Hyduke announces fiscal 2013 second quarter financial results
NISKU, AB, Aug. 14, 2013 /CNW/ - Hyduke Energy Services Inc. (HYD - TSX), announced operating results for the three months and six months ended June 30, 2013. 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 during the quarter include the following:
- Board of Director Changes:
- Board of Directors voted in at AGM comprised of John Pinsent, Patrick Ross, Douglas Bachman and Gordon McCormack
- John Pinsent appointed as Chairman of the Board
- David Yager appointed as a Director of the Board
- Shareholder Rights Plan approved at the AGM
- Senior Management Team Additions:
- Appointment of Michael Symchuk as President of Rig Equipment
- Appointment of Derek Petrie as Director of Inspection and Certification Services
- Appointment of Alfred Moore as General Manager, Hyduke USA
- Business Unit Rationalization and Restructuring:
- Hyduke Rig Equipment - focused on the design, manufacture and refurbishment of land-based drilling rigs, workover rigs, well service rigs and drilling and well service support equipment
- Hyduke Supply and Service - focused on procurement and distribution of spare parts, equipment components, operating supplies and pneumatic controls; the service and repair of drilling, workover, and mobile equipment; and the inspection and certification of drilling and well service equipment.
- Discontinued Operations - the Company discontinued the well service equipment manufacturing operation based in Edmonton, Alberta
- Financial performance:
- Current quarter revenue $12.1 million is down over 50% from the prior year
- Current quarter revenue from international markets $2.7 million is down 80%
- Current quarter revenue from Canadian markets $9.4 million is down 30%
- Current quarter gross profit percentage of 13.2% up 1.4 percentage points
- Liquidity remains strong with current ratio of 3.41 to 1.00.
- Debt to equity ratio remains strong at 0.28 to 1.00.
A summary of Fiscal 2013 second quarter and six months year to date results is as follows:
Selected Statement of Comprehensive Income Information |
Three Months Ended | ||
($000's, except per share data) | June 30 2013 |
March 31 2013 |
June 30 2012 |
Revenues - continuing operations | 12,107 | 16,588 | 26,980 |
International revenues | 2,678 | 5,291 | 13,480 |
Gross profit - continuing operations | 1,603 | 2,140 | 3,188 |
Gross profit (%) | 13.2% | 12.9% | 11.8% |
EBITDAS - continuing operations | (517) | 45 | 667 |
Profit (loss) - continuing operations | (825) | (337) | 71 |
Profit (loss) | (1,148) | (431) | 22 |
Profit (loss) per share - basic ($) | (0.047) | (0.018) | 0.001 |
Profit (loss) per share-diluted ($) | (0.047) | (0.018) | 0.001 |
Selected Statement of Comprehensive Income Information |
Six Months Ended June 30 | |
($000's, except per share data) | 2013 | 2012 |
Revenues - continuing operations | 28,695 | 58,243 |
International revenues | 7,586 | 29,866 |
Gross profit - continuing operations | 3,743 | 8,863 |
Gross profit (%) | 13.0% | 15.2% |
EBITDAS - continuing operations | (472) | 4,324 |
Profit (loss) - continuing operations | (1,162) | 2,432 |
Profit (loss) | (1,579) | 1,997 |
Profit (loss) per share - basic ($) | (0.065) | 0.083 |
Profit (loss) per share-diluted ($) | (0.065) | 0.082 |
Note: For purposes of this News Release, the following terminology is used:
- "Current Quarter" means the three months ended June 30, 2013
- "Prior Quarter" means the three months ended March 31, 2013
- "Previous Year Quarter" means the three months ended June 30, 2012
- "EBITDAS" means earnings before interest, taxes, depreciation, amortization and stock based compensation
Current Quarter revenue from continuing operations of $12.1 million decreased $4.5 million (27%) over the Prior Quarter and decreased $14.9 million (55%) over the Previous Year Quarter. For the six months ended June 30, 2013, revenue from continuing operations of $28.7 million represents a decrease of $29.5 million (51%) over the same period in the prior year. The decrease in both comparative periods is due to a significant reduction in international rig projects (decrease of $22.3 million or 75% over the prior year) and a decline in Canadian activity (decrease of $7.3 million or 26% over the prior year).
Current Quarter gross profit from continuing operations of $1.6 million decreased $0.5 million (25%) over the Prior Quarter and decreased $1.6 million (50%) over the Previous Year Quarter. For the six months ended June 30, 2013, gross profit from continuing operations of $3.7 million decreased $5.1 million (58%) over the same period in the prior year. Current Quarter gross profit percentage of 13.2% increased 0.3 percentage points over the Prior Quarter and increased 1.4 percentage points over the Previous Year Quarter. The reduction in gross profit dollars is due to decreased revenue. The increase in gross profit percentages is due to continued focus on improving margins.
Current quarter EBITDAS from continuing operations of negative $0.5 million decreased $0.6 million over the Prior Quarter and decreased $1.2 million over the Previous Year Quarter. For the six months ended June 30, 2013, EBITDAS from continuing operations of negative $0.5 million represents a decrease of $4.8 million over the same period in the prior year. The decrease in EBITDAS is due to decreased revenue and the negative EBITDAS is due to revenue dropping below the Company's break-even point.
Selected Financial Position Information | |||
($000's, except ratios) | June 30, 2013 |
December 31, 2012 |
December 31, 2011 |
Total assets | 50,241 | 58,155 | 55,529 |
Total current assets | 35,124 | 43,066 | 40,720 |
Total liabilities | 19,977 | 26,246 | 24,476 |
Total current liabilities | 10,291 | 16,111 | 21,915 |
Total bank indebtedness | 1,000 | 1,200 | Nil |
Total interest bearing debt | 8,594 | 8,669 | 1,149 |
Total equity | 30,264 | 31,909 | 31,053 |
Current ratio (current assets divided by current liabilities) |
3.41 to 1:00 | 2.67 to 1.00 | 1.86 to 1.00 |
Debt to equity ratio (interest bearing debt divided by shareholders' equity) |
0.28 to 1.00 | 0.27 to 1.00 | 0.04 to 1.00 |
The Company continues to maintain a very strong financial position with a strong current ratio at 3.4 to 1.00 and a debt to equity ratio of 0.28 to 1.00.
OUTLOOK
At the mid-point of 2013, the Company is faced with the challenges of reduced revenues combined with low gross profit margins. These two areas are the primary focus for management.
Low Canadian industry activity in 2013 (experienced to date and expected for the remainder of the year) and a slowdown in new equipment commitments is having a downward effect on domestic revenue in 2013. Industry expectations for western Canada for the remainder of 2013 are expected to be slightly lower than activity experienced in 2012. The Canadian Association of Oilwell Drilling Contractors (CAODC) has forecast the number of wells to be drilled (on a completion basis) for 2013 to be 10,409 which is 6% lower than 2012 activity levels. Continued uncertainty over commodity prices combined with continued low natural gas pricing is the primary factor impacting these low levels of activity. Additionally, we are expecting that new rig builds for use in western Canada during the remainder of 2013 will be minimal. It is expected that most new capital projects will come from outside Canada during 2013.
Internationally, Hyduke continues to actively market its products and services in the Russian Federation, India, South America, North Africa, Middle East and Asia-Pacific. While the project decision making cycle is longer on international work, active quoting continues on a significant number of international opportunities. The Company continues to invest in product development and personnel in order to achieve more consistent success winning international projects.
Continued development of Hyduke's international sector will yield long-term positive impacts for Hyduke. International projects tend to be larger, more turn-key in nature and have significant benefits throughout the Hyduke group due to the integrative nature of the Hyduke's business model. Not only will the manufacturing segments of the organization benefit, but a positive impact will be felt in the Life Cycle Management businesses such as repair and maintenance, inspections and certification, and consumables. The Company will continue to focus on increasing market share through marketing Hyduke's Life Cycle Management and Single Source Supplier platforms to customers. These platforms benefit customers by offering continued support throughout the useful life of their equipment and by offering a wide array of consistent, reliable services from a single source.
Improved manufacturing margins is a major focus of the management team. We are investing in key areas that management feels are important to improve margins. Areas such as engineering and drafting, project management, electrical, hydraulic and mechanical functions will be strengthened to differentiate Hyduke in the marketplace but costs will be incurred while these changes are implemented. Management is confident this investment will result in improved margins going forward. At the same time, management is also aggressively looking for cost reductions by reducing personnel and facility expenses.
We are confident that the strong efforts of our sales and marketing team will result in a more consistent stream of significant and accretive turn-key projects. Additionally, management's focus on manufacturing processes, project management and the investments in all key areas and processes will result in improved margin percentages.
Forward Looking Statements
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
Hyduke is an integrated oilfield services company with over thirty-five years experience in the manufacture, repair and distribution of oilfield equipment and supplies in Canada and worldwide. Hyduke specializes in providing customized, integrated solutions to the drilling and well service industries including:
- Turn-Key Equipment - drilling rig, work-over rig and service rig packages including in-house design, engineering and drafting, major component procurement and overall project management;
- Life Cycle Management - inspection, certification, service, repair and supply services throughout the operating life of the drilling, work-over or well service rig; and
- Single Source Supply - providing new capital equipment, repair and maintenance on existing capital equipment and supply of operating consumables.
Hyduke is headquartered in Nisku, Alberta, Canada and has facilities in Edmonton, Calgary, Nisku, Leduc, Red Deer and Lloydminster, Alberta and Houston, Texas, USA.
During the quarter, the Company restructured its business operations into two operating segments and one corporate services segment as follows:
Hyduke Rig Equipment: the Hyduke Rig Equipment segment includes the design, manufacture and refurbishment of land-based drilling rigs, workover rigs, well service rigs, drilling and well service support equipment.
Hyduke Supply and Service: the Hyduke Supply and Service segment includes the procurement and distribution of spare parts, equipment components, operating supplies and pneumatic controls to the drilling and well service industries, the service and repair of drilling rig, workover rig, service rig and truck mounted equipment, and the inspection and certification of drilling rig and well service equipment.
Corporate Services: The Corporate Services segment includes costs for management and administration, sales and marketing, accounting and finance and engineering and drafting services provided to all Hyduke operating segments.
The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this News Release.
SOURCE: Hyduke Energy Services Inc.
Gordon R. McCormack, CA
President and Chief Executive Officer
(780) 955-0355
Veronica Dutchak, CA
Chief Financial Officer
(780) 955-0355
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