Flint Energy Services Ltd. Announces Fourth Quarter & 2010 Annual Earnings Release
(TSX - FES)
CALGARY, March 17 /PRNewswire-FirstCall/ - Flint Energy Services Ltd. (Flint, the Company) released its fourth quarter and 2010 annual results today after markets closed.
2010 Highlights
- For the year ended December 31, 2010, revenues were $1,781.3 million, down from $1,876.5 million in 2009, representing a decrease of $95.2 million or 5.1%. While the Company's maintenance businesses are relatively stable, a significant portion of the Company's field services business is more directly tied to completions and tie in work, which lags the drilling cycle, and has not yet benefited fully from additional activity. In addition, the Facility Infrastructure bidding process involves substantial lead times in winning contracts. While revenue is down in this segment year-over-year, the Company avoided taking on contracts with unacceptable risk during a period of low activity for the industry.
- In the United States, revenue was $310.7 million (17.4% of consolidated revenue), down 0.7% compared to $313.0 million (16.7% of consolidated revenues) in 2009. This was primarily due to the strengthening of the Canadian dollar. United States revenues in US dollars were $301.7 million in 2010 compared to $274.5 million in 2009, an increase of $27.2 million or 10.0%, as a result of improving midstream activity and expansion of the Company's oilfield hauling capabilities.
- EBITDA for the year ended December 31, 2010 was $131.3 million, down $17.9 million or 12.0% from $149.2 million in 2009. The decrease in EBITDA resulted from i) an overall decrease in revenues from 2009, ii) increased competition in the Oilfield Services segment creating downward pressure on prices in 2010, and iii) the Maintenance Services segment, which has primarily lower margins due to a lower risk profile, forming a larger percentage of total revenue compared to 2009.
- For the year ended December 31, 2010, net earnings were $33.0 million ($0.72 per common share - diluted) compared to net earnings of $45.7 million ($1.00 per common share - diluted) in 2009.
- Cash flow from operations, before changes in non cash balances, was $97.9 million compared to $102.5 million in 2009. Working capital at December 31, 2010 was $242.5 million compared to $354.5 million at the end of 2009, as a result of an increase in the current portion of long term debt, due in 2011.
- Cash balances remained steady at $163.6 million as at December 31, 2010, compared to $163.9 million at the end of 2009. Accounts receivable increased by $13.9 million and revenue in excess of billings decreased by $5.9 million, representing a collective increase of $8.0 million or 2.6% from the prior year. As a result of sufficient cash flow from operations, the Company did not have to draw on its short term borrowing facilities.
- Cash used for investing activities during the year, net of disposals in 2010, was $76.3 million, up $53.2 million from $23.1 million in 2009. The largest portion of the increase was $36.6 million for acquiring oilfield hauling assets in the United States in November of 2010, the acquisition of PES Surface Inc. for $6.3 million in April, 2010, and a $2.0 million investment in Sub-One Technology, Inc. The balance of the increase was used for the purchase of plant property and equipment to expand operations, primarily in the United States
General and administrative expenses for 2010 decreased $3.3 million or 2.1%, to $148.3 million, compared to $151.6 million in 2009. Net interest expenses were down $5.0 million to $12.0 million, due to reductions in borrowing and increased interest income in 2010. The decrease in these expenses was offset by increased stock based compensation expenses which were $8.5 million in 2010, up $3.6 million from $4.9 million in 2009, as a result of the appreciation in the market price for the Company's common shares.
W. J. (Bill) Lingard said, "As anticipated, lower activity levels in our oil sands group in the second half of 2010 resulted in lower overall annual revenues in 2010. However, we are very pleased by the increased revenues we saw in Maintenance Services, Oilfield Services and our US Production Services. While major contract awards on recently announced oil sands projects have been delayed, we expect to fill our backlog with additional contract work in 2011. Our other business segments are doing well and our strategy of geographic coverage and full cycle services continues to provide great opportunities for Flint."
Quarter Four
Revenues for the three months ended December 31, 2010 were $394.3 million, compared to $462.5 million in the comparative quarter of 2009, representing a decrease of $68.2 million or 14.7%. The decrease in revenues for the fourth quarter of fiscal 2010 was primarily the result of reduced oil sands construction work in Facility Infrastructure, compared to the prior year's quarter when Flint was working on the Shell Albian Sands, Statoil Leismer and Suncor Firebag oil sands projects. Both the Shell and Statoil projects were completed early in the third quarter of 2010.
EBITDA for the three months ended December 31, 2010 was $24.9 million, down $18.5 million from $43.4 million in the comparative period in 2009. EBITDA in Facility Infrastructure was $1.2 million, down $22.7 million compared to $23.9 million in the previous year's quarter. This was only partially offset by increased EBITDA from Oilfield Services of $7.6 million, up $4.6 million, and Maintenance Services of $5.8 million, up $0.3 million in the quarter. Production Services EBITDA was $10.3 million, down $0.7 million compared to quarter four 2009, primarily due to weaker Canadian activity late in the quarter, as well as increased costs associated with the relocation of the plastic pipe manufacturing facility in Edmonton.
During the three months ended December 31, 2010, the Company's net earnings were $0.9 million compared to $13.8 million in quarter four of 2009. Earnings per fully diluted share in the fourth quarter were $0.02 compared to $0.32 in quarter four of 2009.
Outlook
In Canada, approximately 12,500 wells were drilled in 2010, up 47% from 2009.1 Industry forecasts for 2011 call for an 18% increase in drilling in western Canada.2 This will be primarily driven by crude oil production, especially unconventional crude oil sources such as bitumen, heavy oil and shale oil, as well as certain liquids-rich natural gas projects that remain economic at current commodity prices.
United States drilling activity was also up by 47% year-over-year with 52,000 wells drilled in 2010. Industry forecasts in the United States are calling for a 17% increase in drilling in 2011,2 primarily related to new shale oil plays such as the North Dakota Bakken, as well as continued growth in shale gas areas such as the Marcellus and the Eagle Ford.
Production Services activity, which typically lags drilling by approximately two quarters, was up modestly in 2010 from 2009, and is expected to increase as 2011 progresses, as a result of work from increased drilling activity and projects that were delayed in late 2010, which are proceeding in 2011.
The Oilfield Services segment, which is levered to drilling, was also up modestly in the United States in 2010. The Company has increased its service delivery capacity in the United States through the acquisition of equipment in late 2010, along with the construction of the new Williston, North Dakota office to service the Bakken shale oil play, and a new office in Victoria, Texas to service the Eagle Ford liquids rich shale.
Maintenance Services revenues in 2010 reached a record $421.7 million due to new contracts and increased scope on existing contracts. Last year, revenue gains were from planned turnarounds and unplanned shutdowns. There is less planned turnaround activity in 2011 and although management expects revenues to trend down slightly from 2010, they expect growth in the maintenance business as additional production from new and existing projects continues to drive maintenance spending levels.
Facility Infrastructure experienced reduced revenues in the second half of 2010 with the completion of the Shell Albian Sands project and the Statoil Leismer project in July, combined with delays in new project contract awards. Current backlog in this segment is approximately $105.0 million and includes contract work on SAGD projects near Fort McMurray. The Company is also pursuing additional contract work with several oil sands operators, but because of the delays in awarding construction work on a number of projects in the first quarter of 2011, expected revenues in this segment will be much lower in the first half of 2011 than in the first half of 2010, and full year revenues will ramp up slower than expected. Management expects revenues to climb late in 2011 and remain high from 2012 through to 2014. Overall, management believes the gains in activity in other segments in 2011 will partially offset the lower activity in Facility Infrastructure, and accordingly, 2011 revenues from organic sources are expected to be similar to 2010 levels.
The Company continues to actively pursue accretive acquisitions, as well as green-field expansions in new basins where customers are increasing their unconventional drilling and production activities. Management expects that 2011 will be a year of continued strategic positioning of assets, rebuilding backlog, and acquisition activities to prepare the Company for expected growth over the next five years.
Management is strategically capitalizing on the Flint business model and has several initiatives commencing in Q1 of 2011. The Facility Infrastructure group has positioned key personnel in Houston to begin bidding and executing larger energy infrastructure projects in the US market, and expects to have some contract awards in place by the second half of 2011.
Oilfield Services has several US expansion initiatives underway with committed contracts already in place, as well as fluid hauling services being added to the Eagle Ford shale operations. These operations are expected to commence in Q2 2011. The Oilfield Services expansion into North Dakota has been accelerated, with two clients committing to the Company's rig moving services for the spring of 2011.
Production Services continues to expand the Wear Technology business, and Flint InnerArmor's first plasma machine located in Calgary, Alberta commenced applying internal wear coating to pipe spools in February 2011. The pilot test was completed successfully and orders are in place for additional product for our first clients.
Sources
1: JuneWarren - Nickle's Energy Group
2: Spears and Associates, December, 2010 Drilling and Production Outlook
A conference call with management to discuss the Company's 2010 results and outlook for 2011 is scheduled for 10:00 AM Eastern Time on Friday, March 18, 2011. Details on how to participate in or listen to the call are available on the Company's website: www.flintenergy.com.
A summary of financial information follows. Complete copies of the Company's 2010 MD&A and Consolidated Annual Financial Statements are available on www.SEDAR.com and on the Company's website: www.flintenergy.com.
| Consolidated Fourth Quarter Financial Results (Millions of Canadian dollars, except share data) |
|||||||||||||||||||||||
| (For the three months ended December 31) | 2010 | 2009 | Increase (decrease) | % Change | |||||||||||||||||||
| Revenue | $ | 394.3 | $ | 462.5 | $ | (68.2) | $ | (14.7%) | |||||||||||||||
| Direct costs | 327.6 | 371.8 | (44.2) | (11.9%) | |||||||||||||||||||
| 66.7 | 90.7 | (24.0) | (26.5%) | ||||||||||||||||||||
| General and administrative expenses | 44.7 | 48.3 | (3.6) | (7.4%) | |||||||||||||||||||
| Amortization | 16.0 | 14.5 | 1.5 | 10.3% | |||||||||||||||||||
| Share based compensation expense | 2.8 | 2.4 | 0.4 | 16.7% | |||||||||||||||||||
| Interest expense, net of interest income | 1.7 | 4.1 | (2.4) | (58.5%) | |||||||||||||||||||
| Gain on sale of assets | (1.0) | (0.8) | (0.2) | 25.0% | |||||||||||||||||||
| Gain on business combination | (1.1) | - | (1.1) | - | |||||||||||||||||||
| Earnings before income taxes | 3.6 | 22.2 | (18.6) | (83.8%) | |||||||||||||||||||
| Income taxes, current and future | 2.7 | 8.4 | (5.7) | (67.9%) | |||||||||||||||||||
| Net earnings | 0.9 | 13.8 | (12.9) | (93.5%) | |||||||||||||||||||
| per common share - basic | $ | 0.02 | $ | 0.32 | $ | (0.30) | - | ||||||||||||||||
| per common share - diluted | $ | 0.02 | $ | 0.32 | $ | (0.30) | - | ||||||||||||||||
| EBITDA | 24.9 | 43.4 | (18.5) | (42.7%) | |||||||||||||||||||
| Selected financial information for each reportable business segment for the fourth quarter is as follows: | |||||||||||||||||||||||||
| (in thousands of Canadian dollars) | 2010 | 2009 | Increase (decrease) | % Change | |||||||||||||||||||||
| Revenue by reportable segment | |||||||||||||||||||||||||
| Production Services | $ | 188,803 | 48% | $ | 169,399 | 37% | $ | 19,404 | 11.5% | ||||||||||||||||
| Facility Infrastructure | 40,626 | 10% | 161,821 | 35% | (121,195) | (74.9%) | |||||||||||||||||||
| Oilfield Services | 65,322 | 17% | 55,979 | 12% | 9,343 | 16.7% | |||||||||||||||||||
| Maintenance Services | 99,595 | 25% | 75,256 | 16% | 24,339 | 32.3% | |||||||||||||||||||
| Total | $ | 394,346 | 100% | $ | 462,455 | 100% | $ | (68,109) | (14.7%) | ||||||||||||||||
| EBITDA by reportable segment | |||||||||||||||||||||||||
| Production Services | $ | 10,324 | 41% | $ | 11,054 | 25% | $ | (730) | (6.6%) | ||||||||||||||||
| Facility Infrastructure | 1,235 | 5% | 23,903 | 55% | (22,668) | (94.8%) | |||||||||||||||||||
| Oilfield Services | 7,595 | 30% | 3,003 | 7% | 4,592 | 152.9% | |||||||||||||||||||
| Maintenance Services | 5,753 | 24% | 5,470 | 13% | 283 | 5.2% | |||||||||||||||||||
| Total | $ | 24,907 | 100% | $ | 43,430 | 100% | $ | (18,523) | (42.7%) | ||||||||||||||||
| Consolidated Annual Financial Results (Millions of Canadian dollars, except share data) |
|||||||||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 - 2009 Increase (decrease) |
2010 - 2009 % Change |
|||||||||||||||||||||||
| Revenue | $ | 1,781.3 | $ | 1,876.5 | $ | 2,314.6 | (95.2) | (5.1%) | |||||||||||||||||||
| Direct costs | 1,504.7 | 1,578.4 | 1,949.2 | (73.7) | (4.7%) | ||||||||||||||||||||||
| 276.6 | 298.1 | 365.4 | (21.5) | (7.2%) | |||||||||||||||||||||||
| General and administrative expenses | 148.3 | 151.6 | 166.2 | (3.3) | (2.2%) | ||||||||||||||||||||||
| Amortization | 58.3 | 57.8 | 66.5 | 0.5 | 0.9% | ||||||||||||||||||||||
| Share based compensation expense | 8.5 | 4.9 | 4.6 | 3.6 | 73.5% | ||||||||||||||||||||||
| Interest expense, net of interest income | 12.0 | 17.0 | 19.9 | (5.0) | (29.4%) | ||||||||||||||||||||||
| Gain on disposal of property, plant, and equipment | (0.4) | (1.4) | (0.8) | 1.0 | (71.4%) | ||||||||||||||||||||||
| Gain on business combination | (1.1) | - | - | (1.1) | - | ||||||||||||||||||||||
| Adjusted earnings before income taxes | 51.0 | 68.2 | 109.0 | (17.2) | (25.2%) | ||||||||||||||||||||||
| Income taxes, current and future | 17.9 | 22.5 | 34.3 | (4.6) | (20.7%) | ||||||||||||||||||||||
| Adjusted net earnings | 33.0 | 45.7 | 74.7 | (12.7) | (27.7%) | ||||||||||||||||||||||
| per common share - basic | $ | 0.72 | $ | 1.00 | $ | 1.57 | $ | (0.28) | (28.0%) | ||||||||||||||||||
| per common share - diluted | $ | 0.72 | $ | 0.99 | $ | 1.57 | $ | (0.27) | (27.5%) | ||||||||||||||||||
| Impairment charge | - | - | 442.5 | - | - | ||||||||||||||||||||||
| Future income taxes related to impairment | - | - | (26.4) | - | - | ||||||||||||||||||||||
| Net earnings (loss) | 33.0 | 45.7 | (341.4) | (12.7) | (27.7%) | ||||||||||||||||||||||
| per common share - basic | $ | 0.72 | $ | 1.00 | $ | (7.20) | $ | (0.28) | - | ||||||||||||||||||
| per common share - diluted | $ | 0.72 | $ | 0.99 | $ | (7.20) | $ | (0.27) | - | ||||||||||||||||||
| EBITDA | 131.3 | 149.2 | 201.7 | (17.9) | (12.0%) | ||||||||||||||||||||||
| Reconciliation of EBITDA | 2010 | 2009 | 2008 | ||||||||||||
| Earnings (loss) before income taxes | $ | 51.0 | $ | 68.2 | $ | (333.5) | |||||||||
| Amortization of property, plant, and equipment and intangible assets | 59.8 | 59.1 | 68.2 | ||||||||||||
| Impairment charge | - | - | 442.5 | ||||||||||||
| Share based compensation expense | 8.5 | 4.9 | 4.6 | ||||||||||||
| Interest expense, net of interest income | 12.0 | 17.0 | 19.9 | ||||||||||||
| EBITDA | $ | 131.3 | $ | 149.2 | $ | 201.7 | |||||||||
| Selected annual financial information for each reportable business segment is as follows: | |||||||||||||||||||||||||
| (in thousands of Canadian dollars) | 2010 | 2009 | Increase (decrease) | % Change | |||||||||||||||||||||
| Revenue by reportable segment | |||||||||||||||||||||||||
| Production Services | $ | 783,940 | 44% | $ | 795,344 | 42% | $ | (11,404) | (1.4%) | ||||||||||||||||
| Facility Infrastructure | 354,894 | 20% | 595,714 | 32% | (240,820) | (40.4%) | |||||||||||||||||||
| Oilfield Services | 220,831 | 12% | 206,671 | 11% | 14,160 | 6.9% | |||||||||||||||||||
| Maintenance Services | 421,675 | 24% | 278,807 | 15% | 142,868 | 51.2% | |||||||||||||||||||
| Total | $ | 1,781,340 | 100% | $ | 1,876,536 | 100% | $ | (95,196) | (5.1%) | ||||||||||||||||
| EBITDA by reportable segment | |||||||||||||||||||||||||
| Production Services | $ | 58,394 | 44% | $ | 45,620 | 31% | $ | 12,774 | 28.0% | ||||||||||||||||
| Facility Infrastructure | 38,928 | 30% | 70,619 | 47% | (31,691) | (44.9%) | |||||||||||||||||||
| Oilfield Services | 15,315 | 12% | 16,477 | 11% | (1,162) | (7.1%) | |||||||||||||||||||
| Maintenance Services | 18,710 | 14% | 16,512 | 11% | 2,198 | 13.3% | |||||||||||||||||||
| Total | $ | 131,347 | 100% | $ | 149,228 | 100% | $ | (17,881) | (12.0%) | ||||||||||||||||
| Consolidated Financial Position as of December 31, 2010 (Millions of Canadian dollars, except share data) |
||||||||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 - 2009 Increase (decrease) |
2010 - 2009 % Change |
||||||||||||||||||||||
| Current assets | $ | 568.1 | $ | 546.9 | $ | 633.5 | $ | 21.2 | 3.9% | |||||||||||||||||
| Current liabilities | 325.6 | 192.4 | 319.7 | 133.2 | 69.2% | |||||||||||||||||||||
| Net working capital | 242.5 | 354.5 | 313.8 | (112.0) | (31.6%) | |||||||||||||||||||||
| Long-term debt | 229.3 | 239.1 | 310.5 | (9.8) | (4.1%) | |||||||||||||||||||||
| Current | 136.9 | 16.7 | 60.3 | 120.2 | 719.8% | |||||||||||||||||||||
| Non-current | 92.4 | 222.4 | 250.2 | (130.0) | (58.5%) | |||||||||||||||||||||
| Total assets | 983.6 | 961.5 | 1,088.9 | 22.1 | 2.3% | |||||||||||||||||||||
| Total liabilities | 440.2 | 449.7 | 606.7 | (9.5) | (2.1%) | |||||||||||||||||||||
| Total equity | 543.4 | 511.8 | 482.2 | 31.6 | 6.2% | |||||||||||||||||||||
| Days sales outstanding (DSO) | 83 | 69 | 79 | 14 | 20.3% | |||||||||||||||||||||
Flint Energy Services Ltd. is a market leader providing an expanding range of integrated products and services for the oil and gas industry including: production services; infrastructure construction; oilfield transportation; and maintenance services. Flint provides this unique breadth of products and services through over 60 strategic locations in the oil and gas producing areas of western North America, from Inuvik in the Northwest Territories to Mission, Texas on the Mexican border. Flint is a preferred provider of infrastructure construction management, module fabrication, maintenance services for upgrading, and production facilities in Alberta's oil sands sector.
FORWARD LOOKING STATEMENTS
Certain statements in this news release are "forward-looking statements", which reflect current expectations of the management of Flint regarding future events or Flint's future performance. All statements other than statements of historical fact contained in this news release may be forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements. Flint believes that the expectations reflected in such forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. The forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements are made as of the date of this news release and Flint assumes no obligation to update or revise them to reflect new events or circumstances, except as expressly required by applicable securities law. Further information regarding risks and uncertainties relating to Flint and its securities can be found in the disclosure documents filed by Flint with the securities regulatory authorities, available at www.sedar.com.
SOURCE Flint Energy Services Ltd.
Share this article