Dalmac Energy Provides Operations Update

TSX Venture: "DAL"

EDMONTON, Jan. 29, 2015 /CNW/ - John Babic, President and CEO of Dalmac Energy Inc. ("Dalmac") (TSX Venture "DAL") is pleased to provide a shareholder update.

The oil and gas industry in Canada is facing significant challenges due to falling oil prices.  Production companies are beginning to take steps to limit capital expenditures by reducing or suspending drilling programs and by eliminating all unnecessary expenses.  This is having a profound impact on cash flow throughout the industry for both producers and service companies.  Dalmac is pleased to report that it has been proactively successful to-date in maintaining its revenue base, profit margins, and activity levels. 

Current activity levels within the Western Canadian Sedimentary basin vary dramatically based largely upon location, the spectrum of hydrocarbons, decline rates, and cost of drilling.  The majority of Dalmac's operations are concentrated around the Duvernay shale basin in west central Alberta, which has not been affected to the same degree by falling oil prices as many of the marginal US shale plays.  The Duvernay's advantage of having a broad spectrum of hydrocarbon production makes it more profitable than other conventional oil plays. 

The Duvernay basin has been credited as the source rock for many of the large Devonian oil and gas pools in Alberta, including the most famous Leduc Field which was discovered in 1947. The Duvernay is touted as the second largest oil reserve in Canada covering an area of about 100,000 square kilometers in size. That's larger than the infamous North Dakota Bakken and Texas Eagle Ford combined with room to spare. According to the Energy Resource Conservation Board, the Duvernay holds an estimated 61.7 billion barrels of oil, 11.3 billion barrels of natural gas liquids, and 443 trillion cubic feet of natural gas. This makes it one of the most profitable oil and gas plays in Canada. In addition to the oil production, the Duvernay is also known for being rich in liquid gases such as propane, ethane and butane all of which can be processed and sold separately- which makes for a very profitable mix. Another important aspect of the Duvernay is condensate – which is a diluent for enabling heavier oil and oilsands production to flow through pipelines. Typical deep Duvernay wells, which cost about $11-$15 million to complete, produce upwards of 1,300 barrels of condensate per day. In Alberta, condensate commands an ultra-low royalty rate of 5% as compared to upwards of 25% for Eagle Ford or Marcellus condensate. In Alberta, condensate has recently been selling at upwards of a 10% premium to crude.

Another important factor is that while drilling activity has seen a major reduction in many areas, the majority of Dalmac's revenues come from recurring fluid transfers from existing production wells along with well maintenance and servicing which is an ongoing requirement.  Management has predominantly seen a slowdown in supply growth oriented activities such as drilling and completions as opposed to day-to-day production activity which is a mainstay of Dalmac's services. 

Dalmac is currently achieving utilization rates for production equipment in the 70% range.  This represents the upper percentile of activity for the Company due to factors such as seasonality uses for various types of equipment, servicing schedules, and maintaining an adequate staffing of personnel and inventory of equipment for key customers.

Dalmac is pleased to report that revenues in Q3 ending January 31^st are expected to be in line with revenues from the prior year while margins will continue to show improvement.  The Company boosted its gross profit margin to 30% in the last quarter compared to 22% in the prior year.  Dalmac expects to maintain its gross margin near 30% due to improving internal controls along with the implementation of the new computerized dispatching and invoicing system. 

To spur revenue growth, Dalmac is working with many of its existing customers to expand its scope of service activity to reflect the full range of services provided.  Management strongly feels that the benefits of offering quality service along with the correct product mix is more cost effective than having our customers single source their service and production needs.  The Company has been successful in utilizing much of the equipment received in 2014 and has been able to cross sell this equipment to provide a one-stop shop for current customers.  This growth initiative is expected to continue into 2015.

While the Canadian oil and gas industry continues to deal with the impact of lower energy pricing, management is confident that Dalmac will continue to deliver solid shareholder value.  Q3 results are expected to be reported in March 2015.

Statements throughout this report that are not historical facts may be considered 'forward looking statements'.  Such statements are based on current expectations that involve risks and uncertainties, which could cause actual results to differ from those anticipated.  Important factors that can cause anticipated outcomes to differ materially from actual outcomes include the impact of general economic conditions, industry conditions, competition from other industry participants, volatility of petroleum prices, the ability to attract and retain qualified personnel, changes in laws or regulation, currency fluctuations, continued ability to access capital from available facilities and environmental risks.  References to "Dalmac', the "Corporation", "Company", "us", "we", and "our" mean Dalmac Energy Inc. and its subsidiary Dalmac Oilfield Services Inc.  The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.  We seek safe harbor.

SOURCE Dalmac Energy Inc.

John Babic - CEO - Dalmac Energy, Tel: [phone], Email: [email protected]; Doren Quinton, President, QIS Capital Corp., Ph: [phone], Email: [email protected], www.smallcaps.ca