Hyduke Energy Services Inc. Announces Third Quarter 2009 Financial Results
TSX Symbol: HYD
------------------------------------------------------------------------- Selected Income Statement Three Months Ended Nine Months Ended Information ------------------------------------------------------------------------- ($000's, except per Sept 30 June 30 Sept 30 Sept 30 Sept 30 share data) 2009 2009 2008 2009 2008 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Revenue 7,258 6,892 15,292 23,799 43,052 ------------------------------------------------------------------------- Gross margin(1) (274) (299) 434 (57) 3,865 ------------------------------------------------------------------------- Gross margin (%) (3.8%) (4.3%) 2.8% (0.2%) 9.0% ------------------------------------------------------------------------- Adjusted gross margin(1) 547 (88) 1,387 1,194 5,283 ------------------------------------------------------------------------- Adjusted gross margin (%) 7.5% (1.3%) 9.1% 5.0% 12.3% ------------------------------------------------------------------------- EBITDAS(1) (1,581) (1,728) (875) (4,259) 62 ------------------------------------------------------------------------- Adjusted EBITDAS(1) (966) (1,728) (148) (3,644) 788 ------------------------------------------------------------------------- Net loss (1,398) (1,452) (994) (3,731) (1,043) ------------------------------------------------------------------------- Net loss per share - basic and diluted ($) (0.064) (0.066) (0.045) (0.170) (0.047) ------------------------------------------------------------------------- (1) The Company uses certain non-GAAP measures as indicators of financial performance and believes that these non-GAAP measures provide useful supplemental information to investors. Gross margin, adjusted gross margin, EBITDAS and adjusted EBITDAS are measures used by the Company that do not have a standardized meaning prescribed by GAAP. The Company's method of calculating these non-GAAP measures may differ from other companies and may not be comparable to similar measures presented by other companies. Gross margin is defined as revenue less cost of sales. Cost of sales includes direct materials, direct labor, variable and fixed manufacturing overhead, and other costs closely associated with the manufacture of goods; costs of service and supply inventory including costs required to locate the inventory in its current location; provisions to reduce inventory to estimated net realizable value; and contract loss provisions. Adjusted gross margin is defined as gross margin before manufacturing related amortization, provisions to reduce inventory to estimated net realizable value, and contract loss provisions. EBITDAS is defined as earnings before interest, taxes, depreciation and amortization, gain or loss on sale of property, plant and equipment, gain or loss on foreign exchange, and stock-based compensation. Adjusted EBITDAS is defined as EBITDAS before goodwill impairment charges, provisions to reduce inventory to estimated net realizable value, contract loss provisions and allowance for doubtful accounts receivable provisions.
Revenue levels continue to be severely negatively impacted by a significant reduction in drilling and well service activity levels in Western
Gross margin of $(274) thousand for the three months ended
EBITDAS of negative
Net loss of
------------------------------------------------------------------------- Selected Balance Sheet Information As At ------------------------------------------------------------------------- ($000's, except ratios) September 30 December 31 December 31 2009 2008 2007 ------------------------------------------------------------------------- Total assets 39,155 48,971 48,552 ------------------------------------------------------------------------- Total liabilities 11,293 17,414 12,286 ------------------------------------------------------------------------- Total current assets 27,386 36,479 33,494 ------------------------------------------------------------------------- Total current liabilities 9,507 15,187 9,871 ------------------------------------------------------------------------- Total bank indebtedness 3,886 6,975 2,243 ------------------------------------------------------------------------- Total long-term debt 1,953 2,267 2,359 ------------------------------------------------------------------------- Total shareholders' equity 27,862 31,557 36,266 ------------------------------------------------------------------------- Current ratio (current assets divided by current liabilities) 2.88 to 1.00 2.40 to 1.00 3.39 to 1.00 ------------------------------------------------------------------------- Debt to equity ratio (long-term debt divided by shareholders' equity) 0.07 to 1.00 0.07 to 1.00 0.07 to 1.00 -------------------------------------------------------------------------
Total assets of
Net working capital (current assets less current liabilities) of
The Company's current ratio is 2.88 to 1.00 and debt to equity ratio is negligible at 0.07 to 1.00. The Company is focusing on managing cash flow and is working to convert current assets into cash and eliminate bank indebtedness. This balance sheet strength will allow Hyduke to weather the economic and financing challenges currently facing the Company.
OUTLOOK
Western Canadian industry results for 2009 and expectations for 2010 are among the worst years historically as measured by the number of wells drilled. The Canadian Association of Oilwell Drilling Contractors (CAODC) have forecast the number of wells to be drilled (on a completion basis) in 2010 to be 8,523 which is consistent with the poor activity realized in 2009. The Petroleum Services Association of
Internationally, the industry continues to experience a significant slowdown and is continuing to be depressed as a result of the worldwide credit crisis. However, Hyduke has been successful in obtaining in early October a significant drilling rig equipment order of
The reduced levels of industry activity experienced in 2009 and forecast for 2010 are severely negatively impacting revenue levels in Hyduke's Life Cycle Management businesses such as repair and maintenance, inspections and certification, and consumables. We 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.
Overall, management recognizes that we are operating in a very challenging economic environment. The impact of the downturn in the worldwide credit markets precipitated a global economic slowdown. Continued weakness in North American natural gas prices is resulting in an increased focus on cost control in both capital and operating budgets for companies in our industry sector. Management is responding to these challenging conditions. We have experienced significant operating losses over the past year and recent quarter that are primarily due to reductions in revenue levels due to a severe industry downturn. As detailed in prior MD&A's, we have implemented, and will continue to implement, a number of cost cutting initiatives. We have reduced staffing levels by over 50% from
Hyduke's strong working capital position and low debt load in relation to equity will be a factor in protecting the Company from a prolonged downturn as well as allow the Company to pursue viable financing alternatives should conventional operating line lending become restricted.
Forward Looking Statements
This report contains certain forward-looking statements relating, but not limited to, 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. 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 years experience in the manufacture, repair and distribution of oilfield equipment and supplies in
- Turn-Key Equipment - drilling 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 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 and has facilities in
Hyduke operates in three operating segments. The Drilling Equipment segment includes manufacture and repair of land-based drilling rigs and drilling rig structures, supply and repair of drilling rig equipment, procurement and distribution of drilling supplies, supply and service of pneumatic controls, engineering and design of drilling rigs and inspection and certification of drilling rig equipment. The Well Service Equipment segment includes manufacture and repair of well service rigs, mobile and skid mounted pump units and other well service equipment, procurement and distribution of well servicing supplies, supply and service of pneumatic controls, engineering and design of well service rigs and inspection and certification of well service equipment. The Other Oilfield Services segment includes manufacture and distribution of cased hole and overburden drill bits and drilling systems, custom and production machining services, industrial sandblasting, painting and collision repair and distribution and repair of truck-mounted equipment including cranes, winches and dump boxes.
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For further information: 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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