DAL Dalmac Energy Inc

Highlights for Q1’20

• The Corporation’s first quarter is typically the weakest quarters of the year. This is primarily due to spring break up conditions and the timing of road bans. Road bans have been a factor throughout the quarter due to the unseasonably wet and rainy summer which was one of the worst on record.
• Dalmac had secured new production contracts with additional customers, which were scheduled to commence in May, however, much of that newly acquired service and production activity that was scheduled to commence had to be cancelled and postponed till later in the year because of road closures affecting access to site locations.
• The Corporation adopted IFRS-16 as of May 1st 2019. IFRS-16 relates to the recognition of lease liabilities in relation to leases which were previously classified as operating leases under the principals of IAS 17. This adoption is approximately valued at 7% of the gross margin on the quarter. As lease payments are made, there is a reduction to the principal portion of the lease liability as well as an amount allocated to finance costs.  The finance cost is expensed within the condensed consolidated statement of comprehensive income over the lease term.  The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
• Despite the aforementioned the Corporation managed to post a gross margin of 31% in Q1’20 on revenues of $3.6M, which is almost double Q1’19, in spite of the fact that year over year revenues were down almost $300K. This is mainly attributable to the concerted efforts by the Corporation to reduce operating costs by effectively managing resources, external contractors and staffing levels.
• EBITDA for Q1’20 was $557K which represents almost a fivefold improvement over the prior year.

OutlookIn conjunction with the outlook presented in the Corporation’ s YE’19 MD&A –E&P companies are following through on their capital expenditure forecasts which is a good indicator that the winter drilling season will be much better than in the preceding year.

The unseasonably wet conditions that ran over the course of the summer have pushed back the start of several drilling and completion projects into the fall. As a result of ongoing discussions and commitments with customers, management is confident that the fall and winter season will be significantly better than in the previous year.

The Company’s experienced management and personnel are committed to providing and maintaining a high quality of service to all of our clients in the industry. Dalmac’s customers include some of largest oil and gas producers in Canada. In Q1 the Company has increased its customer base with the addition of new clients as well as expanded the provision of services to existing ones.  Management will continue to drive cost reductions through the Company to assist in offsetting any pricing pressures and reduced activity. With the diversification of the Company’s services, streamlining of our operations and cash management measures, management is confident in the Company’s ability to navigate in a difficult and price sensitive environment. Dalmac has benefited from cost reductions through increased margins and reduced spending as compared to previous periods and these reductions will continue throughout 2020. Management will maintain a conservative approach towards capital spending in conjunction with maintaining necessary commitments to keep its equipment fleet modern and up to date in order to meet customer demands.

For more information contact:

John Babic - CEO - Dalmac EnergyTel: 780-988-8510 Email: jbabic@dalmac.ca

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 Dalamc 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.

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