CALGARY, ALBERTA–(Marketwired – Nov. 22, 2016) – Cordy Oilfield Services Inc. (the “Corporation” or “Cordy”) (TSX VENTURE:CKK) released today its third quarter 2016 results.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| ($000’s) | 2016 | 2015 | ($) Change | 2016 | 2015 | ($) Change | ||||||
| Revenue | ||||||||||||
| Environmental Services | 2,215 | 3,756 | (1,541 | ) | 6,809 | 13,775 | (6,966 | ) | ||||
| Heavy Construction | 84 | 1,083 | (999 | ) | 305 | 4,192 | (3,887 | ) | ||||
| Corporate | 3 | 4 | (1 | ) | 22 | 4 | 18 | |||||
| 2,302 | 4,843 | (2,541 | ) | 7,136 | 17,971 | (10,835 | ) | |||||
| Direct operating expenses | ||||||||||||
| Environmental Services | 1,631 | 3,408 | (1,777 | ) | 4,914 | 12,650 | (7,736 | ) | ||||
| Heavy Construction | 39 | 1,044 | (1,005 | ) | 412 | 4,724 | (4,312 | ) | ||||
| Corporate | (19 | ) | 2 | (21 | ) | (11 | ) | 2 | (13 | ) | ||
| 1,651 | 4,454 | (2,803 | ) | 5,315 | 17,376 | (12,061 | ) | |||||
| General and administrative expenses | ||||||||||||
| Environmental Services | 129 | 364 | (235 | ) | 266 | 891 | (625 | ) | ||||
| Heavy Construction | 6 | 130 | (124 | ) | 24 | 248 | (224 | ) | ||||
| Corporate | 245 | 508 | (263 | ) | 949 | 2,022 | (1,073 | ) | ||||
| 380 | 1,002 | (622 | ) | 1,239 | 3,161 | (1,922 | ) | |||||
| EBITDAS(1) | ||||||||||||
| Environmental Services | 455 | (16 | ) | 471 | 1,629 | 234 | 1,395 | |||||
| Heavy Construction | 39 | (91 | ) | 130 | (131 | ) | (780 | ) | 649 | |||
| Corporate | (223 | ) | (506 | ) | 283 | (916 | ) | (2,020 | ) | 1,104 | ||
| 271 | (613 | ) | 884 | 582 | (2,566 | ) | 3,148 | |||||
| Depreciation | 668 | 485 | 183 | 2,031 | 1,209 | 822 | ||||||
| Finance costs | 333 | 268 | 65 | 1,013 | 1,424 | (411 | ) | |||||
| Gain (loss) on disposal | (5 | ) | 44 | (49 | ) | 58 | (663 | ) | 721 | |||
| Share-based payments (recovery) | (6 | ) | (107 | ) | 101 | (16 | ) | (260 | ) | 244 | ||
| Loss before tax | (719 | ) | (1,303 | ) | 584 | (2,504 | ) | (4,276 | ) | 1,772 | ||
| Income tax expense | – | 27 | (27 | ) | – | 85 | (85 | ) | ||||
| Net loss from continuing operations | (719 | ) | (1,330 | ) | 611 | (2,504 | ) | (4,361 | ) | 1,857 | ||
| (1) EBITDAS is a non-IFRS term and is defined as earnings before interest, taxes, depreciation, amortization, impairment, and share-based payments. |
THIRD QUARTER ENDED SEPTEMBER 30, 2016
For the nine month period ended September 30, 2016, Cordy’s consolidated revenues decreased by $10.8 million, from the comparative period in 2015. This significant drop is due to Cordy’s initiatives in response to the economic conditions in western Canada and reduced demand for Cordy’s services.
The Environmental Services segment saw decreased revenue for the nine month period ended September 30, 2016, of $7.0 million, from the comparative period in 2015. The volatility of commodity prices has resulted in reduced capital expenditures of Cordy Environmental’s oilfield customers, which in turn has resulted in a pressure on rates and overall reduced demand. Despite the significant reduction of revenue, the segment produced $1.4 million higher EBITDAS compared to the comparative period in 2015. This can be attributable to the restructuring of Cordy, significant cost reductions implemented Company wide and the capitalization of leases that were previously classified as operating leases.
The Construction segment saw decreased revenue for the nine month period ended September 30, 2016, of $3.9 million, from the comparative period in 2015. This is directly related to the shutdown of all operations in the Heavy Construction segment except for the Pipeline and Facilities division, coupled with the reduced demand for construction services.
Despite the large drop in revenue, Cordy’s consolidated EBITDAS increased $3.1 million compared to the prior year, this can be attributable to the change in leases from operating to finance that occurred in the latter half of 2015, coupled with aforementioned cost cutting initiatives.
CORPORATE RESTRUCTURING AND OUTLOOK
The third quarter of 2016 marks a big milestone for Cordy following the announcement of a new executive management team, the subsequent completion of a rights offering for $1.3 million of proceeds and the announcement of up to an additional $1.0 million private placement. The funds raised in the rights offering, potential funds from a private placement and friendly lending terms from our major equipment financer will help provide a runway into 2017 and opportunity for new market share as competitors are unable to survive the prolonged downturn.
As the economy and the oil and gas industry adjust to the reality of low commodity prices, Cordy continues to cut costs, push sales and position itself to be a major player in these new market realities. Although revenue continues to be impacted, margins continue to improve as management’s strategy, centred around a focus on cost discipline and right sizing the business, is coming to fruition.
For the remainder of 2016, we anticipate a competitive environment, and continued pricing pressures; this will limit topline growth in Cordy’s business units. The Company will continue to rely on the Environmental Services segment’s diversity in the municipal and industrial services sector, until the Oil and Gas industry shows some signs of recovery, which management does not anticipate until the second half of 2017. Over the next six months Cordy will focus on increasing our utilization, which currently sits at 30% for the three months ended September 30, 2016, management will work to improve this to 65% over the coming winter season. Cordy will also continue to focus on debt repayment with cash from operations and continue discussions with our lenders on achieving better lending terms for Cordy.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
READER ADVISORY
This News Release contains certain statements that constitute forward-looking statements. These statements relate to future events or the Corporation’s future performance. All statements, other than statements of historical fact, that address activities, events or developments that the Corporation or a third party expects or anticipates will or may occur in the future, are forward-looking statements. These include the Corporation’s future growth, results of operations, performance and business prospects and opportunities; prevailing economic conditions; commodity prices; sourcing, pricing and availability of raw materials, components and parts, equipment, suppliers, facilities and skilled personnel; dependence on major customers; uncertainties in weather and temperature affecting the duration of the service periods and the activities that can be completed; regional competition; and other factors, many of which are beyond the Corporation’s control. These other factors include future prices of oil and natural gas and oil and natural gas industry activity, including the effect of changes in commodity prices on oil and natural gas exploration and development activity, the ability to complete strategic acquisitions and realize the anticipated benefits of any acquisitions that are completed, the Corporation’s outlook regarding the competitive environment it operates in, and the assumptions underlying any of the foregoing. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Corporation’s control, including those discussed under “Risks and Uncertainties” and elsewhere in this News Release, that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Corporation believes that the expectations reflected in those 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 News Release should not be unduly relied upon. These statements speak only as of the date of this News Release. The Corporation does not intend, and does not assume any obligation, to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable securities laws. The forward-looking statements contained in this News Release are expressly qualified by this cautionary statement.
Cordy uses the measures Earnings Before Interest, Taxes, Depreciation, Amortization and Impairment and Share Based Compensation (EBITDAS) in this news release. This measure does not have any standardized meaning prescribed by International Financial Reporting Standards (IFRS). It is, therefore, considered to be non-IFRS term and may not be comparable to similar measures presented by other entities. Management of Cordy uses these non-IFRS measures to improve its ability to compare financial results among reporting periods and to enhance its understanding of operating performance, liquidity and ability to generate funds to finance operations. This non-IFRS measure is also provided to readers as additional information on Cordy’s operating performance, liquidity and ability to generate funds to finance operations. EBITDAS is an approximate measure of the Cordy’s pre-tax operating cash flow and is generally used to better measure performance and evaluate trends of individual assets. EBITDAS comprises earnings before deducting interest and other financial charges, income taxes, depreciation and amortization, net income attributable to non-controlling interests and preferred share dividend.
Darrick Evong
Chief Executive Officer
403-262-7667
403-237-6278 (FAX)
IR@cordy.ca