Hyduke Announces First Quarter Fiscal 2015 Financial Results
NISKU, AB, May 15, 2015 /CNW/ - Hyduke Energy Services Inc. (HYD - TSX), announced operating results for three months ended March 31, 2015 and 2014. Hyduke's Financial Statements and Management's Discussion and Analysis have been filed with regulators and are available at www.hyduke.com and at www.sedar.com.
Highlights include the following:
- Revenue for the quarter of $7.0 million, a decline of 43.1% from $12.4 million in 2014.
- Gross profit for the quarter of $0.9 million, a decline of $1.8 million from $2.7 million in the 2014.
- Gross profit margin of 12.3% is decreased 9.4 basis points from 2014.
- Net loss from continuing operations for the quarter of $0.8 million.
- Loss per share (basic) for the year of $0.03.
- EBITDAS (Earnings Before Interest, Taxes, Depreciation, Amortization and Stock Based Compensation) for continuing operations for the quarter of ($0.5) million.
- Working capital remains positive at $8.5 million with a current ratio at 1.6 to 1.00.
- Cash on hand at March 31, 2015 is $5.1 million.
- Debt to equity ratio remains low at 0.39 to 1.00
- Doug Bachman, Director of Hyduke Energy Services since April 2013, resigned from the Board on May 11, 2015. The Board of Directors thanks him for his dedication to the Company and wishes him a speedy recovery to full health.
Three months ended March 31, 2015 |
Year-over-year |
Three months ended March 31, 2014 (restated)(1) |
|
Revenue |
7,047 |
(43.1%) |
12,392 |
Cost of goods sold |
6,183 |
(36.3%) |
9,705 |
Gross margin(2) |
864 |
(67.8%) |
2,687 |
Gross margin % |
12.3% |
(43.3%) |
21.7% |
Selling, general & administrative |
2,103 |
(1.4%) |
2,132 |
EBITDAS(2) – continuing operations |
(502) |
(164.9%) |
773 |
Net profit (loss) from continuing operations |
(834) |
(241.8%) |
588 |
Net loss |
(812) |
(248) |
|
Per share – basic |
(0.03) |
(0.01) |
|
Per shares – diluted |
(0.03) |
(0.01) |
|
March 31, 2015 |
December 31, 2014 |
||
Total assets |
35,312 |
(7.1%) |
38,023 |
Total liabilities |
14,155 |
(12.2%) |
16,115 |
(1) |
Prior year numbers have been restated due to reclassification of entities to discontinued operations |
Total revenue for the quarter was $7.0 million. This represents a decline of $5.3 million or 43.1% over the same period in the year. 98% of the decline is due to reduction of sales in the Supply and Service segment.
Gross margin of $0.9 million or 12.3% of revenue declined 67.8% from first quarter 2014 gross margin of $2.7 million or 21.7%.
Selling, general and administrative expenses decreased $30 thousand or 1.4% to $2.1 million. Administrative and employment expenses of $1.9 million decreased $64 thousand from the first quarter of 2014 due to restructuring within the Company. During the quarter, the Company incurred approximately $151 thousand in severances. Furthermore, the Company continues to settle obligations with former executives with a cost of $103 thousand in the quarter.
Negative EBITDAS for continuing operations was $0.5 million for the first quarter of 2015, a decline of $1.3 million from positive EBITDAS of $0.8 in 2014. The decline in EBITDAS was largely the result of a 43% reduction in revenue and a 67.8% reduction in gross margin.
At March 31, 2015, Hyduke maintained a strong balance sheet as measured by liquidity (current ratio of 1.6 to 1.00) and debt to equity (ratio of 0.39 to 1.00)
Total assets of $35.3 million as at March 31, 2015 represents a decrease of $2.7 million (7%) from December 31, 2014 and is due primarily to the collection of accounts receivable and a reduction in inventory and unbilled revenue offset by an increase in cash.
Total liabilities of $14.2 million as at March 31, 2015 represents a decrease of $2.0 million (12%) from December 31, 2014. Total current liabilities increase of $5.4 million relates primarily to the reclassification of term debt to current in the current year.
OUTLOOK
In the first quarter of the current fiscal year Hyduke faced the same business challenges as other companies supporting the upstream Canadian oil and gas industry. Due to collapsed oil prices exploration and production company budgets have been sharply reduced resulting in declining revenue for all segments of the oilfield services sector. This includes the drilling and service rig contractors, the primary sources of revenue for most of Hyduke products and services offering. Hyduke's financial statements reflect this decline and are, on a year-over-year basis, in line with those of other companies in this sector.
Therefore, Hyduke continues to take significant steps to protect the company's balance sheet, human capital and capacity to recover, while continuing with the restructuring and repositioning of the Company into one with a modified, focused and more sustainable business model for future growth.
Our safety initiatives, through the efforts of our new Safety Coordinator and all staff, have resulted in a 90% reduction of our TRIF. Hyduke and its subsidiaries logged two months, March & April, incident free.
Hyduke has completed the integration of Thunder and Lightning. They have vacated their facilities and our rent obligations ended at the end of April. We are thrilled with the calibre of the personnel that came over and look forward to taking care of our new customers.
On the expense side, fixed costs are being contained wherever possible. The Board of Directors voluntarily took a 25% across the board reduction in fees in the first quarter. This will stay in place for the rest of year or longer if required. Senior managers have taken voluntary 10% pay cuts. Other workers have moved to a four day work week. Another Hyduke operating division has received approval for EI funded financial support for workers on reduced hours and the Company hopes to expand this to all divisions. The purpose of this program is to protect as many jobs among the core management team and operating personnel until such time that business improves sufficiently for these measures to be reversed.
We resolved a long-standing claim with a Customer in Russia. This has resulted in the elimination of further legal fees and the recovery of over $300k.
In an effort to further reduce costs whilst improving communication and inter company synergies, Reliable Air and Canwest Crane will be moving to our company owned Nisku facilities over the next month.
The overall industry downturn is creating opportunities in terms of attracting new personnel, which will play a key role in the Company's future growth. Three recent management additions are in the areas of market expansion (fabrication opportunities in the vast Engineering, Procurement and Constriction sector which executes major capital projects in multiple industries outside of Hyduke's historic client base) and quality control and process enhancement. The intention of these key hires is to simultaneously enhance the quality of Hyduke's manufacturing and fabrication capabilities and reach into large local markets that the Company has previously not pursued. Hyduke regained its CWB designation in Q1. We believe we are on track to regain our API designation by the end of Q3.
Overall activity among Hyduke's core client base of drilling and well servicing contractors appears to be at or near bottom in the current quarter. Drilling, completion and production workover activity declined steadily with oil prices in the six month period from September 2014 to March 2015. Exploration and production companies cancelled or delayed spending programs in order to conserve cash and determine when the bottom of the commodity pricing cycle would occur and at what levels.
Since March, oil prices have recovered by almost 40% from their first quarter lows and their major service providers have repriced their services based on current market demand. The combination of higher oil prices and lower drilling, completion and services costs has created a situation where numerous projects are now economic to develop that were not economic using Q1 2015 oil prices and 2014 drilling and services prices. Therefore, the Company expects that as soon as road bans are lifted there will a material increase in field activity which will have an immediate positive impact on Hyduke's operating divisions.
While the recovering market will be price-competitive, it will be a significant improvement over the first quarter of 2015 and should have a positive impact on Hyduke's financial performance.
Meanwhile, the Company's balance sheet is strong and provides flexibility to pursue opportunities as they emerge. The reduced EBITDA in the first quarter did cause a technical covenant breach on Hyduke's senior secured debt but the Company continues to work pro-actively with its lenders to ensure that we work through this difficult period with an outcome that works best for all stakeholders. Having cash in the bank that covers 60% of outstanding long-term debt at March 31 puts Hyduke in a materially better position that most oilfield service companies that are working their way through short-term lending issues caused by the unexpected and severe drop in oil prices and business activity.
When total assets relative to debt are considered, the Company is confident it has the financial strength to endure the current downturn intact, continue to streamline operations, add key personnel that will make Hyduke stronger in the future, and seek strategic expansion opportunities that will yield a positive results for all stakeholders - shareholders, capital providers, employees and staff - for years to come.
FORWARD LOOKING STATEMENT
This report contains certain forward-looking statements under the heading "Outlook" and elsewhere concerning future events or the Company's operations, anticipated financial performance, business prospects and strategies of Hyduke. Forward-looking information typically contains statements with words such as "anticipate", "believe", "estimate", "expect", "plan", "intend" or similar words suggesting future outcomes or outlooks on, without limitation, estimates of business activity, supply and demand for the Company's products, the estimated amounts and timing of capital expenditures, anticipated future debt levels, or other expectations, beliefs, plans, objectives, assumptions or statements about future events or performance. Readers are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties both general and specific that may cause actual future results to differ materially from those contemplated and contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. These factors may affect anticipated earnings or assets and include, but are not limited to: industry activity levels, market liquidity, customer credit risk, competition, oil and gas prices, product liability, fixed price contracts, development of new products, uninsured and underinsured losses, access to additional financing, source of supply of raw material and third party components, availability of key personnel, agreements and contracts, government regulations, foreign exchange exposure, interest rate risk, international scope of operations, environmental health and safety regulations and Hyduke's anticipation of and success in managing the risks implied by the foregoing. The Company cautions that the foregoing list of important factors is not exhaustive. The Company believes that the expectations reflected in the forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon. The forward-looking statements in this report speak only as of the date of this report. Hyduke undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required pursuant to applicable securities legislation.
About Hyduke
Trading on the TSX under the symbol "HYD," Hyduke Energy Services Inc. is a supplier of equipment and services to the oil and gas drilling and well servicing industry.
The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this News Release.
SOURCE Hyduke Energy Services Inc.
Patrick Ross, President & Chief Executive Officer, (780) 955-0355; Veronica Dutchak, CA, Chief Financial Officer, (780) 955-0355
Share this article