CALGARY,
AB, Sept. 13, 2022 /CNW/ - Calfrac Well
Services Ltd. ("Calfrac" or "the Company") (TSX: CFW) is
pleased to provide an operational and financial update for the
third quarter of 2022 for its continuing operations in the United States, Canada, and Argentina.
THIRD QUARTER OPERATIONAL UPDATE
FOR CONTINUING OPERATIONS
Since the end of the second quarter, the Company has experienced
improved utilization throughout all service lines in North America and Argentina. Coupled with net price increases,
Calfrac anticipates third-quarter revenue and Adjusted EBITDA to
deliver significant year-over-year growth.
UNITED
STATES
The Company continues to execute at a high level and provide
top-tier service quality to its clients which is expected to drive
margin expansion and very strong financial performance in the third
quarter. The pricing environment for the
United States pressure pumping sector effectively captures
inflationary input costs and is beginning to produce a return on
capital employed that approximates the value of services
provided.
CANADA
The Company began the third quarter with improved pricing and
anticipates better utilization of its four fracturing fleets and
five coiled tubing units during the quarter as compared to the
first quarter of the year. Calfrac continues to leverage its dual
fuel fracturing fleets and logistical expertise to service its
customers' operational needs while, at the same time, meeting their
ESG objectives. As pricing catches up to the evolving scope of work
requirements, the Company anticipates that its safe and efficient
execution will result in profitability growth.
ARGENTINA
The Company expects that significantly improved utilization in
the Vaca Muerta shale play stemming from a renewed contract for a
dedicated fracturing fleet will generate improved financial results
in the third quarter. During this past month, Calfrac set a
divisional record for operational efficiency by pumping 19 hours in
a day and is consistently pumping greater than 16 hours per day.
The Company's strong market position in Argentina supports Calfrac's ability to
generate enhanced financial returns.
FINANCIAL RESULTS FOR CONTINUING
OPERATIONS – IMPROVING OUTLOOK
Although the third quarter of 2022 has not yet finished,
Calfrac's management expects its third-quarter revenue from
continuing operations in the United
States, Canada, and
Argentina to range between
$400.0 million and $430.0 million, Adjusted EBITDA from continuing
operations to range between $75.0
million and $85.0 million, and
Adjusted EBITDA margin from continuing operations to range between
19% and 20%. These financial projections could be affected by
external factors that are outside of the Company's control, such as
adverse weather conditions, inflation, and changes in its clients'
schedules.
By comparison, Calfrac generated revenue from continuing
operations of $318.5 million and
Adjusted EBITDA from continuing operations of $39.3 million (Adjusted EBITDA margin of 12%) in
the second quarter of 2022. Calfrac generated revenue from
continuing operations of $262.9
million and Adjusted EBITDA from continuing operations of
$29.8 million (Adjusted EBITDA margin
of 11%) in the third quarter of 2021.
Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP
financial measures that do not have a standardized meaning and are
not consistently defined among issuers. See "Non-GAAP Measures"
below.
FOURTH-QUARTER OUTLOOK FOR
CONTINUING OPERATIONS
Calfrac anticipates improved utilization during the fourth
quarter versus the previous year as the supportive commodity price
environment and balanced fracturing market in North America motivates operators to maintain
their pace of development. The Company will continue its stringent
focus on cost management and will strive to adjust pricing, as
necessary, to enable it to reinvest in equipment and generate
sustainable long-term returns to shareholders.
The Company believes that this upcycle remains in the early
stages, as labor and supply chain constraints continue to limit
widespread growth in pressure pumping supply. As demand for
Calfrac's services increases, the Company will evaluate
opportunities to profitably reactivate fracturing crews into its
North American operations.
BALANCE SHEET UPDATE
Concurrent with the improvement in profitability, Calfrac's
Total Debt to consolidated trailing twelve month Adjusted EBITDA
ratio continues to trend lower and is expected to decrease to below
2.75 to 1.00 at the end of the third quarter (see "Non-GAAP
Measures" below). Deleveraging the balance sheet remains a key
priority for the Company and a primary method to return value to
its shareholders. The Company has initiated discussions on the
renewal of its credit facilities with its syndicate of lenders and
expects to have this extension completed before the end of
September.
CEO'S COMMENTS
Calfrac's Chief Executive Officer, Pat
Powell commented: "I am proud of the performance of our
operating and corporate teams who work hard every day and exhibit
the Company's brand promise. These improved results are, of course,
partially related to the improvement in pressure pumping
fundamentals but would not be possible without our employees'
commitment to doing the job safely, right, and profitably."
Calfrac's objective is to create value for its stakeholders by
prioritizing the following:
- Aligning with key customers in growing markets in North America and Argentina who value its operational expertise
and share its commitment for safe and efficient job execution
- Reactivating idle fleets into profitable areas to generate
additional free cash flow
- Deleveraging the balance sheet
CORPORATE PRESENTATION
Calfrac's latest Corporate Presentation can be found in the
Investors section of the Company's website and by clicking the
following link:
https://calfrac.investorroom.com/presentations-events
NON-GAAP MEASURES
Adjusted EBITDA, Adjusted EBITDA margin, and Total Debt to
consolidated trailing twelve month Adjusted EBITDA do not have any
standardized meaning under International Financial Reporting
Standards and are non-GAAP financial measures. These measures are
described and presented to provide readers with additional
information regarding the Company's financial results, liquidity
and ability to generate funds to finance its operations. These
measures may not be comparable to similar measures presented by
other entities and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
GAAP. Adjusted EBITDA is defined as net income or loss for the
period adjusted for interest, income taxes, depreciation and
amortization, unrealized foreign exchange losses (gains), non-cash
stock-based compensation, and gains and losses that are
extraordinary or non-recurring. Adjusted EBITDA margin is the
ratio of Adjusted EBITDA to revenue for the period expressed as a
percentage. Total Debt for the purposes of the Company's
Total Debt to consolidated trailing twelve month Adjusted EBITDA
calculation includes bank loans and long-term debt (before
unamortized debt issuance costs and debt discount) plus outstanding
letters of credit and is reduced by cash on hand with Calfrac's
lenders. Adjusted EBITDA for the purposes of this ratio includes
the results of the Company's Russian operations. These non-GAAP
measures should be read in conjunction with the Company's quarterly
financial statements and annual financial statements and the
accompanying notes thereto.
A quantitative reconciliation of Adjusted EBITDA from continuing
operations to net loss (a GAAP measure) for the second quarter of
2022 can be found under the heading "Non-GAAP Measures" in
Calfrac's management discussion and analysis for the three and six
months ended June 30, 2022 dated
August 2, 2022, which are available
at www.sedar.com and are incorporated herein by reference.
Calfrac's net loss for the second quarter of 2022 was $6.8 million.
A quantitative reconciliation of Adjusted EBITDA to net loss (a
GAAP measure) for the third quarter of 2021 can be found in under
the heading "Non-GAAP Measures" in Calfrac's management discussion
and analysis for the three and nine months ended September 30, 2021 dated November 5, 2021, which are available at
www.sedar.com and are incorporated herein by reference. Calfrac's
net loss for the third quarter of 2021 (inclusive of operations
from Russia, which were
subsequently discontinued and are held for sale) was $1.5 million. Adjusted EBITDA from continuing
operations for the third quarter of 2021 excludes Adjusted EBITDA
attributable to discontinued operations of $5.8 million.
***
Calfrac's common shares and warrants are publicly traded on the
Toronto Stock Exchange under the trading symbols "CFW" and
"CFW.WT", respectively.
Calfrac provides specialized oilfield services to exploration
and production companies designed to increase the production of
hydrocarbons from wells with continuing operations focused
throughout western Canada,
the United States and
Argentina. During the first quarter of 2022, management
committed to a plan to sell its Russian division, resulting in the
associated assets and liabilities being classified as held for sale
and presented in the Company's financial statements as discontinued
operations. The results of the Company's discontinued operations
are excluded from the discussion and figures presented above unless
otherwise noted. See Note 3 to the Company's consolidated interim
financial statements for the three and six months ended
June 30, 2022 for additional
information on the Company's discontinued operations.
This press release contains forward-looking statements and
forward-looking information within the meaning of applicable
securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "may", "will", "project",
"should", "believe", "plans", "intends" and similar expressions are
intended to identify forward-looking information or statements.
More particularly and without limitation, this press release
contains forward-looking statements and information relating to the
activity, utilization and outlook for Calfrac's operating divisions
in Canada, the United States and Argentina in the third and fourth quarter of
2022; the supply and demand fundamentals and prospects for the
pressure pumping industry; input costs, margin and service pricing
trends and strategies; the Company's service quality and execution;
operating and financing strategies, performance, priorities,
metrics and estimates; preliminary estimates of Calfrac's revenue,
Adjusted EBITDA and Adjusted EBITDA margin for continuing
operations for the three months ended September 30, 2022; the trend for and expected
reduction of Calfrac's Total Debt to consolidated trailing twelve
month Adjusted EBITDA ratio as of September
30, 2022; the anticipated renewal of the Company's credit
facilities, and the Company's expectations and intentions with
respect to the foregoing. Calfrac's financial statements for the
three months ended September 30, 2022
are not yet complete. Accordingly, the Company is presenting
preliminary estimates of certain financial information for the
three months ended September 30,
2022. These estimates are preliminary and unaudited and are
inherently uncertain and subject to change as Calfrac completes its
financial statements for the three months ended September 30, 2022. Given the timing of these
estimates, the Company has not completed its customary financial
closing and review procedures as of and for the three months ended
September 30, 2022, and there can be
no assurance that Calfrac's final results for the three months
ended September 30, 2022 will not
differ from the preliminary estimates set forth in this press
release.
These forward-looking statements and information are based on
certain key expectations and assumptions made by Calfrac in light
of its experience and perception of historical trends, current
conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances,
including, but not limited to, the following: the economic and
political environment in which the Company operates, including the
anticipated impacts of inflation on the Company's operations and
demand for its services; the Company's expectations for its current
and prospective customers' capital budgets, schedule and
geographical areas of focus; the seasonal weather patterns
affecting the Company's operations; industry equipment
levels; the effect of competition on the Company's ability to
retain current clients and obtain new ones; the effect of
environmental, social and governance factors on customer and
investor preferences and capital deployment; the Company's existing
contracts and the status of current negotiations with key customers
and suppliers; the continued effectiveness of cost reduction
measures instituted by the Company; the Company's ability to obtain
and retain qualified staff; the Company's future capital
expenditures and sources of financing thereof; the effect of the
military conflict in the Ukraine
and related Canadian, U.S. and international sanctions involving
Russia and counter-sanctions by
Russia on the broader markets for
the Company's services; and the likelihood that the current tax and
regulatory regime will remain substantially unchanged.
This press also release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about the Company's anticipated third quarter revenues,
Adjusted EBITDA, Adjusted EBITDA margin and Total Debt to
consolidated trailing twelve month Adjusted EBITDA, which are
subject to the same assumptions, risk factors, limitations, and
qualifications as set forth in the above paragraphs. The Company's
actual results of operations and the resulting financial results
will likely vary from the amounts set forth in this press release
and such variation may be material. The Company and its management
believe that the FOFI has been prepared on a reasonable basis,
reflecting management's best estimates and judgments as of the date
hereof; however, because this information is subjective and subject
to numerous risks, it should not be relied on as necessarily
indicative of future results.
The forward-looking statements and information (including FOFI)
contained in this press release speak only as of the date hereof
and Calfrac does not undertake any obligation to update publicly or
revise any such forward-looking statements or information, whether
due to new information, future events or otherwise, unless so
required by applicable securities laws. The Company's actual
results could also differ materially from those anticipated in
these forward-looking information and statements (including FOFI)
due to the risk factors set forth under the heading "Risk Factors"
in Calfrac's Annual Information Form for the year ended
December 31, 2021 dated March 18, 2022 and under the heading "Business
Risks" in Calfrac's Management's Discussion and Analysis for the
year ended December 31, 2021 dated
March 18, 2022, which are available
at www.sedar.com and are incorporated herein by reference.
SOURCE Calfrac Well Services Ltd.