Palko Environmental Ltd. Announces First Quarter 2011 Results

Loading...
Loading...

CALGARY, ALBERTA--(Marketwire - June 9, 2011) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.

Palko Environmental Ltd. ("Palko" or "the Company") PLK is pleased to announce our financial and operating results for the three months ended March 31, 2011, reflecting improving results and positive momentum.

The financial results presented for March 31, 2011 and all comparative information has been prepared in accordance with International Financial Reporting Standards ("IFRS") with effect from January 1, 2010. The following should be read in conjunction with management's discussion and analysis and the unaudited condensed financial statements and notes of Palko as at and for the three months ending March 31, 2011. Additional information relating to the Company is available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com.

Q1 2011 Selected Financial Highlights



----------------------------------------------------------------------------
Three months ended
March 31
$(000'S) 2011 2010 % Change
----------------------------------------------------------------------------
Revenue 8,485 5,314 60%
Operating expenses 5,030 3,282 53%
----------------------------------------------------------------------------
Operating margin 3,455 2,032 70%
Operating margin % 41% 38% 6%
----------------------------------------------------------------------------
Selling, general & administrative 1,414 791 79%
----------------------------------------------------------------------------
EBITDA(1) 2,041 1,241 64%
Per share, basic and diluted 0.09 0.08 10%
----------------------------------------------------------------------------
Income before trust unit adjustment 443 275 61%
----------------------------------------------------------------------------
Unrealized loss on change in fair value
of trust units liability 0 4,601 100%
----------------------------------------------------------------------------
Comprehensive income (loss) 443 (4,326) 110%
Per share, basic and diluted 0.02 (0.28) 107%
----------------------------------------------------------------------------
Funds flow from operations (1) 1,727 929 86%
Per share, basic and diluted 0.08 0.06 24%
----------------------------------------------------------------------------
Capital expenditures 939 106 786%
----------------------------------------------------------------------------
Weighted average shares outstanding -
basic 23,016,317 15,337,998 50%
Weighted average shares outstanding -
diluted 23,746,991 15,521,973 53%
----------------------------------------------------------------------------

1. These financial measures are Non-GAAP measurements and do not have any
standardized meaning prescribed by International Financial Reporting
Standards ("IFRS") and are therefore unlikely to be comparable to
measures presented by other reporting issuers. See management's
discussion and analysis available at www.sedar.com for a description of
the Non-GAAP measurements.



Q1-2011 Corporate Highlights



-- Revenues totaled $8.5 million for the first quarter of 2011 as compared
to $5.3 million in comparable period of 2010 reflecting a quarter-over-
quarter increase of 60%.

-- Palko continued to make operational improvements, increasing our
operating margin in Q1-2011 to $3.4 million from $2.0 million in Q1-2010
and as a % of revenue to 41% from 38% period over period.

-- Our EBITDA increased to $2 million ($0.09 per share) or 24% of revenue
in the first quarter of 2011 from $1.2 million ($0.08 per share) or 23%
of revenue in the first quarter of 2010.

-- In Q1 Palko focused on the execution of identifying facility and service
opportunities in western Canada. As announced March 28, 2011, Palko has
significantly advanced the development of two new facilities in
Saskatchewan. Palko has obtained wellbores and land consents in both
locations and commenced all regulatory approval processes. The Company
will initiate construction of these facilities upon final regulatory
approval and expects both facilities to be operational within 2011.
Funding for the new facilities will come from operating cash flow and
availability on our credit facilities.

-- Palko spent $0.9 million on property, plant and equipment in the first
quarter of 2011 compared to $0.1 million in Q1-2010.

-- Palko commissioned our mobile oil treatment system, obtained ERCB
approval for the technology and initiated direct marketing of the
service to our customers. Testing proves the unit is effective in custom
treating and waste oil facility applications and Palko is continuing
with delivery of additional units beginning in Q2.

-- In Q1 Palko continued to assess new technologies and processes to
service our customers through our Technical Advisory Group and 3rd party
technology providers. This included increased sampling and analysis of
facility streams and testing of different treatment and measurement
technologies.



Financial Overview

REVENUE

Revenue for the three months ended March 31, 2011 was $8,485, an increase of 60% as compared to $5,314 for the same period in 2010. An increase in activity and volumes at our facilities, the increased ownership of the Midale facility and increasing crude oil prices provided for much of this revenue growth. In addition our 2010 capital expenditure program expanded the capabilities at certain of our facilities, which impacted our Q1 2011 results positively and selective pricing increases were implemented in the first quarter of 2011 as well.

OPERATING COSTS AND OPERATING MARGIN

Operating costs in the first quarter of 2011 increased 53% to $5,030 compared to $3,282 in the first quarter of 2010. An increase in activity and volumes at our facilities as well as the inclusion of 100% of Midale's operating costs accounted for most of the increases. However, revenue increased by 60% and operating costs increased by only 53% in the first quarter of 2011 as compared to 2010, which increased our operating margins during the quarter, reflecting continued operating cost management throughout the Company.

The operating margin and operating margin percentage for the first quarter of 2011 was $3,455 and 41% compared to the $2,032 and 38% for the first quarter of 2010 which continues to reflect the efficiencies gained as we grow our Company and take advantage of the increased activity in our markets and the fixed cost nature of our business.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SGA)



----------------------------------------------------------------------------
Three months ended
March 31
$(000'S) 2011 2010
----------------------------------------------------------------------------
SGA expenses 1,414 791
----------------------------------------------------------------------------
SGA as % of revenue 17% 15%
----------------------------------------------------------------------------



Selling, general and administrative expenses ("SGA") and as a percentage of revenue for the three months ended March 31, 2011 and 2010 were $1,414, 17% and $791, 15% respectively The gross amount of SGA increased in the first quarter 2011 as compared to the same period in 2010 due to the acquisition of the Midale facility as at June 30, 2010, growth of the sales function established in the later part of 2009, the addition of a business development group in 2010 and filling positions in head office that have been vacant during the economic downturn that were not replaced until the third and fourth quarters of 2010. Increased SGA was also incurred to facilitate our conversion to International Financial Reporting Standards ("IFRS"). In addition, based on first quarter 2011 results, a bonus was accrued for our employees in the first quarter of 2011 where as in the same period of 2010 there was no bonus accrued for.

OUTLOOK

Palko's Q1 2011 first quarter results confirm that we are positioned to capitalize on the ongoing recovery in oil and gas exploration and production taking place in western Canada.

Recent increases in oil prices have bolstered both cash flows and lending values for producers. Moreover, equity markets have been supporting these increased producer returns with a steady stream of new equity issues. These compounding factors leave various producers with cash weighted balance sheets and extensive undrawn credit lines. We believe this sets the stage for a robust oilfield services sector in 2011 and for the foreseeable future.

As the oilfield market expands, most service sector operators experience very real pressures from the labour markets because activity levels strongly correlate with quantity and cost of labour. Palko's business model is comparatively unique in the sector since labour costs and staffing levels remain relatively fixed as activity levels rise. Moreover, Palko's labour costs are a modest percentage of our overall operating expenses. While we fully expect to see pressures on the cost of labour, Palko forecasts the cost of labour as a percentage of revenues to decrease as activity levels increase and pricing pressures decrease.

Technological innovation in the form of horizontal wells employing multistage fracturing technology in unconventional resource plays has brought a dramatic increase in activity in Southern Alberta. The Exshaw (also known as the Alberta Bakken) appears to be at the forefront of this renewed interest in the region and consequently in Q2-2011 Palko's Claresholm facility, which was previously underutilized has become one of Palko's top performing facilities.

Development of Palko's two new proposed plants in southern Saskatchewan is progressing well. We recently received final mineral right consents which mark the last of all consents required for both projects. Applications have been presented to regulators and we expect receipt of final approvals for these projects during the third quarter. Long lead transferable items have been ordered and Palko is preparing to commence site specific work as soon as final approvals are in hand. We anticipate generation of revenues at both of these sites in the later part of 2011 if the final approvals are received as anticipated.

During the fourth quarter of 2010 and first quarter of this year, Palko has been actively constructing equipment for our new onsite service division. To date, Palko has completed construction of two modular trailer mounted oil treatment units. Palko expects to see contributions from these units in the third quarter. The technology enables Palko to remove solids and water from oil much faster with a much smaller footprint than conventional tank treating, and provides capability to manage more troublesome emulsions that conventional tank treating basically cannot separate. Palko is encouraged with its operational experience in the early days of this new business model.

Palko's prudent investments in our infrastructure over the past few years leave the business poised to accept additional volumes at the majority of our facilities - where additional capacity is required Palko has plans underway to meet the incremental demand. First quarter results coupled with our near-term growth plans and increased capital budget to include the two new facilities in Saskatchewan have Palko excited for the future.

About Palko Environmental Ltd.

Palko provides processing and disposal of oilfield and industrial wastes through our network of waste handling and hydrocarbon recovery facilities located across Alberta and Saskatchewan. Our focus on client service extends to custom oil treating, waste oil reclamation and crude oil market access for customers.

Our services support all aspects and stages of oil and gas exploration and production, including drilling, fracturing, completion, production and subsequent abandonment and reclamation. In addition, Palko provides hydrocarbon recovery and waste management solutions for a variety of non-oilfield and industrial wastes of similar composition.

Additional information relating to the Company is available on SEDAR at www.sedar.com.

Certain statements in this press release constitute "forward-looking" statements that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Palko, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this document, such statements use such words as "may", "will", "intend", "should", "expect", "believe", "plan", "anticipate", "estimate", "predict", "potential", "continue", or the negative of these terms or other similar terminology.

Such statements include:



-- the Company's ability to capitalize on the ongoing recovery in oil and
gas exploration in Western Canada;
-- the expectation that two new facilities in Saskatchewan will be
operational and generating reserves within 2011;
-- the expectation that renewal at the Company's credit facility will be
granted in due course;
-- the ability of the Company to fund its 2011 capital expenditure program
from cash flow from operations and its credit facilities;
-- the expectation that the oilfield services sector will be robust in 2011
and for the foreseeable future;
-- the expectation that the Company's cost of labour as a percentage of
revenues will decrease;
-- the expectation that the Company will be able to meet incremental demand
at their facilities;
-- the expectation that the new modular trailer mounted oil treatment units
("mobile units") will provide revenue in the third quarter.



These statements reflect current expectations regarding future events and operating performance and speak only as of the date of this document. These statements are based on certain assumptions, including assumptions with respect to, prices for oil and natural gas, level of activity of oil and gas exploration, forecasts of capital expenditures and the sources of financing thereof, the amount, nature, timing and effects of capital expenditures, operating and other costs, business strategies and plans of management, tax treatment of the Company and competitive position of the Company in the oilfield waste management industry.

In particular, the Company has made the following assumptions:



-- that the recovery of the oil and gas exploration sector will continue
and a robust oilfield service sector will result;
-- that there will be the anticipated demand for mobile units;
-- that necessary consents for and regulatory approval of the Company's
proposed new Saskatchewan facilities will be obtained and all necessary
items for site development will be obtained;
-- that if built the new facilities will generate revenues in the later
part of 2011;
-- that the Company's bank will be satisfied with the Company's financial
condition and will be willing to extend its credit facility on terms
acceptable to the Company;
-- that existing facilities will be able to absorb increasing volumes.



Although Palko believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that these expectations will prove to be correct. There are risks which could affect Palko's future results and could cause the results to differ materially from those expressed in these forward looking statements including:



-- volatility in market prices for oil and natural gas;
-- liabilities and risks inherent in Palko's operations;
-- competition for, among other things, capital and skilled personnel;
-- incorrect assessments of the value of acquisitions;
-- increased competition;
-- technical and drilling problems;
-- equipment failure;
-- construction delays;
-- delivery delays;
-- the possibility that the Company will not come to terms with its bank on
a credit facility renewal and will not have access to other capital;
-- the possibility that the economic downturn will continue;
-- the possibility that there will not be the anticipated demand for the
onsite service division;
-- fluctuations in foreign exchange or interest rates and stock market
volatility;
-- uncertainties associated with changes in legislation, including but not
limited to changes in income tax laws.



Statements of past performance should not be construed as an indication of future performance. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors, including those discussed above, could cause actual results to differ materially from the results discussed in the forward-looking statements. Any such forward-looking statements are expressly qualified in their entirety by this cautionary statement. Moreover, Palko does not assume responsibility for the accuracy or completeness of such forward-looking statements.

The forward-looking statements included in this Press Release are made as of the date of this Press Release and Palko undertakes no obligation to publicly update or revise forward-looking statements other than as required by applicable laws. You should not place undue reliance on forward-looking statements.

Loading...
Loading...
Posted In: Press ReleasesBroadcasting & Cable TVConsumer Discretionary
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...