CALGARY, April 18 /CNW/ - IROC Energy Services Corp. ("IROC" or the "Corporation") (TSXV: ISC) is pleased to present a summary of its operating and financial results for the three months and one year periods ended December 31, 2010. For a complete copy of IROC's annual financial statements and management's discussion and analysis ("MD&A") please visit www.sedar.com.
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Highlights for the three months ended December 31, 2010:
-------------------------------------------------------
- Total revenue from continuing operations increased 35% to $20.8
million for the three months ended December 31, 2010 as compared to
$15.5 million in the comparable period of the prior year.
- Gross margin from continuing operations increased 47% to $7.5 million
for the three months ended December 31, 2010 as compared to $5.1
million in the comparable period of the prior year.
- EBITDAS from continuing operations increased 73% to $5.1 million for
the three months ended December 31, 2010 as compared to $3.0 million
in the comparable period of the prior year.
- Net income from continuing operations increased to $2.1 million for
the three months ended December 31, 2010 as compared to a loss of $0.4
million in the comparable period of the prior year.
Highlights for the year ended December, 2010:
---------------------------------------------
- Total revenue from continuing operations increased 31% to $64.4
million for the year ended December 31, 2010 as compared to $49.0
million in the comparable period of the prior year.
- Gross margin from continuing operations increased 34% to $21.3 million
for the year ended December 31, 2010 as compared to $15.9 million in
the comparable period of the prior year.
- EBITDAS from continuing operations increased 66% to $12.5 million for
the year ended December 31, 2010 as compared to $7.5 million in the
comparable period of the prior year.
- Net income from continuing operations increased to $2.0 million for
the year ended December 31, 2010 as compared to a loss of $10.9
million in the comparable period of the prior year.
- Expanded our rental product lines to include coiled tubing and related
well servicing equipment through the acquisition of the rental assets
of Trust Energy Services Corp.
Operations
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IROC's continuing operations are reported in three segments; the Drilling and Production Services segment, the Technology Services segment and Corporate Services. The following is a discussion of the reporting segments in which IROC operates.
Drilling and Production Services
The Drilling and Production Services segment provides services and rental equipment to oil and gas exploration, development and production companies with most of our customers and operations being located in western Canada, in the provinces of Alberta and Saskatchewan.
The Drilling and Production Services segment consists of two divisions:
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Eagle Well Servicing ("Eagle") contracts service rigs to oil and gas
companies to perform various completion, work-over and maintenance
services on oil and natural gas wells. Eagle has offices and equipment
in Red Deer, Grande Prairie and Lloydminster in Alberta and an office and
equipment in Estevan, Saskatchewan with equipment being used in those
geographic areas.
Aero Rental Services ("Aero") provides rental equipment for surface
pressure control in drilling and work-over operations and tubular
handling equipment used for the work-over, re-entry and completion
operations. Aero has an office in Red Deer, Alberta with equipment being
rented for use primarily in Alberta. Aero's results are directly
affected by the level of new well drilling activity.
-------------------------------------------------------------------------
Three months ended
December 31, September 30, June 30, March 31,
2010 2010 2010 2010
-------------------------------------------------------------------------
Eagle Well Servicing:
Number of service rigs 35 35 35 36
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Service rig utilization 66% 57% 33% 55%
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Aero Rental Services:
Gross margin $000's 1,687 735 233 467
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Book value of rental
equipment $000's 10,724 8,733 7,379 7,005
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Commodity prices:
NYMEX crude oil $US/bbl 85.17 76.20 78.03 78.72
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AECO Monthly index
natural gas $CAD/GJ 3.39 3.52 3.66 5.08
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Three months ended
December 31, September 30, June 30, March 31,
2009 2009 2009 2009
-------------------------------------------------------------------------
Eagle Well Servicing:
Number of service rigs 36 36 36 34
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Service rig utilization 49% 34% 27% 46%
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Aero Rental Services:
Gross margin $000's 455 311 60 368
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Book value of rental
equipment $000's 6,868 6,743 6,873 5,076
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Commodity prices:
NYMEX crude oil $US/bbl 76.19 68.30 59.62 43.08
-------------------------------------------------------------------------
AECO Monthly index
natural gas $CAD/GJ 4.01 2.87 3.47 5.34
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At December 31, 2010, Eagle had a fleet of 35 service rigs with our equipment amongst the newest in the industry. All Eagle's service rigs are internally guyed with no requirement for external anchors. This reduces set up time and corresponding costs when compared to anchored rigs. During the second quarter of 2010 we ceased marketing of our oldest service rig and have removed it from the number of active service rigs for utilization calculation purposes. Subsequent to quarter end, in January, 2011 the Corporation has placed one additional rig into service for a total operational service rig fleet of 36 rigs. In addition, three new service rigs are being built with delivery expected in the second and third quarters of 2011.
Commodity prices are the main activity driver as the Corporation's customers' exploration and development programs are directly impacted by oil and natural gas prices. Oil and gas producers spend capital on new wells and service operations when they are economic within the context of current and forecasted commodity prices. Year over year, crude oil prices were stronger in each quarter of 2010 as compared to 2009 and have been following a general trend of strengthening since the fourth quarter of 2008. Subsequent to year end, NYMEX crude oil prices for the first quarter of 2011 averaged $US94.07/bbl. Natural gas prices have experienced less of a recovery than crude oil and remain relatively weak in comparison to historic price levels over the past five years. At current price levels, natural gas development is focused on resource type development projects and liquids rich reservoirs as much conventional shallow gas is no longer economic.
Service rig utilization, as measured by IROC's internal methodology, increased in the quarter to 66%, as compared to 49% in the comparative period of last year. Our utilization percentage increased by 9% as compared to the third quarter as activity levels increased due to the fall and winter freeze-up. Certain areas are only accessible by service rigs and other heavy equipment during winter when the ground is frozen. In 2010, our utilization percentage has increased 14% averaging 53% as compared to 39% in the prior year. Subsequent to year end, first quarter 2011 utilization has increased further to 78%.
On July 16, 2010 IROC purchased all of the rental assets, rental contracts, and most of the business assets of Trust Energy Services Corp. ("Trust"). Trust was a privately owned Alberta based oilfield rental company, specializing in a complete line of coil tubing and well servicing equipment rentals. The Trust assets were acquired to complement Aero Rental Services existing rental assets and to expand the products and services offered. The Trust rental location was closed and all equipment was transferred and integrated into IROC's existing rental asset inventory immediately after the purchase. As part of the asset purchase, Trust's manager has joined Aero Rental Services in a management position.
Technology Services
The Technology Services segment is comprised solely of our Canada Tech division. Canada Tech designs, develops, manufactures and sells or rents a wide line of tools and systems that measure pressures, temperatures and other attributes in the downhole and surface environment of oil and gas wells.
Canada Tech continues to make progress in the sales of products that measure temperature and pressure in Steam Assisted Gravity Drainage ("SAGD") applications in Alberta's heavy oil sector. This is a market segment with large growth potential as this sector has been growing and has recently surpassed natural gas in the dollar amount of Crown royalties being paid to the Alberta Government for the first time.
Our products utilize new and superior technology enabling our gauges and systems to operate in higher temperatures and more challenging environments. Canada Tech's customers require data that is reliable, consistent and accurate. Canada Tech's competitive advantage is the ability to look at each well individually and adapt a system to match the needs of the customer within the well parameters. Due to the custom nature of much of Canada Tech's sales, much of the manufacturing is done on a build to order basis and a significant portion of revenues are on a project basis.
There is continued progress in the permanent monitoring market because of our ability to adapt systems to the customer's needs. This is evident through the SAGD and shale gas projects we are involved in where we are deploying new Hybrid technology which measures temperatures and pressures up to 225 degrees C. In addition, we have developed permanent technology for measuring temperature up to 260 degrees C. For customers with multiple zones in a well, we have installed permanent multi gauge systems with up to six gauges per well and have the capability to increase the number of gauges beyond this. We anticipate growth in SAGD and multiple zone applications, both in Western Canada and internationally where permanent monitoring technology has become more accepted and is ready to be deployed.
In memory tools we continue to pursue sales into international markets. Although sales are marginally reduced over the prior year period, we have executed additional customer contracts and anticipate continued growth over the coming year. In addition, Canada Tech has developed increased memory capability in both Piezo gauges and Quartz gauges to allow for additional data storage.
Canada Tech differs from our other divisions in that the capital requirement is smaller and the value of the division is contained in its patents and proprietary technology. A significant portion of Canada Tech's costs are fixed and as such increased sales volumes have a magnified effect on the EBITDAS of IROC. Financial performance in the last two quarters of 2010 fell short of expectations due to permanent installation projects being delayed or cancelled. While these results are disappointing, we continue to gain market acceptance with our high temperature permanent systems with installations being completed for two additional SAGD customers in the fourth quarter of this year.
Corporate Services
IROC's non-operating segment, Corporate Services, captures general and administrative expenses associated with supporting each of the reporting segments operations noted above, plus costs associated with being a public company. Also, included in Corporate Services is interest expense for debt servicing and income tax expense.
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Financial results and selected financial information
----------------------------------------------------
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$ 000's except
number of shares Year ended Three months ended
and per share December December September June 30, March 31,
amounts 31, 2010 31, 2010 30, 2010 2010 2010
-------------------------------------------------------------------------
Revenue:
Eagle Well
Servicing 46,014 15,400 12,241 6,642 11,731
Aero Rental
Services 7,602 3,131 1,801 894 1,776
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Total drilling &
production
services 53,616 18,531 14,042 7,536 13,507
Technology services 10,738 2,306 2,402 3,289 2,741
-------------------------------------------------------------------------
Total revenue 64,354 20,837 16,444 10,825 16,248
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Operating costs:
Eagle Well
Servicing 31,085 10,175 8,234 5,106 7,570
Aero Rental
Services 4,480 1,444 1,066 661 1,309
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Total drilling &
production
services 35,565 11,619 9,300 5,767 8,879
Technology services 7,477 1,721 2,108 1,897 1,751
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Total operating costs 43,042 13,340 11,408 7,664 10,630
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Gross margin(1)
Eagle Well
Servicing 14,929 5,225 4,007 1,536 4,162
Aero Rental
Services 3,122 1,687 735 233 467
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Total drilling &
production
services 18,051 6,912 4,742 1,769 4,629
Technology services 3,261 585 294 1,392 989
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Total gross margin 21,312 7,497 5,036 3,161 5,618
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Gross margin %(1):
Eagle Well Servicing 32% 34% 33% 23% 35%
Aero Rental Services 41% 54% 41% 26% 26%
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Total drilling &
production services 34% 37% 34% 23% 34%
Technology services 30% 25% 12% 42% 36%
-------------------------------------------------------------------------
Total gross margin % 33% 36% 31% 29% 35%
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EBITDAS(1):
Eagle Well
Servicing 12,534 4,486 3,403 1,079 3,566
Aero Rental
Services 2,398 1,457 524 101 316
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Total drilling &
production
services 14,932 5,943 3,927 1,180 3,882
Technology services 1,046 10 (204) 765 475
Corporate (3,500) (804) (747) (970) (979)
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Total EBITDAS 12,478 5,149 2,976 975 3,378
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General and
administrative 8,834 2,348 2,060 2,186 2,240
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Depreciation and
amortization 8,693 2,431 2,268 2,003 1,991
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Interest expense net
of interest income 1,209 291 293 265 360
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Stock based
compensation 506 101 98 129 178
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Provision for current
and future income
taxes 365 221 187 (278) 235
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Loss (gain) on foreign
exchange 24 17 (2) (88) 97
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Net income (loss) from
continuing operations 2,010 2,104 437 (1,055) 524
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Net income (loss) 2,010 2,104 437 (1,055) 524
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Net income (loss) per
common share from
continuing
operations:
- Basic $0.05 $0.05 $0.01 $(0.02) $0.01
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- Diluted $0.05 $0.05 $0.01 $(0.02) $0.01
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Net income (loss)
per common share:
- Basic $0.05 $0.05 $0.01 $(0.02) $0.01
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- Diluted $0.05 $0.05 $0.01 $(0.02) $0.01
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Weighted average
common shares
outstanding:
- Basic 43,426,436 43,026,730 43,502,346 43,604,911 43,576,971
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- Diluted 43,453,485 43,270,196 43,523,763 43,604,911 43,576,971
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(1) See Non-GAAP Measures
-------------------------------------------------------------------------
$ 000's except
number of shares Year ended Three months ended
and per share December December September June 30, March 31,
amounts 31, 2009 31, 2009 30, 2009 2009 2009
-------------------------------------------------------------------------
Revenue:
Eagle Well
Servicing 33,496 10,537 7,166 5,349 10,444
Aero Rental
Services 4,776 1,501 1,013 900 1,362
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Total drilling &
production
services 38,272 12,038 8,179 6,249 11,806
Technology services 10,751 3,445 2,052 3,053 2,201
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Total revenue 49,023 15,483 10,231 9,302 14,007
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Operating costs:
Eagle Well
Servicing 22,097 6,982 4,652 3,919 6,544
Aero Rental Services 3,583 1,047 702 840 994
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Total drilling &
production
services 25,680 8,029 5,354 4,759 7,538
Technology services 7,406 2,356 1,554 1,808 1,688
-------------------------------------------------------------------------
Total operating
costs 33,086 10,385 6,908 6,567 9,226
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Gross margin(1)
Eagle Well
Servicing 11,399 3,555 2,514 1,430 3,900
Aero Rental
Services 1,194 455 311 60 368
-------------------------------------------------------------------------
Total drilling &
production
services 12,593 4,010 2,825 1,490 4,268
Technology services 3,344 1,088 498 1,245 513
-------------------------------------------------------------------------
Total gross margin 15,937 5,098 3,323 2,735 4,781
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Gross margin %(1):
Eagle Well Servicing 34% 34% 35% 27% 37%
Aero Rental Services 25% 30% 31% 7% 27%
-------------------------------------------------------------------------
Total drilling &
production services 33% 33% 34% 24% 36%
Technology services 31% 32% 24% 41% 23%
-------------------------------------------------------------------------
Total gross margin % 33% 33% 32% 29% 34%
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EBITDAS(1):
Eagle Well Servicing 9,617 3,057 2,129 997 3,434
Aero Rental Services 745 331 206 (53) 261
-------------------------------------------------------------------------
Total drilling &
production
services 10,362 3,388 2,335 944 3,695
Technology services 932 512 29 556 (165)
Corporate (3,779) (927) (985) (917) (950)
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Total EBITDAS 7,515 2,973 1,379 583 2,580
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General and
administrative 8,422 2,125 1,944 2,152 2,201
-------------------------------------------------------------------------
Depreciation and
amortization 8,454 2,392 2,073 1,978 2,011
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Interest expense net
of interest income 1,232 446 308 205 273
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Stock based
compensation 340 74 64 92 110
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Provision for current
and future
income taxes (620) 380 (268) (785) 54
-------------------------------------------------------------------------
Loss on foreign
exchange 619 43 168 354 54
-------------------------------------------------------------------------
Net income (loss)
from continuing
operations (10,886) (395) (9,314) (1,260) 82
-------------------------------------------------------------------------
Net income (loss) (10,576) (481) (9,324) (1,260) 488
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Net income (loss)
per common share
from continuing
operations:
- Basic $(0.25) $(0.01) $(0.21) $(0.03) $ -
-------------------------------------------------------------------------
- Diluted $(0.25) $(0.01) $(0.21) $(0.03) $ -
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Net income (loss)
per common share:
-------------------------------------------------------------------------
- Basic $(0.24) $(0.01) $(0.21) $(0.03) $0.01
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- Diluted $(0.24) $(0.01) $(0.21) $(0.03) $0.01
-------------------------------------------------------------------------
Weighted average
common shares
outstanding:
- Basic 44,000,524 43,565,754 43,947,852 44,200,651 44,296,448
-------------------------------------------------------------------------
- Diluted 44,000,524 43,565,754 43,947,852 44,200,651 44,296,448
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(1) See Non-GAAP Measures
Outlook
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The continued strength in the price of oil combined with the ever increasing application of horizontal drilling has provided for significant improvements in levels of activity in the Western Canadian Sedimentary Basin during the last half of 2010. The industry has seen year over year increases in all aspects of the service business with activity levels for the first quarter of 2011 indicating this trend is likely to continue through 2011.
Eagle Well Servicing has developed solid relationships with active oil and gas operators across Western Canada by providing the newest equipment available, trained personnel and a competent group of managers that combine to provide value to our customers both in superior customer service and efficient operations. We experienced continued strong utilization and improved financial performance through the winter season resulting from our customers' oil driven activities and seasonal activity increases for our northern based rigs. 36 service rigs (our entire fleet) were fully operational and crewed during the winter as demand remained strong for our equipment and personnel in all of our operating areas. Subsequent to year end, and in response to continuing customer demand, Eagle has initiated a build program for 3 new service rigs expected to be delivered and operational during the second quarter of 2011.
Aero Rental Services, having grown both organically and with the equipment and personnel acquired from Trust Energy Services during the past year, has facilities and a staff of pressure control professionals capable of handling increased activity in the near term. Management intends to continue deploying capital into this division given the increasing returns and continuing increased demand for its products and services. Capital expenditures of $5 million are planned, with the bulk of the assets to be acquired during the first half of 2011. The Corporation expects Aero will become an increasingly important contributor to the financial performance of the Corporation by providing an increasing share of both revenue and cash flow over time.
Canada Tech continues to focus on increasing revenue streams by penetrating both domestic and international markets. Management has continued to work on efficiencies to reduce our fixed costs while at the same time pushing hard to extend our penetration into select markets around the world. A number of new products introduced over the past two years will allow for increased diversification with some of the oilsands applications for our technology beginning to contribute.
The increase in activity witnessed during the last half of 2010 is expected to continue during 2011, given strong oil prices and the resulting intensity of oil based activity. Oil wells require greater levels of maintenance over time, which bodes well for the service industry as new wells are completed adding more inventory to the active wells requiring attention. It is currently estimated that over 75 percent of activity in Canada is oil related. This provides a solid base for our service driven businesses. The continuing labour shortage is a cause for concern and much of our success in the coming quarters will depend on our ability to access personnel for our field operations.
In summary, we are now optimistic the challenges the industry experienced in late 2009 and early 2010 have certainly receded. Increased activity levels experienced during the last half of 2010 are expected to continue as we make our way through 2011.
IROC remains well positioned for growth from both financial and operational perspectives. Subsequent to year end, on April 11, 2011, the Corporation completed a short form prospectus offering of 7,200,361 common shares at a price of $1.40 per common share, for estimated net proceeds after costs of approximately $9.3 million. Along with this offering, Key Energy Services, Inc. sold the 8,734,469 common shares which it had held since 2005. Key's ownership amounted to 20.47% of the total outstanding common shares and we believe the sale of these shares to a much wider distribution along with the new shares issued will enhance liquidity in the trading of the Corporation's shares.
As we move into 2011, IROC has a strong balance sheet, the newest in equipment and technologies, and a competent group of employees that will allow us to both create opportunities for growth and capitalize on opportunities as they present themselves.
About IROC Energy Services Corporation
IROC Energy Services Corp. is an Alberta oilfield services company that, through the IROC Energy Services Partnership, provides a diverse range of products, services and equipment to the oil and gas industry that are among the newest and most innovative in the Western Canadian Sedimentary Basin and international markets. IROC combines cutting-edge technology with depth of experience to deliver a product and services offering in the following core areas: Well Servicing & Equipment, Downhole Temperature & Pressure Monitoring Tools, Rental Services and Coiled Tubing Services. For more information on IROC Energy Services Corp. visit our website at www.iroccorp.com.
Cautionary Statement Regarding Forward Looking Information and Statements
Certain information contained in this news release, including information related to the Corporation's planned capital expenditures and growth opportunities, outlook for future oil and gas prices, cyclical industry fundamentals, drilling, completion, work over and abandonment activity levels, the Corporation's ability to fund future obligations and capital expenditures, and information or statements that contain words such as "could", "should", "can", "anticipate", "expect", "believe", "will", "may", "likely", "estimate", "predict", "potential", "continue", "maintain", "retain", "grow", and similar expressions and statements relating to matters that are not historical facts, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. This information or these statements are based on certain assumptions and analysis made by the Corporation in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. In particular, the Corporation's expectation of uncertain demand and prices for oil and natural gas and the resulting future industry activity, is premised on the Corporation's understanding of customers' capital budgets and their ability to access capital, the focus of its customers on deeper and horizontal drilling opportunities in the current natural gas pricing environment, and the continuing impact of the recent global financial crisis and the current economic recovery all of which affects the demand for oil and gas. Whether actual results, performance or achievements will conform to the Corporation's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from the Corporation's expectations. Such risks and uncertainties include, but are not limited to: fluctuations in the price and demand for oil and natural gas; fluctuations in the level of oil and natural gas exploration and development activities; fluctuations in the demand for well servicing; the effects of weather conditions on operations and facilities; the existence of competitive operating risks inherent in well servicing; general economic, market or business conditions; changes in laws or regulations, including taxation, environmental and currency regulations; the lack of availability of qualified personnel or management; the other risk factors set forth under the heading "Risks" in the annual MD&A for the year ended December 31, 2010 and other unforeseen conditions which could impact on the use of services supplied by the Corporation.
Consequently, all of the forward-looking information and statements made in this news release are qualified by this cautionary statement and there can be no assurance that the actual results or developments anticipated by the Corporation will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Corporation or its business or operations. Except as may be required by law, the Corporation assumes no obligation to update publicly any such forward-looking information and statements, whether as a result of new information, future events, or otherwise.
This press release is not for dissemination in United States or to any United States news services. The Common Shares of IROC have not and will not be registered on the United States Securities Act of 1933, as amended (the "United States Securities Act") or any state securities laws and are not offered or sold in the United States or to any US person except in certain transactions exempt from the registration requirements of the United States Securities Act and applicable state securities laws.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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Non-Gaap Measures
-----------------
>>
The financial statements have been prepared in accordance with GAAP. Certain supplementary information and measures not recognized under GAAP are provided where Management believes they assist the reader in understanding IROC's results. These measures include:
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1. EBITDAS and EBITDAS per share- EBITDAS is defined as earnings before
interest, taxes, depreciation and amortization, stock-based
compensation expense, foreign exchange gains and losses, goodwill
impairment, note receivable impairment, and gains or losses on
disposal of property and equipment. EBITDAS and EBITDAS per share are
not recognized measures under GAAP. The Corporation believes that
EBITDAS is provided as a measure of operating performance without
reference to financing decisions, income tax impacts and non-cash
expenses, which are not controlled at the operating management level.
Accordingly, the Corporation believes EBITDAS is a useful measure for
prospective investors in evaluating the financial performance of the
Corporation, and specifically, the ability of the Corporation to
service the interest on its indebtedness. Investors should be
cautioned that EBITDAS should not be construed as an alternative to
net income determined in accordance with GAAP as an indicator of the
Corporation's performance. IROC's method of calculating EBITDAS may
differ from those of other companies, and accordingly, EBITDAS may not
be directly comparable to measures used by other companies. EBITDAS %
is calculated as EBITDAS divided by revenue.
2. Gross margin is defined as revenue less operating expenses. Gross
margin % is defined as gross margin divided by revenue. The Company
believes that gross margin and gross margin % are useful measures
which provide an indicator of the Corporation's fundamental ability to
make money on the products and services it sells. The Corporation
believes the relationship between revenues and costs expressed by the
gross margin % is a useful measure when compared between different
financial periods as it demonstrates the trending relationship between
revenues, costs and margins. Gross margin and gross margin % are not
recognized measures of GAAP and do not have any standardized meaning
prescribed by GAAP. IROC's method of calculating gross margin and
gross margin % may differ from those of other companies, and
accordingly, may not be directly comparable to measures used by other
companies. Gross margin is reconciled to revenue - continuing
operations in the Financial results and selected financial information
table.
>>
The following is a reconciliation of EBITDAS and EBITDAS per share to net income from continuing operations:
<<
-------------------------------------------------------------------------
$ 000's except
number of shares Year ended Three months ended
and per share December December September June 30, March 31,
amounts 31, 2010 31, 2010 30, 2010 2010 2010
-------------------------------------------------------------------------
Net income (loss)
from continuing
operations 2,010 2,104 437 (1,055) 524
Depreciation and
amortization 8,693 2,431 2,268 2,003 1,991
Loss (gain) on
foreign exchange 24 17 (2) (88) 97
Stock based
compensation expense 506 101 98 129 178
Loss (gain) on
disposal of equipment (29) (16) (5) (1) (7)
Other interest 227 64 45 37 81
Interest on long-term
debt 1,029 237 263 239 290
Interest income (47) (10) (15) (11) (11)
Goodwill impairment - - - - -
Note receivable
impairment (recovery) (300) - (300) - -
Income taxes:
Current - - - - -
Future 365 221 187 (278) 235
-------------------------------------------------------------------------
EBITDAS - continuing
operations 12,478 5,149 2,976 975 3,378
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDAS per share
Basic $0.29 $0.12 $0.07 $0.02 $0.08
Diluted $0.29 $0.12 $0.07 $0.02 $0.08
-------------------------------------------------------------------------
-------------------------------------------------------------------------
$ 000's except
number of shares Year ended Three months ended
and per share December December September June 30, March 31,
amounts 31, 2009 31, 2009 30, 2009 2009 2009
-------------------------------------------------------------------------
Net income (loss)
from continuing
operations (10,886) (395) (9,314) (1,260) 82
Depreciation and
amortization 8,454 2,392 2,073 1,978 2,011
Loss (gain) on
foreign exchange 619 43 168 354 54
Stock based
compensation expense 340 74 64 92 110
Loss (gain) on disposal
of equipment 26 33 (2) (1) (4)
Other interest 269 92 50 54 73
Interest on long-term
debt 1,048 373 276 187 212
Interest income (85) (19) (18) (36) (12)
Interest and accretion
on debentures - - - - -
Goodwill impairment 6,850 - 6,850 - -
Note receivable
impairment 1,500 - 1,500 - -
Income taxes:
Current - - - - -
Future (620) 380 (268) (785) 54
-------------------------------------------------------------------------
EBITDAS - continuing
operations 7,515 2,973 1,379 583 2,580
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDAS per share
Basic $0.17 $0.07 $0.03 $0.01 $0.06
Diluted $0.17 $0.07 $0.03 $0.01 $0.06
-------------------------------------------------------------------------
>>
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IROC ENERGY SERVICES CORP. ANNOUNCES INCREASED NET INCOME AND FILING OF QUARTERLY FINANCIAL STATEMENTS
CALGARY, April 18 /CNW/ - IROC Energy Services Corp. ("IROC" or the "Corporation") (TSXV: ISC) is pleased to present a summary of its operating and financial results for the three months and one year periods ended December 31, 2010. For a complete copy of IROC's quarterly financial statements and management's discussion and analysis ("MD&A") please visit www.sedar.com.
<<
Highlights for the three months ended December 31, 2010:
-------------------------------------------------------
- Total revenue from continuing operations increased 35% to $20.8
million for the three months ended December 31, 2010 as compared to
$15.5 million in the comparable period of the prior year.
- Gross margin from continuing operations increased 47% to $7.5 million
for the three months ended December 31, 2010 as compared to $5.1
million in the comparable period of the prior year.
- EBITDAS from continuing operations increased 73% to $5.1 million for
the three months ended December 31, 2010 as compared to $3.0 million
in the comparable period of the prior year.
- Net income from continuing operations increased to $2.1 million for
the three months ended December 31, 2010 as compared to a loss of $0.4
million in the comparable period of the prior year.
Highlights for the year ended December, 2010:
---------------------------------------------
- Total revenue from continuing operations increased 31% to $64.4
million for the year ended December 31, 2010 as compared to $49.0
million in the comparable period of the prior year.
- Gross margin from continuing operations increased 34% to $21.3 million
for the year ended December 31, 2010 as compared to $15.9 million in
the comparable period of the prior year.
- EBITDAS from continuing operations increased 66% to $12.5 million for
the year ended December 31, 2010 as compared to $7.5 million in the
comparable period of the prior year.
- Net income from continuing operations increased to $2.0 million for
the year ended December 31, 2010 as compared to a loss of $10.9
million in the comparable period of the prior year.
- Expanded our rental product lines to include coiled tubing and related
well servicing equipment through the acquisition of the rental assets
of Trust Energy Services Corp.
Operations
----------
>>
IROC's continuing operations are reported in three segments; the Drilling and Production Services segment, the Technology Services segment and Corporate Services. The following is a discussion of the reporting segments in which IROC operates.
Drilling and Production Services
The Drilling and Production Services segment provides services and rental equipment to oil and gas exploration, development and production companies with most of our customers and operations being located in western Canada, in the provinces of Alberta and Saskatchewan.
The Drilling and Production Services segment consists of two divisions:
<<
Eagle Well Servicing ("Eagle") contracts service rigs to oil and gas
companies to perform various completion, work-over and maintenance
services on oil and natural gas wells. Eagle has offices and equipment
in Red Deer, Grande Prairie and Lloydminster in Alberta and an office and
equipment in Estevan, Saskatchewan with equipment being used in those
geographic areas.
Aero Rental Services ("Aero") provides rental equipment for surface
pressure control in drilling and work-over operations and tubular
handling equipment used for the work-over, re-entry and completion
operations. Aero has an office in Red Deer, Alberta with equipment being
rented for use primarily in Alberta. Aero's results are directly
affected by the level of new well drilling activity.
-------------------------------------------------------------------------
Three months ended
December 31, September 30, June 30, March 31,
2010 2010 2010 2010
-------------------------------------------------------------------------
Eagle Well Servicing:
Number of service rigs 35 35 35 36
-------------------------------------------------------------------------
Service rig utilization 66% 57% 33% 55%
-------------------------------------------------------------------------
Aero Rental Services:
Gross margin $000's 1,687 735 233 467
-------------------------------------------------------------------------
Book value of rental
equipment $000's 10,724 8,733 7,379 7,005
-------------------------------------------------------------------------
Commodity prices:
NYMEX crude oil $US/bbl 85.17 76.20 78.03 78.72
-------------------------------------------------------------------------
AECO Monthly index
natural gas $CAD/GJ 3.39 3.52 3.66 5.08
-------------------------------------------------------------------------
Three months ended
December 31, September 30, June 30, March 31,
2009 2009 2009 2009
-------------------------------------------------------------------------
Eagle Well Servicing:
Number of service rigs 36 36 36 34
-------------------------------------------------------------------------
Service rig utilization 49% 34% 27% 46%
-------------------------------------------------------------------------
Aero Rental Services:
Gross margin $000's 455 311 60 368
-------------------------------------------------------------------------
Book value of rental
equipment $000's 6,868 6,743 6,873 5,076
-------------------------------------------------------------------------
Commodity prices:
NYMEX crude oil $US/bbl 76.19 68.30 59.62 43.08
-------------------------------------------------------------------------
AECO Monthly index
natural gas $CAD/GJ 4.01 2.87 3.47 5.34
-------------------------------------------------------------------------
>>
At December 31, 2010, Eagle had a fleet of 35 service rigs with our equipment amongst the newest in the industry. All Eagle's service rigs are internally guyed with no requirement for external anchors. This reduces set up time and corresponding costs when compared to anchored rigs. During the second quarter of 2010 we ceased marketing of our oldest service rig and have removed it from the number of active service rigs for utilization calculation purposes. Subsequent to quarter end, in January, 2011 the Corporation has placed one additional rig into service for a total operational service rig fleet of 36 rigs. In addition, three new service rigs are being built with delivery expected in the second and third quarters of 2011.
Commodity prices are the main activity driver as the Corporation's customers' exploration and development programs are directly impacted by oil and natural gas prices. Oil and gas producers spend capital on new wells and service operations when they are economic within the context of current and forecasted commodity prices. Year over year, crude oil prices were stronger in each quarter of 2010 as compared to 2009 and have been following a general trend of strengthening since the fourth quarter of 2008. Subsequent to year end, NYMEX crude oil prices for the first quarter of 2011 averaged $US94.07/bbl. Natural gas prices have experienced less of a recovery than crude oil and remain relatively weak in comparison to historic price levels over the past five years. At current price levels, natural gas development is focused on resource type development projects and liquids rich reservoirs as much conventional shallow gas is no longer economic.
Service rig utilization, as measured by IROC's internal methodology, increased in the quarter to 66%, as compared to 49% in the comparative period of last year. Our utilization percentage increased by 9% as compared to the third quarter as activity levels increased due to the fall and winter freeze-up. Certain areas are only accessible by service rigs and other heavy equipment during winter when the ground is frozen. In 2010, our utilization percentage has increased 14% averaging 53% as compared to 39% in the prior year. Subsequent to year end, first quarter 2011 utilization has increased further to 78%.
On July 16, 2010 IROC purchased all of the rental assets, rental contracts, and most of the business assets of Trust Energy Services Corp. ("Trust"). Trust was a privately owned Alberta based oilfield rental company, specializing in a complete line of coil tubing and well servicing equipment rentals. The Trust assets were acquired to complement Aero Rental Services existing rental assets and to expand the products and services offered. The Trust rental location was closed and all equipment was transferred and integrated into IROC's existing rental asset inventory immediately after the purchase. As part of the asset purchase, Trust's manager has joined Aero Rental Services in a management position.
Technology Services
The Technology Services segment is comprised solely of our Canada Tech division. Canada Tech designs, develops, manufactures and sells or rents a wide line of tools and systems that measure pressures, temperatures and other attributes in the downhole and surface environment of oil and gas wells.
Canada Tech continues to make progress in the sales of products that measure temperature and pressure in Steam Assisted Gravity Drainage ("SAGD") applications in Alberta's heavy oil sector. This is a market segment with large growth potential as this sector has been growing and has recently surpassed natural gas in the dollar amount of Crown royalties being paid to the Alberta Government for the first time.
Our products utilize new and superior technology enabling our gauges and systems to operate in higher temperatures and more challenging environments. Canada Tech's customers require data that is reliable, consistent and accurate. Canada Tech's competitive advantage is the ability to look at each well individually and adapt a system to match the needs of the customer within the well parameters. Due to the custom nature of much of Canada Tech's sales, much of the manufacturing is done on a build to order basis and a significant portion of revenues are on a project basis.
There is continued progress in the permanent monitoring market because of our ability to adapt systems to the customer's needs. This is evident through the SAGD and shale gas projects we are involved in where we are deploying new Hybrid technology which measures temperatures and pressures up to 225 degrees C. In addition, we have developed permanent technology for measuring temperature up to 260 degrees C. For customers with multiple zones in a well, we have installed permanent multi gauge systems with up to six gauges per well and have the capability to increase the number of gauges beyond this. We anticipate growth in SAGD and multiple zone applications, both in Western Canada and internationally where permanent monitoring technology has become more accepted and is ready to be deployed.
In memory tools we continue to pursue sales into international markets. Although sales are marginally reduced over the prior year period, we have executed additional customer contracts and anticipate continued growth over the coming year. In addition, Canada Tech has developed increased memory capability in both Piezo gauges and Quartz gauges to allow for additional data storage.
Canada Tech differs from our other divisions in that the capital requirement is smaller and the value of the division is contained in its patents and proprietary technology. A significant portion of Canada Tech's costs are fixed and as such increased sales volumes have a magnified effect on the EBITDAS of IROC. Financial performance in the last two quarters of 2010 fell short of expectations due to permanent installation projects being delayed or cancelled. While these results are disappointing, we continue to gain market acceptance with our high temperature permanent systems with installations being completed for two additional SAGD customers in the fourth quarter of this year.
Corporate Services
IROC's non-operating segment, Corporate Services, captures general and administrative expenses associated with supporting each of the reporting segments operations noted above, plus costs associated with being a public company. Also, included in Corporate Services is interest expense for debt servicing and income tax expense.
<<
Financial results and selected financial information
----------------------------------------------------
-------------------------------------------------------------------------
$ 000's except
number of shares Year ended Three months ended
and per share December December September June 30, March 31,
amounts 31, 2010 31, 2010 30, 2010 2010 2010
-------------------------------------------------------------------------
Revenue:
Eagle Well
Servicing 46,014 15,400 12,241 6,642 11,731
Aero Rental
Services 7,602 3,131 1,801 894 1,776
-------------------------------------------------------------------------
Total drilling &
production
services 53,616 18,531 14,042 7,536 13,507
Technology services 10,738 2,306 2,402 3,289 2,741
-------------------------------------------------------------------------
Total revenue 64,354 20,837 16,444 10,825 16,248
-------------------------------------------------------------------------
Operating costs:
Eagle Well
Servicing 31,085 10,175 8,234 5,106 7,570
Aero Rental
Services 4,480 1,444 1,066 661 1,309
-------------------------------------------------------------------------
Total drilling &
production
services 35,565 11,619 9,300 5,767 8,879
Technology services 7,477 1,721 2,108 1,897 1,751
-------------------------------------------------------------------------
Total operating costs 43,042 13,340 11,408 7,664 10,630
-------------------------------------------------------------------------
Gross margin(1)
Eagle Well
Servicing 14,929 5,225 4,007 1,536 4,162
Aero Rental
Services 3,122 1,687 735 233 467
-------------------------------------------------------------------------
Total drilling &
production
services 18,051 6,912 4,742 1,769 4,629
Technology services 3,261 585 294 1,392 989
-------------------------------------------------------------------------
Total gross margin 21,312 7,497 5,036 3,161 5,618
-------------------------------------------------------------------------
Gross margin %(1):
Eagle Well Servicing 32% 34% 33% 23% 35%
Aero Rental Services 41% 54% 41% 26% 26%
-------------------------------------------------------------------------
Total drilling &
production services 34% 37% 34% 23% 34%
Technology services 30% 25% 12% 42% 36%
-------------------------------------------------------------------------
Total gross margin % 33% 36% 31% 29% 35%
-------------------------------------------------------------------------
EBITDAS(1):
Eagle Well
Servicing 12,534 4,486 3,403 1,079 3,566
Aero Rental
Services 2,398 1,457 524 101 316
-------------------------------------------------------------------------
Total drilling &
production
services 14,932 5,943 3,927 1,180 3,882
Technology services 1,046 10 (204) 765 475
Corporate (3,500) (804) (747) (970) (979)
-------------------------------------------------------------------------
Total EBITDAS 12,478 5,149 2,976 975 3,378
-------------------------------------------------------------------------
-------------------------------------------------------------------------
General and
administrative 8,834 2,348 2,060 2,186 2,240
-------------------------------------------------------------------------
Depreciation and
amortization 8,693 2,431 2,268 2,003 1,991
-------------------------------------------------------------------------
Interest expense net
of interest income 1,209 291 293 265 360
-------------------------------------------------------------------------
Stock based
compensation 506 101 98 129 178
-------------------------------------------------------------------------
Provision for current
and future income
taxes 365 221 187 (278) 235
-------------------------------------------------------------------------
Loss (gain) on foreign
exchange 24 17 (2) (88) 97
-------------------------------------------------------------------------
Net income (loss) from
continuing operations 2,010 2,104 437 (1,055) 524
-------------------------------------------------------------------------
Net income (loss) 2,010 2,104 437 (1,055) 524
-------------------------------------------------------------------------
Net income (loss) per
common share from
continuing
operations:
- Basic $0.05 $0.05 $0.01 $(0.02) $0.01
-------------------------------------------------------------------------
- Diluted $0.05 $0.05 $0.01 $(0.02) $0.01
-------------------------------------------------------------------------
Net income (loss)
per common share:
- Basic $0.05 $0.05 $0.01 $(0.02) $0.01
-------------------------------------------------------------------------
- Diluted $0.05 $0.05 $0.01 $(0.02) $0.01
-------------------------------------------------------------------------
Weighted average
common shares
outstanding:
- Basic 43,426,436 43,026,730 43,502,346 43,604,911 43,576,971
-------------------------------------------------------------------------
- Diluted 43,453,485 43,270,196 43,523,763 43,604,911 43,576,971
-------------------------------------------------------------------------
(1) See Non-GAAP Measures
-------------------------------------------------------------------------
$ 000's except
number of shares Year ended Three months ended
and per share December December September June 30, March 31,
amounts 31, 2009 31, 2009 30, 2009 2009 2009
-------------------------------------------------------------------------
Revenue:
Eagle Well
Servicing 33,496 10,537 7,166 5,349 10,444
Aero Rental
Services 4,776 1,501 1,013 900 1,362
-------------------------------------------------------------------------
Total drilling &
production
services 38,272 12,038 8,179 6,249 11,806
Technology services 10,751 3,445 2,052 3,053 2,201
-------------------------------------------------------------------------
Total revenue 49,023 15,483 10,231 9,302 14,007
-------------------------------------------------------------------------
Operating costs:
Eagle Well
Servicing 22,097 6,982 4,652 3,919 6,544
Aero Rental Services 3,583 1,047 702 840 994
-------------------------------------------------------------------------
Total drilling &
production
services 25,680 8,029 5,354 4,759 7,538
Technology services 7,406 2,356 1,554 1,808 1,688
-------------------------------------------------------------------------
Total operating
costs 33,086 10,385 6,908 6,567 9,226
-------------------------------------------------------------------------
Gross margin(1)
Eagle Well
Servicing 11,399 3,555 2,514 1,430 3,900
Aero Rental
Services 1,194 455 311 60 368
-------------------------------------------------------------------------
Total drilling &
production
services 12,593 4,010 2,825 1,490 4,268
Technology services 3,344 1,088 498 1,245 513
-------------------------------------------------------------------------
Total gross margin 15,937 5,098 3,323 2,735 4,781
-------------------------------------------------------------------------
Gross margin %(1):
Eagle Well Servicing 34% 34% 35% 27% 37%
Aero Rental Services 25% 30% 31% 7% 27%
-------------------------------------------------------------------------
Total drilling &
production services 33% 33% 34% 24% 36%
Technology services 31% 32% 24% 41% 23%
-------------------------------------------------------------------------
Total gross margin % 33% 33% 32% 29% 34%
-------------------------------------------------------------------------
EBITDAS(1):
Eagle Well Servicing 9,617 3,057 2,129 997 3,434
Aero Rental Services 745 331 206 (53) 261
-------------------------------------------------------------------------
Total drilling &
production
services 10,362 3,388 2,335 944 3,695
Technology services 932 512 29 556 (165)
Corporate (3,779) (927) (985) (917) (950)
-------------------------------------------------------------------------
Total EBITDAS 7,515 2,973 1,379 583 2,580
-------------------------------------------------------------------------
General and
administrative 8,422 2,125 1,944 2,152 2,201
-------------------------------------------------------------------------
Depreciation and
amortization 8,454 2,392 2,073 1,978 2,011
-------------------------------------------------------------------------
Interest expense net
of interest income 1,232 446 308 205 273
-------------------------------------------------------------------------
Stock based
compensation 340 74 64 92 110
-------------------------------------------------------------------------
Provision for current
and future
income taxes (620) 380 (268) (785) 54
-------------------------------------------------------------------------
Loss on foreign
exchange 619 43 168 354 54
-------------------------------------------------------------------------
Net income (loss)
from continuing
operations (10,886) (395) (9,314) (1,260) 82
-------------------------------------------------------------------------
Net income (loss) (10,576) (481) (9,324) (1,260) 488
-------------------------------------------------------------------------
Net income (loss)
per common share
from continuing
operations:
- Basic $(0.25) $(0.01) $(0.21) $(0.03) $ -
-------------------------------------------------------------------------
- Diluted $(0.25) $(0.01) $(0.21) $(0.03) $ -
-------------------------------------------------------------------------
Net income (loss)
per common share:
-------------------------------------------------------------------------
- Basic $(0.24) $(0.01) $(0.21) $(0.03) $0.01
-------------------------------------------------------------------------
- Diluted $(0.24) $(0.01) $(0.21) $(0.03) $0.01
-------------------------------------------------------------------------
Weighted average
common shares
outstanding:
- Basic 44,000,524 43,565,754 43,947,852 44,200,651 44,296,448
-------------------------------------------------------------------------
- Diluted 44,000,524 43,565,754 43,947,852 44,200,651 44,296,448
-------------------------------------------------------------------------
(1) See Non-GAAP Measures
Outlook
-------
>>
The continued strength in the price of oil combined with the ever increasing application of horizontal drilling has provided for significant improvements in levels of activity in the Western Canadian Sedimentary Basin during the last half of 2010. The industry has seen year over year increases in all aspects of the service business with activity levels for the first quarter of 2011 indicating this trend is likely to continue through 2011.
Eagle Well Servicing has developed solid relationships with active oil and gas operators across Western Canada by providing the newest equipment available, trained personnel and a competent group of managers that combine to provide value to our customers both in superior customer service and efficient operations. We experienced continued strong utilization and improved financial performance through the winter season resulting from our customers' oil driven activities and seasonal activity increases for our northern based rigs. 36 service rigs (our entire fleet) were fully operational and crewed during the winter as demand remained strong for our equipment and personnel in all of our operating areas. Subsequent to year end, and in response to continuing customer demand, Eagle has initiated a build program for 3 new service rigs expected to be delivered and operational during the second quarter of 2011.
Aero Rental Services, having grown both organically and with the equipment and personnel acquired from Trust Energy Services during the past year, has facilities and a staff of pressure control professionals capable of handling increased activity in the near term. Management intends to continue deploying capital into this division given the increasing returns and continuing increased demand for its products and services. Capital expenditures of $5 million are planned, with the bulk of the assets to be acquired during the first half of 2011. The Corporation expects Aero will become an increasingly important contributor to the financial performance of the Corporation by providing an increasing share of both revenue and cash flow over time.
Canada Tech continues to focus on increasing revenue streams by penetrating both domestic and international markets. Management has continued to work on efficiencies to reduce our fixed costs while at the same time pushing hard to extend our penetration into select markets around the world. A number of new products introduced over the past two years will allow for increased diversification with some of the oilsands applications for our technology beginning to contribute.
The increase in activity witnessed during the last half of 2010 is expected to continue during 2011, given strong oil prices and the resulting intensity of oil based activity. Oil wells require greater levels of maintenance over time, which bodes well for the service industry as new wells are completed adding more inventory to the active wells requiring attention. It is currently estimated that over 75 percent of activity in Canada is oil related. This provides a solid base for our service driven businesses. The continuing labour shortage is a cause for concern and much of our success in the coming quarters will depend on our ability to access personnel for our field operations.
In summary, we are now optimistic the challenges the industry experienced in late 2009 and early 2010 have certainly receded. Increased activity levels experienced during the last half of 2010 are expected to continue as we make our way through 2011.
IROC remains well positioned for growth from both financial and operational perspectives. Subsequent to year end, on April 11, 2011, the Corporation completed a short form prospectus offering of 7,200,361 common shares at a price of $1.40 per common share, for estimated net proceeds after costs of approximately $9.3 million. Along with this offering, Key Energy Services, Inc. sold the 8,734,469 common shares which it had held since 2005. Key's ownership amounted to 20.47% of the total outstanding common shares and we believe the sale of these shares to a much wider distribution along with the new shares issued will enhance liquidity in the trading of the Corporation's shares.
As we move into 2011, IROC has a strong balance sheet, the newest in equipment and technologies, and a competent group of employees that will allow us to both create opportunities for growth and capitalize on opportunities as they present themselves.
About IROC Energy Services Corporation
IROC Energy Services Corp. is an Alberta oilfield services company that, through the IROC Energy Services Partnership, provides a diverse range of products, services and equipment to the oil and gas industry that are among the newest and most innovative in the Western Canadian Sedimentary Basin and international markets. IROC combines cutting-edge technology with depth of experience to deliver a product and services offering in the following core areas: Well Servicing & Equipment, Downhole Temperature & Pressure Monitoring Tools, Rental Services and Coiled Tubing Services. For more information on IROC Energy Services Corp. visit our website at www.iroccorp.com.
Cautionary Statement Regarding Forward Looking Information and Statements
Certain information contained in this news release, including information related to the Corporation's planned capital expenditures and growth opportunities, outlook for future oil and gas prices, cyclical industry fundamentals, drilling, completion, work over and abandonment activity levels, the Corporation's ability to fund future obligations and capital expenditures, and information or statements that contain words such as "could", "should", "can", "anticipate", "expect", "believe", "will", "may", "likely", "estimate", "predict", "potential", "continue", "maintain", "retain", "grow", and similar expressions and statements relating to matters that are not historical facts, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. This information or these statements are based on certain assumptions and analysis made by the Corporation in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. In particular, the Corporation's expectation of uncertain demand and prices for oil and natural gas and the resulting future industry activity, is premised on the Corporation's understanding of customers' capital budgets and their ability to access capital, the focus of its customers on deeper and horizontal drilling opportunities in the current natural gas pricing environment, and the continuing impact of the recent global financial crisis and the current economic recovery all of which affects the demand for oil and gas. Whether actual results, performance or achievements will conform to the Corporation's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from the Corporation's expectations. Such risks and uncertainties include, but are not limited to: fluctuations in the price and demand for oil and natural gas; fluctuations in the level of oil and natural gas exploration and development activities; fluctuations in the demand for well servicing; the effects of weather conditions on operations and facilities; the existence of competitive operating risks inherent in well servicing; general economic, market or business conditions; changes in laws or regulations, including taxation, environmental and currency regulations; the lack of availability of qualified personnel or management; the other risk factors set forth under the heading "Business Risks" in the annual MD&A for the year ended December 31, 2010 and other unforeseen conditions which could impact on the use of services supplied by the Corporation.
Consequently, all of the forward-looking information and statements made in this news release are qualified by this cautionary statement and there can be no assurance that the actual results or developments anticipated by the Corporation will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Corporation or its business or operations. Except as may be required by law, the Corporation assumes no obligation to update publicly any such forward-looking information and statements, whether as a result of new information, future events, or otherwise.
This press release is not for dissemination in United States or to any United States news services. The Common Shares of IROC have not and will not be registered on the United States Securities Act of 1933, as amended (the "United States Securities Act") or any state securities laws and are not offered or sold in the United States or to any US person except in certain transactions exempt from the registration requirements of the United States Securities Act and applicable state securities laws.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
<<
Non-Gaap Measures
-----------------
>>
The financial statements have been prepared in accordance with GAAP. Certain supplementary information and measures not recognized under GAAP are provided where Management believes they assist the reader in understanding IROC's results. These measures include:
<<
1. EBITDAS and EBITDAS per share- EBITDAS is defined as earnings before
interest, taxes, depreciation and amortization, stock-based
compensation expense, foreign exchange gains and losses, goodwill
impairment, note receivable impairment, and gains or losses on
disposal of property and equipment. EBITDAS and EBITDAS per share are
not recognized measures under GAAP. The Corporation believes that
EBITDAS is provided as a measure of operating performance without
reference to financing decisions, income tax impacts and non-cash
expenses, which are not controlled at the operating management level.
Accordingly, the Corporation believes EBITDAS is a useful measure for
prospective investors in evaluating the financial performance of the
Corporation, and specifically, the ability of the Corporation to
service the interest on its indebtedness. Investors should be
cautioned that EBITDAS should not be construed as an alternative to
net income determined in accordance with GAAP as an indicator of the
Corporation's performance. IROC's method of calculating EBITDAS may
differ from those of other companies, and accordingly, EBITDAS may not
be directly comparable to measures used by other companies. EBITDAS %
is calculated as EBITDAS divided by revenue.
2. Gross margin is defined as revenue less operating expenses. Gross
margin % is defined as gross margin divided by revenue. The Company
believes that gross margin and gross margin % are useful measures
which provide an indicator of the Corporation's fundamental ability to
make money on the products and services it sells. The Corporation
believes the relationship between revenues and costs expressed by the
gross margin % is a useful measure when compared between different
financial periods as it demonstrates the trending relationship between
revenues, costs and margins. Gross margin and gross margin % are not
recognized measures of GAAP and do not have any standardized meaning
prescribed by GAAP. IROC's method of calculating gross margin and
gross margin % may differ from those of other companies, and
accordingly, may not be directly comparable to measures used by other
companies. Gross margin is reconciled to revenue - continuing
operations in the Financial results and selected financial information
table.
>>
The following is a reconciliation of EBITDAS and EBITDAS per share to net income from continuing operations:
<<
-------------------------------------------------------------------------
$ 000's except
number of shares Year ended Three months ended
and per share December December September June 30, March 31,
amounts 31, 2010 31, 2010 30, 2010 2010 2010
-------------------------------------------------------------------------
Net income (loss)
from continuing
operations 2,010 2,104 437 (1,055) 524
Depreciation and
amortization 8,693 2,431 2,268 2,003 1,991
Loss (gain) on
foreign exchange 24 17 (2) (88) 97
Stock based
compensation expense 506 101 98 129 178
Loss (gain) on
disposal of equipment (29) (16) (5) (1) (7)
Other interest 227 64 45 37 81
Interest on long-term
debt 1,029 237 263 239 290
Interest income (47) (10) (15) (11) (11)
Goodwill impairment - - - - -
Note receivable
impairment (recovery) (300) - (300) - -
Income taxes:
Current - - - - -
Future 365 221 187 (278) 235
-------------------------------------------------------------------------
EBITDAS - continuing
operations 12,478 5,149 2,976 975 3,378
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDAS per share
Basic $0.29 $0.12 $0.07 $0.02 $0.08
Diluted $0.29 $0.12 $0.07 $0.02 $0.08
-------------------------------------------------------------------------
-------------------------------------------------------------------------
$ 000's except
number of shares Year ended Three months ended
and per share December December September June 30, March 31,
amounts 31, 2009 31, 2009 30, 2009 2009 2009
-------------------------------------------------------------------------
Net income (loss)
from continuing
operations (10,886) (395) (9,314) (1,260) 82
Depreciation and
amortization 8,454 2,392 2,073 1,978 2,011
Loss (gain) on
foreign exchange 619 43 168 354 54
Stock based
compensation expense 340 74 64 92 110
Loss (gain) on disposal
of equipment 26 33 (2) (1) (4)
Other interest 269 92 50 54 73
Interest on long-term
debt 1,048 373 276 187 212
Interest income (85) (19) (18) (36) (12)
Interest and accretion
on debentures - - - - -
Goodwill impairment 6,850 - 6,850 - -
Note receivable
impairment 1,500 - 1,500 - -
Income taxes:
Current - - - - -
Future (620) 380 (268) (785) 54
-------------------------------------------------------------------------
EBITDAS - continuing
operations 7,515 2,973 1,379 583 2,580
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDAS per share
Basic $0.17 $0.07 $0.03 $0.01 $0.06
Diluted $0.17 $0.07 $0.03 $0.01 $0.06
-------------------------------------------------------------------------
>>
For further information: PLEASE CONTACT: IROC Energy Services Corp., Mr. Thomas M. Alford, President and CEO, Telephone: (403) 263-1110, Email: investorrelations@iroccorp.com
