Flint Energy Services Ltd. Announces First Quarter Results

(TSX - FES)

CALGARY, May 3, 2012 /CNW/ - Flint Energy Services Ltd. ("Flint", the "Company") released its first quarter 2012 financial results before markets opened today.

The Pending URS Transaction (Plan of Arrangement)

On February 20, 2012, the Company announced it had entered into an arrangement with URS Corporation ("URS"), in which URS will acquire all of the issued and outstanding common shares of Flint by way of a plan of arrangement for $25.00 per Flint Share or approximately $1.25 billion in aggregate.  URS will also assume the outstanding debt of the Company at closing.

On April 3, 2012, the Company held a special meeting of Securityholders to approve the transaction.  By special resolution passed at the meeting of Securityholders, the Arrangement was approved by 99.99% of the votes cast by Securityholders (voting together as a single class), and by 99.99% of the votes cast by the holders of Common Shares (voting separately). Following the special meeting, the Alberta Court of Queen's Bench granted its final order approving the Arrangement.

Pursuant to the arrangement agreement between the Company and URS, the closing of the Arrangement is subject to a number of regulatory approvals.  Certain approvals have already been obtained, and the parties are pursuing the remaining approval under the Investment Canada review process. Closing of the Arrangement is expected to occur in May 2012.

Highlights for the Quarter

Revenues for the three month period ending March 31, 2012, including Maintenance Services, were $643.5 million, up $251.6 million or 64.2% compared to Q1 last year, and all operating segments had increased revenues for the quarter year over year.  Under IFRS presentation, excluding Maintenance Services, revenues for Q1 were $572.4 million, up 75.1% from $326.8 million in Q1 2011.

Including Maintenance Services, EBITDA for the three months ended March 31, 2012 was $55.1 million. Under IFRS presentation, excluding Maintenance Services, EBITDA was $51.7 million compared to $15.1 million for Q1 2011. Overall, EBITDA margins increased to 9.0% in the first quarter of 2012 from 4.6% in Q1 2011 due to higher profit margins resulting from improved asset utilization and more favorable weather conditions compared to the same period in 2011.

Profit for the three months ended March 31, 2012 was $15.5 million, compared to a loss of $4.5 million in the same period of 2011 due to the increased revenues and improved margins during Q1 2012. Excluding costs relating to the acquisition of the Company by URS Corporation of $12.7 million and a $9.7 million unrealized gain from the fair value of embedded derivative financial instruments related to the issue of senior notes (less tax of $1.9 million), the adjusted profit for Q1 2012 was $16.6 million.

The fully diluted earnings per share for the three months ended March 31, 2012 was $0.32 per common share, compared to loss of $0.10 per common share for the same period in 2011.  Excluding the exceptional items noted above, the adjusted fully diluted earnings for Q1 2012 were $0.34 per share.

Selected financial information for each reportable business segment is as follows:

(in thousands of Canadian dollars, for the three months ended March 31)				March 31, 2012								March 31, 2011								Increase (decrease)				% Change
Revenue by reportable segment
Production Services			$	398,625				70%			$	186,615				57%			$	212,010				113.6%
Facility Infrastructure				81,712				14%				54,749				17%				26,963				49.2%
Oilfield Services				92,048				16%				85,461				26%				6,587				7.7%
Maintenance Services				71,098				12%				65,097				20%				6,001				9.2%
				643,483				112%				391,922				120%				251,561				64.2%
Less: Maintenance Services Joint Ventures				(71,098)				(12%)				(65,097)				(20%)				(6,001)				9.2%
Total			$	572,385				100%			$	326,825				100%			$	245,560				75.1%
EBITDA by reportable segment
Production Services			$	46,339				90%				$ 9,592				64%			$	36,747				383.1%
Facility Infrastructure				4,650				9%				5,571				37%				(921)				(16.5%)
Oilfield Services				19,784				38%				13,837				92%				5,947				43.0%
Maintenance Services				3,396				7%				5,265				35%				(1,869)				(35.5%)
			$	74,169				144%			$	34,265				228%			$	39,904				116.5%
Corporate				(19,075)				(37%)				(13,925)				(93%)				(5,150)				37.0%
				55,094				107%				20,340				135%				34,754				170.9%
Less: Maintenance Services Joint Ventures				(3,396)				(7%)				(5,265)				(35%)				1,869				(35.5%)
Total			$	51,698				100%			$	15,075				100%			$	36,623				242.9%

 

Revenues for the three months ended March 31, 2012 were $572.4 million, up from $326.8 million for the same period in 2011 as all segments realized increased revenues. Canadian operations generated $430.3 million in revenues, up $185.3 million from the same period in 2011 due in part to the acquisition of Carson Energy Services Ltd. in October 2011 and from increased activity levels overall compared to Q1 2011.  The United States operations generated $142.1 million in revenues, up $60.2 million from the same period in 2011 due to growth in the field services and oilfield services businesses.

Overall, EBITDA margins increased 4.4% to 9.0% in the three months ended March 31, 2012 from 4.6% for the same period in 2011. The Production Services segment EBITDA margin percentage of 11.6% was an increase of 6.5% from 5.1% in Q1 2011.  This increase resulted from improved utilization of equipment and fewer delays caused by poor weather compared to the same period in 2011.  The EBITDA margin in the Facility Infrastructure segment was 5.7% compared to 10.2% in Q1 2011, a decrease of 4.5% caused by lower overall margins on the projects during the period compared to Q1 2011. EBITDA margins in the Oilfield Services segment increased to 21.5% compared to 16.2% in Q1 2011, due to the excellent results in the expanded US operations and improved asset utilization.  The EBITDA percentage for the Maintenance Services segment decreased to 4.8% from 8.1% in Q1 2011 due to a mix of lower-margin projects.

W. J. (Bill) Lingard, President and Chief Executive Officer said, "Our first quarter results reflected the strength of the geographic and service line diversity in our business model, with strong gains from our Production Services operations in both Canada and the United States.  The addition of Carson Energy Services in Q4, 2011, added significantly to Canadian results in this division."  Mr. Lingard went on to say, "Our Facility Infrastructure division, with three large oil sands fabrication and construction contracts, saw an uptick in activity in the first quarter.  We are ramping up on two field construction contracts which will improve margins throughout the year.  We currently have about 1,400 trades and craft labour deployed in the field, and we will be filling another 2,000 construction positions in 2012".

Outlook

Strong Q1 2012 well drilling activity in both Canada and the United States led to higher levels of upstream and midstream work for the Company's Oilfield Services and Production Services segments.  The addition of Carson Energy Services in Q4, 2011 added substantially to Production Services revenues and EBITDA in Q1.  United States' Production Services revenues and EBITDA were also up as a result of very stronger activity in Texas and North Dakota where liquids rich gas and shale oil drilling have continued to expand.

While Canadian activity in Q2 has entered the typical seasonal slowdown between March and June, industry forecasts are calling for drilling and midstream production related activities to increase in 2012 over last year driven primarily by Bakken oil drilling in both Saskatchewan and Manitoba, and other active shale oil drilling in Central and Southern Alberta.  This increased level of activity will continue to keep both the Oilfield Services and Production Services segments busy in Canada throughout 2012.

United States industry forecasts call for drilling and production related spending to remain higher than 2011 due to continued increased activity in liquids rich gas fields and in oil directed drilling.  While gas directed drilling is expected to pull back with lower prices, rig activity has already shifted to oil drilling regions.  Both Oilfield Services and Production Services activities will continue to benefit from these activity levels in 2012.

Oil sands capital spending in 2012 is expected to increase over 2011 levels with many new projects sanctioned and underway.  The Company's existing fabrication and construction contracts are ramping up in Q2 on two oil sands projects near Fort McMurray. The Company's fabrication facilities are also busy working on module fabrication for a third oil sands project.  As a result, revenues in this segment are expected to increase throughout the year.

FT Services, the Company's Maintenance Services operation, experienced higher levels of plant turnaround work in Q1.  Ongoing maintenance work on the four existing multiyear oil sands maintenance agreements, as well as scheduled turnaround work for later in 2012, is expected to provide stable revenues throughout 2012.

Management's focus for 2012 will be on executing a smooth integration within URS' organization, and with the increased capabilities created through the merger, capturing many of the opportunities the Company is seeing across all of its operational areas and service lines.

Complete copies of the Company's Q1 2012 results will be available on www.SEDAR.com and on the Company's website: www.flintenergy.com.

Flint Energy Services Ltd. is a market leader providing an expanding range of integrated products and services for the oil and gas industry including: production services; infrastructure construction; oilfield transportation; and maintenance services.  With more than 10,000 employees, Flint provides this unique breadth of products and services through over 80 strategic locations in the oil and gas producing areas of Western North America, from Inuvik in the Northwest Territories to Mission, Texas on the Mexican border.  Flint is a preferred provider of infrastructure construction management, module fabrication, maintenance services for upgrading, and production facilities in Alberta's oil sands sector.

FORWARD LOOKING STATEMENTS

Certain statements in this news release are "forward-looking statements", which reflect current expectations of the management of Flint regarding future events or Flint's future performance. All statements other than statements of historical fact contained in this news release may be forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements.  Flint believes that the expectations reflected in such forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. The forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements are made as of the date of this news release and Flint assumes no obligation to update or revise them to reflect new events or circumstances, except as expressly required by applicable securities law. Further information regarding risks and uncertainties relating to Flint and its securities can be found in the disclosure documents filed by Flint with the securities regulatory authorities, available at www.sedar.com.

 

Guy Cocquyt, Vice President Communications
Telephone: [phone], Email: [email protected]