CALGARY, May 9 /PRNewswire-FirstCall/ - Flint Energy Services Ltd. (Flint, the Company) released its first quarter, 2011 operating results after markets closed today.
The Company's consolidated financial statements for the three month period ended March 31, 2011 were prepared in accordance with International Financial Reporting Standards (IFRS), including a restatement of its prior year results for comparative purposes, in accordance with IFRS.
On April 27, 2011, as a result of weaker first quarter activity, Flint announced a potential loss per share ranging from $0.08 to $0.14 per fully diluted share. As reported today, the loss for the quarter ended March 31, 2011 was $4.5 million, or $0.10 per fully diluted common share, compared to earnings of $18.0 million or $0.39 per fully diluted common share for the same period in 2010.
Revenue for the three months ended March 31, 2011 was $326.8 million, a decrease of $96.4 million or 22.8%, compared to $423.2 million for the same period in 2010. Increased revenue from the Oilfield Services segment was not sufficient to offset reduced revenues in the other reporting segments. Canadian operations generated $244.9 million in revenue, down $105.6 million, primarily as a result of decreased activity in Facility Infrastructure. The United States operations generated $81.9 million in revenue, up $9.2 million as a result of expansion of the Oilfield Services segment into the United States in late 2010.
Several factors caused our Production Services and Facility Infrastructure segments to drag on first quarter earnings. A portion of the Company's field services business is directly tied to well completions and tie-in work, and construction of field facilities, which lag the drilling cycle, experienced further delays due to poor weather and slower project startups. In addition, the Facility Infrastructure bidding process involves substantial lead times prior to contract awards. While year over year construction backlog and revenues were down in this segment, the Company has a large pipeline of potential contract work ahead and has avoided taking on higher risk contracts during this period of lower activity in the industry. The expansion into the United States oilfield transportation market and an extended winter drilling season in Canada, resulted in a quarter over quarter increase in revenues and EBITDA in the Oilfield Services segment.
EBITDA for the quarter was $15.1 million compared to $45.2 million for the comparative quarter in 2010. Overall, EBITDA margins declined to 4.6% in the first quarter of 2011, from 10.7% in 2010. The EBITDA margin in the Facility Infrastructure segment was 10.2% compared to 16.3% for 2010, a decrease of 6.1%, as a result of non-reimbursable costs for ongoing bidding and estimating for future projects. The Production Services segment's EBITDA margin percentage of 5.1% was a decrease of 6.7% from 11.8% in 2010. This decrease resulted from low utilization of equipment and resources due to work delays in Canada, and poor weather in parts of the United States, both of which caused certain locations to have operating losses during the period. EBITDA margins in the Oilfield Services segment increased to 16.2% compared to 13.0% for 2010, as a result of profitable expansion into the US market. The EBITDA percentage for the Maintenance Services segment increased to 8.1% from 4.8% in 2010, as the 2010 results included a write-down in accounts receivable in one of the Company's joint ventures.
W. J. (Bill) Lingard, President and CEO, stated, "This was a disappointing quarter with revenues in our key Production Services segment and our Facility Infrastructure segment impacted by a number of timing related issues, while margins were hurt by one-time costs and rising labour and fuel costs. After a very weak January and first half of February, we saw midstream activity levels begin to pick up to more normal levels in March. Production Services is expected to see continuing improvements in the balance of the year as delayed projects get underway and pricing increases begin to be reflected in our margins. We continue to rebalance our assets in this segment to areas of improving activity and better margins." Mr. Lingard went on to say, "We were pleased by the results of our Oilfield Services segment, which offered both increased revenues and improved margins during the quarter. Work in Facility Infrastructure is picking up, and we are still confident that we will add major contract awards to our backlog in this segment in 2011. Maintenance Services revenues were lower than expected as turnaround work tends to be intermittent, but the margin improvement in the segment came in stronger than expected. Overall, in spite of a weaker first quarter, we believe our full year results can come in at or near our expectations."
With strong crude oil prices and flat natural gas pricing, customer spending trends in the quarter favoured oil and liquids rich targets, while unconventional gas saw more emphasis on upstream drilling. On the other hand, midstream spending in the quarter in both Canada and the United States was the lowest seen in several years. This was due to weather related delays in the US in the early part of the quarter, and midstream project delays in Canada.
While some field projects were delayed in Q1, these are still expected to go ahead during the balance of the year. In spite of weaker midstream activity in the first quarter, field work including pipeline construction and field facilities capital expenditures, is expected to increase in the balance of the year to support the increased drilling production seen in late 2010 and forecast in 2011. Current bidding and contract activity is very strong, with backlogs building in all segments.
Oil sands capital spending, which increased to an estimated $14 billion in 2010, is expected to continue to increase annually to $22 billion by 2014. While a number of the previously announced projects have seen delayed start ups, early stage construction activities are expected to begin later in 2011.
Canadian rig activity in Q1 was up 23% over last year, but wells drilled were up only 7% as drilling shifted to much deeper horizontal basins, especially with shale gas and shale oil. With 3,893 wells rig released in Q1, industry forecasts for 2011 call for a 15% increase in drilling in Canada, with steady growth in unconventional crude oil targets and a continued pullback in conventional gas basins. On a further positive note, the first quarter drilling season was extended by almost 30 days with spring breakup arriving in mid-April.
United States drilling activity was also stronger, with rig activity up 27.5% and industry forecasts calling for 60,000 wells to be drilled in 2011, an increase of 18% over 2010, and at a level which would exceed the recent peak of over 57,000 wells drilled in 2008. Growth in US drilling will occur primarily in shale plays such as the North Dakota Bakken Shale, as well as continued growth in shale gas areas such as the Marcellus, and the liquids rich Eagle Ford shale in West Texas.
Flint's Oilfield Services segment benefited from increased rig moving revenues in Q1 due to expanded US operations. During Q2, Canadian operations will experience the seasonal spring slowdown, while the new US operations will provide more stable revenue as activity will continue through the quarter.
Maintenance Services revenues were down in Q1 as a result of fewer planned turnarounds on our oil sands maintenance contracts compared to last year. The expectations for full year 2011 will be for lower non-recurring revenues from turnarounds than last year. Management expects future growth in the maintenance business from potential new contracts, as well as additional growth in production from new and existing projects, to drive maintenance spending levels.
In Production Services, several Canadian field projects which should have started in Q1 are now under way, and US activities are expected to improve in the second quarter and the second half of 2011, as many of the weather-delayed projects have now been started as well. Management expects full year revenues in Production Services to get back on track and modestly exceed 2010 levels.
Facility Infrastructure revenues were down substantially in Q1 with the completion of the Shell Albian Sands project and the Statoil Leismer project in July, 2010, combined with delays in new oil sands project contract awards. Revenues were up $14.1 million sequentially from Q4, 2010, due to increased work on Suncor's Firebag SAGD projects. Current backlog in this segment is approximately $108 million and includes contract work on Suncor's Firebag SAGD projects near Fort McMurray. Flint is bidding on or is completing bids on additional contract work with several oil sands operators, and expects announcements on contract awards during the second quarter of this year.
Management expects Facility Infrastructure revenues to begin to climb late in 2011 and remain stronger from 2012 through to 2014. Overall, the gains expected in Flint's other segments will partially offset the lower activity in Facility Infrastructure.
Management is reviewing a number of acquisition opportunities to fill in the geographic gaps of existing business lines in both Canada and the United States.
After repaying the current portion of long term debt due in May, 2011, Flint will also be pursuing the refinancing of the loans and borrowings on its balance sheet, to support operational growth and strategic growth activities.
Copies of the Company's Financial Statements have been filed on SEDAR (www.sedar.com) and are available on the Company's website (www.flintenergy.com). A management conference call has been scheduled for Tuesday, May 10, 2011 at 10:00 AM (ET), 8:00 AM (MT). Details on how to participate in or listen to the conference call are available on the Company's website.
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 65 locations in the active 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.