Market Overview

Strad Energy Services Announces Third Quarter Results

Share:

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES ("U.S.")

The news release contains "forward-looking information and statements" within the meaning of applicable securities laws. For full disclosure of the forward-looking information and statements and the risks to which they are subject, see the "Cautionary Statement Regarding Forward-Looking Information and Statements" later in this news release.

CALGARY, Alberta, Nov. 09, 2017 (GLOBE NEWSWIRE) -- Strad Energy Services Ltd., (TSX:SDY) ("Strad" or the "Company"), a North American-focused, energy services company, today announced its financial results for the three and nine months ended September 30, 2017. All amounts are stated in Canadian dollars unless otherwise noted.

THIRD QUARTER SELECTED FINANCIAL AND OPERATIONAL HIGHLIGHTS:

•      Revenue of $33.9 million increased 67% compared to $20.3 million for the same period in 2016;

•      Adjusted EBITDA(1) of $9.4 million compared to $1.2 million for the same period in 2016;

•      Net income and income per share was $0.6 million and $0.01, respectively, compared to a net loss and loss per share of $(3.7) million and $(0.09) for the same period in 2016;

•      Revenue from the energy infrastructure customer vertical for the three months ended September 30, 2017, decreased to $10.8 million or 17% from $13.0 million from the same period in 2016; 

•      During the third quarter, the Company amended and extended its credit facilities by two years to September 29, 2020.  The amendments include a return to pre-covenant relief period maximum ratio of Funded Debt to covenant EBITDA(3) of 3.0:1 and a minimum ratio of Interest Expense to covenant EBITDA(3) of 3.0:1;

•      Capital additions totaled $7.2 million during the third quarter of 2017; and

•      Total funded debt(2) to covenant EBITDA(3) ratio was 0.9 to 1 at the end of the third quarter of 2017 compared to 1.2 to 1 at the end of the second quarter of 2017.

Notes:
(1)       Earnings before interest, taxes, depreciation and amortization and other adjustments ("adjusted EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation".
(2)       Funded debt includes bank indebtedness plus long-term debt plus current and long-term obligations under finance lease less cash.
(3)       EBITDA is based on trailing twelve months adjusted EBITDA plus share based payments, plus additional one time charges.

"Significant year-over-year improvements in our financial performance continued into the third quarter with strong results from both our Canadian and U.S. Operations," said Andy Pernal, President and Chief Executive Officer of Strad. "We are pleased with the steady improvement in our operations south of the border and expect this trend to continue as we focus on increasing our market share and pricing. During the third quarter, the improved EBITDA performance in our Canadian Operations continued to be driven by matting rental and service on large energy infrastructure projects. On balance, our strong financial performance in 2017 and strong balance sheet have us positioned well heading into 2018 and ready to take advantage of opportunities as the macro environment continues to improve."

"Our funded debt to EBITDA leverage ratio continued to decline during the third quarter due to the continued improvement in our adjusted EBITDA results year-over-year," said Michael Donovan, Chief Financial Officer of Strad. "With improving market fundamentals, our focus will remain on preserving the strength of our balance sheet and maintaining the cost structure we've established as we continue to grow and scale the business."

THIRD QUARTER FINANCIAL HIGHLIGHTS

($000's, except per share amounts) Three months ended September 30,   Nine months ended September 30,
  2017   2016   % chg.     2017   2016   % chg.  
               
Revenue 33,923   20,277   67     90,077   45,115   100  
Adjusted EBITDA(1) 9,418   1,247   655     19,505   (338 ) nm  
Adjusted EBITDA as a % of revenue 28 % 6 %     22 % (1 )%    
Per share ($), basic 0.16   0.03   433     0.34   (0.01 ) nm  
Per share ($), diluted 0.16   0.03   433     0.34   (0.01 ) nm  
Net income (loss) 598   (3,746 ) nm     (3,911 ) (13,697 ) nm  
Per share ($), basic 0.01   (0.09 ) nm     (0.07 ) (0.36 ) nm  
Per share ($), diluted 0.01   (0.09 ) nm     (0.07 ) (0.36 ) nm  
Funds from operations(2) 11,397   2,881       23,000   3,839    
Per share ($), basic 0.19   0.01   1,800     0.40   0.10   300  
Per share ($), diluted 0.19   0.01   1,800     0.40   0.10   300  
               
Capital expenditures(3) 7,233   3,215       16,967   3,806    
               
Total assets 189,388   188,965       189,388   188,965    
Long-term debt 18,886   25,761   (27 )   18,886   25,761   (27 )
Total long-term liabilities 30,695   37,171   (17 )   30,695   37,171   (17 )
Common shares - end of period ('000's) 60,013   48,379       60,013   48,379    
Weighted avg common shares ('000's)              
Basic 58,844   40,493       57,531   38,123    
Diluted 59,234   40,493       57,531   38,123    

Notes:

(1)      Earnings before interest, taxes, depreciation and amortization and other adjustments ("adjusted EBITDA") is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". 
(2)      Funds from operations is cash flow from operating activities excluding changes in non-cash working capital. Funds from operations is not a recognized measure under IFRS; see "Non-IFRS Measures Reconciliation". Strad updated 2016 comparative note per Financial Statement note disclosure as 2016 funds from operations have amounts that were reclassified to conform to the current presentation of the interim consolidated statement of cash flows.
(3)      Includes assets acquired under finance lease and purchases of intangible assets.

FINANCIAL POSITION AND RATIOS

($000's except ratios) As at September 30, 2017
  As at December 31, 2016
 
     
Working capital (1) $ 24,138   $ 15,636  
Funded debt (2) 23,286   29,025  
Total assets 189,388   185,321  
     
Funded debt to EBITDA (3) 0.9 : 1
  3.2 : 1
 

Notes:

(1)      Working capital is calculated as current assets less current liabilities.
(2)      Funded debt includes bank indebtedness plus long-term debt plus current and long-term obligations under finance lease less cash.
(3)      EBITDA is based on trailing twelve months adjusted EBITDA plus share based payments, plus additional one time charges. See "Non-IFRS Measures Reconciliation".

THIRD QUARTER RESULTS

Strad reported an increase in revenue and adjusted EBITDA of 67% and 655%, respectively during the three months ended September 30, 2017, compared to the same period in 2016. Strad's third quarter results were driven by increased drilling activity in the WCSB and Strad's U.S. operating regions, in addition to increased customer pricing.  Furthermore revenue was impacted by the increase in utilization within the Canadian surface equipment product lines and both of the U.S. product lines, due to the increase in drilling activity. As a result adjusted EBITDA margin percentage increased to 28% compared to 6% in the prior year, due to increased revenue and a relatively fixed cost structure.

Revenue generated from Strad's energy infrastructure customer vertical decreased to $10.8 million during the third quarter of 2017 compared to $13.0 million in 2016. The decrease in energy infrastructure revenue is primarily a result of lower Product sales due to a one time sale during the third quarter of 2016 that did not re-occur this year. The energy infrastructure vertical continued to be primarily driven by matting in Canada. For the nine months ended September 30, 2017, energy infrastructure revenue has totaled $30.2 million of total revenue as compared to $22.6 million.

Strad's Canadian Operations reported an increase in revenue and adjusted EBITDA of 70% and 237%, respectively, during the three months ended September 30, 2017, compared to the same period in 2016. Increased revenue was a result of higher drilling activity and continued improved pricing within the matting vertical during the  third quarter. Additionally surface equipment utilization increased by 26% as compared to the third quarter of 2016, which contributed to the increase in revenue for the third quarter of 2017. Energy infrastructure contributed $9.4 million in revenue of the total $23.4 million revenue for the third quarter of 2017 compared to $8.8 million in revenue of $13.7 million revenue in the same period in 2016.

Strad's U.S. Operations reported an increase in revenue of 164% as compared to the same period in 2016. Rig counts in all three of Strad's targeted U.S. resource plays were higher during the third quarter of 2017 compared to the same period in 2016. Rig counts in the Bakken, Rockies and Marcellus regions increased by 89%, 114%, and 94%, respectively resulting in increased utilization for the third quarter of 2017 as compared to the same period in 2016. Revenue for the third quarter of 2017 was also impacted by increased customer pricing as compared to the same period in 2016. Third quarter EBITDA increased for Q3 2017 to $1.8 million as compared to a loss of $0.3 million in Q3 2016, as a result of a lower cost structure in the U.S. due to our focus on reducing overhead costs and discretionary spending.

Strad's Product Sales reported a decline in revenue of 23%, primarily the result of lower in-house manufactured products and third party sales which decreased to $0.2 million and $nil, respectively, during the three months ending September 30, 2017, as compared to $0.9 million and $2.1 million during the same period in  2016. This was offset by an increase in rental fleet sales which increased to $2.6 million during the third quarter of 2017 as compared to $0.6 million in the same period in 2016.

During the third quarter of 2017, capital expend

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com