Le Lézard
Classified in: Oil industry, Business
Subject: ERN

Hyduke Announces Third Quarter 2017 Financial Results


NISKU, AB, Nov. 14, 2017 /CNW/ - Hyduke Energy Services Inc. ("Hyduke" or the "Company") (HYD ? TSX) announced operating results for the nine months ended September 30, 2017 and 2016. Hyduke's Financial Statements and Management Discussion & Analysis have been filed with regulators and are available at www.sedar.com.

Unless otherwise stated, tabular amounts presented are expressed in thousands of Canadian dollars and per-share figures in dollars per weighted average common share.

SELECTED FINANCIAL INFORMATION









Three months

ended

September 30,

2017

Year-over-

year

change

(%)

Three months

ended

September 30,

2016

(restated)(1)

Nine

months

ended

September

30, 2017

Year-

over-year

change

(%)

Nine months

ended

September 30,

2016

(restated)(1)

Revenue

15,213

422%

2,913

33,499

259%

9,323

Cost of goods sold

13,715

431%

2,582

30,158

235%

9,009

Gross margin(2)

1,497

352%

331

3,341

964%

314

Gross margin %

9.8%


11.4%

10.0%


3.4%

Selling, general &

administrative

2,892

137%

1,221

6,822

68%

4,062

EBITDAS(2)

continuing

operations

(1,214)

58%

(768)

(2,939)

(8%)

(3,212)

Net profit (loss)

from continuing

 operations

(1,797)

68%

(1,072)

(4,456)

8%

(4,143)

Net loss

(1,809)

34%

(1,607)

(4,464)

(16%)

(5,301)

Per share ? basic &

diluted

(0.03)


(0.05)

(0.07)


(0.17)


September 30, 2017


December 31, 2016

Total assets

35,138


18,214

Total liabilities

19,281


10,218

(1)

Certain amounts related to selling and distribution, general and administrative, and other operating income and expenses were reclassified from Cost of Goods Sold.

(2)

See "Non-GAAP Measures" in the Company's Management Discussion & Analysis

 

Revenue




Three Months Ended September 30

Nine Months Ended September 30


2017

2016

Change (%)

2017

2016

Change (%)

Manufacturing & Fabrication

13,029

1,064

1125%

26,070

4,735

451%

Supply & Service

2,652

1,877

41%

8,243

4,654

77%

Corporate Services

6

8

25%

17

19

(11%)

Elimination Entries

(474)

(35)

1254%

(831)

(84)

1133%

Total Revenue

15,213

2,913

422%

33,499

9,324

259%









The nine month period ended September 30, 2017 showed a 451% increase in revenues to $26,070. For the three months ended September 30, 2017, the Manufacturing & Fabrication segment generated $13,029 of revenue, an 1125% increase over the same period in the prior year. Approximately 40% of the third quarter increase reflects revenues from acquisitions and 60% from increased revenues from organic growth. The organic growth reflects increased revenues related to the AltaGas project, oil sands projects and the diversification of its products and services to include the manufacture and repair of storage tanks and custom steel fabrication.

Consistent with the increase in operating drilling and service rigs, Supply & Service revenue increased 77% to $8,243 during the nine months of 2017 compared to the same period of 2016, and 41% to $2,652 for the three month period. The sector experienced an overall increase in activity resulting from an increase in oil prices in addition to a longer winter drilling season compared to the early spring break up experienced in 2016. These factors resulted in an increase in demand for oilfield supplies, pneumatics and inspection services.

Gross margin (see "Non-GAAP Measures") for the three months ended September 30, 2017 was $1,497 or 9.8% compared to gross margin of $331 (11.4% of revenue) in the third quarter of 2016. The increased gross margin reflects a combination of increased revenues, operating efficiencies, and price improvements offset by some increases in SG&A costs.

SG&A expenses for the nine months ended September 30, 2017 was $6,825, an increase of 156% compared to $4,062 for the nine months ended September 30, 2016. The three month period ending September 30, 2017 increased 137%, or $1,671, over the same period in 2016. SG&A costs from the Company's acquisitions account for approximately 57% of this increase. The remaining increase is comprised of the removal of employee wage rollbacks and additional staff for the AltaGas project.

Negative EBITDAS from continuing operations was $1,214 for the nine months ended September 30, 2017 compared to a negative EBITDAS of $768 in the same period of 2016.

Depreciation and amortization of $365 increased from $163 in the third quarter of 2016. The increase in the expense was due to the property, plant, and equipment acquired with the business acquisitions.

Stock based compensation was $29 compared to $17 in the third quarter of 2016.

The Company recorded $161 in interest charges during the third quarter of 2017, a decrease of $17 from 2016. The decrease is due to the payout of the term loan in August 2017.

Continuing operations net loss for Q3/17 was $(1,797) compared to a loss of $(1,072) in Q3/16.

MANAGEMENT REVIEW AND OUTLOOK

The third quarter and first nine months of the current fiscal year were a combination of success and challenges.

On the positive side, due to acquisitions, new contract wins in the process and production facilities sector of the upstream and downstream oil and gas industry, and activity improvements in conventional oilfield activity, total sales in the first nine months ended September 30 were over three times higher than the same period in the 2016 fiscal year. In the third quarter, revenue exceeded $15 million for the first time since the third quarter of 2013. With the exception of the BW Rig supply business, the majority of the revenue Hyduke has generated in 2017 is from customers and industry sectors the company has never worked for before. 

However, the financial results indicate the marketplace for certain product lines remains extremely competitive resulting in continuing challenged gross margins. Combined with higher fixed costs for sales, general and administration expenses because of the acquisitions and the reversal of wage rollbacks in prior year's cuts in the second quarter, the EBITDA gain over the first nine months was only marginal and for Q3 the EBITDA loss was higher than in the prior year.

Management continues to take the necessary measures to restore positive cash flow as a first step to sustainable profitability.

A major event in the third quarter was the refinancing of the Company's long-term debt whereby a loan due in August of 2017 was replaced with a multi-year mortgage on its real estate assets which matures in 2043. This gives the Company enhanced financial flexibility and certainty and allows management to place more focus on operations.

Another major event in the third quarter was the hiring of two key members of the senior executive team in the positions of Chief Financial Officer and Vice-President of Operations. Based in Edmonton, Jimmie Yeung and Boyd Mahon respectively have decades of experience in financial management in a diverse range of industries and manufacturing, fabrication and assembly of major capital assets, primarily in Hyduke's key focus areas of upstream, midstream and downstream oil and gas. The marketing team in Calgary has been refocused to ensure it is selling the entire Hyduke product and service suite to the vast range of clients headquartered in that city.

Divisionally, four of five major business units are meeting or exceeding expectations. BW Rig, a provider of operating supplies to drilling and service rigs, is performing positively as expected due to increased field activity in western Canada. Opportunities to expand BW into new geographical markets continue to be investigated. Avalanche Metal, the new manufacturing division in Kelowna, is enjoying its highest levels of activity since 2014. Avalanche operates in a lower cost labor market than Alberta hence the Company is continuing to send Avalanche more business. Hyduke's main fabrication facility in Nisku is steady having completed some interesting new equipment components for the oil sands tailing pond cleanup operations of a major bitumen miner. The AltaGas project on Ridley Island on Canada's west coast, which kicked off major operations in July, is unfolding as planned.

The major obstacle to improved operating margins is related to the Western Manufacturing acquisition. This company was in severe financial difficulty when Hyduke purchased the capital and inventory assets at cost effective April 1, 2017. The company had been in survival mode for some time and had a backlog of projects quoted at prices too low to cover all costs. Hyduke has discontinued quoting any new business below an acceptable gross margin and has made significant reductions in fixed costs as Western is integrated into Hyduke's administrative, management and marketing infrastructure.

Eliminating operating losses at Western was a significant focus of the Company in Q3 as it restructured its long-term debt and augmented its senior executive team. It will be the primary objective for the remainder of the 2017 fiscal year and until the issue is resolved. Field production tank manufacturing is a very competitive business but Western has some fundamental strengths, one being its location in the heart of the Montney natural gas and liquids play. Of the 209 active drilling rigs in western Canada on November 7 according to the JWN Rig Locator, 132 or 63% are operating in PSAC activity areas B2, A2, A6 and A7 which encompasses all of the Montney and the increasingly attractive Duvernay play to the east and south. Virtually all of these wells are focused on liquids production which requires tankage.

The Company continues to explore new business opportunities in new markets and with new customers. In the past nearly 100% of Hyduke's business came entirely from drilling and well servicing contractors. Today the client base includes some of Canada's largest and most respected oil and gas producing and midstream companies. This gives the Company credibility with a growing range of clients looking for a reliable and trustworthy supplier with capacity, engineering, integrity and a transparent commitment to safety. 

Additional information relating to Hyduke is available under the Company's profile on SEDAR website at www.sedar.com and www.hyduke.com

Forward looking information

This news release contains forward-looking information relating to the expectations of management that the integration process will lead to improvements in operations and efficiency for both Western and Hyduke. Such forward-looking information is subject to important risks, uncertainties and assumptions. The results or events predicated in this forward-looking information may differ materially from actual results or events. As a result, you are cautioned not to place undue reliance on this forward-looking information.

Forward-looking information is based on certain factors and assumptions regarding, among other things, general assumptions respecting the business and operations of Hyduke and economic factors. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward looking-information is subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what is currently expected. These factors include but are not limited to risks associated with the failure of the Company to obtain the benefits of integration; volatility in market prices for oil and natural gas; and the general economic conditions in Canada.

You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, the Company is under no obligation and does not undertake to update this information at any particular time, except as required by law.

About Hyduke

Trading on the TSX under the symbol "HYD," Hyduke Energy Services Inc. is a supplier of equipment and services to the oil and gas drilling and well servicing industry. 

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this News Release.

SOURCE Hyduke Energy Services Inc.


These press releases may also interest you

28 mar 2024
Curio Legacy Ventures (Curio), a frontrunner in nuclear technology innovation, proudly announces a strategic partnership with Navarro Research and Engineering, Inc. (Navarro). This collaboration signals a significant step forward in advancing nuclear...

28 mar 2024
Arctech has recently signed a contract for the 500MW Manah I power plant project in Oman, following its successful bid for the 588MW Manah II PV project in Oman earlier in 2023. This consecutive project win showcases Arctech's customized solutions...

28 mar 2024
The "Fuel Cells - Global Strategic Business Report" has been added to  ResearchAndMarkets.com's offering. The global market for Fuel Cells estimated at US$11.4 Billion in the year 2023, is projected to reach a revised size of US$40.7 Billion by...

28 mar 2024
Peabody today filed its Proxy Statement for its 2024 Annual Meeting of Stockholders to be held on May 9, 2024, which disclosed that current members of Peabody's Board of Directors Samantha B. Algaze and David J. Miller have determined that they will...

28 mar 2024
Quanta Services, Inc. announced today that its Board of Directors has declared a quarterly cash dividend to stockholders of $0.09 per share, or a rate of $0.36 per share on an annualized basis. The dividend is payable on April 17, 2024, to...

28 mar 2024
ONEOK, Inc. will release first quarter 2024 earnings after the market closes on April 30, 2024. ONEOK's executive management will participate in a conference call the following day.      What:              ONEOK first quarter 2024 earnings...



News published on and distributed by: