Calfrac Announces Third Quarter Results and Update on 2021 Capital Program
CALGARY, AB, Nov. 2, 2021 /CNW/ - Calfrac Well Services Ltd. ("Calfrac" or "the Company") (TSX: CFW) announces its financial and operating results for the three and nine months ended September 30, 2021.
HIGHLIGHTS
| |
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||
| |
2021 |
2020 |
Change |
2021 |
2020 |
Change |
| (C$000s, except per share and unit data) |
($) |
($) |
(%) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
|
|
|
| Revenue |
295,754 |
127,776 |
131 |
744,640 |
524,714 |
42 |
| Operating income (1) |
35,623 |
8,009 |
345 |
54,606 |
6,400 |
753 |
| Per share – basic(2) |
0.95 |
2.76 |
(66) |
1.46 |
2.21 |
(34) |
| Per share – diluted(2) |
0.43 |
2.75 |
(84) |
0.66 |
2.20 |
(70) |
| Adjusted EBITDA(1) |
35,581 |
8,467 |
320 |
51,910 |
10,094 |
414 |
| Per share – basic(2) |
0.95 |
2.91 |
(67) |
1.38 |
3.48 |
(60) |
| Per share – diluted(2) |
0.43 |
2.91 |
(85) |
0.62 |
3.47 |
(82) |
| Net loss |
(1,541) |
(50,000) |
(97) |
(54,494) |
(450,132) |
(88) |
| Per share – basic(2) |
(0.04) |
(17.20) |
(100) |
(1.45) |
(155.13) |
(99) |
| Per share – diluted(2) |
(0.04) |
(17.20) |
(100) |
(1.45) |
(155.13) |
(99) |
| Working capital (end of period) |
|
|
|
179,511 |
127,989 |
40 |
| Total equity (end of period) |
|
|
|
357,830 |
(81,033) |
NM |
| Weighted average common shares outstanding (000s) |
|
|
|
|
|
|
| Basic(2) |
37,635 |
2,906 |
NM |
37,498 |
2,902 |
NM |
| Diluted(2) |
83,241 |
2,910 |
NM |
83,366 |
2,905 |
NM |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
| (2) Comparative amounts were adjusted to reflect the Company's fifty-to-one common share consolidation that occurred on December 18, 2020. |
PRESIDENT'S MESSAGE
Calfrac's President and Chief Operating Officer, Lindsay Link commented: "The Company's results in the third quarter exceeded expectations due to strong year-over-year growth in equipment utilization in all of its operating divisions, while at the same time, maintaining industry leading service quality and HS&E performance. Calfrac continued to execute on its data enhancement strategy through its recent investments in equipment analytics technology that is providing actionable preventative maintenance insights in order to reduce unscheduled downtime and lower operating costs." During the quarter, Calfrac:
- elected to pay interest of $3.0 million on its 1.5 lien notes in cash;
- acquired fracturing equipment in Argentina for $2.5 million, which was a significant discount to replacement cost from a competitor exiting that market;
- averaged eight fleets operating in the United States and four fleets in Canada; and
- achieved high rates of utilization for equipment in Russia and Argentina.
CONSOLIDATED HIGHLIGHTS
| Three Months Ended September 30, |
2021 |
2020 |
Change |
| (C$000s, except operational information) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Revenue |
295,754 |
127,776 |
131 |
| Expenses |
|
|
|
| Operating |
249,196 |
109,708 |
127 |
| Selling, general and administrative (SG&A) |
10,935 |
10,059 |
9 |
| |
260,131 |
119,767 |
117 |
| Operating income (1) |
35,623 |
8,009 |
345 |
| Operating income (%) |
12.0 |
6.3 |
90 |
| Adjusted EBITDA(1) |
35,581 |
(5,185) |
NM |
| Adjusted EBITDA (%) |
12.0 |
(4.1) |
NM |
| Fracturing revenue per job ($) |
32,885 |
33,382 |
(1) |
| Number of fracturing jobs |
8,174 |
3,527 |
132 |
| Active pumping horsepower, end of period (000s) |
976 |
840 |
16 |
| Idle pumping horsepower, end of period (000s) |
383 |
505 |
(24) |
| Total pumping horsepower, end of period (000s) |
1,359 |
1,345 |
1 |
| Coiled tubing revenue per job ($) |
23,629 |
22,795 |
4 |
| Number of coiled tubing jobs |
653 |
364 |
79 |
| Active coiled tubing units, end of period (#) |
16 |
15 |
7 |
| Idle coiled tubing units, end of period (#) |
11 |
12 |
(8) |
| Total coiled tubing units, end of period (#) |
27 |
27 |
— |
| Cementing revenue per job ($) |
52,203 |
51,000 |
2 |
| Number of cementing jobs |
113 |
27 |
NM |
| Active cementing units, end of period (#) |
10 |
12 |
(17) |
| Idle cementing units, end of period (#) |
6 |
4 |
50 |
| Total cementing units, end of period (#) |
16 |
16 |
— |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
Revenue in the third quarter of 2021 was $295.8 million, an increase of 131 percent from the same period in 2020. The improved revenue was mainly due to the fracturing job count increasing by 132 percent, resulting primarily from higher activity in all operating divisions. Cementing and coiled tubing activity in Argentina returned to more normal levels after being negatively impacted by the mandated shut-down in the comparable quarter, while consolidated coiled tubing activity increased by 79 percent. Fracturing revenue per job was consistent with the comparable quarter in 2020.
Calfrac reported Adjusted EBITDA of $35.6 million for the third quarter of 2021, an increase from $8.5 million in the comparable period in 2020, primarily as a result of b etter utilization for all of its operating fleets.
The net loss was $1.5 million or $0.04 per share diluted compared to a net loss of $50.0 million or $17.20 per share diluted in the same period last year.
| Three Months Ended |
September 30, |
June 30, |
Change |
| |
2021 |
2021 |
|
| (C$000s, except operational information) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Revenue |
295,754 |
207,311 |
43 |
| Expenses |
|
|
|
| Operating |
249,196 |
191,219 |
30 |
| SG&A |
10,935 |
10,048 |
9 |
| |
260,131 |
201,267 |
29 |
| Operating income(1) |
35,623 |
6,044 |
489 |
| Operating income (%) |
12.0 |
2.9 |
314 |
| Adjusted EBITDA(1) |
35,581 |
4,393 |
710 |
| Adjusted EBITDA (%) |
12.0 |
2.1 |
471 |
| Fracturing revenue per job ($) |
32,885 |
32,704 |
1 |
| Number of fracturing jobs |
8,174 |
5,675 |
44 |
| Active pumping horsepower, end of period (000s) |
976 |
950 |
3 |
| Idle pumping horsepower, end of period (000s) |
383 |
393 |
(3) |
| Total pumping horsepower, end of period (000s) |
1,359 |
1,343 |
1 |
| Coiled tubing revenue per job ($) |
23,629 |
22,616 |
4 |
| Number of coiled tubing jobs |
653 |
563 |
16 |
| Active coiled tubing units, end of period (#) |
16 |
16 |
— |
| Idle coiled tubing units, end of period (#) |
11 |
11 |
— |
| Total coiled tubing units, end of period (#) |
27 |
27 |
— |
| Cementing revenue per job ($) |
52,203 |
48,095 |
9 |
| Number of cementing jobs |
113 |
116 |
(3) |
| Active cementing units, end of period (#) |
10 |
10 |
— |
| Idle cementing units, end of period (#) |
6 |
6 |
— |
| Total cementing units, end of period (#) |
16 |
16 |
— |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
Third-quarter revenue in 2021 of $295.8 million represented an increase of 43 percent from the second quarter of 2021, primarily due to higher fracturing activity in North America and Argentina. Revenue per fracturing job was consistent with with the second quarter of 2021.
In Canada, revenue increased by 51 percent from the second quarter to $76.6 million in the third quarter due to the normal ramp in activity post spring break-up. Calfrac also increased its marketed asset base back up to four fracturing fleets from three fleets in the second quarter. Operating income as a percentage of revenue was 20 percent, compared to 8 percent in the second quarter.
In the United States, revenue in the third quarter of 2021 was $138.3 million, a 60 percent improvement from the second quarter of 2021. The third quarter had relatively consistent utilization, including the two fleets that were reactivated late in the second quarter. Operating income was $13.8 million in the third quarter compared to a loss of $2.6 million in the second quarter of 2021.
In Russia, revenue of $32.9 million in the third quarter of 2021 was 2 percent lower on a sequential basis due to some wet weather related delays that impacted utilization in September. Operating income increased by $0.7 million primarily due to the continued increase in the number of multi-stage fracturing jobs.
In Argentina, revenue in the third quarter of 2021 increased to $48.0 million from $36.3 million in the second quarter. The ongoing improvement in operating conditions resulted in a sequential improvement in overall activity and fewer customer-specific disruptions. Operating income increased from $4.9 million in the second quarter of 2021 to $6.4 million in the third quarter.
On a consolidated basis, Adjusted EBITDA of $35.6 million for the third quarter of 2021 increased from $4.4 million in the second quarter of 2021, primarily due to higher utilization in the United State s combined with the return to normal operations following the seasonal slowdown in Canada during the second quarter.
BUSINESS UPDATE AND OUTLOOK
Market fundamentals in the pressure pumping sector have significantly improved since the prior year, and Calfrac is well positioned to capitalize on this oilfield recovery. Compared to the third quarter of 2020, the Company's active fleet count in North America increased by over 60 percent which resulted in consolidated revenue and operating income improving by 131 percent and 345 percent, respectively. On a sequential quarter-over-quarter basis, revenue increased by more than 40 percent while operating income improved by approximately 489 percent as strong equipment utilization and a disciplined focus on cost control drove significant growth in the Company's financial performance. In North America, the tight oilfield labour market caused by the changing economy is reducing the pace of fleet activations and is resulting in the gradual tightening of the pressure pumping markets in both Canada and the United States. Although the industry has experienced widespread cost inflation over the last few quarters, Calfrac has been successful for the most part in recovering these increases in operating costs. As strengthening commodity prices translate into the significant improvement in the financial performance of the exploration and production sector, Calfrac is expecting an increase in the demand for its services in 2022 which is anticipated to drive further improvements in operating and financial performance.
CANADA
In Canada, activity during the third quarter improved from the seasonal slowdown in the second quarter despite some wet weather in central and northern Alberta that affected crew utilization during September. Although spot market pricing has experienced some positive momentum, Calfrac remains committed to operating four fracturing fleets in Canada as current economics remain below its minimum internal return on investment thresholds.
While drilling and completions activity in Canada accelerated in the third quarter, as is typical, it is expected to slow down towards year-end as annual capital budgets are exhausted by the Company's customer base. However, the Company expects that the recent strength in commodity prices will result in higher levels of operating activity in the first quarter of 2022 and tighten the fracturing completions market significantly in western Canada.
UNITED STATES
The third quarter showed significant improvement for Calfrac's operations in the United States due primarily to increased utilization across most of its operating districts. The fourth quarter of 2021 is expected to outperform the same period in 2020, but the operating and financial results will be impacted by a slow down of activity in December resulting from the exhaustion of capital by some of the Company's core clients. The Company's United States division will exit the year with nine active fracturing fleets and believes that the fundamentals for the pressuring pumping market will continue to improve in 2022 with the increase in the commodity price environment for its customers.
RUSSIA
Calfrac's Russian division continued to deliver strong financial performance during the third quarter as operating income improved on a sequential basis resulting from more consistent fracturing crew utilization combined with improved cost control. Calfrac anticipates a typical slowdown in activity during the fourth quarter due to the temporary loss of river crossings and access to the oilfield roads until ice bridges are established. However, Calfrac expects full utilization of its active equipment in 2022 and is currently working on the extensions of its fracturing and coiled tubing contracts in the fourth quarter.
ARGENTINA
Argentina's financial performance improved significantly from the second quarter primarily due to more consistent levels of activity in the Vaca Muerta shale play. The Company expects the demand for its services in this market to remain strong for the remainder of the year and into 2022.
CORPORATE
At a corporate level, Calfrac remains committed to prudently allocating capital in order to maximize free cash flow, with debt reduction being a top priority. As well, the Company will not consider any further fleet reactivation or upgrade investments until financial returns exceed internal benchmarks that properly account for macroeconomic, industry and operation-specific risk factors.
Calfrac's Board of Directors has approved a $5.5 million increase to its 2021 capital budget to approximately $61.0 million. This increase is to support a pre-existing equipment build commitment in Argentina and facilitate the acquisition of fracturing assets in Argentina at a significant discount to replacement cost from a competitor that was exiting that market.
FINANCIAL OVERVIEW – THREE MONTHS ENDED SEPTEMBER 30, 2021 VERSUS 2020
CANADA
| Three Months Ended September 30, |
2021 |
2020 |
Change |
| (C$000s, except operational information) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Revenue |
76,574 |
44,669 |
71 |
| Expenses |
|
|
|
| Operating |
61,341 |
36,352 |
69 |
| SG&A |
163 |
1,826 |
(91) |
| |
61,504 |
38,178 |
61 |
| Operating income(1) |
15,070 |
6,491 |
132 |
| Operating income (%) |
19.7 |
14.5 |
36 |
| Fracturing revenue per job ($) |
23,823 |
24,179 |
(1) |
| Number of fracturing jobs |
2,949 |
1,647 |
79 |
| Active pumping horsepower, end of period (000s) |
202 |
174 |
16 |
| Idle pumping horsepower, end of period (000s) |
70 |
100 |
(30) |
| Total pumping horsepower, end of period (000s) |
272 |
274 |
(1) |
| Coiled tubing revenue per job ($) |
18,611 |
14,995 |
24 |
| Number of coiled tubing jobs |
324 |
294 |
10 |
| Active coiled tubing units, end of period (#)
|
7 |
8 |
(13) |
| Idle coiled tubing units, end of period (#)
|
6 |
5 |
20 |
| Total coiled tubing units, end of period (#) |
13 |
13 |
— |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
REVENUE
Revenue from Calfrac's Canadian operations during the third quarter of 2021 was $76.6 million compared to $44.7 million in the same period of 2020, primarily due to higher activity. The number of fracturing jobs increased by 79 percent from the comparable period in 2020 as a significantly improved commodity price environment resulted in an increase in drilling and completions activity in western Canada. Revenue per fracturing job was consistent with the comparable quarter as the impact of job mix and pricing was negligible on a period-over-period basis. The number of coiled tubing jobs increased by 10 percent from the third quarter in 2020 due to an increase in standalone milling work, which also contributed to the 24 percent increase in revenue per job.
OPERATING INCOME
Operating income in Canada during the third quarter of 2021 was $15.1 million compared to $6.5 million in the same period of 2020. The Canadian division's operating income as a percentage of revenue was 20 percent compared to 15 percent in the third quarter of 2020 primarily due to the higher revenue base. In addition, the third quarter of 2021 included $2.4 million of Canadian Emergency Wage Subsidy (CEWS) versus $4.1 million in the comparable quarter of 2020. SG&A expense in the third quarter of 2021 also included a $1.4 million recovery of a bad debt expense. The third quarter of 2020 included a non-cash termination charge of $2.1 million in order to exit a contractual take-or-pay product purchase commitment and a $0.7 million bad debt provision. Excluding these items, operating income on a normalized basis for the third quarter of 2021 would have been $12.7 million or 16.6 percent versus $5.2 million or 11.6 percent in the comparable period in 2020. The increase in operating income for the quarter, both on a total basis and as a percentage of revenue, was mainly due to improved utilization for its fracturing and coiled tubing equipment.
UNITED STATES
| Three Months Ended September 30, |
2021 |
2020 |
Change |
| (C$000s, except operational and exchange rate information) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Revenue |
138,339 |
46,503 |
197 |
| Expenses |
|
|
|
| Operating |
121,451 |
40,827 |
197 |
| SG&A |
3,113 |
2,887 |
8 |
| |
124,564 |
43,714 |
185 |
| Operating income(1) |
13,775 |
2,789 |
394 |
| Operating income (%) |
10.0 |
6.0 |
67 |
| Fracturing revenue per job ($) |
33,308 |
34,630 |
(4) |
| Number of fracturing jobs |
4,156 |
1,345 |
209 |
| Active pumping horsepower, end of period (000s) |
576 |
483 |
19 |
| Idle pumping horsepower, end of period (000s) |
297 |
388 |
(23) |
| Total pumping horsepower, end of period (000s) |
873 |
871 |
— |
| Active coiled tubing units, end of period (#)
|
— |
— |
— |
| Idle coiled tubing units, end of period (#)
|
1 |
1 |
— |
| Total coiled tubing units, end of period (#) |
1 |
1 |
— |
| Active cementing units, end of period (#) |
— |
— |
— |
| Idle cementing units, end of period (#) |
3 |
2 |
50 |
| Total cementing units, end of period (#) |
3 |
2 |
50 |
| US$/C$ average exchange rate(2) |
1.2600 |
1.3321 |
(5) |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
| (2) Source: Bank of Canada. |
REVENUE
Revenue from Calfrac's United States operations increased to $138.3 million during the third quarter of 2021 from $46.5 million in the comparable quarter of 2020. The improved commodity price backdrop relative to the third quarter in 2020 allowed the Company to operate four more fracturing fleets in 2021 compared to the same quarter in 2020. The significant increase in revenue can be attributed to a combination of a 209 percent increase in the number of fracturing jobs completed, offset partially by a 4 percent decrease in revenue per job period-over-period, primarily due to the decline in the U.S. dollar exchange rate.
OPERATING INCOME
The Company's United States operations generated operating income of $13.8 million during the third quarter of 2021 compared to $2.8 million in the same period in2020. The improvement in operating income was largely driven by higher utilization of equipment and operating efficiencies. During the quarter, there were inflationary pressures experienced across most operating cost drivers that were effectively offset by pricing increases.
RUSSIA
| Three Months Ended September 30, |
2021 |
2020 |
Change |
| (C$000s, except operational and exchange rate information) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Revenue |
32,889 |
28,530 |
15 |
| Expenses |
|
|
|
| Operating |
26,186 |
21,880 |
20 |
| SG&A |
726 |
617 |
18 |
| |
26,912 |
22,497 |
20 |
| Operating income (1) |
5,977 |
6,033 |
(1) |
| Operating income (%) |
18.2 |
21.1 |
(14) |
| Fracturing revenue per job ($) |
57,654 |
67,303 |
(14) |
| Number of fracturing jobs |
535 |
390 |
37 |
| Active pumping horsepower, end of period (000s) |
77 |
65 |
18 |
| Idle pumping horsepower, end of period (000s) |
— |
12 |
(100) |
| Total pumping horsepower, end of period (000s) |
77 |
77 |
— |
| Coiled tubing revenue per job ($) |
36,498 |
48,542 |
(25) |
| Number of coiled tubing jobs |
56 |
47 |
19 |
| Active coiled tubing units, end of period (#)
|
4 |
3 |
33 |
| Idle coiled tubing units, end of period (#)
|
3 |
4 |
(25) |
| Total coiled tubing units, end of period (#) |
7 |
7 |
— |
| Rouble/C$ average exchange rate(2) |
0.0171 |
0.0181 |
(6) |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
| (2) Source: Bank of Canada. |
REVENUE
Revenue from Calfrac's Russian operations increased by 15 percent during the third quarter of 2021 to $32.9 million from $28.5 million in the corresponding period of 2020. The increase in revenue was attributable to a 37 percent increase in fracturing activity due to better utilization as the Company increased its operating footprint from four fleets in 2020 to six fleets in 2021, combined with changes in job mix as a higher percentage of multi-stage work was completed resulting in a higher number of stages completed at a lower average job size. Revenue per fracturing job decreased by 14 percent primarily due to the impact of job mix, combined with a 6 percent decline in the Russian rouble. Coiled tubing activity increased by 19 percent as the Company operated one additional coiled tubing unit although one fleet was shut-down for one month due to COVID-19. The lower revenue per coiled tubing job was primarily due to job mix, combined with the decline in the Russian rouble.
OPERATING INCOME
The Company's Russian division generated operating income of $6.0 million during the third quarter of 2021 or 18 percent of revenue versus $6.0 million or 21 percent of revenue in the comparable quarter in 2020. The lower operating margin performance was primarily due to lower than expected fracturing equipment utilization due to the impact of excessive rainfall in September, which resulted in the closure of river crossings and limited access to oilfield roads. Coiled tubing equipment utilization was also impacted by a COVID-19 shutdown of one fleet for a month during the quarter.
ARGENTINA
| Three Months Ended September 30, |
2021 |
2020 |
Change |
| (C$000s, except operational and exchange rate information) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Revenue |
47,952 |
8,074 |
494 |
| Expenses |
|
|
|
| Operating |
39,965 |
10,365 |
286 |
| SG&A |
1,596 |
1,585 |
1 |
| |
41,561 |
11,950 |
248 |
| Operating income (loss)(1) |
6,391 |
(3,876) |
NM |
| Operating income (loss) (%) |
13.3 |
(48.0) |
NM |
| Fracturing revenue per job ($) |
54,820 |
35,105 |
56 |
| Number of fracturing jobs |
534 |
145 |
268 |
| Active pumping horsepower, end of period (000s) |
121 |
118 |
3 |
| Idle pumping horsepower, end of period (000s) |
16 |
5 |
NM |
| Total pumping horsepower, end of period (000s) |
137 |
123 |
11 |
| Coiled tubing revenue per job ($) |
26,944 |
69,880 |
(61) |
| Number of coiled tubing jobs |
273 |
23 |
NM |
| Active coiled tubing units, end of period (#) |
5 |
4 |
25 |
| Idle coiled tubing units, end of period (#) |
1 |
2 |
(50) |
| Total coiled tubing units, end of period (#) |
6 |
6 |
— |
| Cementing revenue per job ($) |
52,203 |
51,000 |
2 |
| Number of cementing jobs |
113 |
27 |
NM |
| Active cementing units, end of period (#) |
10 |
12 |
(17) |
| Idle cementing units, end of period (#) |
3 |
2 |
50 |
| Total cementing units, end of period (#) |
13 |
14 |
(7) |
| US$/C$ average exchange rate(2)
|
1.2600 |
1.3321 |
(5) |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
| (2) Source: Bank of Canada. |
REVENUE
Calfrac's Argentinean operations generated revenue of $48.0 million during the third quarter of 2021 compared to $8.1 million in the comparable quarter in 2020. Activity in the third quarter of 2021 improved sequentially and year-over-year due to strong activity in the Vaca Muerta shale play as well as in southern Argentina. During the third quarter of 2021, activity was not impacted by as many operational delays that were experienced in the previous quarter or the government-mandated COVID-19 shut-downs that impacted activity in the comparable quarter in 2020. Revenue per job for all service lines was negatively impacted by a 5 percent depreciation in the U.S. dollar. Despite this decline, fracturing revenue increased by 56 percent due to job mix and cementing revenue per job increased by 2 percent due to changes in job mix as a greater number of pre-fracturing projects were completed in the third quarter of 2021.
OPERATING INCOME (LOSS)
The Company's operations in Argentina generated an operating income of $6.4 million during the third quarter of 2021 compared to an operating loss of $3.9 million in the comparable quarter of 2020. Utilization for the Company's equipment significantly improved compared to the same period in 2020 as the prior year included a government mandated shutdown of oilfield activity in response to the COVID-19 pandemic. The Company's fixed cost structure remained relatively consistent with the comparable quarter in 2020 so the additional revenue resulted in operating income as a percentage of revenue improving to 13.3 percent from negative 48.0 percent in the third quarter in 2020. The Company recorded $0.2 million of severance expense during the third quarter in 2021.
CORPORATE
| Three Months Ended September 30, |
2021 |
2020 |
Change |
| (C$000s) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Expenses |
|
|
|
| Operating |
253 |
284 |
(11) |
| SG&A |
5,337 |
3,144 |
70 |
| |
5,590 |
3,428 |
63 |
| Operating loss(1) |
(5,590) |
(3,428) |
63 |
| % of Revenue |
1.9 |
2.7 |
(30) |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
OPERATING LOSS
Corporate expenses for the third quarter of 2021 were $5.6 million compared to $3.4 million in the third quarter of 2020. The increase was due in part to the issuance of new equity-based awards under its omnibus incentive plan, which resulted in a stock-based compensation expense of $1.2 million in the third quarter in 2021 compared to $0.6 million in the same period in 2020. In addition, $1.2 million of costs associated with the Company's Recapitalization Transaction were reclassified to prepaid expenses during the third quarter in 2020, which resulted in a reduction to SG&A expense during that quarter.
DEPRECIATION
For the three months ended September 30, 2021, depreciation expense increasedby $1.5 million to $33.2 million from $31.7 million in the corresponding quarter in 2020. The increase in third-quarter depreciation expense was primarily due to theyear-over-year increase in capital expenditures relating to major component purchases, which have a shorter useful life and a corresponding higher rate of depreciation.
FOREIGN EXCHANGE GAINS AND LOSSES
The Company recorded a foreign exchange gain of $2.3 million during the third quarter of 2021 versus a loss of $7.8 million in the comparative three-month period of 2020. Foreign exchange gains and losses arise primarily from the translation of net monetary assets or liabilities that were held in U.S. dollars in Canada, net monetary assets or liabilities that were held in pesos in Argentina, and liabilities held in Canadian dollars in Russia. The foreign exchange loss during the third quarter was mainly due to net monetary assets that were held in pesos in Argentina as the peso devalued against the U.S. dollar during this period, combined with the revaluation of net monetary assets that were held in U.S. dollars as the Canadian dollar strengthened relative to the U.S. dollar.
INTEREST
The Company's net interest expense of $9.7 million for the third quarter of 2021 was $9.9 million lower than the comparable period in 2020. The decrease in interest expense was primarily due to the significant reduction in long-term debt resulting from the Recapitalization Transaction that closed on December 18, 2020, combined with the debt exchange that was completed during the first quarter in 2020. These transactions combined to eliminate US$650.0 million of the Company's 8.50 percent Unsecured Notes and replaced it with US$120.0 million of Second Lien Notes bearing interest at 10.875 percent and$59.0 million of 1.5 Lien Notes bearing interest at 10.0 percent. In addition, the USD/CAD exchange rate was 5 percent lower than the comparable quarter in 2020, which resulted in a reduction of reported interest expense on the Company's Second Lien Notes.
INCOME TAXES
The Company recorded an income tax recovery of $3.6 million during the third quarter of 2021 compared to a recovery of $0.2 million in the comparable period of 2020. A deferred tax recovery of $4.3 million was recorded primarily due to losses incurred in the United States, and a current income tax expense of $0.7 million resulted from current tax obligations in Russia.
IMPAIRMENT
Since the impairment test that was conducted as at December 31, 2020, the Company did not identify any changes in the indicators of impairment or any new indicators of impairment. The impairment charge by cash-generating unit (CGU) is shown in the table below.
| Three Months Ended September 30, |
2021 |
|
2020 |
| (C$000s) |
($) |
|
($) |
| Canada |
— |
|
16,203 |
| Argentina |
— |
|
(16,203) |
| Russia |
— |
|
— |
| |
— |
|
— |
During the third quarter of 2020, the Company identified specific assets within its CGUs in Argentina and Canada whose individual carrying amounts differed from their recoverable amounts, resulting in a reclassification of the impairment charge recorded in the second quarter of 2020 between these CGUs.
SUMMARY OF QUARTERLY RESULTS
| Three Months Ended |
Dec. 31, |
Mar. 31, |
Jun. 30, |
Sep. 30, |
Dec. 31, |
Mar. 31, |
Jun. 30, |
Sep. 30, |
| |
2019 |
2020 |
2020 |
2020 |
2020 |
2021 |
2021 |
2021 |
| (C$000s, except per share and operating data) |
($) |
($) |
($) |
($) |
($) |
($) |
($) |
($) |
| (unaudited) |
|
|
|
|
|
|
|
|
| Financial |
|
|
|
|
|
|
|
|
| Revenue |
317,085 |
305,515 |
91,423 |
127,776 |
180,722 |
241,575 |
207,311 |
295,754 |
| Operating income (loss)(1) |
20,997 |
5,698 |
(7,307) |
8,009 |
15,597 |
12,940 |
6,043 |
35,623 |
| Per share – basic(2) |
7.25 |
1.97 |
(2.52) |
2.76 |
1.91 |
0.35 |
0.16 |
0.95 |
| Per share – diluted(2) |
7.22 |
1.96 |
(2.52) |
2.75 |
0.27 |
0.15 |
0.07 |
0.43 |
| Adjusted EBITDA(1) |
26,882 |
6,812 |
(5,185) |
8,467 |
13,715 |
11,936 |
4,393 |
35,581 |
| Per share – basic(2) |
9.29 |
2.35 |
(1.79) |
2.91 |
1.68 |
0.31 |
0.12 |
0.95 |
| Per share – diluted(2) |
9.25 |
2.34 |
(1.79) |
2.91 |
0.24 |
0.14 |
0.05 |
0.43 |
| Net income (loss) |
(49,400) |
(122,857) |
(277,275) |
(50,000) |
125,897 |
(22,418) |
(30,535) |
(1,541) |
| Per share – basic(2) |
(17.07) |
(42.38) |
(95.61) |
(17.20) |
15.43 |
(0.60) |
(0.82) |
(0.04) |
| Per share – diluted(2) |
(17.07) |
(42.38) |
(95.61) |
(17.20) |
2.19 |
(0.60) |
(0.82) |
(0.04) |
| Capital expenditures |
34,418 |
29,283 |
6,068 |
2,792 |
6,487 |
11,586 |
18,065 |
25,234 |
| Working capital (end of period) |
248,772 |
233,125 |
157,165 |
127,989 |
161,448 |
170,088 |
152,176 |
179,511 |
| Total equity (end of period) |
368,623 |
239,099 |
(34,195) |
(81,033) |
410,234 |
384,561 |
350,631 |
357,830 |
| |
|
|
|
|
|
|
|
|
| Operating (end of period) |
|
|
|
|
|
|
|
|
| Active pumping horsepower (000s) |
1,269 |
1,242 |
780 |
840 |
901 |
934 |
950 |
976 |
| Idle pumping horsepower (000s) |
141 |
174 |
572 |
505 |
444 |
411 |
393 |
383 |
| Total pumping horsepower (000s) |
1,410 |
1,416 |
1,352 |
1,345 |
1,345 |
1,345 |
1,343 |
1,359 |
| Active coiled tubing units (#) |
20 |
20 |
16 |
15 |
17 |
16 |
16 |
16 |
| Idle coiled tubing units (#) |
8 |
7 |
11 |
12 |
10 |
11 |
11 |
11 |
| Total coiled tubing units (#) |
28 |
27 |
27 |
27 |
27 |
27 |
27 |
27 |
| Active cementing units (#) |
13 |
13 |
13 |
12 |
12 |
10 |
10 |
10 |
| Idle cementing units (#) |
6 |
3 |
3 |
4 |
4 |
6 |
6 |
6 |
| Total cementing units (#) |
19 |
16 |
16 |
16 |
16 |
16 |
16 |
16 |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
| (2) Comparative amounts were adjusted to reflect the Company's fifty-to-one common share consolidation that occurred on December 18, 2020. |
SEASONALITY OF OPERATIONS
The Company's North American business is seasonal. The lowest activity is typically experienced during the second quarter of the year when road weight restrictions are in place due to spring break-up weather conditions and access to well sites in Canada and North Dakota is reduced (refer to "Business Risks - Seasonality" in the 2020 Annual Report).
FOREIGN EXCHANGE FLUCTUATIONS
The Company's consolidated financial statements are reported in Canadian dollars. Accordingly, the quarterly results are directly affected by fluctuations in the exchange rates for United States, Russian and Argentinean currency (refer to "Business Risks - Fluctuations in Foreign Exchange Rates" in the 2020 Annual Report).
FINANCIAL OVERVIEW – NINE MONTHS ENDED SEPTEMBER 30, 2021 VERSUS 2020
CANADA
| Nine Months Ended September 30, |
2021 |
2020 |
Change |
| (C$000s, except operational information) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Revenue |
212,924 |
177,101 |
20 |
| Expenses |
|
|
|
| Operating |
177,506 |
146,253 |
21 |
| SG&A |
874 |
6,054 |
(86) |
| |
178,380 |
152,307 |
17 |
| Operating income(1) |
34,544 |
24,794 |
39 |
| Operating income (%) |
16.2 |
14.0 |
16 |
| Fracturing revenue per job ($) |
21,156 |
18,172 |
16 |
| Number of fracturing jobs |
9,139 |
8,811 |
4 |
| Active pumping horsepower, end of period (000s) |
202 |
174 |
16 |
| Idle pumping horsepower, end of period (000s) |
70 |
100 |
(30) |
| Total pumping horsepower, end of period (000s) |
272 |
274 |
(1) |
| Coiled tubing revenue per job ($) |
20,152 |
19,469 |
4 |
| Number of coiled tubing jobs |
957 |
850 |
13 |
| Active coiled tubing units, end of period (#)
|
7 |
8 |
(13) |
| Idle coiled tubing units, end of period (#)
|
6 |
5 |
20 |
| Total coiled tubing units, end of period (#) |
13 |
13 |
— |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
REVENUE
Revenue from Calfrac's Canadian operations during the first nine months in 2021 was $212.9 million versus $177.1 million in the same period in 2020 primarily due to changes in job mix. Work during 2021 shifted from smaller jobs in the Viking to larger jobs in the Cardium, Deep Basin and Montney areas resulting in a 16 percent increase in revenue per job from the comparable period in 2020. The number of coiled tubing jobs increased by 13 percent from the comparable period in 2020 due to higher activity, while revenue per job increased by 4 percent due to changes in job mix.
OPERATING INCOME
The Company's Canadian division generated operating income of $34.5 million compared to $24.8 million in 2020. The Company recognized CEWS benefits of $6.3 million in the first nine months of 2021 compared to $8.0 million in 2020. SG&A expenses for the first nine months of 2021 included the reversal of a bad debt expense of $1.4 million. In addition, SG&A expenses in 2021 included a recovery from a litigation settlement offset partially by higher operating expenses stemming from an arbitral order, which increased operating income by $0.7 million. The comparable period in 2020 included $1.6 million of severance costs, a non-cash termination charge of $2.1 million in order to exit a contractual take-or-pay product purchase commitment and a $0.7 million bad debt provision. Excluding these items, normalized operating income for the first nine months of 2021 would have been $27.6 million or 13.0 percent compared to $21.2 million or 12.0 percent in 2020. The improvement in operating income is due to the 4 percent and 13 percent increases in fracturing and coiled tubing activity, respectively.
UNITED STATES
| Nine Months Ended September 30, |
2021 |
2020 |
Change |
| (C$000s, except operational and exchange rate information) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Revenue |
317,940 |
238,807 |
33 |
| Expenses |
|
|
|
| Operating |
300,971 |
225,554 |
33 |
| SG&A |
8,760 |
10,228 |
(14) |
| |
309,731 |
235,782 |
31 |
| Operating income(1) |
8,209 |
3,025 |
171 |
| Operating income (%) |
2.6 |
1.3 |
100 |
| Fracturing revenue per job ($) |
29,387 |
30,053 |
(2) |
| Number of fracturing jobs |
10,820 |
7,946 |
36 |
| Active pumping horsepower, end of period (000s) |
576 |
483 |
19 |
| Idle pumping horsepower, end of period (000s) |
297 |
388 |
(23) |
| Total pumping horsepower, end of period (000s) |
873 |
871 |
— |
| Active coiled tubing units, end of period (#)
|
— |
— |
— |
| Idle coiled tubing units, end of period (#)
|
1 |
1 |
— |
| Total coiled tubing units, end of period (#) |
1 |
1 |
— |
| Active cementing units, end of period (#) |
— |
— |
— |
| Idle cementing units, end of period (#) |
3 |
2 |
50 |
| Total cementing units, end of period (#) |
3 |
2 |
50 |
| US$/C$ average exchange rate(2) |
1.2514 |
1.3541 |
(8) |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
| (2) Source: Bank of Canada. |
REVENUE
Revenue from Calfrac's United States operations increased to $317.9 million in the first nine months in 2021 from $238.8 million in the same period in 2020, primarily due to a 36 percent increase in the number of fracturing jobs completed. Overall activity in 2021 was impacted by extreme cold weather during the first quarter which temporarily shutdown operations and some short notice schedule delays late in the second quarter. Activity increased significantly in the third quarter for existing crews plus the two additional fleets that were reactivated late in the second quarter. The lower fracturing revenue per job was mainly due to the 8 percent depreciation of the U.S dollar, offset partially by the impact of job mix.
OPERATING INCOME
The Company's United States division generated operating income of $8.2 million during the first nine months in 2021 compared to operating income of $3.0 million in the comparable period in 2020. The first nine months of 2021 included the reactivation of two fracturing fleets and the relocation of a third fleet. These actions resulted in $5.0 million of increased operating expenses during the period. Pricing during the first half of 2021 remained challenged but the Company was able to obtain some modest net pricing increases during the third quarter. Utilization of the Company's fracturing fleets was stronger at times than the comparable period in 2020, however, the results were negatively impacted by weather delays in certain operating areas in the first quarter, while customer delays by key customers and the relocation of equipment also impacted utilization during the second quarter. Activity levels in the third quarter were strong and contributed the majority of the U.S. division's operating income for the year-to-date period. SG&A expenses decreased by 14 percent as the comparable period in 2020 included $2.4 million of restructuring costs.
RUSSIA
| Nine Months Ended September 30, |
2021 |
2020 |
Change |
| (C$000s, except operational and exchange rate information) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Revenue |
94,052 |
73,458 |
28 |
| Expenses |
|
|
|
| Operating |
79,117 |
64,598 |
22 |
| SG&A |
2,195 |
2,373 |
(8) |
| |
81,312 |
66,971 |
21 |
| Operating income(1) |
12,740 |
6,487 |
96 |
| Operating income (%) |
13.5 |
8.8 |
53 |
| Fracturing revenue per job ($) |
61,479 |
83,347 |
(26) |
| Number of fracturing jobs |
1,410 |
795 |
77 |
| Active pumping horsepower, end of period (000s) |
77 |
65 |
18 |
| Idle pumping horsepower, end of period (000s) |
— |
12 |
(100) |
| Total pumping horsepower, end of period (000s) |
77 |
77 |
— |
| Coiled tubing revenue per job ($) |
39,188 |
46,432 |
(16) |
| Number of coiled tubing jobs |
188 |
155 |
21 |
| Active coiled tubing units, end of period (#)
|
4 |
3 |
33 |
| Idle coiled tubing units, end of period (#)
|
3 |
4 |
(25) |
| Total coiled tubing units, end of period (#) |
7 |
7 |
— |
| Rouble/C$ average exchange rate(2) |
0.0169 |
0.0191 |
(12) |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
| (2) Source: Bank of Canada. |
REVENUE
Revenue from Calfrac's Russian operations in the first nine months in 2021 of $94.1 million was 28 percent higher than in the comparable period in 2020. The increase in revenue was attributable to a 77 percent increase in fracturing activity due to a higher percentage of multi-stage projects completed in 2021, which resulted in a higher number of stages completed at a lower average job size. In addition, the Company did not encounter the same degree of weather-related disruptions during 2021. Revenue per fracturing job was 26 percent lower than in 2020 due to the 12 percent depreciation of the Russian rouble, combined with changes in job mix. Coiled tubing activity increased by 21 percent as the Company operated one additional coiled tubing unit. The 16 percent decline in revenue per job was primarily due to the decline in the Russian rouble versus the Canadian dollar.
OPERATING INCOME
The Company's Russian division generated operating income of $12.7 million during the first nine months in 2021 compared to operating income of $6.5 million in the comparable period in 2020. Utilization in the first nine months of 2021 improved significantly as the Company increased its operating footprint from five fracturing fleets in 2020 to six fleets in 2021. In addition, the completion of more multi-stage projects also had a positive impact on profitability during the period. Operating results for the first nine months of 2020 included $0.4 million in severance costs while the same period in 2021 did not include any severance costs.
ARGENTINA
| Nine Months Ended September 30, |
2021 |
2020 |
Change |
| (C$000s, except operational and exchange rate information) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Revenue |
119,724 |
35,348 |
239 |
| Expenses |
|
|
|
| Operating |
99,307 |
41,706 |
138 |
| SG&A |
5,184 |
5,595 |
(7) |
| |
104,491 |
47,301 |
121 |
| Operating income (loss)(1) |
15,233 |
(11,953) |
NM |
| Operating income (loss) (%) |
12.7 |
(33.8) |
NM |
| Fracturing revenue per job ($) |
55,336 |
56,850 |
(3) |
| Number of fracturing jobs |
1,332 |
321 |
315 |
| Active pumping horsepower, end of period (000s) |
121 |
118 |
3 |
| Idle pumping horsepower, end of period (000s) |
16 |
5 |
NM |
| Total pumping horsepower, end of period (000s) |
137 |
123 |
11 |
| Coiled tubing revenue per job ($) |
23,253 |
72,424 |
(68) |
| Number of coiled tubing jobs |
715 |
110 |
550 |
| Active coiled tubing units, end of period (#) |
5 |
4 |
25 |
| Idle coiled tubing units, end of period (#) |
1 |
2 |
(50) |
| Total coiled tubing units, end of period (#) |
6 |
6 |
— |
| Cementing revenue per job ($) |
50,279 |
58,920 |
(15) |
| Number of cementing jobs |
322 |
155 |
108 |
| Active cementing units, end of period (#) |
10 |
12 |
(17) |
| Idle cementing units, end of period (#) |
3 |
2 |
50 |
| Total cementing units, end of period (#) |
13 |
14 |
(7) |
| US$/C$ average exchange rate(2)
|
1.2514 |
1.3541 |
(8) |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
| (2) Source: Bank of Canada. |
REVENUE
Calfrac's Argentinean operations generated revenue of $119.7 million during the first nine months in 2021 versus $35.3 million in the same period in 2020, primarily due to a significant increase in activity as the oilfield industry in Argentina experienced a complete shutdown of field activity in mid-March 2020 due to the COVID-19 pandemic, which affected all of the Company's operating regions and service lines. In the second and third quarters of 2021, Argentina returned to normal operations for all service lines, including an increase to subcontractor revenue that was not experienced in the first nine months of 2020 due to changes in contracted service mix in Neuquén. However, utilization in 2021 was negatively impacted by some operational delays in Neuquén due to roadblocks in April as union strikes caused the shutdown of all oilfield activity for 18 days along with lower activity with a customer due to wellbore issues. This lower activity was partially mitigated by a contractual arrangement that provided a minimum revenue guarantee. Revenue per job across all service lines was negatively impacted by the depreciation of the U.S. dollar.
OPERATING INCOME (LOSS)
In the first nine months of 2021, the Company's operations in Argentina generated operating income of $15.2 million, compared to an operating loss of $12.0 million in the comparable period in 2020. The increase in operating income was due to improved equipment utilization as the comparable period in 2020 had an unprecedented revenue disruption caused by the government mandated shutdown of all oilfield activity in response to the COVID-19 pandemic. The Company recorded $0.7 million of severance expense during first nine months in 2021 compared to $0.1 million during the same period in 2020.
CORPORATE
| Nine Months Ended September 30, |
2021 |
2020 |
Change |
| (C$000s) |
($) |
($) |
(%) |
| (unaudited) |
|
|
|
| Expenses |
|
|
|
| Operating |
961 |
1,864 |
(48) |
| SG&A |
15,159 |
14,089 |
8 |
| |
16,120 |
15,953 |
1 |
| Operating loss(1) |
(16,120) |
(15,953) |
1 |
| % of Revenue |
2.2 |
3.0 |
(27) |
| (1) Refer to "Non-GAAP Measures" on pages 23 and 24 for further information. |
OPERATING LOSS
Corporate expenses during the first nine months in 2021 were $16.1 million compared to $16.0 million in the comparable period in 2020. The decrease in corporate operating expense was primarily due to lower personnel costs as the comparable period in 2020 included $0.8 million of severance costs. This reduction was offset by higher professional fees and stock-based compensation expense during the first nine months of 2021. The impact of the Canada Emergency Wage Subsidy and Emergency Rent programs was consistent with the same period in 2020 with a combined reduction of $1.2 million in each period.
DEPRECIATION
Depreciation expense during the first nine months in 2021 decreased by $44.9 million from $141.2 million to $96.3 million in the same period in 2020. The decrease was primarily due to the impact ofthe $227.2 million of property, plant and equipment (PP&E) impairment charges that were recorded during the first half of 2020, combined with lower sustaining capital expenditures.
FOREIGN EXCHANGE LOSSES
The Company recorded a foreign exchange loss of $3.4 million during the first nine months in 2021 versus a loss of $9.7 million in the comparable period in 2020. Foreign exchange gains and losses arise primarily from the translation of net monetary assets or liabilities that were held in U.S. dollars in Canada, net monetary assets or liabilities that were held in pesos in Argentina, and liabilities held in Canadian dollars in Russia. The Company's foreign exchange loss in the first nine months in 2021 was largely attributable to net monetary assets that were held in pesos in Argentina as the peso devalued against the U.S. dollar during this period, combined with the revaluation of net monetary assets that were held in U.S. dollars as the Canadian dollar strengthened relative to the U.S. dollar.
INTEREST
The Company's interest expense of $28.1 million in the first nine months in 2021was $38.3 million lower than the comparable period in 2020. The decrease in interest expense was primarily due to the significant reduction in long-term debt resulting from the Recapitalization Transaction that closed on December 18, 2020, combined with the debt exchange that was completed during the first quarter in 2020. These transactions combined to eliminate US$650.0 million of the Company's 8.50 percent Unsecured Notes and replaced it with US$120.0 million of Second Lien Notes bearing interest at 10.875 percent and $59.0 million of 1.5 Lien Notes bearing interest at 10.0 percent. Interest expense in the first nine months in 2020 also included the write-off of $4.4 million of deferred finance costs related to the portion of Unsecured Notes that were exchanged during the period.
INCOME TAXES
The Company recorded an income tax recovery of $19.2 million in the first nine months in 2021 compared to a $113.8 million tax expense in the comparable period in 2020. A deferred tax recovery of $20.7 million was recorded primarily due to losses incurred in the United States and a current income tax expense of $1.5 million resulted from current tax obligations in Russia and certain state taxes in the United States. The expense position in the first nine months in 2020 was the result of the derecognition of the Company's deferred tax asset, which resulted in a deferred tax expense of $115.6 million.
IMPAIRMENT
Since the impairment test that was conducted as at December 31, 2020, the Company did not identify any changes in the indicators of impairment or any new indicators of impairment. The impairment charge by CGU is shown in the table below.
| |
Nine Months Ended Sep. 30, |
|
| |
2021 |
2020 |
| (C$000s) |
($) |
($) |
| Canada |
— |
132,483 |
| United States |
— |
15,380 |
| Argentina |
— |
52,466 |
| Russia |
— |
26,879 |
| |
— |
227,208 |
In addition, the Company also carried out a comprehensive review of its inventory in 2020 to identify individual items that were permanently idle or obsolete, with potential for impairment in value. The inventory write-down by CGU was as follows:
| |
Nine Months Ended Sep. 30, |
|
| |
2021 |
2020 |
| (C$000s) |
($) |
($) |
| Canada |
— |
6,200 |
| United States |
— |
10,668 |
| Argentina |
— |
11,000 |
| |
— |
27,868 |
LIQUIDITY AND CAPITAL RESOURCES
| |
Three Months Ended Sep. 30, |
Nine Months Ended Sep. 30, |
||
| |
2021 |
2020 |
2021 |
2020 |
| (C$000s) |
($) |
($) |
($) |
($) |
| (unaudited) |
|
|
|
|
| Cash provided by (used in): |
|
|
|
|
| Operating activities |
(17,935) |
(31,151) |
(18,969) |
39,418 |
| Financing activities |
21,588 |
(9,193) |
39,273 |
(3,160) |
| Investing activities |
(20,989) |
(648) |
(45,040) |
(36,224) |
| Effect of exchange rate changes on cash and cash equivalents |
2,714 |
(6,796) |
949 |
(2,464) |
| Decrease in cash and cash equivalents |
(14,622) |
(47,788) |
(23,787) |
(2,430) |
OPERATING ACTIVITIES
The Company's cash used by operating activities for the three months ended September 30, 2021 was $17.9 million versus $31.2 million during the same period in 2020. The decrease in cash used by operations was primarily due to improved operating results in all divisions, offset partially by $40.3 million used by working capital during the third quarter compared to working capital using $26.2 million of cash in the same period in 2020. At September 30, 2021, Calfrac's working capital was $179.5 million, compared to $161.4 million at December 31, 2020.
FINANCING ACTIVITIES
Net cash provided by financing activities for the three months ended September 30, 2021 was $21.6 million compared to net cash used of $9.2 million in the comparable period in 2020. During the three months ended September 30, 2021, the Company had net draws under its credit facilities of $25.0 million, debt issuance costs of $1.3 million and lease principal payments of $2.1 million.
On December 18, 2020, Calfrac completed the Recapitalization Transaction and the new financing of $60.0 million 1.5 Lien Notes. The completion of the Recapitalization Transaction significantly reduced the Company's total debt and interest expense, and provided additional liquidity to fund ongoing operations.
During the first quarter of 2021, the Company recorded the rescission of $1.0 million of its 1.5 Lien Notes. For accounting purposes, the $1.0 million principal amount was recorded on a proportional basis as a reduction of the liability and equity portion of the 1.5 Lien Notes. The Company also opted to pay its September 15, 2021 interest payment on the 1.5 Lien Notes in cash rather than utilizing the payment-in-kind option.
On June 30, 2021, the Company amended its revolving credit facility agreement, which is available on SEDAR, to reduce its total facility capacity from $290.0 millionto $225.0 million and extended the maturity date to July 1, 2023. The amended agreement includes a $25.0 million accordion feature that is available to the Company during the term of the agreement. The Company's Funded Debt to Adjusted EBITDA covenant is 4.50x for the quarter ended September 30, 2021, 3.50x for the quarter ended December 31, 2021 ("Covenant Relief Period") and 3.00x for each quarter end thereafter. The Covenant Relief Period terminates on the earlier of December 31, 2021 and any prior quarter end for which Calfrac has requested early termination and has provided a compliance certificate to its lenders certifying compliance with all financial covenants and where the Funded Debt to Adjusted EBITDA ratio is less than 3.00x at such quarter end.
The facilities consist of an operating facility of $45.0 million and a syndicated facility of $180.0 million. The Company's credit facilities mature on July 1, 2023, and can be extended by one or more years at the Company's request and lenders' acceptance. The Company may also prepay principal without penalty. 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 1.00 percent to prime plus 3.50 percent. For LIBOR-based loans and bankers' acceptance-based loans, the margin thereon ranges from 2.00 percent to 4.50 percent above the respective base rates. The Company incurs interest at the high end of the ranges outlined above during the Covenant Relief Period or if its net Total Debt to Adjusted EBITDA ratio is above 4.00:1.00. Additionally, in the event that the Company's net Total Debt to Adjusted EBITDA ratio is above 5.00:1.00 and also during the Covenant Relief Period, certain restrictions apply including the following, among others: (a) acquisitions are subject to consent of the lenders; (b) distributions are restricted other than those relating to the Company's equity compensation plans; (c) no increase in the rate of dividends are permitted; and (d) additional permitted debt is restricted to $5.0 million, subject to certain exceptions.As at September 30, 2021, the Company's net Total Debt to Adjusted EBITDA ratio exceeded the 5.00:1.00 threshold and the Company was also subject to the additional Covenant Relief Period restrictions described herein.
Advances under the credit facilities are limited by a borrowing base. The borrowing base is calculated based on the sum of the following:
| i. |
Eligible North American accounts receivable, which is based on 75 percent of accounts receivable owing by companies rated BB+ or lower by Standard & Poor's (or a similar rating agency) and 85 percent of accounts receivable from companies rated BBB- or higher; |
| ii. |
100 percent of unencumbered cash of the parent company and its U.S. operating subsidiary, excluding any cash held in a segregated account for a specified purpose, including a potential equity cure; and |
| iii. |
25 percent of the net book value of property, plant and equipment (PP&E) of the parent company and its U.S. operating subsidiary. The value of PP&E excludes assets under construction and is limited to $150.0 million. |
At September 30, 2021, the Company had used $0.9 million of its credit facilities for letters of credit and had $180.0 million of borrowings under its credit facilities, leaving $44.1 million in available capacity under its credit facilities. As described above, the Company's credit facilities are subject to a monthly borrowing base, which at September 30, 2021 was higher than the available capacity under the credit facilities. Under the terms of the Company's amended credit facility agreement, Calfrac must maintain a minimum liquidity amount of $15.0 million during the Covenant Relief Period.
The Company's credit facilities contain certain financial covenants. As per the amended credit facility agreement, the Company's Funded Debt to Adjusted EBITDA covenant is 4.50x for the quarter ended September 30, 2021, 3.50x for the quarter ended December 31, 2021 and 3.00x for each quarter end thereafter. As shown in the table below, the Company was in full compliance with its financial covenants associated with its credit facilities as at September 30, 2021.
| |
Covenant |
Actual |
| As at September 30, |
2021 |
2021 |
| Working capital ratio not to fall below |
1.15x |
2.19x |
| Funded Debt to Adjusted EBITDA not to exceed(1)(2) |
4.50x |
3.20x |
| Funded Debt to Capitalization not to exceed(1)(3) |
0.30x |
0.24x |
| (1) |
Funded Debt is defined as Total Debt excluding all outstanding second lien senior notes, 1.5 lien notes, and lease obligations. Total Debt includes bank loans and long-term debt (before unamortized debt issuance costs and debt discount) plus outstanding letters of credit. For the purposes of the Total Debt to Adjusted EBITDA ratio, the Funded Debt to Capitalization Ratio and the Funded Debt to Adjusted EBITDA ratio, the amount of Total Debt or Funded Debt, as applicable, is reduced by the amount of cash on hand with lenders (excluding any cash held in a segregated account for a specified purpose, including a potential equity cure). |
| (2) |
Adjusted EBITDA is defined as net income or loss for the period adjusted for interest, taxes, depreciation and amortization, non-cash stock-based compensation, and gains and losses that are extraordinary or non-recurring. |
| (3) |
Capitalization is Total Debt plus equity. |
On February 24, 2020, Calfrac executed an exchange offer of US$120.0 million of new 10.875 percent second lien secured notes ("Second Lien Notes") due March 15, 2026 to holders of its existing 8.50 percent senior unsecured notes ("Unsecured Notes") due June 15, 2026. The Second Lien Notes are secured by a second lien on the same assets that secure the obligations under the Company's credit facility and 1.5 Lien Notes. The exchange was completed at an exchange price of US$550 for each US$1,000 of Unsecured Notes, resulting in US$218.2 million of Unsecured Notes being exchanged for US$120.0 million of Second Lien Notes. The exchange resulted in reduced debt of approximately $130.0 million and a reduction in annual debt service costs of approximately $7.3 million.
Proceeds from equity offerings may be applied, as an equity cure, in the calculation of Adjusted EBITDA towards the Funded Debt to Adjusted EBITDA covenant for any of the quarters ending prior to and including June 30, 2023, subject to certain conditions including:
| i. |
the Company is only permitted to use the proceeds of a common share issuance to increase Adjusted EBITDA a maximum of two times; |
| |
|
| ii. |
the Company cannot use the proceeds of a common share issuance to increase Adjusted EBITDA in consecutive quarter ends; |
| |
|
| iii. |
the maximum proceeds of each common share issuance permitted to be attributed to Adjusted EBITDA cannot exceed the greater of 50 percent of Adjusted EBITDA on a trailing four-quarter basis and $25.0 million; and |
| |
|
| iv. |
if proceeds are not used immediately as an equity cure they must be held in a segregated bank account pending an election to use them for such purpose, and if they are removed from such account but not used as an equity cure they will no longer be eligible for such use. |
To utilize an equity cure, the Company must provide notice of any such election to the lending syndicate at any time prior to the filing of its quarterly financial statements for the applicable quarter on SEDAR. Amounts used as an equity cure prior to June 30, 2023 will increase Adjusted EBITDA over the relevant twelve-month rolling period and may also serve to reduce Funded Debt unless used for other purposes.
The Company's credit facilities also require majority lender consent for dispositions of property or assets in Canada and the United States if the aggregate market value exceeds $20.0 million in a calendar year ($10.0 million during the Covenant Relief Period), subject to certain exceptions. There are no restrictions pertaining to dispositions of property or assets outside of Canada and the United States, except that to the extent that if advances under the credit facilities exceed $50.0 million at the time of any such dispositions, Calfrac must use the resulting proceeds to reduce the advances to less than $50.0 million before using the balance for other purposes. Also, during the Covenant Relief Period, there is an obligation to reduce advances under the credit facilities using proceeds of any disposition of property or assets that exceed $10.0 million.
The indentures governing the 1.5 Lien Notes and Second Lien Notes (the "Indentures"), which are available on SEDAR, contain restrictions on the Company's ability to pay dividends, purchase and redeem shares of the Company and make certain restricted investments, that are not defined as Permitted Investments under the Indentures, in circumstances where:
| i. |
the Company is in default under the Indentures or the making of such payment would result in a default; |
| |
|
| ii. |
ii. the Company would not meet the Fixed Charge Coverage Ratio(1) under the Indentures of at least 2:1 for the most recent four fiscal quarters, after giving pro forma effect to such restricted payment as if it had been made at the beginning of the applicable four fiscal quarter period; or |
| |
|
| iii. |
there is insufficient room for such payment within the builder baskets included in the Indentures. |
| |
| (1) The Fixed Charge Coverage Ratio is defined as cash flow to interest expense. Cash flow is a non-GAAP measure and does not have a standardized meaning under IFRS and is defined under the Indentures as net income (loss) before depreciation, extraordinary gains or losses, unrealized foreign exchange gains or losses, gains or losses on disposal of property, plant and equipment, impairment or reversal of impairment of assets, restructuring charges, stock-based compensation, interest, and income taxes. Interest expense is adjusted to exclude any non-recurring charges associated with redeeming or retiring any indebtedness prior to its maturity. |
These limitations on restricted payments are tempered by the existence of a number of exceptions to the general prohibition, including a basket allowing for restricted payments in an aggregate amount of up to US$20.0 million in the Indentures. As at September 30, 2021, the US$20.0 million basket was not utilized. The Indentures also restrict the ability to incur additional indebtedness if the Fixed Charge Coverage Ratio determined on a pro forma basis for the most recently ended four fiscal quarter period for which internal financial statements are available is not at least 2:1. As is the case with restricted payments, there are a number of exceptions to this prohibition on the incurrence of additional indebtedness. The 1.5 Lien Notes indenture includes additional restrictions on certain investments, including certain investments in subsidiary entities, however the indenture includes several exceptions to this prohibition, including a general basket of US$10.0 million and baskets related to prepayments and certain capital build commitments which aggregate over US$12.0 million. The 1.5 Lien Notes indenture also contains a restriction that any indebtedness incurred in excess of $290.0 million under the credit facilities basket shall be junior in priority to the 1.5 Lien Notes.
As at September 30, 2021, the Company's Fixed Charge Coverage Ratio of 1.44:1 was below the required 2:1 ratio. Failing to meet the Fixed Charge Coverage Ratio is not an event of default under the Indentures, and the baskets highlighted in the preceding paragraph provide sufficient flexibility, subject to the additional restrictions during the Covenant Relief Period discussed above, for the Company to incur additional indebtedness and make anticipated restricted payments which may be required to conduct its operations.
INVESTING ACTIVITIES
Calfrac's net cash used for investing activities was $21.0 million for the three months ended September 30, 2021 versus $0.6 million in the comparable period in 2020. Cash outflows relating to capital expenditures during the quarter were $21.5 million in 2021 compared to $2.1 million during the same period in 2020. Calfrac's Board of Directors increased its 2021 Capital Budget by $5.5 million to approximately $61.0 million in order to support a pre-existing equipment build commitment in Argentina and acquire fracturing assets in Argentina at a significant discount to replacement cost from a competitor that was exiting that market.
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 the three months ended September 30, 2021 was a gain of $2.7 million versus a loss of $6.8 million in the same period in 2020. These gains and losses relate to movements of cash and cash equivalents held by the Company in a foreign currency during the period.
At September 30, 2021, the Company had a cash balance of $6.0 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 omnibus incentive plan. The number of shares reserved for issuance under the plan is equal to 10 percent of the Company's issued and outstanding common shares. As at October 29, 2021, the Company had issued and outstanding 37,654,207 common shares, 5,786,364 common share purchase warrants and 3,600,000 options to purchase common shares.
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", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "forecast" or similar words suggesting future outcomes, are forward-looking statements.
In particular, forward-looking statements in this press release include, but are not limited to, statements with respect to the Recapitalization Transaction, including its expected benefits to the Company and impacts on its debt, liquidity and financial position, the U.S. appeal by Wilks Brothers, LLC, and the Company's expectations and intentions with respect to the foregoing and other matters relating to the Recapitalization Transaction, expected operating strategies and targets, 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 and economic reforms and sanctions 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 financing activities and restrictions, including with regard to its credit agreement and the indentures pursuant to which its 1.5 Lien Notes and Second Lien Notes were issued, and its ability to raise capital, treatment under government regulatory regimes, commodity prices, anticipated outcomes of specific events (including exposure and positioning under existing or potential legal proceedings), expectations regarding trends in, and the growth prospects of, the global oil and natural gas industry, the Company's 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 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 effectiveness of cost reduction measures instituted by the Company and the likelihood that the current tax and regulatory regime will remain substantially unchanged.
Forward-looking statements are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from the Company's expectations. Such risk factors include: the Company's ability to continue to manage the effect of the COVID-19 pandemic on its operations; actions taken by Wilks Brothers, LLC, decisions by securities regulators and/or the courts; restrictions resulting from compliance with or breach of debt covenants and risk of acceleration of indebtedness, including under the Company's credit facilities, 1.5 Lien Notes indenture and/or Second Lien Notes indenture; failure to reach any additional agreements with the Company's lenders; the impact of events of defaults in respect of other material contracts of the Company, including but not limited to, cross-defaults resulting in acceleration of amounts payable thereunder or the termination of such agreements; failure to receive any applicable regulatory, court, third party and other stakeholder approvals or decisions in respect of the Recapitalization Transaction and the court orders granting enforcement thereof; global economic conditions, the level of exploration, development and production for oil and natural gas in Canada, the United States, Argentina and Russia; the demand for fracturing and other stimulation services for the 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; the availability of capital on satisfactory terms; direct and indirect exposure to volatile credit markets, including credit rating risk; sourcing, pricing and availability of raw materials, component parts, equipment, suppliers, facilities and skilled personnel; excess oilfield equipment levels; regional competition; currency exchange rate risk; risks associated with foreign operations; dependence on, and concentration of, major customers; liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations; uncertainties in weather and temperature affecting the duration of the service periods and the activities that can be completed; liabilities relating to legal and/or administrative proceedings; operating restrictions and compliance costs associated with legislative and regulatory initiatives relating to hydraulic fracturing and the protection of workers and the environment; changes in legislation and the regulatory environment; failure to maintain the Company's safety standards and record; liabilities and risks associated with prior operations; the ability to integrate technological advances and match advances from competitors; intellectual property risk; third party credit risk; failure to realize anticipated benefits of acquisitions and dispositions. Further information about these and other risks and uncertainties may be found under "Business Risks" below.
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 is 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 Suite 500, 407 - 8th Avenue S.W., Calgary, Alberta, Canada, T2P 1E5, or at www.calfrac.com, or by facsimile at 403-266-7381.
NON-GAAP MEASURES
Certain supplementary measures presented in this press release do not have any standardized meaning under IFRS and, because IFRS have been incorporated as Canadian generally accepted accounting principles (GAAP), these supplementary measures are also non-GAAP measures. These measures have been described and presented in order to provide shareholders and potential investors with additional information regarding the Company's financial results, liquidity and ability to generate funds to finance its operations. These measures may not be comparable to similar measures presented by other entities, and are explained below.
Operating income (loss) is defined as net income (loss) before depreciation, foreign exchange gains or losses, gains or losses on disposal of property, plant and equipment, gains or losses on exchange or settlement of debt, impairment of property, plant and equipment, impairment of other assets, interest, 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 taxed. Operating income for the period was calculated as follows:
| |
Three Months Ended Sep.30, |
Nine Months Ended Sep. 30, |
||
| |
2021 |
2020 |
2021 |
2020 |
| (C$000s) |
($) |
($) |
($) |
($) |
| (unaudited) |
|
|
|
|
| Net loss |
(1,541) |
(50,000) |
(54,494) |
(450,132) |
| Add back (deduct): |
|
|
|
|
| Depreciation |
33,248 |
31,720 |
96,287 |
141,178 |
| Foreign exchange (gains) losses |
(2,288) |
7,822 |
3,403 |
9,744 |
| Loss (gain) on disposal of property, plant and equipment |
159 |
(1,272) |
513 |
284 |
| Impairment of property, plant and equipment |
— |
— |
— |
227,208 |
| Impairment of inventory |
— |
— |
— |
27,868 |
| Impairment of other assets |
— |
— |
— |
507 |
| Gain on exchange of debt |
— |
— |
— |
(130,444) |
| Interest |
9,677 |
19,588 |
28,075 |
66,354 |
| Income taxes |
(3,632) |
151 |
(19,178) |
113,833 |
| Operating income |
35,623 |
8,009 |
54,606 |
6,400 |
Adjusted EBITDA is defined in the Company's credit facilities for covenant purposes as net income or loss for the period adjusted for interest, income taxes, depreciation and amortization, unrealized foreign exchange losses (gains), non-cash stock-based compensation, and gains and losses that are extraordinary or non-recurring. Adjusted EBITDA is presented because it is used in the calculation of the Company's bank covenants. Adjusted EBITDA for the period was calculated as follows:
| |
Three Months Ended Sep.30, |
Nine Months Ended Sep. 30, |
||
| |
2021 |
2020 |
2021 |
2020 |
| (C$000s) |
|
|
($) |
($) |
| (unaudited) |
|
|
|
|
| Net loss |
(1,541) |
(50,000) |
(54,494) |
(450,132) |
| Add back (deduct): |
|
|
|
|
| Depreciation |
33,248 |
31,720 |
96,287 |
141,178 |
| Unrealized foreign exchange (gains) losses |
(3,607) |
5,202 |
(620) |
4,884 |
| Loss (gain) on disposal of property, plant and equipment |
159 |
(1,272) |
513 |
284 |
| Impairment of property, plant and equipment |
— |
— |
— |
227,208 |
| Impairment of inventory |
— |
— |
— |
27,868 |
| Impairment of other assets |
— |
— |
— |
507 |
| Gain on exchange of debt |
— |
— |
— |
(130,444) |
| Litigation settlements |
— |
— |
(700) |
— |
| Restructuring charges |
198 |
400 |
671 |
5,373 |
| Stock-based compensation |
1,079 |
596 |
1,356 |
1,099 |
| Interest |
9,677 |
19,588 |
28,075 |
66,354 |
| Income taxes |
(3,632) |
151 |
(19,178) |
113,833 |
| Adjusted EBITDA(1) |
35,581 |
8,467 |
51,910 |
10,094 |
| (1) For bank covenant purposes, EBITDA includes the deduction of an additional $6.5 million for the nine months ended September 30, 2021 (nine months ended September 30, 2020 - $13.1 million) of lease payments that would have been recorded as operating expenses prior to the adoption of IFRS 16. |
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.
THIRD QUARTER CONFERENCE CALL
Calfrac will be conducting a conference call for interested analysts, brokers, investors and news media representatives to review its 2021 third-quarter results at 10:00 a.m. (Mountain Time) on Tuesday, November 2, 2021. 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 3535678). A webcast of the conference call may be accessed via the Company's website at www.calfrac.com.
CONSOLIDATED BALANCE SHEETS
| |
September 30, |
December 31, |
| |
2021 |
2020 |
| (C$000s) (unaudited) |
($) |
($) |
| ASSETS |
|
|
| Current assets |
|
|
| Cash and cash equivalents |
6,043 |
29,830 |
| Accounts receivable |
228,636 |
139,486 |
| Income taxes recoverable |
1,910 |
1,530 |
| Inventories |
93,090 |
83,294 |
| Prepaid expenses and deposits |
15,217 |
17,050 |
| |
344,896 |
271,190 |
| Non-current assets |
|
|
| Property, plant and equipment |
579,960 |
618,488 |
| Right-of-use assets |
23,142 |
22,785 |
| Total assets |
947,998 |
912,463 |
| LIABILITIES AND EQUITY |
|
|
| Current liabilities |
|
|
| Accounts payable and accrued liabilities |
157,763 |
101,784 |
| Current portion of lease obligations |
7,622 |
7,958 |
| |
165,385 |
109,742 |
| Non-current liabilities |
|
|
| Long-term debt (note 1) |
377,728 |
324,633 |
| Lease obligations (note 8) |
14,277 |
14,013 |
| Deferred income tax liabilities |
32,778 |
53,841 |
| Total liabilities |
590,168 |
502,229 |
| Capital stock (note 3) |
800,810 |
800,184 |
| Conversion rights on convertible notes (note 1) |
4,765 |
4,873 |
| Contributed surplus |
67,342 |
65,986 |
| Warrants (notes 2 and 4) |
40,542 |
40,797 |
| Loan receivable for purchase of common shares |
(2,500) |
(2,500) |
| Accumulated deficit |
(563,903) |
(509,409) |
| Accumulated other comprehensive income |
10,774 |
10,303 |
| Total equity |
357,830 |
410,234 |
| Total liabilities and equity |
947,998 |
912,463 |
| Contingencies (note 6) |
| See accompanying notes to the interim condensed consolidated financial statements. |
CONSOLIDATED STATEMENTS OF OPERATIONS
| |
Three Months Ended Sept. 30, |
Nine Months Ended Sept. 30, |
||
| |
2021 |
2020 |
2021 |
2020 |
| (C$000s, except per share data) (unaudited) |
($) |
($) |
($) |
($) |
| Revenue |
295,754 |
127,776 |
744,640 |
524,714 |
| Cost of sales |
282,443 |
141,429 |
754,149 |
621,154 |
| Gross profit (loss) |
13,311 |
(13,653) |
(9,509) |
(96,440) |
| Expenses |
|
|
|
|
| Selling, general and administrative |
10,936 |
10,058 |
32,172 |
38,338 |
| Foreign exchange (gains) losses |
(2,288) |
7,822 |
3,403 |
9,744 |
| Loss (gain) on disposal of property, plant and equipment |
159 |
(1,272) |
513 |
284 |
| Impairment of property, plant and equipment |
— |
— |
— |
227,208 |
| Impairment of inventory |
— |
— |
— |
27,868 |
| Impairment of other assets |
— |
— |
— |
507 |
| Gain on exchange of debt (note 1) |
— |
— |
— |
(130,444) |
| Interest |
9,677 |
19,588 |
28,075 |
66,354 |
| |
18,484 |
36,196 |
64,163 |
239,859 |
| Loss before income tax |
(5,173) |
(49,849) |
(73,672) |
(336,299) |
| Income tax expense (recovery) |
|
|
|
|
| Current |
662 |
151 |
1,538 |
228 |
| Deferred |
(4,294) |
— |
(20,716) |
113,605 |
| |
(3,632) |
151 |
(19,178) |
113,833 |
| Net loss |
(1,541) |
(50,000) |
(54,494) |
(450,132) |
| |
|
|
|
|
| Loss per share (note 3) |
|
|
|
|
| Basic |
(0.04) |
(17.20) |
(1.45) |
(155.13) |
| Diluted |
(0.04) |
(17.20) |
(1.45) |
(155.13) |
| See accompanying notes to the interim condensed consolidated financial statements. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| |
Three Months Ended Sept. 30, |
Nine Months Ended Sept. 30, |
||
| |
2021 |
2020 |
2021 |
2020 |
| (C$000s) (unaudited) |
($) |
($) |
($) |
($) |
| Net loss |
(1,541) |
(50,000) |
(54,494) |
(450,132) |
| Other comprehensive income (loss) |
|
|
|
|
| Items that may be subsequently reclassified to profit or loss: |
|
|
|
|
| Change in foreign currency translation adjustment |
7,402 |
2,566 |
471 |
(623) |
| Comprehensive income (loss) |
5,861 |
(47,434) |
(54,023) |
(450,755) |
| See accompanying notes to the interim condensed consolidated financial statements. |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| |
Share |
Conversion Rights on Convertible Notes |
Contributed Surplus |
Warrants |
Loan Receivable |
Accumulated Other Comprehensive Income (Loss) |
Accumulated Deficit |
Total Equity |
| (C$000s) (unaudited) |
($) |
|
($) |
($) |
($) |
($) |
($) |
($) |
| Balance – January 1, 2021 |
800,184 |
4,873 |
65,986 |
40,797 |
(2,500) |
10,303 |
(509,409) |
410,234 |
| Net loss |
— |
|
— |
— |
— |
— |
(54,494) |
(54,494) |
| Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
| Cumulative translation adjustment |
— |
— |
— |
— |
— |
471 |
— |
471 |
| Comprehensive loss |
— |
— |
— |
— |
— |
471 |
(54,494) |
(54,023) |
| Stock options: |
|
|
|
|
|
|
|
|
| Stock-based compensation recognized |
— |
— |
1,356 |
— |
— |
— |
— |
1,356 |
| Conversion of 1.5 Lien Notes into shares (note 5) |
281 |
(23) |
|
|
|
|
|
258 |
| Rescission of equity portion of 1.5 Lien Notes |
— |
(85) |
— |
— |
— |
— |
— |
(85) |
| Warrants: |
|
|
|
|
|
|
|
|
| Proceeds from issuance of shares (note 4) |
345 |
— |
— |
(255) |
— |
— |
— |
90 |
| Balance – Sept. 30, 2021 |
800,810 |
4,765 |
67,342 |
40,542 |
(2,500) |
10,774 |
(563,903) |
357,830 |
| Balance – January 1, 2020 |
509,235 |
— |
44,316 |
— |
(2,500) |
2,746 |
(185,174) |
368,623 |
| Net loss |
— |
— |
— |
— |
— |
— |
(450,132) |
(450,132) |
| Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
| Cumulative translation adjustment |
— |
— |
— |
— |
— |
(623) |
— |
(623) |
| Comprehensive loss |
— |
— |
— |
— |
— |
(623) |
(450,132) |
(450,755) |
| Stock options: |
|
|
|
|
|
|
|
|
| Stock-based compensation recognized |
— |
— |
682 |
— |
— |
— |
— |
682 |
| Performance share units: |
|
|
|
|
|
|
|
|
| Stock-based compensation recognized |
— |
— |
417 |
— |
— |
— |
— |
417 |
| Shares issued (note 3) |
1,275 |
— |
(1,275) |
— |
— |
— |
— |
— |
| Balance – Sept. 30, 2020 |
510,510 |
— |
44,140 |
— |
(2,500) |
2,123 |
(635,306) |
(81,033) |
| See accompanying notes to the interim condensed consolidated financial statements. |
CONSOLIDATED STATEMENTS OF CASH FLOWS
| |
Three Months Ended Sept. 30, |
Nine Months Ended Sept. 30, |
||
| |
2021 |
2020 |
2021 |
2020 |
| (C$000s) (unaudited) |
($) |
($) |
($) |
($) |
| CASH FLOWS PROVIDED BY (USED IN) |
|
|
|
|
| OPERATING ACTIVITIES |
|
|
|
|
| Net loss |
(1,541) |
(50,000) |
(54,494) |
(450,132) |
| Adjusted for the following: |
|
|
|
|
| Depreciation |
33,248 |
31,720 |
96,287 |
141,178 |
| Stock-based compensation |
1,079 |
596 |
1,356 |
1,099 |
| Unrealized foreign exchange (gains) losses |
(3,607) |
5,202 |
(620) |
4,884 |
| Loss (gain) on disposal of property, plant and equipment |
159 |
(1,272) |
513 |
284 |
| Impairment of property, plant and equipment |
— |
— |
— |
227,208 |
| Impairment of inventory |
— |
— |
— |
27,868 |
| Impairment of other assets |
— |
— |
— |
507 |
| Non-cash gain on exchange of debt (note 1) |
— |
— |
— |
(130,444) |
| Interest |
9,677 |
19,588 |
28,075 |
66,354 |
| Interest paid |
(12,379) |
(10,797) |
(24,053) |
(19,877) |
| Deferred income taxes |
(4,294) |
— |
(20,716) |
113,605 |
| Changes in items of working capital |
(40,277) |
(26,188) |
(45,317) |
56,884 |
| Cash flows (used in) provided by operating activities |
(17,935) |
(31,151) |
(18,969) |
39,418 |
| FINANCING ACTIVITIES |
|
|
|
|
| Issuance of long-term debt, net of debt issuance costs |
28,716 |
(1,064) |
50,907 |
57,340 |
| Long-term debt repayments |
(5,000) |
(5,000) |
(6,050) |
(48,727) |
| Lease obligation principal repayments |
(2,129) |
(3,129) |
(5,674) |
(11,773) |
| Proceeds on issuance of common shares from the exercising of warrants |
1 |
— |
90 |
— |
| Cash flows provided by (used in) financing activities |
21,588 |
(9,193) |
39,273 |
(3,160) |
| INVESTING ACTIVITIES |
|
|
|
|
| Purchase of property, plant and equipment |
(21,530) |
(2,135) |
(46,988) |
(39,151) |
| Proceeds on disposal of property, plant and equipment |
275 |
563 |
923 |
1,591 |
| Proceeds on disposal of right-of-use assets |
266 |
924 |
1,025 |
1,336 |
| Cash flows used in investing activities |
(20,989) |
(648) |
(45,040) |
(36,224) |
| Effect of exchange rate changes on cash and cash equivalents |
2,714 |
(6,796) |
949 |
(2,464) |
| Decrease in cash and cash equivalents |
(14,622) |
(47,788) |
(23,787) |
(2,430) |
| Cash and cash equivalents, beginning of period |
20,665 |
87,920 |
29,830 |
42,562 |
| Cash and cash equivalents, end of period |
6,043 |
40,132 |
6,043 |
40,132 |
| See accompanying notes to the interim condensed consolidated financial statements. |
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at and for the three and nine months ended September 30, 2021 and 2020
(Amounts in text and tables are in thousands of Canadian dollars, except share data and certain other exceptions as indicated)
1. LONG-TERM DEBT
| |
September 30, |
December 31, |
| |
2021 |
2020 |
| (C$000s) |
($) |
($) |
| $225,000 extendible revolving term loan facility, secured by the Canadian and U.S. assets of the Company on a first priority basis |
180,000 |
130,000 |
| $58,673 1.5 Lien Notes due December 18, 2023, bearing interest at 10.00% payable semi-annually, secured by the Canadian and U.S. assets of the Company on a second priority basis ahead of the Second Lien Notes |
55,006 |
55,171 |
| US$120,000 Second Lien Notes due March 15, 2026, bearing interest at 10.875% payable semi-annually, secured by the Canadian and U.S. assets of the Company on a second priority basis |
152,892 |
152,784 |
| Less: unamortized debt issuance costs |
(10,170) |
(13,322) |
| |
377,728 |
324,633 |
The fair value of the Second Lien Notes (as defined below), as measured based on the closing market price at September 30, 2021 was $118,441 (December 31, 2020 – $106,706). The carrying values of the revolving term loan facility and 1.5 Lien Notes approximate their fair value as the interest rate is not significantly different from current interest rates for similar loans.
a) 1.5 Lien Notes
On December 18, 2020, the Company issued $60,000 of 1.5 Lien Notes due December 18, 2023 on a private placement basis. The terms of the 1.5 Lien Notes enable the holders to convert each $1,000 principal amount into approximately 750 common shares at their discretion. Interest is payable in cash semi-annually on March 15 and September 15 of each year. On each interest payment date, the Company may elect to defer and pay in-kind any interest accrued as of such interest payment date by increasing the unpaid principal amount of the 1.5 Lien Notes as at such date (each, a "PIK Interest Payment"). Following each such increase in the principal amount of the 1.5 Lien Notes as a result of any PIK Interest Payment, the 1.5 Lien Notes will bear interest on such increased principal amount from and after the date of each such PIK Interest Payment. Upon repayment of the 1.5 Lien Notes, any interest which has accrued thereon but has not been capitalized as set forth above shall be paid in cash.
The liability portion of the 1.5 Lien Notes was recorded at an initial fair value of $55,127 using a discount rate of 13.4 percent, representing the discount rate of a comparable debt instrument without a conversion feature. The remaining $4,873 is the difference between the initial principal amount and the fair value of the liability component and was recorded as the equity portion of the conversion feature in shareholders' equity. The Company incurred transaction costs of $7,596 associated with the issuance of the 1.5 Lien Notes which was allocated to debt issuance costs and share issuance costs on a proportional basis to the initial fair value of the liability and equity components.
During the first quarter of 2021, the Company recorded the rescission of $1,050 of its 1.5 Lien Notes. For accounting purposes, the $1,050 principal amount was recorded on a proportional basis as a reduction of the liability and equity portion of the 1.5 Lien Notes for $965 and $85, respectively. During the third quarter of 2021, $277 principal amount of the 1.5 Lien Notes was converted into 207,879 common shares. For accounting purposes, the conversion was recorded on a proportional basis as a reduction of the liability and equity portion of the 1.5 Lien Notes for $258 and $23, respectively, with a corresponding increase to share capital.
The Company also opted to pay its September 15, 2021 interest payment on the 1.5 Lien Notes in cash rather than utilizing the payment-in-kind option.
b) Second Lien Notes
On February 24, 2020, the Company completed an exchange offer of US$120,000 of new 10.875% second lien secured notes ("Second Lien Notes") due March 15, 2026 to holders of its existing Unsecured Notes. The exchange was completed at an average exchange price of US$550 per each US$1,000 of Unsecured Notes resulting in US$218,182 being exchanged for US$120,000 of Second Lien Notes, resulting in a non-cash gain on exchange of debt of $130,444. The early settlement of the Unsecured Notes resulted in the write-off of $4,449 of unamortized deferred finance costs.
c) Revolving Credit Facility
On June 30, 2021, the Company amended its revolving credit facility agreement to reduce its total facility capacity from $290,000 to $225,000 and extended the maturity date to July 1, 2023. The amended agreement includes a $25,000 accordion feature that is available to the Company during the term of the agreement. The Company's Funded Debt to Adjusted EBITDA covenant is 4.50x for the quarter ended September 30, 2021, 3.50x for the quarter ended December 31, 2021 ("Covenant Relief Period") and 3.00x for each quarter end thereafter. The Covenant Relief Period terminates on the earlier of December 31, 2021 and any prior quarter end for which the Company has requested early termination and has provided a compliance certificate to its lenders certifying compliance with all financial covenants and where the Funded Debt to Adjusted EBITDA ratio is less than 3.00x at such quarter end.
The facilities consist of an operating facility of $45,000 and a syndicated facility of $180,000. The Company's credit facilities mature on July 1, 2023, and can be extended by one or more years at the Company's request and lenders' acceptance. The Company may also prepay principal without penalty. 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 1.00 percent to prime plus 3.50 percent. For LIBOR-based loans and bankers' acceptance-based loans, the margin thereon ranges from 2.00 percent to 4.50 percent above the respective base rates. The Company incurs interest at the high end of the ranges outlined above during the Covenant Relief Period or if its net Total Debt to Adjusted EBITDA ratio is above 4.00:1.00. Additionally, in the event that the Company's net Total Debt to Adjusted EBITDA ratio is above 5.00:1.00 and also during the Covenant Relief Period, certain restrictions apply including the following: (a) acquisitions are subject to consent of the lenders; (b) distributions are restricted other than those relating to the Company's equity compensation plans; (c) no increase in the rate of dividends are permitted; and (d) additional permitted debt is restricted to $5,000. As at September 30, 2021, the Company's net Total Debt to Adjusted EBITDA ratio exceeded the 5.00:1.00 threshold and the Company was also subject to the Covenant Relief Period restrictions.
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 nine months ended September 30, 2021 was $28,041 (nine months ended September 30, 2020 – $65,376).
The following table sets out an analysis of long-term debt and the movements in long-term debt:
| |
2021 |
| (C$000s) |
($) |
| Balance, January 1 |
324,633 |
| Issuance of long-term debt, net of debt issuance costs |
50,907 |
| Long-term debt repayments |
(5,965) |
| Conversion of 1.5 Lien Notes into shares |
(258) |
| Amortization of compound financial instrument discount |
1,058 |
| Amortization of debt issuance costs and debt discount |
7,237 |
| Foreign exchange adjustments |
116 |
| Balance, September 30 |
377,728 |
At September 30, 2021, the Company had utilized $932 of its loan facility for letters of credit, had $180,000 outstanding under its revolving term loan facility, leaving $44,068 in available credit, subject to a monthly borrowing base, which at September 30, 2021 was higher than the available capacity under the credit facilities. Under the terms of the amended credit facility agreement, the Company must maintain a minimum liquidity amount of $15,000 during the Covenant Relief Period.
See note 5 for further details on the covenants in respect of the Company's long-term debt.
2. RECAPITALIZATION TRANSACTION
On December 18, 2020, the Company completed its Recapitalization Transaction, which was implemented pursuant to a Plan of Arrangement under the Canada Business Corporations Act. The Recapitalization Transaction involved the surrender and cancellation of the Company's US$431,818 Unsecured Notes, including all accrued and unpaid interest, in exchange for common shares of the Company. In addition, the Company issued new $60,000 1.5 lien senior secured 10% payment-in-kind convertible notes ("1.5 Lien Notes") due December 18, 2023 on a private placement basis. The proceeds from the issuance of the 1.5 Lien Notes were used to reduce the amounts owing under its revolving credit facilit y. All common share figures and share prices below are disclosed on a post-share consolidation basis of 50:1.
The composition of the gain on settlement of debt as reported in the statement of operations during the fourth quarter of 2020 was as follows:
| |
Unsecured Notes |
Warrants |
1.5 Lien Notes |
Total |
| (C$000s) |
|
|
|
($) |
| Settlement of Unsecured Notes against shares issued to noteholders (note 2a) |
(250,867) |
— |
— |
(250,867) |
| Forgiveness of accrued interest on Unsecured Notes (note 2a) |
(47,272) |
— |
— |
(47,272) |
| Issuance of warrants (note 2b) |
— |
40,797 |
— |
40,797 |
| Transaction and associated costs(1) (notes 2h and 4) |
20,815 |
— |
— |
20,815 |
| Issuance of shares in respect of the commitment fee related to the 1.5 Lien Notes (note 2g) |
— |
— |
10,131 |
10,131 |
| Withholding taxes on shares issued in respect of commitment fee on 1.5 Lien Notes (note 2g) |
— |
— |
77 |
77 |
| Total (gain) loss on settlement of debt(2) |
(277,324) |
40,797 |
10,208 |
(226,319) |
| (1) Includes $1,266 of other associated costs related to the Plan of Arrangement, of which $1,092 were non-cash expenses. |
| (2) $198,847 of the total gain on settlement of debt was non-cash in nature. |
(a) Unsecured Notes Settlement
The Company's US$431,818 8.50% unsecured notes due June 15, 2026 ("Unsecured Notes"), plus all accrued and unpaid interest, were surrendered and cancelled in exchange for 33,491,870 common shares. The common shares were valued for accounting purposes at a price of $9.00 per share, which represents the share price on December 21, 2020, the first trading day immediately following the announcement of the closing of this transaction, and resulted in an accounting gain on the settlement of debt of $277,324. The settlement of the Unsecured Notes also resulted in the write-off of the remaining unamortized deferred finance costs that pertained to these notes which totaled $7,387.
(b) Warrants
Under the Recapitalization Transaction, shareholders were entitled to receive two warrants for each common share held. Pursuant to the Plan of Arrangement, the Company issued 5,824,433 warrants to shareholders of record (i.e. registered shareholders) as of market close on December 17, 2020. Each warrant is exercisable for a period of three years into one common share at a price of $2.50 per common share subject to customary adjustments and restrictions. The fair value of the warrants of $40,797 was estimated using a Black-Scholes pricing model, and was accounted for as a reduction of the gain on settlement of debt. See note 4 for further information on the warrants.
(c) Shareholder Cash Election
Under the Recapitalization Transaction, shareholders were provided the opportunity to elect for the Company to purchase all or any portion of their common shares for $7.50 per share up to an aggregate maximum of $10,000 in consideration available for shareholder cash elections. On December 18, 2020, 121,231 common shares were purchased for an aggregate cash election amount of $926 including transaction costs. See note 3 for further information on the shareholder cash election.
(d) Common Share Consolidation
Immediately prior to the Unsecured Notes settlement, and after the issuance of warrants and settlement of shareholder cash elections noted above, the Company initiated a 50:1 share consolidation. See note 3 for further information on the share consolidation.
(e) Share-Based Compensation
Pursuant to the Plan of Arrangement, all of the Company's outstanding stock options and cash-based performance share units were terminated and cancelled for no consideration. All of the Company's outstanding equity-based performance shares units vested immediately prior to the effective time of the Plan of Arrangement and aggregate consideration of $174 was paid to the holders thereof on a pro rata basis.
The cancellation of the stock options was accounted for as an acceleration of vesting and the remaining fair value of the options of $780 was recorded as a reduction of the gain on settlement of debt during the fourth quarter of 2020.
The immediate vesting of the equity-based performance share units was accounted for as an acceleration of vesting and the remaining fair value of the share units of $312 along with the cash consideration of $174 was recognized during the fourth quarter of 2020 as a reduction of the gain on settlement of debt.
In connection with the approval of the Recapitalization Transaction, shareholders approved an omnibus incentive plan which permits the granting of various types of equity awards, including stock options, share appreciation rights, restricted shares, restricted share units, deferred share units and other share-based awards as determined by the Board of Directors. The number of shares reserved under the omnibus incentive plan is equal to 10 percent of the Company's issued and outstanding common shares. See note 4 for further information.
(f) 1.5 Lien Notes
In conjunction with the Recapitalization Transaction, the Company issued $60,000 of 1.5 Lien Notes on a private placement basis. The gross proceeds of the 1.5 Lien Notes were used to reduce the Company's revolving credit facility, providing additional liquidity. During the first quarter of 2021, the Company recorded the rescission of $1,050 of its 1.5 Lien Notes. See note 1 for further information.
(g) Commitment Fee on the 1.5 Lien Notes
In connection with the 1.5 Lien Notes offering, the Company issued 1,125,703 common shares to certain investors that backstopped the issuance of the 1.5 Lien Notes. These common shares were valued for accounting purposes at a price of $9.00 per share which represents the share price on December 21, 2020, the first trading day immediately following the announcement of the closing of this transaction, and were accounted for as an increase to share capital of $10,131 with a corresponding reduction of the gain on the settlement of debt.
(h) Transaction Costs
The Company incurred transaction costs totaling $27,145 in connection with the Recapitalization Transaction. Of that amount, $19,549 was related to the settlement of the Unsecured Notes and was recorded as a reduction of the gain of settlement of debt. The remaining $7,596 was allocated to the issuance of the 1.5 Lien Notes as debt issuance costs or share issue costs, see note 1 for further information.
(i) Court Appeals and Regulatory Application
Appeals of Chapter 15 Enforcement Order
On December 11, 2020, Wilks Brothers, LLC and its affiliated funds (collectively "Wilks Brothers") filed a notice of appeal (the "District Court Appeal") to the United States District Court for the Southern District of Texas ("U.S. District Court") appealing an order by the United States Bankruptcy Court for the Southern District of Texas under Chapter 15 of the United States Bankruptcy Code entered effective December 1, 2020 ("Chapter 15 Enforcement Order"), granting enforcement of the October 30, 2020 order of the Court of Queen's Bench of Alberta approving the Plan of Arrangement pursuant to the Canada Business Corporations Act (the "CBCA Final Order"). At a hearing held on April 23, 2021, the U.S. District Court affirmed the Chapter 15 Enforcement Order and effectively denied the District Court Appeal (the "District Court Decision"). On June 1, 2021, Wilks Brothers filed a notice of appeal to the United States Court of Appeals for the Fifth Circuit (the "Fifth Circuit Appeal"). The briefing schedule for the Fifth Circuit Appeal has been issued by the Court and briefing is expected to conclude in the first quarter of 2022, however, the hearing dates remain to be determined. The Company believes it is well-positioned to prevail on the merits of the appeal.
Appeal of CBCA Final Order
On January 29, 2021, Wilks Brothers filed an application to the Supreme Court of Canada seeking leave to appeal the December 1, 2020 decision of the Court of Appeal of Alberta upholding the CBCA Final Order. On May, 27, 2021, the Supreme Court of Canada dismissed the leave to appeal application with costs. The Supreme Court of Canada's dismissal of the leave to appeal application means that the CBCA Final Order, pursuant to which the Company implemented its Recapitalization Transaction, is no longer subject to any further Canadian appeal rights, and remains in full force and effect.
Review of Toronto Stock Exchange Decision
On April 22, 2021, the Wilks Brothers filed an application to the Ontario Securities Commission (the "OSC"), requesting a hearing and review by the OSC of the decision of the Toronto Stock Exchange (the "TSX") in March 2021 granting exemptive relief (the "TSX Decision") in respect of the rescission of the purchase of 1.5 Lien Notes acquired by an institutional shareholder (the "Subject Notes").
The TSX Decision confirmed that the conditional listing approval of the TSX in respect of the common shares issuable upon conversion of the remaining $58,950 of 1.5 Lien Notes had been satisfied. Such confirmation was subject to, among other conditions, the completion of the rescission and cancellation of the Subject Notes, which was completed on April 15, 2021, as disclosed in note 1. Among the conditions imposed by the TSX Decision, the Company is subject to enhanced review by the TSX until at least March 2022.
Following a hearing before the OSC on July 12, 2021, on July 13, 2021, the OSC issued an order dismissing Wilks Brothers' application to set aside the TSX Decision. The OSC's reasons for decision were issued to the parties on October 6, 2021. Wilks Brothers has a right of appeal from the OSC decision to the Divisional Court branch of the Ontario Superior Court of Justice, which must be exercised within 30 days from October 6, 2021. In light of the OSC's order and reasons, the Company believes that any possible appeal would be without merit.
3. CAPITAL STOCK
Authorized capital stock consists of an unlimited number of common shares.
| |
Nine Months Ended |
Year Ended |
||
| |
September 30, 2021 |
December 31, 2020 |
||
| Continuity of Common Shares |
Shares |
Amount |
Shares |
Amount |
| |
(#) |
($000s) |
(#) |
($000s) |
| Balance, beginning of period |
37,408,490 |
800,184 |
2,897,778 |
506,735 |
| Issued upon exercise of warrants |
36,317 |
345 |
— |
— |
| Conversion of 1.5 Lien Notes into shares (note 5) |
207,879 |
281 |
— |
— |
| Issued upon vesting of performance share units |
— |
— |
5,646 |
1,275 |
| Issued on acquisition |
— |
— |
8,913 |
2,500 |
| Issued upon settlement of Unsecured Notes (note 2) |
— |
— |
33,491,870 |
301,427 |
| Issued for commitment fee on 1.5 Lien Notes (note 2) |
— |
— |
1,125,703 |
10,131 |
| Shares repurchased by shareholder cash election (note 2) |
— |
— |
(121,231) |
(21,268) |
| Cancellation of fractional shares upon 50:1 share consolidation |
(114) |
— |
(189) |
— |
| Share issue costs on 1.5 Lien Notes |
— |
— |
— |
(616) |
| Balance, end of period |
37,652,572 |
800,810 |
37,408,490 |
800,184 |
On December 18, 2020, the Company consolidated its common shares on a basis of 50:1. All common share figures in the financial statements and comparatives have been adjusted to reflect the 50:1 effect, without a corresponding change in dollar amounts. Earnings per share have been adjusted to reflect the impact of the share consolidation.
| |
Three Months Ended Sept. 30, |
Nine Months Ended Sept. 30, |
||
| |
2021 |
2020 |
2021 |
2020 |
| |
($) |
($) |
(#) |
(#) |
| Weighted average number of common shares outstanding |
|
|
|
|
| Basic |
37,635,433 |
2,906,240 |
37,497,937 |
2,901,718 |
| Diluted |
83,240,526 |
2,909,624 |
83,366,494 |
2,905,113 |
The difference between basic and diluted shares is attributable to: warrants issued as part of the Recapitalization Transaction as disclosed in note 2, the dilutive effect of the conversion of the 1.5 Lien Notes as disclosed in note 1, and the dilutive effect of stock options issued by the Company as disclosed in note 4.
As disclosed in note 2, in conjunction with the Recapitalization Transaction, the Company purchased 121,231 common shares at a cost of $926 and, of the amount paid, $21,268 was charged to capital stock and $20,342 to contributed surplus. These common shares were cancelled prior to December 31, 2020.
4. SHARE-BASED PAYMENTS
(a) Stock Options
| Nine Months Ended September 30, |
2021 |
2020 |
||
| Continuity of Stock Options |
Options |
Average Exercise Price |
Options |
Average Exercise Price |
| |
(#) |
($) |
(#) |
($) |
| Balance, January 1 |
— |
— |
244,060 |
158.00 |
| Granted |
3,540,000 |
3.54 |
1,098 |
31.00 |
| Forfeited |
— |
— |
(48,232) |
194.50 |
| Expired |
— |
— |
(3,342) |
366.50 |
| Balance, September 30 |
3,540,000 |
3.54 |
193,584 |
144.50 |
Stock options vest equally over three years and expire five years from the date of grant. The exercise price of outstanding options is $3.54 with a weighted average remaining life of 4.93 years. When stock options are exercised, the proceeds together with the compensation expense previously recorded in contributed surplus, are added to capital stock.
The weighted average fair value of options granted during 2021, determined using the Black-Scholes valuation method, was $2.15 per option (nine months ended September 30, 2020 – $0.27 per option). The Company applied the following assumptions in determining the fair value of options on the date of grant:
| Nine Months Ended September 30, |
2021 |
2020 |
| Expected life (years) |
3.00 |
3.00 |
| Expected volatility (%) |
100.25 |
71.18 |
| Risk-free interest rate (%) |
0.50 |
0.87 |
| Expected dividends ($) |
— |
— |
Expected volatility is estimated by considering historical average share price volatility.
(b) Share Units
| Nine Months Ended September 30, |
2021 |
2020 |
|
| Continuity of Stock Units |
Deferred Share Units |
Deferred Share Units |
Performance Share Units |
| |
(#) |
(#) |
(#) |
| Balance, January 1 |
2,400 |
2,900 |
25,891 |
| Granted |
105,000 |
2,100 |
19,968 |
| Exercised |
— |
— |
(5,646) |
| Forfeited |
— |
(1,000) |
(7,568) |
| Balance, September 30 |
107,400 |
4,000 |
32,645 |
| |
Three Months Ended Sept. 30, |
Nine Months Ended Sept. 30, |
||
| |
2021 |
2020 |
2021 |
2020 |
| |
($) |
($) |
($) |
($) |
| Expense (recovery) from: |
|
|
|
|
| Stock options |
1,079 |
418 |
1,356 |
682 |
| Deferred share units |
86 |
(6) |
141 |
(138) |
| Performance share units |
— |
178 |
— |
417 |
| Total stock-based compensation expense |
1,165 |
590 |
1,497 |
961 |
Stock-based compensation expense is included in selling, general and administrative expenses, unless otherwise noted.
The Company grants deferred share units to its outside directors. These units vest on the first anniversary of the date 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 share units is recognized equally over the vesting period, based on the current market price of the Company's shares. At September 30, 2021, the liability pertaining to deferred share units was $131 (December 31, 2020 – $9).
Changes in the Company's obligations under the deferred share unit plans, which arise from fluctuations in the market value of the Company's shares underlying these compensation programs, are recorded as the share value changes.
(c) Warrants
In conjunction with the Recapitalization Transaction, the Company issued 5,824,433 warrants to shareholders of record (i.e. registered shareholders) as of market close on December 17, 2020. Each warrant is exercisable for a period of three years into one common share at a price of $2.50 per common share, subject to customary adjustments and restrictions. The fair value of the warrants at issuance was estimated using a Black-Scholes pricing model, in the amount of $40,797, and accounted for as a reduction of the gain on settlement of debt during the fourth quarter of 2020. The Company applied the following Black-Scholes model inputs:
| Expected life (years) |
3.00 |
| Share price at grant date ($) |
9.00 |
| Exercise price ($) |
2.50 |
| Expected volatility (%) |
73.90 |
| Risk-free interest rate (%) |
1.27 |
| Expected dividends ($) |
— |
At September 30, 2021, 36,317 warrants were exercised for total proceeds of $90.
5. CAPITAL STRUCTURE
The Company's capital structure is comprised of shareholders' equity and 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, issue new shares or new debt or repay existing debt. The Company recently completed its Recapitalization Transaction aimed at addressing its capital structure, see note 2 for further information.
The Company monitors its capital structure and financing requirements using, amongst other parameters, the ratio of net debt to operating income. Operating income for this purpose is calculated on a 12-month trailing basis and is defined as follows:
| |
September 30, |
December 31, |
| For the Twelve Months Ended |
2021 |
2020 |
| (C$000s) |
($) |
($) |
| Net income (loss) |
71,403 |
(324,235) |
| Adjusted for the following: |
|
|
| Depreciation |
127,130 |
172,021 |
| Foreign exchange losses |
9,136 |
15,477 |
| (Gain) loss on disposal of property, plant and equipment |
253 |
24 |
| Impairment of property, plant and equipment |
— |
227,208 |
| Impairment of inventory |
— |
27,868 |
| Impairment of other assets |
— |
507 |
| Gain on settlement of debt |
(226,319) |
(226,319) |
| Gain on exchange of debt |
— |
(130,444) |
| Interest |
52,988 |
91,267 |
| Income taxes |
35,612 |
168,623 |
| Operating income |
70,203 |
21,997 |
Net debt for this purpose is calculated as follows:
| |
September 30, |
December 31, |
| |
2021 |
2020 |
| (C$000s) |
($) |
($) |
| Long-term debt, net of debt issuance costs and debt discount |
377,728 |
324,633 |
| Lease obligations |
21,899 |
21,971 |
| Less: cash and cash equivalents |
(6,043) |
(29,830) |
| Net debt |
393,584 |
316,774 |
The ratio of net debt to operating income does not have a standardized meaning under IFRS and may not be comparable to similar measures used by other companies.
At September 30, 2021, the net debt to operating income ratio was 5.61:1 (December 31, 2020 – 14.4) calculated on a 12-month trailing basis as follows:
| |
September 30, |
December 31, |
| For the Twelve Months Ended |
2021 |
2020 |
| (C$000s, except ratio) |
($) |
($) |
| Net debt |
393,584 |
316,774 |
| Operating income |
70,203 |
21,997 |
| Net debt to operating income ratio |
5.61 |
14.40 |
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. As per the amended credit facility agreement as disclosed in note 1, the Company's Funded Debt to Adjusted EBITDA covenant is 4.50x for the quarter ended September 30, 2021, 3.50x for the quarter ended December 31, 2021, and 3.00x for each quarter end thereafter. As shown in the table below, the Company was in full compliance with its financial covenants associated with its credit facilities as at September 30, 2021.
| |
Covenant |
Actual |
| As at September 30, |
2021 |
2021 |
| Working capital ratio not to fall below |
1.15x |
2.19x |
| Funded Debt to Adjusted EBITDA not to exceed(1)(2) |
4.50x |
3.20x |
| Funded Debt to Capitalization not to exceed(1)(3) |
0.30x |
0.24x |
| (1) Funded Debt is defined as Total Debt excluding all outstanding Second Lien Notes, 1.5 Lien Notes, and lease obligations. Total Debt includes bank loans and long-term debt (before unamortized debt issuance costs and debt discount) plus outstanding letters of credit. For the purposes of the Total Debt to Adjusted EBITDA ratio, the Funded Debt to Capitalization Ratio and the Funded Debt to Adjusted EBITDA ratio, the amount of Total Debt or Funded Debt, as applicable, is reduced by the amount of cash on hand with lenders (excluding any cash held in a segregated account for a specified purpose, including a potential equity cure). |
| (2) Adjusted EBITDA is defined as net income or loss for the period adjusted for interest, taxes, depreciation and amortization, non-cash stock-based compensation, and gains and losses that are extraordinary or non-recurring. |
| (3) Capitalization is Total Debt plus equity. |
Three Months Ended Sept. 30, |
Nine Months Ended Sept. 30, |
|||
2021 |
2020 |
2021 |
2020 |
|
(C$000s) |
($) |
($) |
||
Net loss |
(1,541) |
(50,000) |
(54,494) |
(450,132) |
Add back (deduct): |
||||
Depreciation |
33,248 |
31,720 |
96,287 |
141,178 |
Unrealized foreign exchange (gains) losses |
(3,607) |
5,202 |
(620) |
4,884 |
Loss (gain) on disposal of property, plant and equipment |
159 |
(1,272) |
513 |
284 |
Impairment of property, plant and equipment |
— |
— |
— |
227,208 |
Impairment of inventory |
— |
— |
— |
27,868 |
Impairment of other assets |
— |
— |
— |
507 |
Gain on exchange of debt |
— |
— |
— |
(130,444) |
Litigation settlements |
— |
— |
(700) |
— |
Non-cash purchase commitment termination settlement |
— |
2,082 |
— |
2,082 |
Restructuring charges |
198 |
400 |
671 |
5,373 |
Stock-based compensation |
1,079 |
596 |
1,356 |
1,099 |
Interest |
9,677 |
19,588 |
28,075 |
66,354 |
Income taxes |
(3,632) |
151 |
(19,178) |
113,833 |
Adjusted EBITDA(1) |
35,581 |
8,467 |
51,910 |
10,094 |
(1) For bank covenant purposes, EBITDA includes the deduction of an additional $6,536 of lease payments for the nine months ended September 30, 2021 (nine months ended September 30, 2020 – $13,077) that would have been recorded as operating expenses prior to the adoption of IFRS 16. |
Advances under the credit facilities are limited by a borrowing base. The borrowing base is calculated based on the following:
i. |
Eligible North American accounts receivable, which is based on 75 percent of accounts receivable owing by companies rated BB+ or lower by Standard & Poor's (or a similar rating agency) and 85 percent of accounts receivable from companies rated BBB- or higher; |
ii. |
100 percent of unencumbered cash of the parent company and its U.S. operating subsidiary, excluding any cash held in a segregated account for a specified purpose, including a potential equity cure; and |
iii. |
25 percent of the net book value of property, plant and equipment (PP&E) of the parent company and its U.S. operating subsidiary. The value of PP&E excludes assets under construction and is limited to $150,000. |
The indentures governing the Second Lien Notes and 1.5 Lien Notes (the "Indentures") contain restrictions on the Company's ability to pay dividends, purchase and redeem shares of the Company and make certain restricted investments, that are not defined as Permitted Investments under the Indentures, in circumstances where:
i. |
the Company is in default under the Indentures or the making of such payment would result in a default; |
ii. |
ii. the Company would not meet the Fixed Charge Coverage Ratio(1) under the Indentures of at least 2:1 for the most recent four fiscal quarters, after giving pro forma effect to such restricted payment as if it had been made at the beginning of the applicable four fiscal quarter period; or |
iii. |
there is insufficient room for such payment within the builder baskets included in the Indentures. |
(1) The Fixed Charge Coverage Ratio is defined as cash flow to interest expense. Cash flow is a non-GAAP measure and does not have a standardized meaning under IFRS and is defined under the Indentures as net income (loss) before depreciation, extraordinary gains or losses, unrealized foreign exchange gains or losses, gains or losses on disposal of property, plant and equipment, impairment or reversal of impairment of assets, restructuring charges, stock-based compensation, interest, and income taxes. Interest expense is adjusted to exclude any non-recurring charges associated with redeeming or retiring any indebtedness prior to its maturity. |
These limitations on restricted payments are tempered by the existence of a number of exceptions to the general prohibition, including a basket allowing for restricted payments in an aggregate amount of up to US$20,000 in the Indentures. As at September 30, 2021, these baskets were not utilized.
The Indentures also restrict the ability to incur additional indebtedness if the Fixed Charge Coverage Ratio determined on a pro forma basis for the most recently ended four fiscal quarter period for which internal financial statements are available is not at least 2:1. As is the case with restricted payments, there are a number of exceptions to this prohibition on the incurrence of additional indebtedness. The 1.5 Lien Notes indenture includes additional restrictions on certain investments including certain investments in subsidiary entities, however the Indentures include several exceptions to this prohibition, including a general basket of US$10,000 and baskets related to prepayments and and certain capital build commitments which aggregate over US$12,000. This 1.5 Lien Notes indenture also contains a restriction that any indebtedness incurred in excess of $290,000 under the credit facilities basket shall be junior in priority to the 1.5 Lien Notes.
As at September 30, 2021, the Company's Fixed Charge Coverage Ratio of 1.44:1 was below the required 2:1 ratio. Failing to meet the Fixed Charge Coverage Ratio is not an event of default under the Indentures, and the baskets highlighted in the preceding paragraphs provide sufficient flexibility, subject to the additional restrictions during the Covenant Relief Period discussed above, for the Company to incur additional indebtedness and make anticipated restricted payments which may be required to conduct its operations.
Proceeds from equity offerings may be applied, as an equity cure, in the calculation of Adjusted EBITDA towards the Funded Debt to Adjusted EBITDA covenant for any of the quarters ending prior to and including June 30, 2023, subject to certain conditions including:
i. |
the Company is only permitted to use the proceeds of a common share issuance to increase Adjusted EBITDA a maximum of two times; |
ii. |
the Company cannot use the proceeds of a common share issuance to increase Adjusted EBITDA in consecutive quarter ends; |
iii. |
the maximum proceeds of each common share issuance permitted to be attributed to Adjusted EBITDA cannot exceed the greater of 50 percent of Adjusted EBITDA on a rolling four-quarter basis and $25,000; and |
iv. |
if proceeds are not used immediately as an equity cure they must be held in a segregated bank account pending an election to use them for such purpose, and if they are removed from such account but not used as an equity cure they will no longer be eligible for such use. |
To utilize an equity cure, the Company must provide notice of any such election to the lending syndicate at any time prior to the filing of its quarterly financial statements for the applicable quarter on SEDAR. Amounts used as an equity cure prior to June 30, 2023 will increase Adjusted EBITDA over the relevant twelve-month rolling period and may also serve to reduce Funded Debt unless used for other purposes.
The Company's credit facilities also require majority lender consent for dispositions of property or assets in Canada and the United States if the aggregate market value exceeds $20,000 in a calendar year ($10,000 during the Covenant Relief Period), subject to certain exceptions. There are no restrictions pertaining to dispositions of property or assets outside of Canada and the United States, except that to the extent that if advances under the credit facilities exceed $50,000 at the time of any such dispositions, the Company must use the resulting proceeds to reduce the advances to less than $50,000 before using the balance for other purposes. Also, during the Covenant Relief Period, there is an obligation to reduce advances under the credit facilities using proceeds of any disposition of property or assets that exceed $10,000, subject to certain exceptions.
6. 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 $10,063 (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. As a result of Denison's participation in the consortium that was named in the lawsuit, the Company was served with three separate payment orders, one on March 24, 2015 and two others on December 29, 2015. The Company was also served with an enforcement order on November 23, 2015.
Provisional orders granting a temporary suspension of any enforcement proceedings have been granted in respect of all of these orders on the basis they were improperly issued and are barred from a statute of limitations perspective. Hearings in respect of each of the orders have been held, and in each case, decisions were rendered accepting the Company's position. All of these decisions were appealed, but the favorable judgments have all been confirmed in the Company's favor. The plaintiffs have filed petitions for cassation against three of the appeal judgments, and will have 30 days to file a petition for cassation following the service of the remaining judgment once it has been certified. No hearings have been scheduled for the three pending cassation petitions.
NAPC is also the subject of a claim for approximately $3,258 (2,201 euros) plus associated penalties and interest from the Greek social security agency for social security obligations associated with the salaries in arrears that are the subject of the above-mentioned decision.
The maximum aggregate interest and penalties payable under the claims noted above, as well as three other immaterial claims against NAPC totaling $855 (578 euros), amounted to $29,915 (20,212 euros) as at September 30, 2021.
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.
7. SEGMENTED INFORMATION
The Company's activities are conducted in four geographical segments: Canada, the United States, Russia and Argentina. 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.
Canada |
United States |
Russia |
Argentina |
Corporate |
Consolidated |
||
(C$000s) |
($) |
($) |
($) |
($) |
($) |
($) |
|
Three Months Ended September 30, 2021 |
|||||||
Revenue |
76,574 |
138,339 |
32,889 |
47,952 |
— |
295,754 |
|
Operating income (loss)(1) |
15,070 |
13,775 |
5,977 |
6,391 |
(5,590) |
35,623 |
|
Segmented assets |
222,648 |
544,836 |
76,264 |
104,250 |
— |
947,998 |
|
Capital expenditures |
5,766 |
14,689 |
1,101 |
3,678 |
— |
25,234 |
|
Three Months Ended September 30, 2020 |
|||||||
Revenue |
44,669 |
46,503 |
28,530 |
8,074 |
— |
127,776 |
|
Operating income (loss)(1) |
6,491 |
2,790 |
6,033 |
(3,876) |
(3,429) |
8,009 |
|
Segmented assets |
235,234 |
597,025 |
52,975 |
68,972 |
— |
954,206 |
|
Capital expenditures |
1,731 |
1,017 |
— |
44 |
— |
2,792 |
|
Canada |
United States |
Russia |
Argentina |
Corporate |
Consolidated |
||
(C$000s) |
($) |
($) |
($) |
($) |
($) |
($) |
|
Nine Months Ended September 30, 2021 |
|||||||
Revenue |
212,924 |
317,940 |
94,052 |
119,724 |
— |
744,640 |
|
Operating income (loss)(1) |
34,544 |
8,209 |
12,740 |
15,233 |
(16,120) |
54,606 |
|
Segmented assets |
222,648 |
544,836 |
76,264 |
104,250 |
— |
947,998 |
|
Capital expenditures |
8,606 |
34,667 |
3,178 |
8,434 |
— |
54,885 |
|
Nine Months Ended September 30, 2020 |
|||||||
Revenue |
177,101 |
238,807 |
73,458 |
35,348 |
— |
524,714 |
|
Operating income (loss)(1) |
24,794 |
3,026 |
6,487 |
(11,953) |
(15,954) |
6,400 |
|
Segmented assets |
235,234 |
597,025 |
52,975 |
68,972 |
— |
954,206 |
|
Capital expenditures |
8,103 |
27,672 |
879 |
1,489 |
— |
38,143 |
|
(1) Operating income (loss) is defined as net income (loss) before depreciation, foreign exchange gains or losses, gains or losses on disposal of property, plant and equipment, impairment of inventory, impairment of property, plant and equipment, interest, and income taxes.
|
Three Months Ended Sept. 30, |
Nine Months Ended Sept. 30, |
|||
2021 |
2020 |
2021 |
2020 |
|
(C$000s) |
($) |
($) |
($) |
($) |
Net loss |
(1,541) |
(50,000) |
(54,494) |
(450,132) |
Add back (deduct): |
||||
Depreciation |
33,248 |
31,720 |
96,287 |
141,178 |
Foreign exchange (gains) losses |
(2,288) |
7,822 |
3,403 |
9,744 |
Loss (gain) on disposal of property, plant and equipment |
159 |
(1,272) |
513 |
284 |
Impairment of property, plant and equipment |
— |
— |
— |
227,208 |
Impairment of inventory |
— |
— |
— |
27,868 |
Impairment of other assets |
— |
— |
— |
507 |
Provision for settlement of litigation |
— |
— |
— |
(130,444) |
Interest |
9,677 |
19,588 |
28,075 |
66,354 |
Income taxes |
(3,632) |
151 |
(19,178) |
113,833 |
Operating income |
35,623 |
8,009 |
54,606 |
6,400 |
Operating income does not have a standardized meaning under IFRS and may not be comparable to similar measures used by other companies.
SOURCE Calfrac Well Services Ltd.
For further information, please contact: Lindsay Link, President & Chief Operating Officer; Mike Olinek, Chief Financial Officer, Telephone: 403-266-6000, Fax: 403-266-7381, www.calfrac.com
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