Flint Energy Services Ltd. Announces Second Quarter Earnings
(TSX - FES)
CALGARY, Aug. 5 /CNW/ - Flint Energy Services Ltd. (Flint, the Company) released its second quarter results today after markets closed.
Highlights
- Revenues for the three month period ending June 30, 2010 were $459.2
million, up $35.0 million from Q2 2009. Revenues for the six month
period ending June 30, 2010 were $980.5, up $26.1 million from the
comparable period last year.
- Net earnings for the second quarter 2010 were $8.2 million, up $4.4
million from Q2 2009 earnings of $3.8 million. Earnings per share
were $0.18 for the quarter compared to $0.08 in the second quarter of
2009. For the six month period ending June 30, 2010, net earnings
were $25.9 million, up $3.6 million from the same period in 2009.
Fully diluted earnings per share for the six month period were $0.56,
compared to $0.48 for the same period in 2009.
- EBITDA for the three month period ending June 30, 2010 was $31.7
million, up $8.2 million from the second quarter of 2009. EBITDA
margin for the second quarter of 2010 was 6.9%, up 1.4% from the same
period in 2009. EBITDA for the six month period was $75.7 million, up
$5.4 million from the comparable period in 2009. Year to date EBITDA
margin was 7.7% compared to 7.4% for the same period last year.
- General and administrative ("G&A") expense for the first quarter of
2010 was $32.7 million or 7.1% of revenue, compared to $31.9 million
or 7.5% of revenue in the second quarter of 2009. For the first six
months of 2010, G&A expense was $69.0 million, down $5.2 million from
the same period in 2009. Year to date G&A margin was 7.0% compared to
7.8% in the same period of 2009.
- Interest expense (net of interest income) for the second quarter 2010
was $3.6 million, flat with the second quarter of 2009, and year to
date interest expense was $6.9 million, down $1.9 million from the
comparable period in 2009.
- Flint's cash holdings as of June 30, 2010 were $155.0 million and
operating loans remained undrawn in the second quarter of 2010.
- During the quarter, Flint acquired PES Surface Inc. ("PSI"), a
production equipment company located in central Alberta that designs
and fabricates pressure vessels, line heaters, mini cyclones,
combination units, and zero-emission products. The acquisition of PSI
is expected to provide opportunities for the Company's US subsidiary
to expand into the Canadian production equipment market through this
established company, which Flint has branded internally at Flint
Process Systems Ltd.
W. J. (Bill) Lingard, President and Chief Executive Officer of the Company said, "The second quarter represented a turning point for Flint in the recent industry down cycle. We are pleased with the increased activity we are experiencing in our Maintenance Services and Production Services segments. Our Oilfield Services and Facility Infrastructure segments were off the pace in the second quarter with two of Facility Infrastructure's major contracts winding down, while in Oilfield Services, fluid hauling activity was not as robust as it was in the second quarter of last year. The second half of 2010 looks promising for Flint, with increased activity expected in all segments with the exception of Facility Infrastructure where our focus remains on replenishing our construction backlog for 2011 and 2012."
Second Quarter
Revenue for the three months ended June 30, 2010 was $459.2 million, an increase of $35.0 million or 8.3% compared to $424.2 million for the same period in 2009. Increased revenues from the Production Services and Maintenance Services segments offset reduced revenues from the other segments. Canadian operations generated $382.9 million in revenues, up $36.3 million as a result of increased activity in Western Canada. The United States operations generated $76.3 million in revenues, down $1.3 million as a result of the negative impact of foreign exchange of $8.7 million on revenue.
Direct costs in the second quarter were $395.0 million compared to $369.1 million in the second quarter of 2009, for gross margins of 13.9% in the second quarter of 2010 compared to 13.0% in the second quarter of 2009. This increase in margins was the result of improved performance in Production Services, notably in our United States operations due to strong cost control measures put in place in Q3 of last year.
Overall, EBITDA margins increased 1.4% to 6.9% in the second quarter of 2010 from 5.5% in 2009. The Production Services segment EBITDA margin percentage was 9.3%, an increase of 6.4% from 2.9% in 2009. The increase was a direct result of higher volumes in Canada and improved margins in both Canada and the United States. The EBITDA margin in the Facility Infrastructure segment was 9.2% compared to 10.5% for 2009, a decrease of 1.3% as a result of reduced revenues as Flint substantially completed two major contracts in the quarter. EBITDA margins in the Oilfield Services segment decreased to (9.7)% compared to 1.4% for 2009, primarily as a result of lower fluid hauling activity than experienced last year. The EBITDA percentage for the Maintenance Services segment increased to 5.8% from 5.6% in 2009 due to stronger revenues as a result of increased turnaround work in the quarter.
General and administrative expenses for the quarter increased slightly by $0.8 million to $32.7 million compared to $31.9 million in the same quarter in 2009. G&A expenses as a percentage of revenue was 7.1% compared to 7.5% in the second quarter of 2009 and 7.0% in the first quarter of 2010. This area continues to be closely monitored by management.
The Company realized net earnings of $8.2 million ($0.18 per common share) during the quarter ended June 30, 2010, compared to net earnings of $3.8 million ($0.08 per common share) in 2009, for a net increase of $4.4 million. The increase in net earnings was primarily the result of increased volumes overall and improved margins in the Production Services segment.
Outlook
In the first half of 2010, approximately 5,500 wells were drilled in Canada compared to 3,800 in the same period of 2009. Industry forecasts are projecting drilling in Canada to reach 13,000 wells in 2010 compared to just 8,360 drilled last year, which would represent a 65% increase in drilling in the second half of 2010. However, unusually wet weather conditions in Alberta in June and July had dampened drilling activity, especially in the South, which could impact overall drilling volumes in the second half.
In the United States where an estimated 23,109 wells were drilled in the first half of the year compared to 17,416 in the first half of 2009, land based activity had picked up. Industry forecasts project 2010 drilling in the US to reach 49,000 wells, up 42% from last year. Second half drilling is expected to reach 26,000 wells, which would be an increase of 53% over the second half of 2009.
Management expects the second half activity in 2010 for its Production Services segment to continue to improve quarter over quarter, with Q3 activity in Canada more active than Q2 seasonally, and more active than last year due to increased drilling and field work to tie the additional wells drilled. The company has had a number of multi-year contract wins which provide improved certainty for revenues in the second half of 2010 and beyond.
Oilfield Services which includes rig moving, fluid hauling and specialty hauling activities is expected to be busier in the second half of the year with increases in seasonal activity and increased activity due to stronger well drilling. The same should hold true for the company's US operations of Production Services and Oilfield Services, where Flint's recently relocated rig moving equipment will be in operation early in the third quarter.
The Company's Facility Infrastructure segment substantially completed work on the Shell Albian Froth Treatment facility and the StatOil Leismer SAGD demonstration project near Fort McMurray at the end of Q2 2010. Work continues on the Suncor Firebag 3 contract for site wide construction and pre-commissioning work near Fort McMurray which will run through the second half of 2010 and into early 2011. The company is bidding on a number of large contracts which are expected to commence in early to mid 2011. Announcements on these contracts are not expected before the end of Q3 2010.
Flint's 50% owned company, FT Services, which is reported in Flint's Maintenance Services segment, completed a major turnaround for Royal Dutch Shell at their Scotford refining facilities East of Edmonton in Q2 2010. FT Services also commenced work on Suncor's U2 turnaround which was successfully completed in early July. Additionally, FT Services is engaged in business development activities and is bidding on a number of maintenance opportunities with new customers in the oil sands and refining areas of Alberta.
Management is optimistic that the second half of 2010 will see improving revenues in all segments with the exception of Facility Infrastructure. While Facility Infrastructure activities will decrease in the second half, the company expects contract awards late in Q3 or early Q4 which will provide better certainty for 2011 and 2012 revenues for this segment.
A summary of financial information follows. Complete copies of the Company's second quarter 2010 interim financial results are available on www.SEDAR.com and on the Company's website: www.flintenergy.com.
The following table summarizes key financial data to be read in conjunction with the audited financial statements of the Company as at and for the quarter ended June 30, 2010. Such financial statements are prepared in accordance with GAAP and are reported in Canadian dollars.
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(For the three
months ended % of % of Increase %
June 30) 2010 Revenue 2009 Revenue (decrease) Change
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Revenue $ 459.2 100.0% $ 424.2 100.0% $ 35.0 8.3%
EBITDA 31.7 6.9% 23.5 5.5% 8.2 34.9%
Net earnings 8.2 1.8% 3.8 0.9% 4.4 115.8%
per common
share
- basic $ 0.18 $ 0.08 $ 0.10
per common
share
- diluted $ 0.18 $ 0.08 $ 0.10
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Three months ended Six months ended
June 30 June 30
Reconciliation of --------------------------------------------------
EBITDA 2010 2009 2010 2009
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Net earnings $ 8.2 $ 3.8 $ 25.9 $ 22.3
Amortization 14.1 14.2 29.1 28.7
Share based
compensation expense 1.2 0.8 3.0 1.8
Interest expense, net
of interest income 3.7 3.6 6.9 8.8
Income tax expense 4.5 1.1 10.8 8.7
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EBITDA $ 31.7 $ 23.5 $ 75.7 $ 70.3
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Selected financial information for each reportable business segment for the second quarter and six month period ending June 30, 2010 is as follows:
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(in thousands
of Canadian
dollars, for
the three
months ended Increase %
June 30) 2010 2009 (decrease) Change
-------------------------------------------------------------------------
Revenue by
reportable
segment
Production
Services $195,206 43% $187,116 44% $ 8,090 4.3%
Facility
Infra-
structure 109,715 24% 132,071 31% (22,356) (16.9%)
Oilfield
Services 34,904 8% 38,811 9% (3,907) (10.1%)
Maintenance
Services 119,346 25% 66,240 16% 53,106 80.2%
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Total $459,171 100% $424,238 100% $ 34,933 8.2%
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EBITDA by
reportable
segment
Production
Services $ 18,126 57% $ 5,355 23% $ 12,771 238.5%
Facility
Infra-
structure 10,042 32% 13,891 59% (3,849) (27.7%)
Oilfield
Services (3,393) (11%) 536 2% (3,929) (733.0%)
Maintenance
Services 6,898 22% 3,722 16% 3,176 85.3%
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Total $ 31,673 100% $ 23,504 100% $ 8,169 34.8%
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(in thousands
of Canadian
dollars, for
the six
months ended Increase %
June 30) 2010 2009 (decrease) Change
-------------------------------------------------------------------------
Revenue by
reportable
segment
Production
Services $409,994 42% $442,673 46% $(32,679) (7.4%)
Facility
Infra-
structure 250,721 26% 276,088 29% (25,367) (9.2%)
Oilfield
Services 102,314 10% 107,764 11% (5,450) (5.1%)
Maintenance
Services 217,512 22% 127,863 14% 89,649 70.1%
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Total $980,541 100% $954,388 100% $ 26,153 2.7%
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EBITDA by
reportable
segment
Production
Services $ 34,283 45% $ 26,175 37% $ 8,108 31.0%
Facility
Infra-
structure 28,923 38% 26,024 37% 2,899 11.1%
Oilfield
Services 2,925 4% 9,205 13% (6,280) (68.2%)
Maintenance
Services 9,598 13% 8,912 13% 686 7.7%
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Total $ 75,729 100% $ 70,316 100% $ 5,413 7.7%
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Consolidated Financial Position as of June 30, 2010
(Millions of Canadian dollars, except share data)
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June 30, December 31, Increase
As at 2010 2009 (decrease) % Change
-------------------------------------------------------------------------
Current assets $ 595.7 $ 551.2 $ 44.5 8.1%
Current liabilities 295.0 194.4 100.6 51.7%
Net working capital 300.7 356.8 (56.1) (15.7%)
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Long-term debt 244.0 239.1 4.9 2.0%
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Current 120.3 16.7 103.6 620.4%
Non-current 123.7 222.4 (98.7) (44.4%)
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Total assets 1,004.8 974.7 30.1 3.1%
Total liabilities 461.2 459.4 1.8 0.4%
Total equity 543.6 515.3 28.3 5.5%
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Days sales outstanding
(DSO) 74 69 5
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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. Flint, with more than 10,000 employees, provides this unique breadth of products and services through over 60 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.
A conference call with management to discuss the Company's second quarter 2010 results and outlook is scheduled for 10:00 AM Eastern Time on Friday, August 6, 2010. Details on how to participate in or listen to the call are available on the Company's website: www.flintenergy.com.
%SEDAR: 00017156E
For further information: Guy Cocquyt, Director of Investor Relations, Telephone: (403) 218-7195, Email: [email protected]
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