Flint Energy Services Ltd. announces second quarter earnings
Thu Aug 7, 6:22 PM(TSX: FES.TO)
CALGARY, Aug. 7 /CNW/ - Flint Energy Services Ltd. (the "Company" or "Flint") reported net earnings for the three months and six months ended June 30, 2008 of $11.8 million and $30.3 million respectively ($0.25 and $0.63 per common share - diluted) compared to $6.3 million and $28.5 million respectively in 2007 ($0.13 and $0.59 per common share - diluted). Revenue increased 26% to $531.7 million from $421.8 million for the quarter and to $1,047.3 million compared to $924.5 million for the first six months of the year. Funds provided by operations before changes in non-cash working capital for the second quarter were $32.2 million compared to $28.3 million for the same period in 2007.
The increase in revenue of $109.9 million was primarily due to increased operations in Plant Maintenance and Other. FT Services, in its maintenance contracts combined with Flint's other joint ventures, generated $101.5 million in revenue compared to $4.1 million for the same period in 2007. Pricing pressure experienced in the second quarter of 2007 combined with extended spring breakup and limited drilling activity in Western Canada continued to negatively impact the Oilfield Transportation operating segment. The extended spring breakup also negatively impacted the Production Services Canadian operating segment.
According to Bill Lingard, President and Chief Executive Officer of the Company, "While we are pleased with our position and progress in oil sands construction and plant maintenance, the second quarter proved very challenging for our operating segments with exposure to Canadian drilling activities. The second half of 2008 looks much stronger, with July rig counts over 400, our July price increases in place and equipment utilization improving."
The Oilfield Transportation operating segment saw an increase in revenue from the same period in 2007. However, competitive pricing, fixed and variable cost increases, and spring breakup extended by wet weather resulted in an operating loss in this division for the second year in a row during this quarter.
Tubular Management and Manufacturing revenues were down $4.3 million compared to the second quarter of last year, primarily due to changes in U.S. product mix, and stronger Canadian dollar during the current quarter. For the six month period, this same division had a $12.4 million decrease in revenue from 2007 due to the same trends.
The Production Services operating segment's revenue was down $11.7 million from the prior year due to the continued weakness in Canadian gas drilling. U.S. revenues in this segment remained even with 2007 due to continued robust gas drilling activity in the United States. For the six month period the results were similar with a slight decrease in Canadian activity and fairly consistent results from the United States operations.
Facility Infrastructure revenues increased by $25.3 million from the second quarter of 2007, due to the continued ramp up on contracts for Shell's Albian Sands and Suncor's Firebag and other oil sands projects.
Three months ended June 30
(unaudited) ---------------------------------
(in milions of Canadian dollars, ---------------------------------
except share data) 2008 2008 2007
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Revenue $ 531.7 100.0% $ 421.8
Direct costs 459.8 86.5% 347.9
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Gross profit 71.9 13.5% 73.9
General & administrative expense 40.8 7.7% 38.4
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EBITDA(1) 31.1 5.8% 35.5
Stock based compensation expense 1.2 0.2% 1.3
Amortization 16.8 3.2% 17.5
Interest 1.4 0.3% 7.6
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Earnings before income taxes 11.7 2.2% 9.1
Income taxes (0.1) 0.0% 2.8
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Net earnings 11.8 2.2% 6.3
Per common share - basic $ 0.25 $ 0.13
Per common share - diluted $ 0.25 $ 0.13
Total assets 1,542.1 1,486.4
Total long-term liabilities 452.8 459.2
Funds provided by operations before
changes in non-cash working capital(1) 30.5 28.3
Six months ended June 30
(unaudited) ---------------------------------
(in milions of Canadian dollars, ---------------------------------
except share data) 2007 2008 2007
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Revenue 100.0% $ 1,047.3 924.5
Direct costs 82.5% 883.6 744.0
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Gross profit 17.5% 163.7 180.5
General & administrative expense 9.1% 78.9 85.3
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EBITDA(1) 8.4% 84.8 95.2
Stock based compensation expense 0.3% 2.4 2.5
Amortization 4.1% 34.6 35.3
Interest 1.8% 7.3 14.4
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Earnings before income taxes 2.2% 40.5 43.0
Income taxes 0.7% 10.2 14.5
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Net earnings 1.5% 30.3 28.5
Per common share - basic $ 0.63 $ 0.60
Per common share - diluted $ 0.63 $ 0.59
Total assets
Total long-term liabilities
Funds provided by operations before
changes in non-cash working capital(1) 60.6 54.4
(1) The Company presents EBITDA as a supplemental earnings measure as it
is used by the chief operating decision makers of the Company to
measure operating segment profitability. EBITDA is equal to earnings
before interest, taxes, depreciation, amortization and stock based
compensation. Management uses EBITDA to establish performance
benchmarks for incentive compensation for employees, to evaluate the
performance of its operating segments, and in valuing existing
operations to determine potential goodwill impairment. EBITDA is a
non-GAAP financial measure that does not have any standardized
meaning prescribed by GAAP, and may not be comparable to similar
measures presented by other issuers.
Selected Segmented Information
(unaudited)
(in millions of Canadian dollars) Three months ended June 30
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2008 2007
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Revenue by operating segment
Production Services $ 248.0 46.6% $ 259.7 61.5%
Facility Infrastructure 120.4 22.6% $ 95.2 22.6%
Oilfield Transportation 17.9 3.4% 14.7 3.5%
Tubular Management and
Manufacturing 43.9 8.3% 48.1 11.4%
Plant Maintenance and Other 101.5 19.1% 4.1 1.0%
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Total $ 531.7 100.0% $ 421.8 100.0%
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EBITDA(1) by operating segment
Production Services $ 20.7 66.6% $ 27.3 76.9%
Facility Infrastructure 10.3 33.1% 9.6 27.0%
Oilfield Transportation (10.6) (34.1%) (9.2) -25.9%
Tubular Management and
Manufacturing 3.6 11.6% 7.9 22.3%
Plant Maintenance and Other 7.1 22.8% (0.1) -0.3%
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Total $ 31.1 100.0% $ 35.5 100.0%
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(unaudited)
(in millions of Canadian dollars) Six months ended June 30
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2008 2007
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Revenue by operating segment
Production Services $ 518.0 49.5% $ 536.4 58.0%
Facility Infrastructure 221.5 21.1% 200.7 21.7%
Oilfield Transportation 76.8 7.3% 74.9 8.1%
Tubular Management and
Manufacturing 91.0 8.7% 103.4 11.2%
Plant Maintenance and Other 140.0 13.4% 9.1 1.0%
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Total $ 1,047.3 100.0% $ 924.5 100.0%
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EBITDA(1) by operating segment
Production Services $ 48.2 56.8% $ 55.8 58.7%
Facility Infrastructure 18.4 21.7% 16.2 17.0%
Oilfield Transportation (0.7) (0.8%) 4.6 4.8%
Tubular Management and
Manufacturing 8.9 10.5% 18.3 19.2%
Plant Maintenance and Other 10.0 11.8% 0.3 0.3%
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Total $ 84.8 100.0% $ 95.2 100.0%
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(1) The Company presents EBITDA as a supplemental earnings measure as it
is used by the chief operating decision makers of the Company to
measure operating segment profitability. EBITDA is equal to earnings
before interest, taxes, depreciation, amortization and stock based
compensation. Management uses EBITDA to establish performance
benchmarks for incentive compensation for employees, to evaluate the
performance of its operating segments, and in valuing existing
operations to determine potential goodwill impairment. EBITDA is a
non-GAAP financial measure that does not have any standardized
meaning prescribed by GAAP, and may not be comparable to similar
measures presented by other issuers.
Outlook
Western Canadian drilling activity, with an average of around 170 of 854 rigs active in the second quarter, has picked up considerably since spring breakup and industry forecasts are now calling for more than 19,000 wells to be drilled in 2008. While this would see activity levels similar to 2007, because of a weaker first half in 2008, the second half of the year is expected to be busier. This increased level of activity should positively impact both the Oilfield Transportation and Tubular Management and Manufacturing business segments in the second half of the year. Industry statistics show well completions for the first half of the year were down 18% to 8,129 compared to 9,897 in 2007. During July rig activity increased to over 400 active rigs with a number of customers increasing their 2008 well drilling and completion budgets.
U.S. rig counts continue to remain strong with an average of over 1,860 active rigs in the second quarter, up 5% over 2007. July rig activity increased to 1,936 active rigs up 9% from last year. The resulting increased level of gas well tie-ins is expected to keep the U.S. Production Services operations busy and the J.W. Williams' Manufacturing business running at near capacity.
Canadian Production Services activity which was down in the first half of 2008 is expected to see a seasonal increase in activity, especially in well tie-ins and transmission lines, over the next two quarters and into early 2009.
The Facility Infrastructure business segment will continue to ramp up on both the Suncor Energy and Shell Albian Sands projects throughout the second half of 2008 and into 2009. While we expect to see an increase in quarterly revenues for this segment, with the growth also comes the challenge of finding enough skilled construction employees. Recruitment remains a key priority for Facility Infrastructure.
The Plant Maintenance and Other business segment saw a significant increase in revenue due in part to Flint's 50% owned joint venture company, FT Services, which completed a major turnaround on one of Suncor Energy's up-graders in Fort McMurray, Alberta during the second quarter. Work on regular plant maintenance under contract in the oil sands area of Alberta, employs approximately 1,000 employees. FT Services is scheduled to take over maintenance work at Suncor Energy's Sarnia, Ontario refinery during the third quarter. While revenues were higher than normal in the second quarter due to the turnaround, we expect more normal revenue levels in the last half of 2008 and continued growth in 2009.
Oilfield Transportation and Tubular Management operating segments are both experiencing an increase in activity levels and we have initiated price increases for July 1st in both divisions as we move from a heavy discount environment to one where demand is increasing and resources are tight.
Additional Information
Complete copies of the Company's Q2 2008 Management Discussion and Analysis (MD&A), Interim Financial Statements and the Notes to Financial Statements are available on SEDAR at www.sedar.com. Additional information related to the Company is available on SEDAR, including a copy of the latest Annual Information Form of the Company. Electronic copies of the company's quarterly and annual reports and other public filings may also be obtained by visiting www.flintenergy.com.
A conference call with Flint management is scheduled for 11:00 AM Eastern Time on Friday, August 8, 2008. Information on how to participate in the call or listen to live or archived playback of the call is available on Flint's website www.flintenergy.com.
ContactsW.J. (Bill) Lingard
President & Chief Executive Officer Paul M. Boechler
Chief Financial Officer or Guy Cocquyt
Director of Investor Relations Telephone: (403) 218-7100
Fax: (403) 215-5481
