EDMONTON, Alberta, Dec. 28, 2018 (GLOBE NEWSWIRE) — John Babic, President and CEO of Dalmac Energy Inc. (“Dalmac”) (TSX Venture “DAL”) announces the second quarter financial results for the period ended October 31, 2018

Business Highlights for Q2’19

• Pipeline capacity and lack thereof continued to exercise constraints on capital investments regarding drilling and work over projects.
• US refineries go down for maintenance- causes overload on rerouted pipelines – Canadian oil dives to $10/bbl.
• Take away capacity create glut of Alberta oil –Trans mountain pipeline on hold due to court ruling on deficiencies on environmental impact and intervener status.
• September freak snow storm creates spring breakup situations in the fall. Road bans introduced for half the month.
• All of the above played a role in pushing Q2’19 revenues down 8% from Q2’18. A substantial part of this decrease is the result of unprecedented 2-3-week road bans in September due to a freak snow storm. In Q2’19 the Company managed to get 5-10% rate increases from various key customers to compensate for increasing operating cost such as fuel – equipment etc. New rates are scheduled to roll in by the end of 2018.
• Gross margin decreased to 29% from 36%. Factors contributing to this were higher fuel costs, and decrease in tank rental utilization for month of September due to road bans. Customers expressed urgency to gear up as quick as possible in October- this necessitated that the Company hire subcontractors to complete various jobs on schedule, this also contributed to pushing margins down.
• EBITDAS dropped to $629K from $1.2M in Q2’18
• Income loss before tax was $(319) K compared to $82K last year. Due to the accumulated loss position – Company did not claim any tax credits for income taxes.
• The Company is still in the process of completing its annual review with our senior lender to rectify a covenant breach at year end. This process is taking longer than usual due to the senior lenders time and workflow constraints. The completion of the review and covenant amendments are expected to be completed before the end of Q3. Until the completion of the review and covenant amendment, all senior lender long term debt will be classified as current.

Outlook
On December 13^th, 2018, the International Energy Agency (“IEA”) announced it’s forecasting an oil supply deficit in 2019. World demand is expected to grow at 1.4 million bbls/day and with the recently announced OPEC production cuts of 1.2 million bbls/day, IEA is forecasting a supply deficit to occur by the second quarter of next year. Canada currently produces about 4.5 million bbls/day and over the course of the next year, is expected to increase production by an additional 220 thousand(K) bbls/day. In spite of this healthy production of fossil fuels, access to tide water and foreign markets is once again playing a heavy hand in discounting the price for our product. The price differential on getting Alberta oil to market, in October – November of this year, has pushed Western Canadian Select pricing down to$10/bbl, making it the cheapest oil in the world.

The recently announced Alberta government initiatives for a production reduction of about 9% will take about 300K bbls per day off the market starting in January of 2019. This should help alleviate some of the 35 million bbls of backlogged inventory which is one of the key factors contributing to the steep differential on Alberta oil. The above stated reduction is roughly equal to the difference between what we are producing and what we can squeeze into pipelines and rail cars.

Additional take away capacity relief, in the form of rail cars, will come on stream over the course of the year and should help clear about 300-400K bbls of oil per day, by the end of 2019. Also, the Enbridge line 3 pipeline upgrade is expected to be finished by third quarter of 2019 and should provide an additional 400K bbls/day of take away capacity. In addition, the overflow in existing US pipelines is expected to bleed off over the course of 2019 when additional US pipeline capacity from the Permian comes on stream.

With the relaxing of capacity constraints, the differential on oil pricing is expected to narrow and this is good news for those planning more capital expenditures in our industry. Given that 2018 was not exactly a banner year for industry capital expenditures and activity levels – 2019 is beginning to show signs of more promise. Dalmac’s customer base, which largely consists of all the majors in the oil industry, are preparing for a very intensive drilling and completion season starting in January of 2019. Much of this activity is taking place in one of the most prolific and liquids rich production formations in Canada – namely the Duvernay of west central Alberta, which lies in Dalmac’s “back yard”.

Dalmac is relying on its customers’ commitments for various drilling, maintenance and plant certification projects which are scheduled to run over the course of next year to help bolster our activity and utilization levels.  With the recent developments, described above, and the expectation that more take away capacity is soon coming on stream, we are confident that further development and activity in our industry will continue follow suit.

For more information contact:

John Babic – CEO – Dalmac Energy
Tel: 780-988-8510
Email: [email protected]

Statements throughout this report that are not historical facts may be considered ‘forward looking statements’.  Such statements are based on current expectations that involve risks and uncertainties, which could cause actual results to differ from those anticipated.  Important factors that can cause anticipated outcomes to differ materially from actual outcomes include the impact of general economic conditions, industry conditions, competition from other industry participants, volatility of petroleum prices, the ability to attract and retain qualified personnel, changes in laws or regulation, currency fluctuations, continued ability to access capital from available facilities and environmental risks.  References to “Dalmac’, the “Corporation”, “Company”, “us”, “we”, and “our” mean Dalmac Energy Inc. and its subsidiary Dalmac Oilfield Services Inc.  The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.  We seek safe harbor.