2014 of $120.0 million, which focuses on maintenance and support capital, further investment in logistics equipment and international growth. Approximately $33.0 million is allocated to supporting Calfrac's growing international operations, including an investment in coiled tubing and fracturing equipment in Russia and Argentina. In addition, approximately $20.0 million remaining from Calfrac's 2013 capital program is expected to be expended in 2014.
Financial Overview - Three Months Ended December 31, 2013 Versus 2012
| Canada | ||||
| Three Months Ended December 31, | 2013 | 2012 | Change | |
| (C$000s, except operational information) | ($) | ($) | (%) | |
| (unaudited) | ||||
| Revenue | 197,112 | 201,573 | (2) | |
| Expenses | ||||
| Operating | 157,775 | 147,518 | 7 | |
| Selling, general and administrative (SG&A) | 4,334 | 5,033 | (14) | |
| 162,109 | 152,551 | 6 | ||
| Operating income(1) | 35,003 | 49,022 | (29) | |
| Operating income (%) | 17.8% | 24.3% | (27) | |
| Fracturing revenue per job ($) | 188,660 | 192,600 | (2) | |
| Number of fracturing jobs | 995 | 1,001 | (1) | |
| Pumping horsepower, end of period (000s) | 389 | 375 | 4 | |
| Coiled tubing revenue per job ($) | 26,617 | 22,689 | 17 | |
| Number of coiled tubing jobs | 353 | 387 | (9) | |
| Coiled tubing units, end of period (#) | 21 | 21 | - | |
| (1) | Refer to "Non-GAAP Measures" on page 20 for further information. |
Revenue
Revenue from Calfrac's Canadian operations during the fourth quarter of 2013 was $197.1 million versus $201.6 million in the same period of 2012. The decrease in revenue was primarily due to increased pricing pressure, partially offset by the completion of larger jobs during the quarter.
Operating Income
Operating income in Canada decreased by 29 percent to $35.0 million during the fourth quarter of 2013 from $49.0 million in the same period of 2012. The decrease was primarily due to the competitive pricing environment experienced during the quarter. Additionally, extreme cold weather during the latter part of the quarter increased fuel and subcontractor costs. Selling, general and administrative expenses during the fourth quarter were $0.7 million less than in the comparable three-month period for 2012 primarily due to a lower annual bonus provision.
| United States | ||||
| Three Months Ended December 31, | 2013 | 2012 | Change | |
| (C$000s, except operational and exchange rate information) | ($) | ($) | (%) | |
| (unaudited) | ||||
| Revenue | 189,239 | 109,975 | 72 | |
| Expenses | ||||
| Operating | 154,001 | 99,048 | 55 | |
| SG&A | 5,642 | 5,439 | 4 | |
| 159,643 | 104,487 | 53 | ||
| Operating income(1) | 29,596 | 5,488 | 439 | |
| Operating income (%) | 15.6% | 5.0% | 212 | |
| Fracturing revenue per job ($) | 53,815 | 52,347 | 3 | |
| Number of fracturing jobs | 3,348 | 1,943 | 72 | |
| Pumping horsepower, end of period (000s) | 662 | 492 | 35 | |
| Cementing revenue per job ($) | 37,285 | 30,678 | 22 | |
| Number of cementing jobs | 213 | 180 | 18 | |
| Cementing units, end of period (#) | 18 | 12 | 50 | |
| US$/C$ average exchange rate(2) | 1.0498 | 0.9913 | 6 | |
| (1) | Refer to "Non-GAAP Measures" on page 20 for further information. |
| (2) | Source: Bank of Canada. |
Revenue
Revenue from Calfrac's United States operations increased during the fourth quarter of 2013 to $189.2 million from $110.0 million in the comparable quarter of 2012. The increase was due primarily to the commencement of fracturing operations in the Eagle Ford shale play following the acquisition of the Mission assets early in the fourth quarter of 2013. In addition, higher activity in the Niobrara and Marcellus shale plays contributed to the revenue increase. The increase in revenue was partially offset by lower pricing in the United States resulting from high levels of competition.
Operating Income
Operating income in the United States was $29.6 million for the fourth quarter of 2013, an increase of $24.1 million from the comparative period in 2012. The increase was primarily due to higher utilization in the unconventional natural gas plays where Calfrac is active, as well as in the Niobrara shale oil play, and the commencement of operations in the Eagle Ford play.
| Russia | ||||
| Three Months Ended December 31, | 2013 | 2012 | Change | |
| (C$000s, except operational and exchange rate information) | ($) | ($) | (%) | |
| (unaudited) | ||||
| Revenue | 41,404 | 24,197 | 71 | |
| Expenses | ||||
| Operating | 36,946 | 22,707 | 63 | |
| SG&A | 1,794 | 1,744 | 3 | |
| 38,740 | 24,451 | 58 | ||
| Operating income (loss)(1) | 2,664 | (254) | - | |
| Operating income (loss) (%) | 6.4% | -1.0% | - | |
| Fracturing revenue per job ($) | 118,015 | 84,063 | 40 | |
| Number of fracturing jobs | 284 | 199 | 43 | |
| Pumping horsepower, end of period (000s) | 62 | 45 | 38 | |
| Coiled tubing revenue per job ($) | 60,671 | 54,117 | 12 | |
| Number of coiled tubing jobs | 130 | 138 | (6) | |
| Coiled tubing units, end of period (#) | 7 | 7 | - | |
| Rouble/C$ average exchange rate(2) | 0.0322 | 0.0319 | 1 | |
| (1) | Refer to "Non-GAAP Measures" on page 20 for further information. |
| (2) | Source: Bank of Canada. |
Revenue
During the fourth quarter of 2013, the Company's revenue from Russian operations increased by 71 percent to $41.4 million from $24.2 million in the corresponding three-month period of 2012. The increase in revenue was mainly due to higher fracturing activity as a result of the Company expanding its customer base combined with increased demand for horizontal multi-stage fracturing operations in Western Siberia and larger fracturing job sizes. The Company began supplying proppant to two significant customers in 2013, which contributed to the revenue growth over the comparable quarter of 2012. The increase in revenue was partially offset by lower coiled tubing activity resulting from the increased use of multi-stage fracturing completions.
Operating Income (Loss)
Operating income in Russia was $2.7 million during the fourth quarter of 2013 compared to an operating loss of $0.3 million in the corresponding period of 2012. The turnaround in operating income was primarily a result of operational efficiencies resulting from higher fracturing equipment utilization and a higher overall revenue base. The increase in operating income was somewhat tempered by higher fuel and maintenance costs with the onset of winter operating conditions.
| Latin America | |||||
| Three Months Ended December 31, | 2013 | 2012 | Change | ||
| (C$000s, except operational and exchange rate information) | ($) | ($) | (%) | ||
| (unaudited) | |||||
| Revenue | 35,299 | 31,742 | 11 | ||
| Expenses | |||||
| Operating | 28,943 | 26,489 | 9 | ||
| SG&A | 2,520 | 2,152 | 17 | ||
| 31,463 | 28,641 | 10 | |||
| Operating income(1) | 3,836 | 3,101 | 24 | ||
| Operating income (%) | 10.9% | 9.8% | 11 | ||
| Pumping horsepower, end of period (000s) | 81 | 65 | 25 | ||
| Cementing units, end of period (#) | 13 | 13 | - | ||
| Coiled tubing units, end of period (#) | 3 | 1 | 200 | ||
| Mexican peso/C$ average exchange rate(2) | 0.0806 | 0.0766 | 5 | ||
| Argentinean peso/C$ average exchange rate(2) | 0.1732 | 0.2066 | (16) | ||
| (1) | Refer to "Non-GAAP Measures" on page 20 for further information. |
| (2) | Source: Bank of Canada. |
Revenue
Calfrac's Latin America operations generated total revenue of $35.3 million during the fourth quarter of 2013 versus $31.7 million in the comparable three-month period in 2012. The increase in revenue was due to the significant increase in unconventional fracturing activity in Argentina during 2013 as a result of the pressure pumping services contract that was signed with YPF S.A. at the beginning of the fourth quarter of 2013 combined with higher cementing and coiled tubing activity in that country. This increase in revenue was offset by lower fracturing activity in Mexico resulting from budget constraints by Calfrac's major customer in that country. The Colombian market continued to present challenging conditions, due to permitting and infrastructure issues, resulting in lower-than-expected equipment utilization.
Operating Income
Operating income in Latin America for the three months ended December 31, 2013 was $3.8 million versus $3.1 million in the comparative quarter in 2012. The increase in operating income was due to the commencement of fracturing operations in Argentina combined with higher cementing and coiled tubing equipment utilization in that country. This increase was offset by a decrease in operating income in Mexico and Colombia resulting from significantly lower equipment utilization.
| Corporate | ||||
| Three Months Ended December 31, | 2013 | 2012 | Change | |
| (C$000s, except operational information) | ($) | ($) | (%) | |
| (unaudited) | ||||
| Expenses | ||||
| Operating | 2,328 | 2,464 | (6) | |
| SG&A | 11,355 | 11,675 | (3) | |
| 13,683 | 14,139 | (3) | ||
| Operating loss(1) | (13,683) | (14,139) | (3) | |
| % of Revenue | 3.0% | 3.8% | (21) | |
| (1) | Refer to "Non-GAAP Measures" on page 20 for further information. |
Operating Loss
The 3 percent decrease in corporate expenses from the fourth quarter of 2012 was mainly due to lower annual bonus expenses. The decrease was offset partially by higher corporate personnel costs to support the Company's larger scale of operations.
Depreciation
For the three months ended December 31, 2013, depreciation expense increased by 33 percent to $31.4 million from $23.6 million in the corresponding quarter of 2012. The increase was mainly a result of the acquisition of assets from Mission at the beginning of the fourth quarter of 2013 combined with asset additions required to support the commencement of fracturing operations in Argentina.
Foreign Exchange Losses or Gains
The Company recorded a foreign exchange gain of $1.5 million during the fourth quarter of 2013 versus a foreign exchange gain of $3.8 million in the comparative three-month period of 2012. Foreign exchange gains and losses arise primarily from the translation of net monetary assets or liabilities that were held in United States dollars in Canada, Russia and Latin America. The Company's fourth quarter 2013 foreign exchange gain was largely attributable to the translation of United States dollar-denominated assets held in Canada offset by a loss on United States dollar-denominated debt held in Argentina. The value of the United States dollar at December 31, 2013 had strengthened against the Canadian dollar and the Argentinean peso from the beginning of the quarter, resulting in a consolidated net foreign exchange gain.
Interest
The Company's net interest expense of $13.4 million for the fourth quarter of 2013 was $4.5 million higher than in the comparable period of 2012. The increase was related to the issuance of an additional US$150.0 million of Calfrac's 7.50 percent senior notes to finance the acquisition of assets from Mission combined with draws on its revolving credit facility during the fourth quarter. Additional short-term borrowing in Latin America to fund the operational expansion in Argentina also contributed to the increase in interest expense during the quarter.
Income Tax Expenses
The Company recorded income tax expense of $1.1 million during the fourth quarter of 2013 compared to $3.3 million in the comparable period of 2012. The effective income tax rate for the three months ended December 31, 2013 was 8 percent compared to 23 percent in the same quarter of 2012. The decrease in total income tax expense was primarily due to lower profitability in Canada and Mexico offset partially by higher taxable income in the United States. The lower effective tax rate was due to the mix of earnings between various tax jurisdictions combined with a lower-than-expected effective tax rate in the United States. The lower effective tax rate in the United States was partially due to the reclassification of $1.8 million of deferred tax expense related to the Mission acquisition to offset the gain on business combination as required under IFRS and as described in note 11.
| Summary of Quarterly Results | ||||||
| Quarters Ended | Mar. 31, | June 30, | Sept. 30, | Dec. 31, | Total | |
| (C$000s, except per share and operating data) | ($) | ($) | ($) | ($) | ($) | |
| (unaudited) | ||||||
| 2013 |
||||||
| Financial |
||||||
| Revenue |
423,397 | 288,701 | 388,662 | 463,054 | 1,563,814 | |
| Operating income(1) |
62,670 | 16,307 | 51,683 | 57,416 | 188,076 | |
| EBITDA(1) | 65,169 | 16,235 | 46,862 | 57,667 | 185,933 | |
| Per share - basic | 1.44 | 0.36 | 1.02 | 1.25 | 4.07 | |
| Per share - diluted | 1.43 | 0.35 | 1.01 | 1.24 | 4.04 | |
| Net income (loss) attributable to the shareholders of Calfrac | 24,645 | (14,584) | 6,089 | 11,764 | 27,914 | |
| Per share - basic | 0.55 | (0.32) | 0.13 | 0.25 | 0.61 | |
| Per share - diluted | 0.54 | (0.32) | 0.13 | 0.25 | 0.61 | |
| Capital expenditures | 43,989 | 46,618 | 34,683 | 45,227 | 170,517 | |
| Working capital (end of period) | 332,241 | 319,982 | 292,854 | 319,934 | 319,934 | |
| Total equity (end of period) | 802,581 | 784,247 | 786,933 | 795,207 | 795,207 | |
| Operating (end of period) | ||||||
| Pumping horsepower (000s) | 1,013 | 1,025 | 1,025 | 1,194 | ||
| Coiled tubing units (#) | 29 | 29 | 31 | 38 | ||
| Cementing units (#) | 28 | 30 | 30 | 31 | ||
| (1) | Refer to "Non-GAAP Measures" on page 20 for further information. |
| Quarters Ended | Mar. 31, | June 30, | Sept. 30, | Dec. 31, | Total | ||||
| (C$000s, except per share and operating data) | ($) | ($) | ($) | ($) | ($) | ||||
| (unaudited) | |||||||||
| 2012 |
|||||||||
| Financial |
|||||||||
| Revenue |
474,107 | 335,780 | 417,842 | 367,487 | 1,595,216 | ||||
| Operating income(1) |
113,381 | 29,810 | 70,604 | 43,218 | 257,013 | ||||
| EBITDA(1) | 127,995 | 18,736 | 70,874 | 46,866 | 264,471 | ||||
| Per share - basic | 2.92 | 0.42 | 1.59 | 1.05 | 5.97 | ||||
| Per share - diluted | 2.87 | 0.42 | 1.58 | 1.04 | 5.90 | ||||
| Net income attributable to the shareholders of Calfrac | 70,841 | (11,855) | 26,917 | 11,243 | 97,146 | ||||
| Per share - basic | 1.62 | (0.27) | 0.60 | 0.25 | 2.19 | ||||
| Per share - diluted | 1.59 | (0.27) | 0.60 | 0.25 | 2.17 | ||||
| Capital expenditures | 84,075 | 75,286 | 63,962 | 55,694 | 279,017 | ||||
| Working capital (end of period) | 431,053 | 357,128 | 353,182 | 322,857 | 322,857 | ||||
| Total equity (end of period) | 779,426 | 747,591 | 783,091 | 780,759 | 780,759 | ||||
| Operating (end of period) | |||||||||
| Pumping horsepower (000s) | 782 | 830 | 845 | 977 | |||||
| Coiled tubing units (#) | 29 | 29 | 29 | 29 | |||||
| Cementing units (#) | 23 | 23 | 25 | 26 | |||||
| (1) Refer to "Non-GAAP Measures" on page 20 for further information. |
Financial Overview - Year Ended December 31, 2013 Versus 2012
| Canada | ||||
| Years Ended December 31, | 2013 | 2012 | Change | |
| (C$000s, except operational information) | ($) | ($) | (%) | |
| (unaudited) | ||||
| Revenue | 677,114 | 732,880 | (8) | |
| Expenses | ||||
| Operating | 538,730 | 526,400 | 2 | |
| Selling, general and administrative (SG&A) | 16,685 | 17,925 | (7) | |
| 555,415 | 544,325 | 2 | ||
| Operating income(1) | 121,699 | 188,555 | (35) | |
| Operating income (%) | 18.0% | 25.7% | (30) | |
| Fracturing revenue per job ($) | 198,667 | 197,062 | 1 | |
| Number of fracturing jobs | 3,239 | 3,441 | (6) | |
| Pumping horsepower, end of period (000s) | 389 | 375 | 4 | |
| Coiled tubing revenue per job ($) | 25,674 | 30,661 | (16) | |
| Number of coiled tubing jobs | 1,310 | 1,787 | (27) | |
| Coiled tubing units, end of period (#) | 21 | 21 | - | |
| (1) | Refer to "Non-GAAP Measures" on page 20 for further information. |
Revenue
Revenue from Calfrac's Canadian operations was $677.1 million in 2013 versus $732.9 million in 2012. The decrease in revenue was primarily due to lower pricing experienced in Canada during 2013 due to competitive pressures, the effects of which were largely offset by an increase in average job size and associated revenue. The increase in average job size reflects the continued shift in activity into the unconventional oil and liquids-rich regions of western Canada. In addition, flood conditions experienced during the second and third quarters of 2013 resulted in lower fracturing and coiled tubing activity in central and southern Alberta. Lower coiled tubing activity in the Horn River area of northeast British Columbia in 2013 also contributed to the reduction in job sizes and overall revenue.
Operating Income
Operating income in Canada decreased by 35 percent to $121.7 million in 2013 from $188.6 million in 2012. The decline was primarily caused by a more competitive pricing environment combined with higher logistical costs associated with the completion of larger fracturing jobs. Selling, general and administrative expenses during 2013 were $1.2 million less than in 2012 primarily due to a lower provision for annual bonuses.
| United States | ||||
| Years Ended December 31, | 2013 | 2012 | Change | |
| (C$000s, except operational and exchange rate information) | ($) | ($) | (%) | |
| (unaudited) | ||||
| Revenue | 616,174 | 638,483 | (3) | |
| Expenses | ||||
| Operating | 492,699 | 512,482 | (4) | |
| SG&A | 19,350 | 20,872 | (7) | |
| 512,049 | 533,354 | (4) | ||
| Operating income(1) | 104,125 | 105,129 | (1) | |
| Operating income (%) | 16.9% | 16.5% | 2 | |
| Fracturing revenue per job ($) | 57,019 | 69,620 | (18) | |
| Number of fracturing jobs | 10,256 | 8,766 | 17 | |
| Pumping horsepower, end of period (000s) | 662 | 492 | 35 | |
| Cementing revenue per job ($) | 35,432 | 30,912 | 15 | |
| Number of cementing jobs | 854 | 661 | 29 | |
| Cementing units, end of period (#) | 18 | 12 | 50 | |
| US$/C$ average exchange rate(2) | 1.0299 | 0.9996 | 3 | |
| (1) | Refer to "Non-GAAP Measures" on page 20 for further information. |
| (2) | Source: Bank of Canada. |
Revenue
Revenue from Calfrac's United States operations decreased by 3 percent to $616.2 million in 2013 from $638.5 million in 2012, primarily due to competitive pricing pressure and lower activity in the Bakken play of North Dakota. This was somewhat offset by higher fracturing activity in the Marcellus shale formation in Pennsylvania and West Virginia and the commencement of fracturing operations in the Eagle Ford shale play during the fourth quarter. Cementing revenue increased by $9.8 million to $30.3 million in 2013 primarily due to increased activity in the Fayetteville shale in Arkansas.
Operating Income
Operating income in the United States was $104.1 million for 2013, a decrease of 1 percent from 2012 and up slightly to 16.9 as a percentage of revenue. Higher equipment utilization in the Marcellus shale play and the Fayetteville shale basin combined with the start-up of operations in the Eagle Ford shale play in Texas were offset by competitive pricing pressure and lower utilization in North Dakota.
| Russia | ||||
| Years Ended December 31, | 2013 | 2012 | Change | |
| (C$000s, except operational and exchange rate information) | ($) | ($) | (%) | |
| (unaudited) | ||||
| Revenue | 158,782 | 112,765 | 41 | |
| Expenses | ||||
| Operating | 138,910 | 100,098 | 39 | |
| SG&A | 6,514 | 6,101 | 7 | |
| 145,424 | 106,199 | 37 | ||
| Operating income(1) | 13,358 | 6,566 | 103 | |
| Operating income (%) | 8.4% | 5.8% | 45 | |
| Fracturing revenue per job ($) | 108,599 | 92,791 | 17 | |
| Number of fracturing jobs | 1,184 | 826 | 43 | |
| Pumping horsepower, end of period (000s) | 62 | 45 | 38 | |
| Coiled tubing revenue per job ($) | 58,304 | 57,884 | 1 | |
| Number of coiled tubing jobs | 518 | 624 | (17) | |
| Coiled tubing units, end of period (#) | 7 | 7 | - | |
| Rouble/C$ average exchange rate(2) | 0.0323 | 0.0322 | - | |
| (1) | Refer to "Non-GAAP Measures" on page 20 for further information. |
| (2) | Source: Bank of Canada. |
Revenue
The Company's revenue from Russian operations increased by 41 percent to $158.8 million in 2013 from $112.8 million in 2012. The increase in revenue was mainly due to the Company supplying proppant to two significant customers in Western Siberia during 2013. In addition, higher multi-stage fracturing activity in 2013 and an expanded customer base combined with larger conventional fracturing job sizes contributed to the overall increase in revenue. During 2013, approximately 34 percent of Calfrac's total Russian fracturing activity was related to multi-stage well completions compared to less than 5 percent in 2012. Coiled tubing activity declined as a result of the increased use of multi-stage fracturing operations, which reduced the requirements for coiled tubing services.
Operating Income
Operating income in Russia was $13.4 million in 2013 compared to $6.6 million in 2012. The increase in operating income was primarily due to operational efficiencies associated with multi-stage fracturing operations forming a larger proportion of total activity in 2013 and a higher revenue base.
| Latin America | ||||
| Years Ended December 31, | 2013 | 2012 | Change | |
| (C$000s, except operational and exchange rate information) | ($) | ($) | (%) | |
| (unaudited) | ||||
| Revenue | 111,744 | 111,088 | 1 | |
| Expenses | ||||
| Operating | 100,507 | 95,494 | 5 | |
| SG&A | 7,714 | 6,755 | 14 | |
| 108,221 | 102,249 | 6 | ||
| Operating income(1) | 3,523 | 8,839 | (60) | |
| Operating income (%) | 3.2% | 8.0% | (60) | |
| Pumping horsepower, end of period (000s) | 81 | 65 | 25 | |
| Cementing units, end of period (#) | 13 | 13 | - | |
| Coiled tubing units, end of period (#) | 3 | 1 | 200 | |
| Mexican peso/C$ average exchange rate(2) | 0.0807 | 0.0760 | 6 | |
| Argentinean peso/C$ average exchange rate(2) | 0.1889 | 0.2201 | (14) | |
| (1) | Refer to "Non-GAAP Measures" on page 20 for further information. |
| (2) | Source: Bank of Canada. |
Revenue
Calfrac's Latin American operations generated total revenue of $111.7 million during 2013 compared to $111.1 million in 2012. Revenue in Argentina increased significantly due to the start-up of conventional fracturing operations beginning in the second quarter of 2013 followed by the commencement of unconventional fracturing operations for YPF S.A. in Argentina's tight sands in October 2013. Higher cementing and coiled tubing activity in Argentina also contributed to higher overall revenue. The revenue improvement achieved in Argentina was almost entirely offset by significantly lower fracturing activity in Mexico resulting from customer budget reductions.
Operating Income
During 2013, Calfrac's Latin America division generated operating income of $3.5 million versus $8.8 million in 2012. The decrease in operating income was primarily due to lower equipment utilization in Mexico and Colombia combined with higher SG&A expenses as a result of the larger overall scale of the Company's Latin American operations with the commencement of fracturing operations in Argentina.
| Corporate | ||||
| Years Ended December 31, | 2013 | 2012 | Change | |
| (C$000s) | ($) | ($) | (%) | |
| (unaudited) | ||||
| Expenses | ||||
| Operating | 8,706 | 9,973 | (13) | |
| SG&A | 45,923 | 42,103 | 9 | |
| 54,629 | 52,076 | 5 | ||
| Operating loss(1) | (54,629) | (52,076) | 5 | |
| % of Revenue | 3.5% | 3.3% | 6 | |
| (1) | Refer to "Non-GAAP Measures" on page 20 for further information. |
Operating Loss
The 5 percent increase in corporate expenses in 2013 over 2012 was mainly due to a $4.2 million increase in stock-based compensation expenses resulting from additional restricted share units granted to employees and a higher stock price in 2013. Higher corporate personnel costs to support the Company's larger scale of operations also contributed to the increase in corporate expenses. The increase was offset partially by lower annual bonus expenses.
Depreciation
Depreciation expense increased by 22 percent to $110.0 million for 2013 from $90.4 million in 2012. The increase was mainly a result of the acquisition of assets from Mission at the beginning of the fourth quarter of 2013 combined with a larger fleet of equipment deployed in North America and Argentina throughout 2013 pursuant to Calfrac's 2013 capital plan.
Foreign Exchange Losses or Gains
The Company recorded a foreign exchange loss of $1.2 million during 2013 versus an $8.3 million gain in 2012. Foreign exchange gains and losses arise primarily from the translation of net monetary assets or liabilities that were held in United States dollars in Canada, Russia and Latin America. The majority of the Company's foreign exchange loss recorded in 2013 was attributable to U.S. dollar-denominated debt in Russia and Argentina as the U.S. dollar appreciated against the Russian rouble and Argentinean peso during the period. The loss was partially offset by the impact of the net U.S. dollar-denominated asset position in Canada as the U.S. dollar appreciated against the Canadian dollar during this period.
Interest
The Company's interest expense increased by $5.6 million to $42.0 million in 2013 primarily due to the issuance of an additional US$150.0 million of Calfrac's 7.50 percent senior notes at the beginning of the fourth quarter of 2013 to finance the acquisition of assets from Mission. Additional short-term borrowing in Latin America, which was used to fund Calfrac's Argentinean expansion, combined with a draw on the Company's revolving credit facility during the fourth quarter also contributed to the increase in interest expense during the year.
Income Tax Expenses
The Company recorded income tax expense of $7.2 million during 2013 compared to $41.4 million in 2012. The effective income tax rate for 2013 was 21 percent compared to 30 percent in 2012. The decrease in total income tax expense was primarily due to lower profitability in Canada and Mexico. The lower effective tax rate was due to the mix of earnings between various tax jurisdictions combined with a lower-than-expected effective tax rate in the United States. The lower effective tax rate in the United States was partially due to the reclassification of $1.8 million of deferred tax expense related to the Mission acquisition to offset the gain on business combination as required under IFRS and as described below and in note 11.
Business Combination
On October 1, 2013, the Company acquired all of the operating assets of Mission. The purchase was recognized as a business combination and accounted for as such using the acquisition method of accounting under IFRS 3 Business Combinations. The gain of $4.5 million, before taxes, was recognized in the Statement of Operations on the acquisition date and represents the excess of the fair value of identifiable assets over the consideration paid. The Company has reassessed the fair value of the identifiable assets purchased and the fair value of the consideration transferred in determining the gain, as required under IFRS. The composition of the business combination expenses reported in the Statement of Operations is as follows:
| Year Ended December 31, | 2013 | |||
| (C$000s) (unaudited) | ($) | |||
| Gain on business combination | (4,522) | |||
| Deferred taxes relating to business combination | 1,775 | |||
| (2,747) | ||||
| Acquisition costs | 5,221 | |||
| Business combination | 2,474 | |||
Liquidity and Capital Resources
| Years Ended December 31, | 2013 | 2012 | ||||
| (C$000s) (unaudited) | ($) | ($) | ||||
| Cash provided by (used in): | ||||||
| Operating activities | 132,011 | 196,251 | ||||
| Financing activities | 191,515 | (28,762) | ||||
| Investing activities | (331,720) | (259,184) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 7,908 | 1,121 | ||||
| Decrease in cash and cash equivalents | (286) | (90,574) | ||||
Operating Activities
The Company's cash provided by operating activities for the year ended December 31, 2013 was $132.0 million versus $196.3 million in 2012. The decrease was primarily due to a decline in operating margins in Canada. At December 31, 2013, Calfrac's working capital was approximately $319.9 million, in line with its working capital at December 31, 2012 of $322.9 million. The Company had accounts receivable of US$40.8 million at December 31, 2013 with a customer operating in Mexico that has been outstanding for greater than 120 days, for which no provision has been made. The payment delay is consistent with the experience of many other oilfield service companies in this market. Collection is expected in its entirety; however, the timing is uncertain.
Financing Activities
Net cash provided by financing activities was $191.5 million in 2013 compared to cash used in financing activities of $28.8 million in 2012. During 2013, the Company increased its senior notes by $150.2 million (net of debt issuance costs and debt discount) to finance the purchase of assets from Mission, received bank loan proceeds of $27.6 million in Argentina, received a net $22.8 million through draws and repayments on its credit facility, issued $15.8 million of common shares, paid cash dividends of $23.7 million and repaid $1.2 million of finance lease obligations and long-term debt.
On August 8, 2013, the Company extended the term of its credit facilities by one year to September 27, 2017. The maturity may be extended by one or more years at the Company's request and lenders' acceptance. The Company also may prepay principal without penalty. The facilities consist of an operating facility of $20.0 million and a syndicated facility of $280.0 million. The interest rates are based on the parameters of certain bank covenants. For prime-based loans and U.S. base-rate loans, the rate ranges from prime or U.S. base rate plus 0.50 percent to prime plus 1.25 percent. For LIBOR-based loans and bankers' acceptance-based loans, the margin thereon ranges from 1.50 percent to 2.25 percent above the respective base rates. As at December 31, 2013, the Company had used $24.4 million of its credit facilities for letters of credit and had $24.5 million outstanding under its credit facility, leaving $251.1 million in available credit.
On October 8, 2013, the Company closed a private offering of US$150.0 million aggregate principal of its 7.50 percent senior notes yielding net proceeds of $150.2 million (US$145.4 million) after applicable discount and debt issuance costs. Fixed interest on the notes is payable semi-annually on June 1 and December 1 of each year. The notes will mature on December 1, 2020. The net proceeds from this offering were used to finance the Mission asset acquisition.
Calfrac pays quarterly dividends to shareholders at the discretion of the Board of Directors, which qualify as "eligible dividends" as defined by the Canada Revenue Agency. In February 2012, the Company increased its semi-annual cash dividend from $0.10 to $0.50 per share, beginning with the dividend paid on July 16, 2012, thereby increasing the annualized dividend to $1.00 per share beginning in 2012. In December 2012, the Company announced that it would pay dividends quarterly instead of semi-annually commencing with a $0.25 dividend that was declared in the first quarter of 2013.
Investing Activities
Calfrac's net cash used for investing activities was $331.7 million for the year ended December 31, 2013 versus $259.2 million for 2012. Cash outflows relating to capital expenditures were $170.5 million during 2013 compared to $279.0 million in 2012. Capital expenditures were primarily to support the Company's Canadian, United States, Russian and Argentinean fracturing operations.
On October 1, 2013, the Company completed the acquisition of the operating assets of Mission, a privately-held hydraulic fracturing and coiled tubing services provider based in San Antonio, Texas and operating in the Eagle Ford shale play of Texas. The acquisition provides the Company with modern fracturing and coiled tubing equipment and an entry into the Texas market. Under the terms of the purchase agreement, the total purchase price was approximately $150.5 million, excluding transaction costs, which included certain working capital associated with the ongoing operations of the business. The purchase price accounting for this transaction resulted in a business combination expense of $2.5 million recorded in 2013, the composition of which is described above and in note 11.
Calfrac's 2014 capital budget is projected to be approximately $120.0 million, of which $33.0 million is being directed towards growing its international operations, including an investment in coiled tubing and fracturing equipment in Russia and Argentina. In addition, approximately $20.0 million remaining from Calfrac's 2013 capital program is expected to be expended in 2014. As such, projected capital spending in 2014 is expected to be $160.0 million.
Effect of Exchange Rate Changes on Cash and Cash Equivalents
The effect of changes in foreign exchange rates on the Company's cash and cash equivalents during 2013 was a gain of $7.9 million versus a gain of $1.1 million during 2012. These gains relate to cash and cash equivalents held by the Company in a foreign currency.
With its strong working capital position, available credit facilities and anticipated funds provided by operations, the Company expects to have adequate resources to fund its financial obligations and planned capital expenditures for 2014 and beyond.
At December 31, 2013, the Company had cash and cash equivalents of $42.2 million.
Outstanding Share Data
The Company is authorized to issue an unlimited number of common shares. Employees have been granted options to purchase common shares under the Company's shareholder-approved stock option plan. The number of shares reserved for issuance under the stock option plan is equal to 10 percent of the Company's issued and outstanding common shares. As at February 21, 2014, there were 46,560,836 common shares issued and outstanding, and 2,945,725 options to purchase common shares.
The Company has a Dividend Reinvestment Plan that allows shareholders to direct cash dividends paid on all or a portion of their common shares to be reinvested in additional common shares that will be issued at 95 percent of the volume-weighted average price of the common shares traded on the Toronto Stock Exchange (TSX) during the last five trading days preceding the relevant dividend payment date.
Normal Course Issuer Bid
The Company filed a Notice of Intention (the "Renewal Notice") to renew its Normal Course Issuer Bid (the "Renewed NCIB") with the TSX on November 1, 2012. Under the Renewed NCIB, the Company could acquire up to 3,318,738 common shares, which was 10 percent of the public float outstanding as at October 31, 2012, during the period November 12, 2012 through November 11, 2013. The maximum number of common shares that could be acquired by the Company during a trading day was 44,254, with the exception that the Company was allowed to make one block purchase of common shares per calendar week that exceeded such limit. All purchases of common shares were to be made through the TSX, alternative trading systems or such other exchanges or marketplaces through which the common shares trade from time to time at the market price of the shares at the time of acquisition. Any shares acquired under the Renewed NCIB were to be cancelled. There were no shares purchased under the Renewed NCIB for the year ended December 31, 2013. The NCIB was not renewed for 2014. A copy of the Renewal Notice may be obtained by any shareholder, without charge, by contacting the Company's Corporate Secretary at 411 - 8th Avenue S.W., Calgary, Alberta, T2P 1E3, or by telephone at 403-266-6000.
Advisories
Forward-Looking Statements
In order to provide Calfrac shareholders and potential investors with information regarding the Company and its subsidiaries, including management's assessment of Calfrac's plans and future operations, certain statements contained in this press release, including statements that contain words such as "seek", "anticipates", "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 expected operating strategies, capital expenditure programs, future financial resources, anticipated equipment utilization levels, future oil and natural gas well activity in each of the Company's operating jurisdictions, results of acquisitions, the impact of environmental regulations on the Company's business, future costs or potential liabilities, projections of market prices and costs, supply and demand for oilfield services, expectations regarding the Company's ability to maintain its competitive position, anticipated benefits of the Company's competitive position, expectations regarding the Company's ability to raise capital, treatment under government regulatory regimes, commodity prices, anticipated outcomes of specific events, trends in, and the growth prospects of, the global oil and natural gas industry, the Company's growth prospects including, without limitation, its international growth strategy and prospects and the impact of changes in accounting policies and standards on the Company and its financial statements. 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 general stability of the economic and political environment in which the Company operates, the Company's expectations for its current and prospective customers' capital budgets and geographical areas of focus, the Company's existing contracts and the status of current negotiations with key customers and suppliers, the focus of the Company's customers on oil and liquids-rich plays in the current natural gas pricing environment in North America, the effect unconventional gas projects have had on supply and demand fundamentals for natural gas 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: general economic conditions in Canada, the United States, Russia, Mexico, Argentina and Colombia; the demand for fracturing and other stimulation services during drilling and completion of oil and natural gas wells; volatility in market prices for oil and natural gas and the effect of this volatility on the demand for oilfield services generally; regional competition; liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations; changes in legislation and the regulatory environment; sourcing, pricing and availability of raw materials, component parts, equipment, suppliers, facilities and skilled personnel; the ability to integrate technological advances and match advances of competition; the availability of capital on satisfactory terms; intellectual property risks; uncertainties in weather and temperature affecting the duration of the service periods and the activities that can be completed; dependence on, and concentration of, major customers; the creditworthiness and performance by the Company's counterparties and customers; liabilities and risks associated with prior operations; the effect of accounting pronouncements issued periodically; failure to realize anticipated benefits of acquisitions and dispositions; and currency exchange rate risk. Further information about these and other risks and uncertainties may be found in the Company's most recently filed Annual Information Form.
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 incorporated 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 Risks
The 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, which are specifically incorporated by reference herein.
The Annual Information Form is available through the Internet on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR), which can be accessed at www.sedar.com. Copies of the Annual Information Form may also be obtained on request without charge from Calfrac at 411 - 8th Avenue S.W., Calgary, Alberta, Canada, T2P 1E3, or at www.calfrac.com, or by facsimile at 403-266-7381.
Non-GAAP Measures
Certain supplementary measures in this press release do not have any standardized meaning as prescribed under IFRS and are therefore considered non-GAAP measures. These measures include operating income and EBITDA. These measures may not be comparable to similar measures presented by other entities. These measures have been described and presented in this press release in order to provide shareholders and potential investors with additional information regarding the Company's financial results, liquidity and its ability to generate funds to finance its operations. Management's use of these measures has been disclosed further in this press release as these measures are discussed and presented.
Additional Information
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.sedar.com.
Fourth Quarter Conference Call
Calfrac will be conducting a conference call for interested analysts, brokers, investors and news media representatives to review its 2013 fourth quarter results at 10:00 a.m. (Mountain Time) on Wednesday, February 26, 2014. The conference call dial-in number is 1-888-231-8191 or 647-427-7450. The seven-day replay numbers are 1-855-859-2056 or 416-849-0833 (once connected, enter 96180761). A webcast of the conference call may be accessed via the Company's website at www.calfrac.com.
| CONSOLIDATED BALANCE SHEETS | ||||
| As at December 31, | 2013 | 2012 | ||
| (C$000s) (unaudited) | ($) | ($) | ||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | 42,195 | 42,481 | ||
| Accounts receivable | 395,845 | 320,143 | ||
| Income taxes recoverable | 1,146 | 292 | ||
| Inventories | 134,140 | 118,713 | ||
| Prepaid expenses and deposits | 17,189 | 10,697 | ||
| 590,515 | 492,326 | |||
| Non-current assets | ||||
| Property, plant and equipment | 1,245,009 | 1,005,101 | ||
| Goodwill | 10,523 | 10,523 | ||
| Deferred income tax assets | 23,884 | 16,871 | ||
| Total assets | 1,869,931 | 1,524,821 | ||
| LIABILITIES AND EQUITY | ||||
| Current liabilities | ||||
| Accounts payable and accrued liabilities | 245,899 | 168,250 | ||
| Bank loan (note 3) | 24,298 | - | ||
| Current portion of long-term debt (note 4) | 384 | 479 | ||
| Current portion of finance lease obligations | - | 740 | ||
| 270,581 | 169,469 | |||
| Non-current liabilities | ||||
| Long-term debt (note 4) | 651,553 | 441,018 | ||
| Other long-term liabilities | 198 | 435 | ||
| Deferred income tax liabilities | 152,392 | 133,140 | ||
| Total liabilities | 1,074,724 | 744,062 | ||
| Equity attributable to the shareholders of Calfrac | ||||
| Capital stock (note 5) | 332,287 | 300,451 | ||
| Contributed surplus (note 7) | 27,658 | 27,546 | ||
| Loan receivable for purchase of common shares (note 14) | (2,500) | (2,500) | ||
| Retained earnings | 440,179 | 458,543 | ||
| Accumulated other comprehensive loss | (839) | (2,403) | ||
| 796,785 | 781,637 | |||
| Non-controlling interest | (1,578) | (878) | ||
| Total equity | 795,207 | 780,759 | ||
| Total liabilities and equity | 1,869,931 | 1,524,821 | ||
| See accompanying notes to the consolidated financial statements. | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
| Three Months Ended Dec. 31, | Years Ended Dec. 31, | ||||
| 2013 | 2012 | 2013 | 2012 | ||
| (C$000s, except per share data) (unaudited) | ($) | ($) | ($) | ($) | |
| Revenue | 463,054 | 367,487 | 1,563,814 | 1,595,216 | |
| Cost of sales (note 15) | 411,404 | 321,860 | 1,389,558 | 1,334,828 | |
| Gross profit | 51,650 | 45,627 | 174,256 | 260,388 | |
| Expenses | |||||
| Selling, general and administrative | 25,644 | 26,043 | 96,186 | 93,756 | |
| Foreign exchange (gains) losses | (1,517) | (3,818) | 1,183 | (8,260) | |
| Business combination (note 11) | 2,474 | - | 2,474 | - | |
| (Gain) loss on disposal of property, plant and equipment |
(1,208) | 170 | (1,514) | 802 | |
| Interest | 13,433 | 8,933 | 41,985 | 36,354 | |
| 38,826 | 31,328 | 140,314 | 122,652 | ||
| Income before income tax | 12,824 | 14,299 | 33,942 | 137,736 | |
| Income tax expense | |||||
| Current | 814 | (344) | 3,853 | 4,733 | |
| Deferred | 259 | 3,662 | 3,356 | 36,642 | |
| 1,073 | 3,318 | 7,209 | 41,375 | ||
| Net income for the period | 11,751 | 10,981 | 26,733 | 96,361 | |
| Net income (loss) attributable to: | |||||
| Shareholders of Calfrac | 11,764 | 11,243 | 27,914 | 97,146 | |
| Non-controlling interest | (13) | (262) | (1,181) | (785) | |
| 11,751 | 10,981 | 26,733 | 96,361 | ||
| Earnings per share (note 5) | |||||
| Basic | 0.25 | 0.25 | 0.61 | 2.19 | |
| Diluted | 0.25 | 0.25 | 0.61 | 2.17 | |
| See accompanying notes to the consolidated financial statements. | |||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||
| Three Months Ended Dec. 31, | Years Ended Dec. 31, | ||||
| 2013 | 2012 | 2013 | 2012 | ||
| (C$000s) (unaudited) | ($) | ($) | ($) | ($) | |
| Net income for the period | 11,751 | 10,981 | 26,733 | 96,361 | |
| Other comprehensive income (loss) | |||||
| Items that may be subsequently reclassified to profit or loss: | |||||
| Change in foreign currency translation adjustment | 2,337 | 460 | 1,602 | (3,856) | |
| Comprehensive income for the period | 14,088 | 11,441 | 28,335 | 92,505 | |
| Comprehensive income (loss) attributable to: | |||||
| Shareholders of Calfrac | 14,056 | 11,707 | 29,478 | 93,409 | |
| Non-controlling interest | 32 | (266) | (1,143) | (904) | |
| 14,088 | 11,441 | 28,335 | 92,505 | ||
| See accompanying notes to the consolidated financial statements. | |||||
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | |||||||||
| Equity Attributable to the Shareholders of Calfrac | |||||||||
| Share Capital |
Contributed Surplus |
Loan Receivable for Purchase of Common Shares |
Accumulated Other Comprehensive Income (Loss) |
Retained Earnings |
Total | Non- Controlling Interest |
Total Equity |
||
| (C$000s) (unaudited) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |
| Balance - January 1, 2013 | 300,451 | 27,546 | (2,500) | (2,403) | 458,543 | 781,637 | (878) | 780,759 | |
| Net income for the year | - | - | - | - | 27,914 | 27,914 | (1,181) | 26,733 | |
| Other comprehensive income: | |||||||||
| Cumulative translation adjustment | - | - | - | 1,564 | - | 1,564 | 38 | 1,602 | |
| Comprehensive income for the year | - | - | - | 1,564 | 27,914 | 29,478 | (1,143) | 28,335 | |
| Stock options: | |||||||||
| Stock-based compensation recognized | - | 5,454 | - | - | - | 5,454 | - | 5,454 | |
| Proceeds from issuance of shares | 21,132 | (5,342) | - | - | - | 15,790 | - | 15,790 | |
| Dividend Reinvestment Plan shares | |||||||||
| issued (note 21) | 10,704 | - | - | - | - | 10,704 | - | 10,704 | |
| Dividends | - | - | - | - | (45,953) | (45,953) | - | (45,953) | |
| Non-controlling interest contribution | - | - | - | - | - | - | 118 | 118 | |
| Dilution of non-controlling interest | - | - | - | - | (325) | (325) | 325 | - | |
| Balance - December 31, 2013 | 332,287 | 27,658 | (2,500) | (839) | 440,179 | 796,785 | (1,578) | 795,207 | |
| Balance - January 1, 2012 | 271,817 | 24,170 | (2,500) | 1,334 | 405,954 | 700,775 | (206) | 700,569 | |
| Net income for the year | - | - | - | - | 97,146 | 97,146 | (785) | 96,361 | |
| Other comprehensive income: | |||||||||
| Cumulative translation adjustment | - | - | - | (3,737) | - | (3,737) | (119) | (3,856) | |
| Comprehensive income for the year | - | - | - | (3,737) | 97,146 | 93,409 | (904) | 92,505 | |
| Stock options: | |||||||||
| Stock-based compensation recognized | - | 6,990 | - | - | - | 6,990 | - | 6,990 | |
| Proceeds from issuance of shares | 14,836 | (3,614) | - | - | - | 11,222 | - | 11,222 | |
| Dividend Reinvestment Plan shares | |||||||||
| issued (note 21) | 13,798 | - | - | - | - | 13,798 | - | 13,798 | |
| Dividends | - | - | - | - | (44,557) | (44,557) | - | (44,557) | |
| Non-controlling interest contribution | - | - | - | - | - | - | 232 | 232 | |
| Balance - December 31, 2012 | 300,451 | 27,546 | (2,500) | (2,403) | 458,543 | 781,637 | (878) | 780,759 | |
| See accompanying notes to the consolidated financial statements. | |||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
| Three Months Ended Dec. 31, | Years Ended Dec. 31, | |||||
| 2013 | 2012 | 2013 | 2012 | |||
| (C$000s) (unaudited) | ($) | ($) | ($) | ($) | ||
| CASH FLOWS PROVIDED BY (USED IN) | ||||||
| OPERATING ACTIVITIES | ||||||
| Net income for the period | 11,751 | 10,981 | 26,733 | 96,361 | ||
| Adjusted for the following: | ||||||
| Depreciation | 31,410 | 23,634 | 110,006 | 90,381 | ||
| Stock-based compensation (note 8) | 1,075 | 1,926 | 5,454 | 6,990 | ||
| Unrealized foreign exchange (gains) losses | (320) | (2,462) | 1,350 | (10,895) | ||
| Gain on business combination, net of tax (note 11) | (2,747) | - | (2,747) | - | ||
| (Gain) loss on disposal of property, plant and equipment |
(1,208) | 170 | (1,514) | 802 | ||
| Interest | 13,433 | 8,933 | 41,985 | 36,354 | ||
| Deferred income taxes | 259 | 3,662 | 3,356 | 36,642 | ||
| Interest paid | (20,386) | (16,883) | (39,770) | (34,596) | ||
| Changes in items of working capital (note 10) | (46,609) | (10,739) | (12,842) | (25,788) | ||
| Cash flows provided by operating activities | (13,342) | 19,222 | 132,011 | 196,251 | ||
| FINANCING ACTIVITIES | ||||||
| Bank loan proceeds | 11,173 | - | 27,596 | 2,734 | ||
| Issuance of long-term debt, net of debt issuance costs | 339,866 | (511) | 365,581 | (440) | ||
| Bank loan repayments | - | (4,948) | - | (4,948) | ||
| Long-term debt repayments | (166,714) | (125) | (193,037) | (461) | ||
| Finance lease obligation repayments | - | (135) | (740) | (1,734) | ||
| Net proceeds on issuance of common shares | 403 | 693 | 15,790 | 11,222 | ||
| Dividends paid, net of DRIP (note 21) | (7,249) | (16,431) | (23,675) | (35,135) | ||
| Cash flows provided by (used in) financing activities | 177,479 | (21,457) | 191,515 | (28,762) | ||
| INVESTING ACTIVITIES | ||||||
| Purchase of property, plant and equipment (note 10) | (41,330) | (55,338) | (183,124) | (261,321) | ||
| Proceeds on disposal of property, plant and equipment | 713 | 392 | 1,799 | 1,905 | ||
| Business combination (note 11) | (150,513) | - | (150,513) | - | ||
| Other | - | 39 | 118 | 232 | ||
| Cash flows used in investing activities | (191,130) | (54,907) | (331,720) | (259,184) | ||
| Effect of exchange rate changes on cash and cash equivalents | 5,440 | 3,168 | 7,908 | 1,121 | ||
| Increase (decrease) in cash and cash equivalents | (21,553) | (53,974) | (286) | (90,574) | ||
| Cash and cash equivalents, beginning of period | 63,748 | 96,455 | 42,481 | 133,055 | ||
| Cash and cash equivalents, end of period | 42,195 | 42,481 | 42,195 | 42,481 | ||
| See accompanying notes to the consolidated financial statements. | ||||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended December 31, 2013 and 2012
(Amounts in text and tables are in thousands of Canadian dollars, except share data and certain other exceptions as indicated) (unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Calfrac Well Services Ltd. was formed through the amalgamation of Calfrac Well Services Ltd. (predecessor company originally incorporated on June 28, 1999) and Denison Energy Inc. ("Denison") on March 24, 2004 under the Business Corporations Act (Alberta). The registered office is at 411 - 8th Avenue S.W., Calgary, Alberta, Canada, T2P 1E3. The Company provides specialized oilfield services, including hydraulic fracturing, coiled tubing, cementing and other well completion services to the oil and natural gas industries in Canada, the United States, Russia, Mexico, Argentina and Colombia.
These consolidated financial statements were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) and interpretations by the International Financial Reporting Interpretations Committee (IFRIC).
The Company has consistently applied the same accounting policies throughout all periods presented, as if these policies had always been in effect.
These financial statements were approved by the Board of Directors for issuance on February 25, 2014.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim consolidated financial statements follow the same accounting policies and methods of application as the most recent annual financial statements.
For purposes of calculating income taxes during interim periods, the Company utilizes estimated annualized income tax rates. Current income tax expense is only recognized when taxable income is such that current income taxes become payable.
The adoption of accounting standards and amendments, effective January 1, 2013, is disclosed in the March 31, 2013 interim consolidated financial statements.
3. BANK LOAN
The Company's Argentinean subsidiary has two operating lines of credit, and a total of ARS148,975 ($24,298) was drawn at December 31, 2013 (December 31, 2012 - $nil). The interest rate ranges from 35.0 percent to 38.0 percent and both lines of credit are secured by letters of credit issued by the Company.
4. LONG-TERM DEBT
| As at December 31, | 2013 | 2012 | ||
| (C$000s) | ($) | ($) | ||
| US$600,000 senior unsecured notes (December 31, 2012 - | ||||
| US$450,000) due December 1, 2020, bearing interest at | ||||
| 7.5% payable semi-annually | 638,160 | 447,705 | ||
| Less: unamortized debt issuance costs and debt discount | (11,161) | (6,895) | ||
| 626,999 | 440,810 | |||
| $280,000 extendible revolving term loan facility, secured | ||||
| by Canadian and U.S. assets of the Company | 24,463 | - | ||
| Less: unamortized debt issuance costs | (1,291) | (1,444) | ||
| 23,172 | (1,444) | |||
| US$1,661 mortgage maturing May 2018 bearing interest | ||||
| at U.S. prime less 1%, repayable at US$33 per month | ||||
| principal and interest, secured by certain real property | 1,766 | 2,003 | ||
| Argentina term loan maturing December 31, 2013 bearing | ||||
| interest at 18.25%, repayable at ARS61 per month | ||||
| principal and interest, secured by a Company guarantee | - | 128 | ||
| 651,937 | 441,497 | |||
| Less: current portion of long-term debt | (384) | (479) | ||
| 651,553 | 441,018 | |||
The fair value of the senior unsecured notes, as measured based on the closing quoted market price at December 31, 2013, was $652,921 (December 31, 2012 - $443,228). The carrying values of the mortgage obligations, term loans and revolving term loan facilities approximate their fair values as the interest rates are not significantly different from current interest rates for similar loans.
On October 8, 2013, the Company closed a private offering of US$150,000 of its 7.5 percent senior notes yielding net proceeds of $150,208 (US$145,396) after applicable debt discount and debt issuance costs. The notes bear the same terms and conditions as the pre-existing senior notes.
The interest rate on the $280,000 revolving term loan facility is based on the parameters of certain bank covenants. For prime-based loans, the rate ranges from prime plus 0.50 percent to prime plus 1.25 percent. For LIBOR-based loans and Bankers' Acceptance-based loans the margin thereon ranges from 1.50 percent to 2.25 percent above the respective base rates for such loans. The facility is repayable on or before its maturity of September 27, 2017, assuming it is not extended. The maturity may be extended by one or more years at the Company's request and lenders' acceptance. The Company may also prepay principal without penalty. Debt issuance costs related to this facility are amortized over its term.
Interest on long-term debt (including the amortization of debt issuance costs and debt discount) for the year ended December 31, 2013 was $40,629 (year ended December 31, 2012 - $36,085).
The Company also has an extendible operating loan facility, which includes overdraft protection in the amount of $20,000. The interest rate is based on the parameters of certain bank covenants in the same fashion as the revolving term facility. Drawdowns under this facility are repayable on September 27, 2017, assuming the facility is not extended. The term and commencement of principal repayments may be extended by one year on each anniversary at the Company's request and lenders' acceptance. The operating facility is secured by the Company's Canadian and U.S. assets.
At December 31, 2013, the Company had utilized $24,410 of its loan facility for letters of credit and had $24,463 outstanding under its credit facility, leaving $251,127 in available credit.
5. CAPITAL STOCK
Authorized capital stock consists of an unlimited number of common shares.
| Years Ended December 31, | 2013 | 2012 | ||
| Continuity of Common Shares | Shares | Amount | Shares | Amount |
| (#) | (C$000s) | (#) | (C$000s) | |
| Balance, beginning of year | 45,020,641 | 300,451 | 43,709,073 | 271,817 |
| Issued upon exercise of stock options | 896,837 | 21,132 | 686,488 | 14,836 |
| Dividend Reinvestment Plan shares issued (note 21) | 381,096 | 10,704 | 625,080 | 13,798 |
| Balance, end of year | 46,298,574 | 332,287 | 45,020,641 | 300,451 |
The weighted average number of common shares outstanding for the year ended December 31, 2013 was 45,727,828 basic and 46,045,471 diluted (year ended December 31, 2012 - 44,334,810 basic and 44,808,099 diluted). The difference between basic and diluted shares is attributable to the dilutive effect of stock options issued by the Company as disclosed in note 8.
6. NORMAL COURSE ISSUER BID
The Company received regulatory approval to purchase its own common shares in accordance with a Normal Course Issuer Bid (NCIB) for the one-year period November 7, 2011 through November 6, 2012 and for the one-year period November 12, 2012 through November 11, 2013. There were no shares purchased under the NCIB for the years ended December 31, 2013 or 2012. The NCIB was not renewed for 2014.
7. CONTRIBUTED SURPLUS
| Continuity of Contributed Surplus Years Ended December 31, |
2013 | 2012 | |
| (C$000s) | ($) | ($) | |
| Balance, beginning of year | 27,546 | 24,170 | |
| Stock options expensed | 5,454 | 6,990 | |
| Stock options exercised | (5,342) | (3,614) | |
| Balance, end of year | 27,658 | 27,546 | |
8. STOCK-BASED COMPENSATION
(a) Stock Options
| Continuity of Stock Options | 2013 | 2012 | ||||
| Average | Average | |||||
| Exercise | Exercise | |||||
| Options | Price | Options | Price | |||
| (#) | (C$) | (#) | (C$) | |||
| Balance, January 1 | 2,920,412 | 25.67 | 3,198,475 | 23.31 | ||
| Granted during the year | 707,700 | 24.64 | 704,200 | 27.71 | ||
| Exercised for common shares | (896,837) | 17.61 | (686,488) | 16.35 | ||
| Forfeited | (228,025) | 28.94 | (295,775) | 26.60 | ||
| Expired | (1,875) | 13.06 | - | - | ||
| Balance, December 31 | 2,501,375 | 27.98 | 2,920,412 | 25.67 | ||
Stock options vest equally over four years and expire five years from the date of grant. When stock options are exercised, the proceeds, together with the amount of compensation expense previously recorded in contributed surplus, are added to capital stock.
(b) Stock Units
| Continuity of Stock Units | 2013 | 2012 | |||||
| Deferred | Performance | Restricted | Deferred | Performance | Restricted | ||
| Stock | Stock | Stock | Stock | Stock | Stock | ||
| Units | Units | Units | Units | Units | Units | ||
| (#) | (#) | (#) | (#) | (#) | (#) | ||
| Balance, January 1 | 35,000 | 45,000 | 247,230 | 35,000 | 40,000 | - | |
| Granted during the year | 35,000 | 45,000 | 399,125 | 35,000 | 45,000 | 270,135 | |
| Exercised | (35,000) | (45,000) | (82,410) | (35,000) | (40,000) | - | |
| Forfeited | - | - | (50,150) | - | - | (22,905) | |
| Balance, December 31 | 35,000 | 45,000 | 513,795 | 35,000 | 45,000 | 247,230 | |
The Company grants deferred stock units to its outside directors. These units vest in November of the year of grant and are settled either in cash (equal to the market value of the underlying shares at the time of exercise) or in Company shares purchased on the open market. The fair value of the deferred stock units is recognized equally over the vesting period, based on the current market price of the Company's shares. During the year ended December 31, 2013, $1,064 of compensation expense was recognized for deferred stock units (year ended December 31, 2012 - $885). This amount is included in selling, general and administrative expenses. At December 31, 2013, the liability pertaining to deferred stock units was $1,085 (December 31, 2012 - $877).
The Company grants performance stock units to its senior officers who do not participate in the stock option plan. The amount of the grants earned is linked to corporate performance and the grants vest on the approval of the Board of Directors at the meeting held to approve the consolidated financial statements for the year in respect of which performance is being evaluated. As with the deferred stock units, performance stock units are settled either in cash or Company shares purchased on the open market. During the year ended December 31, 2013, $1,467 of compensation expense was recognized for performance stock units (year ended December 31, 2012 - $1,296). This amount is included in selling, general and administrative expenses. At December 31, 2013, the liability pertaining to performance stock units was $1,395 (December 31, 2012 - $1,227).
The Company grants restricted share units to its employees. These units vest equally over three years and are settled either in cash (equal to the market value of the underlying shares at the time of exercise) or in Company shares purchased on the open market. The fair value of the restricted share units is recognized over the vesting period, based on the current market price of the Company's shares. During the year ended December 31, 2013, $9,031 of compensation expense was recognized for restricted share units (year ended December 31, 2012 - $3,693). This amount is included in selling, general and administrative expense. At December 31, 2013, the liability pertaining to restricted share units was $10,696 (December 31, 2012 - $3,693).
Changes in the Company's obligations under the deferred and performance stock unit plans and restricted share unit plan, which arise from fluctuations in the market value of the Company's shares underlying these compensation programs, are recorded as the share value changes.
9. FINANCIAL INSTRUMENTS
The Company's financial instruments included in the consolidated balance sheets are comprised of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, bank loan and long-term debt.
The fair values of financial instruments included in the consolidated balance sheets, except long-term debt, approximate their carrying amounts due to the short-term maturity of those instruments. The fair value of the senior unsecured notes based on the closing market price at December 31, 2013 was $652,921 before deduction of unamortized debt issuance costs (December 31, 2012 - $443,228). The carrying value of the senior unsecured notes at December 31, 2013 was $638,160 before deduction of unamortized debt issuance costs and debt discount (December 31, 2012 - $447,705). The fair values of the remaining long-term debt obligations approximate their carrying values, as described in note 4.
10. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in non-cash operating assets and liabilities are as follows:
| Three Months Ended Dec 31, | Years Ended Dec 31, | |||
| 2013 | 2012 | 2013 | 2012 | |
| (C$000s) | ||||
| Accounts receivable | (97,816) | (15,895) | (75,702) | (6,245) |
| Income taxes recoverable | 1,393 | (345) | (854) | 1,048 |
| Inventory | (12,852) | 4,887 | (8,748) | (24,369) |
| Prepaid expenses and deposits | 4,487 | 2,447 | (5,230) | (548) |
| Accounts payable and accrued liabilities | 58,234 | (1,782) | 77,929 | 4,666 |
| Other long-term liabilities | (55) | (51) | (237) | (340) |
| (46,609) | (10,739) | (12,842) | (25,788) | |
Purchase of property, plant and equipment (excluding the business acquisition disclosed in note 11) is comprised of:
| Three Months Ended Dec. 31, | Years Ended Dec. 31, | ||||
| 2013 | 2012 | 2013 | 2012 | ||
| (C$000s) | ($) | ($) | |||
| Property, plant and equipment additions | (45,227) | (55,694) | (170,517) | (279,017) | |
| Change in liabilities related to purchase of | |||||
| property, plant and equipment | 3,897 | 356 | (12,607) | 17,696 | |
| (41,330) | (55,338) | (183,124) | (261,321) | ||
11. BUSINESS COMBINATION
On October 1, 2013, the Company acquired all of the operating assets of Mission Well Services, LLC ("Mission"), a privately-held hydraulic fracturing and coiled tubing services provider based in San Antonio, Texas and operating in the Eagle Ford shale play. The total purchase price was cash consideration of $150,513. The purchase was recognized as a business combination and accounted for as such using the acquisition method of accounting under IFRS 3 Business Combinations.
The acquisition provides the Company with modern fracturing and coiled tubing equipment as well as an entry into the Texas pressure pumping market. The recognized amounts of identifiable assets acquired and liabilities assumed are as follows:
| (C$000s) | ($) | ||
| Prepaid expenses and deposits | 1,261 | ||
| Inventory | 6,680 | ||
| Property, plant and equipment | 147,094 | ||
| Deferred income tax liability | (1,775) | ||
| Total identifiable net assets | 153,260 | ||
| Gain on business combination, net of tax | (2,747) | ||
| Total consideration | 150,513 | ||
The composition of the business combination expenses reported in the Statement of Operations is as follows:
| (C$000s) | ($) | ||
| Gain on business combination | (4,522) | ||
| Deferred taxes relating to business combination | 1,775 | ||
| (2,747) | |||
| Acquisition costs | 5,221 | ||
| Business combination | 2,474 | ||
The gain of $4,522, before taxes, was recognized in the Statement of Operations on the acquisition date and represents the excess of the fair value of identifiable assets over the consideration paid.
The Company has reassessed the fair value of the identifiable assets purchased and the fair value of the consideration transferred in determining the gain, as required under IFRS.
During the period October 1, 2013 to December 31, 2013, the acquisition contributed immaterial operating income to the Company. The effect on revenue and operating income, had the acquisition occurred on January 1, 2013, is not determinable.
12. CAPITAL STRUCTURE
The Company's capital structure is comprised of shareholders' equity and long-term debt. The Company's objectives in managing capital are (i) to maintain flexibility so as to preserve its access to capital markets and its ability to meet its financial obligations, and (ii) to finance growth, including potential acquisitions.
The Company manages its capital structure and makes adjustments in light of changing market conditions and new opportunities, while remaining cognizant of the cyclical nature of the oilfield services sector. To maintain or adjust its capital structure, the Company may revise its capital spending, adjust dividends paid to shareholders, issue new shares or new debt or repay existing debt.
The Company monitors its capital structure and financing requirements using, amongst other parameters, the ratio of long-term debt to cash flow. Cash flow for this purpose is calculated on a 12-month trailing basis and is defined as follows:
| Years Ended December 31, | 2013 | 2012 | |
| (C$000s) | ($) | ($) | |
| Net income for the year | 26,733 | 96,361 | |
| Adjusted for the following: | |||
| Depreciation | 110,006 | 90,381 | |
| Amortization of debt issuance costs and debt discount | 1,464 | 1,234 | |
| Stock-based compensation | 5,454 | 6,990 | |
| Unrealized foreign exchange losses (gains) | 1,350 | (10,895) | |
| Gain on business combination, net of tax | (2,747) | - | |
| (Gain) loss on disposal of property, plant and equipment | (1,514) | 802 | |
| Deferred income taxes | 3,356 | 36,642 | |
| Cash flow | 144,102 | 221,515 | |
The ratio of long-term debt to cash flow does not have a standardized meaning under IFRS and may not be comparable to similar measures used by other companies.
At December 31, 2013, the long-term debt to cash flow ratio was 4.52:1 (December 31, 2012 - 1.99:1) calculated on a 12-month trailing basis as follows:
| As at December 31, | 2013 | 2012 | |
| (C$000s, except ratio) | ($) | ($) | |
| Long-term debt (net of unamortized debt issuance costs and | |||
| debt discount) (note 4) | 651,937 | 441,497 | |
| Cash flow | 144,102 | 221,515 | |
| Long-term debt to cash flow ratio | 4.52:1 | 1.99:1 | |
The ratio is higher at the current year-end than the prior year-end due to additional debt taken on to acquire the Mission assets. The ratio reflects the full amount of debt (at December 31, 2013) whereas cash flow only represents three months of activities related to the Mission assets.
The Company is subject to certain financial covenants relating to working capital, leverage and the generation of cash flow in respect of its operating and revolving credit facilities. These covenants are monitored on a monthly basis. The Company is in compliance with all such covenants.
The Company's capital management objectives, evaluation measures and targets remained unchanged over the periods presented.
13. PURCHASE OBLIGATIONS
The Company has obligations for the purchase of products, services and property, plant and equipment over the next five years that total approximately $114,814.
14. RELATED-PARTY TRANSACTIONS
In November 2010, the Company lent a senior officer $2,500 to purchase common shares of the Company on the Toronto Stock Exchange. The loan is on a non-recourse basis and is secured by the common shares acquired with the loan proceeds. It is for a term of five years and bears interest at 3.375 percent per annum, payable annually. The market value of the shares that secure the loan was approximately $2,623 as at December 31, 2013 (December 31, 2012 - $2,119). In accordance with applicable accounting standards regarding share purchase loans receivable, this loan is classified as a reduction of shareholders' equity due to its non-recourse nature. In addition, the shares purchased with the loan proceeds are considered to be, in substance, stock options.
The Company leases certain premises from an entity controlled by a director of the Company. The rent charged for these premises during 2013 was $552 (year ended December 31, 2012 - $356), as measured at the exchange amount.
During 2012, an entity controlled by a director of the Company provided ongoing real estate advisory services to the Company; the aggregate fees charged for such services were $29. This arrangement was discontinued in 2013.
15. PRESENTATION OF EXPENSES
The Company presents its expenses on the consolidated Statements of Operations using the function of expense method whereby expenses are classified according to their function within the Company. This method was selected as it is more closely aligned with the Company's business structure. The Company's functions under IFRS are as follows:
- operations; and
- selling, general and administrative.
Cost of sales includes direct operating costs (including product costs, direct labour and overhead costs) and depreciation on assets relating to operations.
Additional information on the nature of expenses is as follows:
| Years Ended December 31, | 2013 | 2012 |
| (C$000s) | ($) | ($) |
| Product costs | 477,384 | 490,222 |
| Depreciation | 110,006 | 90,381 |
| Amortization of debt issuance costs and debt discount | 1,464 | 1,234 |
| Employee benefits expense (note 16) | 379,117 | 356,844 |
16. EMPLOYEE BENEFITS EXPENSE
Employee benefits include all forms of consideration given by the Company in exchange for services rendered by employees.
| Years Ended December 31, | 2013 | 2012 |
| (C$000s) | ($) | ($) |
| Salaries and short-term employee benefits | 356,519 | 337,919 |
| Post-employment benefits (group retirement savings plan) | 3,595 | 3,587 |
| Share-based payments | 17,016 | 12,866 |
| Termination benefits | 1,987 | 2,472 |
| 379,117 | 356,844 | |
17. COMPENSATION OF KEY MANAGEMENT
Key management is defined as the Company's Board of Directors, Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer. Compensation awarded to key management comprised:
| Years Ended December 31, | 2013 | 2012 |
| (C$000s) | ($) | ($) |
| Salaries, fees and short-term benefits | 2,151 | 2,756 |
| Post-employment benefits (group retirement savings plan) | 39 | 34 |
| Share-based payments | 2,732 | 2,392 |
| 4,922 | 5,182 | |
In the event of termination, key management (excluding the Board of Directors) are entitled to one to two years of annual compensation. In the event of termination resulting from change of control, key management (excluding the Board of Directors) are entitled to two years of annual compensation.
18. CONTINGENCIES
Greek Litigation
As a result of the acquisition and amalgamation with Denison in 2004, the Company assumed certain legal obligations relating to Denison's Greek operations.
In 1998, North Aegean Petroleum Company E.P.E. ("NAPC"), a Greek subsidiary of a consortium in which Denison participated (and which is now a majority-owned subsidiary of the Company), terminated employees in Greece as a result of the cessation of its oil and natural gas operations in that country. Several groups of former employees filed claims against NAPC and the consortium alleging that their termination was invalid and that their severance pay was improperly determined.
In 1999, the largest group of plaintiffs received a ruling from the Athens Court of First Instance that their termination was invalid and that salaries in arrears amounting to approximately $10,033 (6,846 euros) plus interest were due to the former employees. This decision was appealed to the Athens Court of Appeal, which allowed the appeal in 2001 and annulled the above-mentioned decision of the Athens Court of First Instance. The said group of former employees filed an appeal with the Supreme Court of Greece, which was heard on May 29, 2007. The Supreme Court of Greece allowed the appeal and sent the matter back to the Athens Court of Appeal for the consideration of the quantum of awardable salaries in arrears. On June 3, 2008, the Athens Court of Appeal rejected NAPC's appeal and reinstated the award of the Athens Court of First Instance, which decision was further appealed to the Supreme Court of Greece. The matter was heard on April 20, 2010 and a decision rejecting such appeal was rendered in June 2010. NAPC and the Company are assessing available rights of appeal to any other levels of court in any jurisdiction where such an appeal is warranted. NAPC is also the subject of a claim for approximately $4,194 (2,862 euros) from the Greek Social Security Agency for social security obligations associated with the salaries in arrears that are the subject matter of the above-mentioned decision and interest of approximately $3,226 (2,201 euros) payable on such amounts as at December 31, 2013.
Several other smaller groups of former employees have filed similar claims in various courts in Greece. One of these cases was heard by the Athens Court of First Instance on January 18, 2007. By judgment rendered November 23, 2007, the plaintiff's allegations were partially accepted, and the plaintiff was awarded compensation for additional work of approximately $51 (35 euros), plus interest. The appeal of this decision was heard on June 2, 2009, at which time an additional claim by the plaintiff was also heard. A decision in respect of the hearing has been rendered which accepted NAPC's appeal of the initial claim and partially accepted the additional claim of the plaintiff, resulting in an award of approximately $16 (11 euros), plus interest.
Another one of the lawsuits seeking salaries in arrears of $188 (128 euros) plus interest was heard by the Supreme Court of Greece on November 6, 2007, at which date the appeal of the plaintiffs was denied for technical reasons due to improper service. A rehearing of this appeal was heard on September 21, 2010 and the decision rendered declared once again the appeal inadmissible due to technical reasons. The remaining action, which is seeking salaries in arrears of approximately $643 (439 euros) plus interest, was scheduled to be heard before the Athens Court of First Instance on October 1, 2009, but has been postponed a total of four times, including the most recent postponement on February 22, 2013. No new date has been set yet for the postponed hearing.
The maximum aggregate interest payable under the claims noted above amounted to $17,988 (12,274 euros) as at December 31, 2013.
Management is of the view that it is improbable there will be a material financial impact to the Company as a result of these claims. Consequently, no provision has been recorded in these consolidated financial statements.
U.S. Litigation
A class and collective action complaint was filed against the Company in September 2012 in the United States District Court for the Western District of Pennsylvania. The complaint alleges failure to pay U.S. employees the correct amount of overtime pay required by the Fair Labor Standards Act (FLSA) and under the Pennsylvania Minimum Wage Act. In May 2013, the plaintiffs amended their complaint to add a Colorado wage-hour claim. In June 2013, the parties filed a joint stipulation for conditional certification of the FLSA collective action with certain current and former employees as the defined class. The notice to opt-in to the class was mailed to 1,204 current and former employees in September 2013. The opt-in period expired on November 15, 2013 and 359 individuals opted in. A discovery plan was approved by the court that extends through June 23, 2014.
The Company has filed answers to each complaint in a timely manner and believes it has defenses to each claim. At this time no motion for final class certification as to the FLSA claim or motion for certification of the Pennsylvania or Colorado state law claims has been filed. Thus no FLSA, Pennsylvania or Colorado class has been certified. Plaintiffs have not alleged an amount of damages and at this time it is not possible to predict the amount of any potential recovery. Given the stage of the proceedings and the existence of available defenses, no provision has been recorded in the Company's financial statements regarding these claims, since the direction and financial consequences of the claims in the amended complaint cannot be determined at this time. The Company does not have insurance coverage for these claims.
19. SEGMENTED INFORMATION
The Company's activities are conducted in four geographical segments: Canada, the United States, Russia and Latin America. All activities are related to hydraulic fracturing, coiled tubing, cementing and other well completion services for the oil and natural gas industry.
The business segments presented reflect the Company's management structure and the way its management reviews business performance. The Company evaluates the performance of its operating segments primarily based on operating income, as defined below.
| United | Latin | |||||
| Canada | States | Russia | America | Corporate | Consolidated | |
| (C$000s) | ($) | ($) | ($) | ($) | ($) | ($) |
| Three Months Ended December 31, 2013 | ||||||
| Revenue | 197,112 | 189,239 | 41,404 | 35,299 | - | 463,054 |
| Operating income (loss)(1) | 35,003 | 29,596 | 2,664 | 3,836 | (13,583) | 57,416 |
| Segmented assets | 706,405 | 828,527 | 149,946 | 185,053 | - | 1,869,931 |
| Capital expenditures | 13,602 | 22,683 | 4,918 | 4,024 | - | 45,227 |
| Goodwill | 7,236 | 2,308 | 979 | - | - | 10,523 |
| Three Months Ended December 31, 2012 | ||||||
| Revenue | 201,573 | 109,975 | 24,197 | 31,742 | - | 367,487 |
| Operating income (loss)(1) | 49,022 | 5,488 | (254) | 3,101 | (14,139) | 43,218 |
| Segmented assets | 707,663 | 568,665 | 126,564 | 121,929 | - | 1,524,821 |
| Capital expenditures | 22,216 | 26,351 | 2,454 | 4,673 | - | 55,694 |
| Goodwill | 7,236 | 2,308 | 979 | - | - | 10,523 |
| Year Ended December 31, 2013 | ||||||
| Revenue | 677,114 | 616,174 | 158,782 | 111,744 | - | 1,563,814 |
| Operating income (loss)(1) | 121,699 | 104,125 | 13,358 | 3,523 | (54,629) | 188,076 |
| Segmented assets | 706,405 | 828,527 | 149,946 | 185,053 | - | 1,869,931 |
| Capital expenditures | 75,875 | 62,297 | 13,368 | 18,977 | - | 170,517 |
| Goodwill | 7,236 | 2,308 | 979 | - | - | 10,523 |
| Year Ended December 31, 2012 | ||||||
| Revenue | 732,880 | 638,483 | 112,765 | 111,088 | - | 1,595,216 |
| Operating income (loss)(1) | 188,555 | 105,129 | 6,566 | 8,839 | (52,076) | 257,013 |
| Segmented assets | 707,663 | 568,665 | 126,564 | 121,929 | - | 1,524,821 |
| Capital expenditures | 124,902 | 138,328 | 6,173 | 9,614 | - | 279,017 |
| Goodwill | 7,236 | 2,308 | 979 | - | - | 10,523 |
| (1) | Operating income (loss) is defined as net income (loss) before depreciation, interest, foreign exchange gains or losses, expenses and gain related to business combinations, gains or losses on disposal of property, plant and equipment, and income taxes. |
| Three Months Ended Dec 31, | Years Ended Dec 31, | ||||
| 2013 | 2012 | 2013 | 2012 | ||
| (C$000s) | |||||
| Net income (loss) | 11,751 | 10,981 | 26,733 | 96,361 | |
| Add back (deduct): | |||||
| Depreciation | 31,410 | 23,634 | 110,006 | 90,381 | |
| Interest | 13,433 | 8,933 | 41,985 | 36,354 | |
| Foreign exchange (gains) losses | (1,517) | (3,818) | 1,183 | (8,260) | |
| Business combination (note 11) | 2,474 | - | 2,474 | - | |
| (Gain) loss on disposal of property, plant andequipment | (1,208) | 170 | (1,514) | 802 | |
| Income taxes | 1,073 | 3,318 | 7,209 | 41,375 | |
| Operating income | 57,416 | 43,218 | 188,076 | 257,013 | |
Operating income does not have a standardized meaning under IFRS and may not be comparable to similar measures used by other companies.
The following table sets forth consolidated revenue by service line:
| Three Months Ended Dec 31, | Years Ended Dec 31, | |||
| 2013 | 2012 | 2013 | 2012 | |
| (C$000s) | ||||
| Fracturing | 422,306 | 331,590 | 1,422,872 | 1,436,279 |
| Coiled tubing | 22,477 | 19,661 | 73,053 | 100,239 |
| Cementing | 15,399 | 10,181 | 53,520 | 34,750 |
| Other | 2,872 | 6,055 | 14,369 | 23,948 |
| 463,054 | 367,487 | 1,563,814 | 1,595,216 | |
The Company's customer base consists of approximately 180 oil and natural gas exploration and production companies, ranging from large multinational publicly traded companies to small private companies. Notwithstanding the Company's broad customer base, Calfrac had five significant customers that collectively accounted for approximately 46 percent of the Company's revenue for the year ended December 31, 2013 (year ended December 31, 2012 - five significant customers for approximately 39 percent) and, of such customers, one customer accounted for approximately 12 percent of the Company's revenue for the year ended December 31, 2013 (year ended December 31, 2012 - 13 percent).
20. SEASONALITY OF OPERATIONS
The Company's Canadian business is seasonal. The lowest activity is typically experienced during the second quarter of the year when road weight restrictions are in place and access to wellsites in Canada is reduced.
21. DIVIDEND REINVESTMENT PLAN
The Company's Dividend Reinvestment Plan (DRIP) allows shareholders to direct cash dividends paid on all or a portion of their common shares to be reinvested in additional common shares that are issued at 95 percent of the volume-weighted average price of the common shares traded on the Toronto Stock Exchange during the last five trading days preceding the relevant dividend payment date.
A dividend of $0.25 per common share, totalling $11,575, was declared on December 5, 2013, to be paid on January 15, 2014. This amount has been accrued in the financial statements.
A dividend of $0.25 per common share was declared on September 17, 2013 and paid on October 15, 2013. Of the total dividend of $11,531, $4,282 was reinvested under the DRIP into 144,478 common shares of the Company.
A dividend of $0.25 per common share was declared on June 14, 2013 and paid on July 15, 2013. Of the total dividend of $11,472, $3,313 was reinvested under the DRIP into 111,594 common shares of the Company.
A dividend of $0.25 per common share was declared on February 26, 2013 and paid on April 15, 2013. Of the total dividend of $11,375, $3,108 was reinvested under the DRIP into 125,024 common shares of the Company.
SOURCE: Calfrac Well Services Ltd.
Fernando Aguilar
President & Chief Executive Officer
Telephone: 403-266-6000
Fax: 403-266-7381
Michael (Mick) J. McNulty
Chief Financial Officer
Telephone: 403-266-6000
Fax: 403-266-7381
Tom J. Medvedic
Senior Vice President,
Corporate Development
Telephone: 403-266-6000
Fax: 403-266-7381
Ian Gillies
Manager, Investor Relations
Telephone: 403-266-6000
Fax: 403-266-7381
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