Canadian Energy Services & Technology Corp. ("CES" or the "Company")
(TSX:CEU)(OTCQX:CESDF) is pleased to report on its financial and operating
results for the three and twelve months ended December 31, 2013. Further, CES
announced today that it will pay a cash dividend of $0.07 per common share on
April 15, 2014 to the shareholders of record at the close of business on March
31, 2014, representing an increased dividend of $0.005 per common share or 8% to
the monthly dividend. This is the ninth dividend increase implemented by CES
since converting to a corporate structure on January 1, 2010.
During Q4 2013, CES continued to make significant strides in advancing its
strategic vision of being a leading provider of technically advanced consumable
chemical solutions throughout the full life cycle of the oilfield. The
integration of JACAM with the overall business is progressing successfully.
JACAM products have been introduced into Canada on both the drilling fluids side
and through PureChem with very positive results. In the US, initial steps have
been undertaken to support AES operations with JACAM manufactured materials and
to expand JACAM's market penetration via the established AES platform. CES sees
the opportunity for the unique JACAM products expanding as we move forward. From
a manufacturing perspective CES is undertaking further vertical integration
initiatives at the JACAM facility with the completion of the solid chemistry
line expansion, the build-out of hydrogenation capabilities and the construction
of an organo clay plant.
In addition to the integration initiatives and the financial contribution JACAM
continues to make, CES sees other significant opportunities in the US as we
continue to leverage our platform, product suite, and infrastructure. In
particular, the AES Permian acquisition, completed in July 2013, has filled the
last remaining geographical hole on the US map for CES. The Permian is the
busiest drilling basin in North America and is continuing to transition to a
horizontal drilling market. CES expects to capitalize on this opportunity
through its unique product offerings, the establishment of an oil based mud
plant in the Permian, and the commissioning of its new barite grinding facility
in Corpus Christi which is expected to be on-line mid-year.
The Canadian business is also performing well and has positive momentum going
into 2014. The fourth quarter of 2013 saw a rebound in drilling related
market-share with new customer wins mainly attributable to new technologies
introduced over the past year. The PureChem division continues its successful
build-out across western Canada with a growing customer base and revenues.
CES generated revenue of $200.6 million during the three months ended December
31, 2013, compared to $95.0 million for the three months ended December 31,
2012, an increase of $105.6 million or 111%. Revenue for the year ended December
31, 2013 totaled $662.8 million, compared to revenues for the year ended
December 31, 2012 of $471.3 million, representing an increase of $191.5 million
or 41%. As detailed below, all facets of the business in Canada and the US have
contributed to this revenue growth.
Revenue generated in Canada for the three months ended December 31, 2013
increased by $34.8 million or 79% compared to the three months ended December
31, 2012, from $44.2 million to $79.0 million. For the twelve month period ended
December 31, 2013, revenue in Canada was $242.7 million compared to revenues of
$204.6 million for the twelve month period ended December 31, 2012, representing
an increase of $38.1 million or 19%. The increase in revenues for both the three
and twelve months ended December 31, 2013, was primarily a result of a
year-over-year shift to a higher percentage of the Company's drilling fluid
systems being run in both the deep basin and the oilsands, as well as an
increase in drill-bit related activity resulting from increased market share
year-over-year. In addition, PureChem has also contributed significantly to the
increase in revenues as it continued to build-out its production and specialty
chemical sales.
Revenue generated in the US for the three months ended December 31, 2013
increased by $70.8 million or 139% compared to the three months ended December
31, 2012, from $50.8 million to $121.6 million. For the twelve month period
ended December 31, 2013, revenue in the US was $420.1 million compared to
revenues of $266.7 million for the twelve month period ended December 31, 2012,
representing an increase of $153.4 million or 58%. This year-over-year increase
for both periods is primarily a result of the JACAM Acquisition and AES Permian
Acquisition, for which there are no associated revenues in the comparable
periods in 2012. These acquisitions have further vertically integrated CES'
business, expanded CES' product offerings across the oilfield spectrum, provided
a significant platform of infrastructure and new customers across the US, and
increased CES' ability to deliver technically advanced science based solutions
to its customers. Also contributing to the increase in US revenues is organic
growth derived from AES resulting in new work in the Rockies region, in the
Eagle Ford, and in the Mid-Continent region, which has more than offset the
reduced activity in the Marcellus shale region of the US.
Net income before interest, taxes, amortization, gains and losses on disposal of
assets, goodwill impairment, unrealized foreign exchange gains and losses,
unrealized derivative gains and losses, and stock-based compensation ("EBITDAC")
for the three months ended December 31, 2013 was $36.5 million as compared to
$10.1 million for the three months ended December 31, 2012, representing an
increase of $26.4 million or 263%. CES recorded EBITDAC per share of $0.55 for
the three months ended December 31, 2013 versus EBITDAC per share of $0.18 in
2012, an increase of 206%. For the twelve month period ended December 31, 2013,
EBITDAC totalled $109.8 million as compared to $64.9 million in 2012,
representing an increase of $44.9 million or 69%. Year-to-date, CES recorded
EBITDAC per share of $1.73 versus EBITDAC per share of $1.17 in 2012.
Based on the financial results achieved in Q4 2013, CES is reaffirming its
expected 2014 guidance that was provided on November 7, 2013. CES' expected
range of consolidated gross revenue for 2014 will be approximately $760.0
million to $820.0 million and expected consolidated EBITDAC will be
approximately $135.0 million to $150.0 million. The 2014 guidance reflects the
positive growth CES is experiencing across all its business units.
CES' balance sheet remains strong and its financial flexibility was greatly
enhanced with the successful placement in April of $225.0 million aggregate
principal amount 7.375% Senior Notes, and the raising of $35.0 million of equity
in the successful equity offering completed in August 2013.
CES also announced today that it will pay a cash dividend of $0.07 per common
share on April 15, 2014 to the shareholders of record at the close of business
on March 31, 2014, representing an increased dividend of $0.005 per common share
or 8% to the monthly dividend. This is the ninth dividend increase implemented
by CES since converting to a corporate structure on January 1, 2010.
CES Q4 Results Conference Call
With respect to the fourth quarter results, CES will host a conference call /
webcast at 9:00 am MST (11:00 am EST) on Friday, March 14, 2014.
North American toll-free: 1-866-542-4270
International / Toronto callers: 416-340-8530
Link to Webcast: http://www.canadianenergyservices.com/
Outlook
Going forward, CES sees significant growth opportunities as a vertically
integrated, full cycle provider of oilfield chemical solutions. Although revenue
generated at the drill-bit and at the completions stage will remain subject to
volatility, operators continue to drill more complex, deeper, and longer
horizontal wells that require more chemicals and fluids in general, but also
more technically advanced chemical solutions in order to be successfully
drilled, cased and completed. Through both its JACAM and PureChem divisions, CES
has vertically integrated manufacturing capabilities with unutilized throughput
at both its Sterling, KS and Carlyle, SK plants. CES also has a full suite of
technically advanced solutions of production chemicals for consumption at the
wellhead or pump-jack, and specialty chemicals for the pipeline and mid-stream
market. These markets are less volatile and are growing on a year-over-year
basis as the volumes of produced hydrocarbons and the associated produced water
increases. CES believes over time it can grow its market share within each of
these sub-segments of the oilfield consumable chemical market. CES' strategy is
to utilize its patented and proprietary technologies and superior execution to
increase market share. CES believes that its unique value proposition in this
increasingly complex operating environment makes it the premier independent
provider of technically advanced consumable chemical solutions throughout the
life-cycle of the oilfield in North America.
The Clear Environmental Solutions division continues to complement CES' core
drilling fluids business and has maintained consistently strong results. The
Environmental Services division has focused on expanding its operational base in
the WCSB and is pursuing opportunities in the oil sands and horizontal drilling
markets.
The EQUAL Transport division remains profitable. It is expected this business
will continue to be instrumental in supporting the core businesses and be
economically viable.
As challenges faced by the oil and gas industry become more complex, advanced
technologies are becoming increasingly important in driving success for
operators. CES will continue to invest in research and development to be a
leader in technology advancements in the consumable oilfield chemical markets.
With the addition of JACAM's state of the art laboratory in Sterling, Kansas,
CES operates four separate lab facilities across North America which also
includes, Houston, Texas; Carlyle, Saskatchewan; and Calgary, Alberta. CES also
leverages third party partner relationships to drive innovation in the
consumable chemicals business.
On a corporate level, CES continually assesses integrated business opportunities
that will keep CES competitive and enhance profitability. However, all
acquisitions must meet our stringent financial and operational metrics. CES will
also closely manage its dividend levels and capital expenditures in order to
preserve its financial strength, its low capital re-investment model and its
strong liquidity position.
Business of CES
CES is a leading provider of technically advanced consumable chemical solutions
throughout the life-cycle of the oilfield. This includes total solutions at the
drill-bit, at the point of completion and stimulation, at the wellhead and
pump-jack, and finally through to the pipeline and midstream market. At the
drill-bit, CES' designed drilling fluids encompass the functions of cleaning the
hole, stabilizing the rock drilled, controlling subsurface pressures, enhancing
drilling rates, and protecting potential production zones while conserving the
environment in the surrounding surface and subsurface area. At the point of
completion and stimulation, CES' designed chemicals form a critical component of
fracking solutions or other forms of well stimulation techniques. The shift to
horizontal drilling and multi-stage fracturing with long horizontal well
completions has been responsible for significant growth in the drilling fluids
and completion and stimulation chemicals markets. At the wellhead and pump-jack,
CES' designed production and specialty chemicals provide down-hole solutions for
production and gathering infrastructure to maximize production and reduce costs
of equipment maintenance. Key solutions include corrosion inhibitors,
demulsifiers, H2S scavengers, paraffin control products, surfactants, scale
inhibitors, biocides and other specialty products. Further, specialty chemicals
are used throughout the pipeline and midstream industry to aid in hydrocarbon
movement and manage transportation and processing challenges including
corrosion, wax build-up and H2S.
CES operates in the Western Canadian Sedimentary Basin ("WCSB") and in several
basins throughout the United States ("US"), with an emphasis on servicing the
ongoing major resource plays. In Canada, CES operates under the trade names
Canadian Energy Services, Moose Mountain Mud ("MMM"), PureChem Services
("PureChem"), Clear Environmental Solutions ("Clear"), and EQUAL Transport
("EQUAL"). In the US, CES operates under the trade names AES Drilling Fluids
("AES"), AES Drilling Fluids Permian ("AES Permian"), and JACAM Chemicals
("JACAM").
The Canadian Energy Services, MMM, AES, and AES Permian brands are focused on
the design and implementation of drilling fluids systems for oil and gas
producers. The JACAM and PureChem brands are vertically integrated manufacturers
of advanced production and specialty chemicals for the wellhead and pump-jack,
drilling related chemicals, technically advanced fluids for completions and
stimulations, and chemical solutions for the pipeline and midstream markets. CES
has two complimentary business segments that operate in the WCSB: Clear which
provides environmental consulting and drilling fluids waste disposal services
and Equal which provides its customers with trucks and trailers specifically
designed to meet the demanding requirements of off-highway oilfield work.
Financial Highlights
Three Months Ended Year Ended
December 31, December 31,
--------------------------------------------
($000's, except per share
amounts) 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue 200,569 95,028 662,818 471,299
Gross margin 55,060 21,401 174,786 110,167
Income before taxes 18,112 4,193 51,893 43,890
per share - basic 0.27 0.07 0.82 0.79
per share - diluted 0.26 0.07 0.79 0.76
Net income 12,837 2,847 37,255 27,869
per share - basic 0.19 0.05 0.59 0.50
per share - diluted 0.18 0.05 0.56 0.49
EBITDAC (1) 36,482 10,050 109,818 64,928
per share - basic 0.55 0.18 1.73 1.17
per share - diluted 0.52 0.17 1.66 1.13
Funds Flow From Operations (1) 25,006 8,603 83,094 48,234
per share - basic 0.37 0.15 1.31 0.87
per share - diluted 0.36 0.15 1.26 0.84
Dividends declared 12,730 9,029 44,319 33,476
per share 0.19 0.16 0.70 0.60
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended Year Ended
December 31, December 31,
--------------------------------------------
Shares Outstanding 2013 2012 2013 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
End of period 67,107,128 56,847,853 67,107,128 56,847,853
Weighted average
- basic 66,914,549 56,193,530 63,495,340 55,693,220
- diluted 69,577,834 57,792,055 66,040,287 57,395,332
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at
--------------------------------------------
Financial Position ($000's) December 31, 2013 December 31, 2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net working capital 197,366 114,899
Total assets 807,319 354,642
Long-term financial liabilities
(2) 322,766 71,575
Shareholders' equity 360,519 215,420
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
1 CES uses certain performance measures that are not recognizable under
International Financial Reporting Standards ("IFRS"). These performance
measuresinclude net income before interest, taxes, depreciation and
amortization, gains and losses on disposal of assets, goodwill impairment,
unrealized foreign exchange gains and losses, unrealized derivative gains
and losses, and stock-based compensation ("EBITDAC"), and Funds Flow From
Operations. Management believes that these measures provide supplemental
financial information that is useful in the evaluation of CES' operations.
Readers should be cautioned, however, that these measures should not be
construed as alternatives to measures determined in accordance with IFRS as
an indicator of CES' performance. CES' method of calculating these measures
may differ from that of other organizations and, accordingly, these may not
be comparable. Please refer to the Non-GAAP measures section of CES' MD&A
for the three and twelve months ended December 31, 2013.
2 Includes the long-term portion of Deferred Acquisition Consideration,
drawings under the Senior Facility, the Senior Notes, vehicle and equipment
financing, and finance leases, excluding current portions.
Cautionary Statement
Except for the historical and present factual information contained herein, the
matters set forth in this news release, may constitute forward- looking
information or forward-looking statements (collectively referred to as
"forward-looking information") which involves known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of CES, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking information. When used in this MD&A, such information uses such
words as "may", "would", "could", "will", "intend", "expect", "believe", "plan",
"anticipate", "estimate", and other similar terminology. This information
reflects CES' current expectations regarding future events and operating
performance and speaks only as of the date of the MD&A. Forward-looking
information involves significant risks and uncertainties, should not be read as
a guarantee of future performance or results, and will not necessarily be an
accurate indication of whether or not such results will be achieved. A number of
factors could cause actual results to differ materially from the results
discussed in the forward-looking information, including, but not limited to, the
factors discussed below. The management of CES believes the material factors,
expectations and assumptions reflected in the forward-looking information and
statements are reasonable but no assurance can be given that these factors,
expectations and assumptions will prove to be correct. The forward-looking
information and statements contained in this document speak only as of the date
of the document, and CES assumes no obligation to publicly update or revise them
to reflect new events or circumstances, except as may be required pursuant to
applicable securities laws or regulations.
In particular, this press release contains forward-looking information
pertaining to the following: future estimates as to dividend levels, including
the payment of a dividend to shareholders of record on March 31, 2014; the
seasonality of CES' business and anticipated reduction in exposure to the
effects of spring break-up in the WCSB; the sufficiency of liquidity and capital
resources to meet long-term payment obligations; management's opinion of the
impact of any potential litigation or disputes; the application of critical
accounting estimates and judgements; the collectability of accounts receivable;
the expected range of consolidated revenue and EBTDAC; CES' ability to increase
its marketshare; supply and demand for CES' products and services; industry
activity levels; commodity prices; treatment under governmental regulatory and
taxation regimes; expectations regarding expansion of services in Canada and the
United States; development of new technologies; expectations regarding CES'
growth opportunities in Canada and the United States; the effect of the JACAM
Acquisition and the AES Permian Acquisition on the Corporation; expectations
regarding the performance or expansion of CES' operations; expectations
regarding demand for CES' services and technology; investments in research and
development and technology advancements; access to debt and capital markets; and
competitive conditions.
CES' actual results could differ materially from those anticipated in the
forward-looking information as a result of the following factors: general
economic conditions in Canada, the United States, and internationally;
fluctuations in demand for consumable fluids and chemical oilfield services;
volatility in market prices for oil, natural gas, and natural gas liquids and
the effect of this volatility on the demand for oilfield services generally;
competition; liabilities and risks, including environmental liabilities and
risks inherent in oil and natural gas operations; sourcing, pricing and
availability of raw materials, consumables, component parts, equipment,
suppliers, facilities, and skilled management, technical and field personnel;
ability to integrate technological advances and match advances of competitors;
availability of capital; uncertainties in weather and temperature affecting the
duration of the oilfield service periods and the activities that can be
completed; the ability to successfully integrate and achieve synergies from the
Company's acquisitions; changes in legislation and the regulatory environment,
including uncertainties with respect to programs to reduce greenhouse gas and
other emissions and regulations restricting the use of hydraulic fracturing;
reassessment and audit risk associated with the Conversion and other tax filing
matters; changes to the fiscal regimes applicable to entities operating in the
WCSB and the US; access to capital and the liquidity of debt markets;
fluctuations in foreign exchange and interest rates, and the other factors
considered under "Risk Factors" in CES' Annual Information Form for the year
ended December 31, 2013 and "Risks and Uncertainties" in this MD&A.
Without limiting the foregoing, the forward-looking information contained in
this press release is expressly qualified by this cautionary statement.
CES has filed its 2013 annual audited consolidated financial statements and
notes thereto as at and for the year ended December 31, 2013, and accompanying
management discussion and analysis in accordance with National Instrument 51-102
- Continuous Disclosure Obligations adopted by the Canadian securities
regulatory authorities. Additional information about CES will be available on
CES' SEDAR profile at www.sedar.com and CES' website at
www.CanadianEnergyServices.com.
THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY
FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
FOR FURTHER INFORMATION PLEASE CONTACT:
Canadian Energy Services & Technology Corp.
Tom Simons
President and Chief Executive Officer
(403) 269-2800
Canadian Energy Services & Technology Corp.
Craig F. Nieboer, CA
Chief Financial Officer
(403) 269-2800
info@ceslp.ca
www.CanadianEnergyServices.com
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