Flint Energy Services Ltd. Announces First Quarter Earnings
Thu May 15, 4:03 PM(TSX: FES.TO)
CALGARY, May 15 /CNW/ - Flint Energy Services Ltd. (the "Company" or "Flint") reported Flint's net earnings for the three months ended March 31, 2008 were $18.4 million ($0.38 per common share - diluted) compared to $22.2 million ($0.46 per common share - diluted) in 2007. Revenue increased 2.6% to $515.6 million from $502.7 million in 2007. Funds provided by operations before changes in non-cash working capital for the first quarter were $30.0 million compared to $26.2 million for the same period in 2007.
The increase in revenue of $12.9 million is primarily due to increased operations in Flint's 50% owned joint venture, Flint Transfield Services Limited (FT Services). FT Services, in its 5 year maintenance contract with Suncor combined with Flint's other joint ventures, generated $38.6 million in revenue compared to $5.1 million for the same period in 2007. Offsetting this increase was a reduction through the remaining segments as a result of the continued slowdown in activity levels in the Canadian gas and drilling industries. The pricing pressure experienced in the second half of 2007 continued to impact the Oilfield Transportation operating segment and the Production Services operating segment as the backlog of work in natural gas completions was drawn down and the lower level of activity affected the Company's divisional offices.
According to Bill Lingard, President and Chief Executive Officer of the Company, "the growth we are seeing in revenues from our Plant Maintenance and Other segment has helped to offset the weaknesses in some of our other divisions. We are pleased by the sequential improvement in Oilfield Transportation revenues and earnings, and while these are still under some price pressure, we are seeing the results of both our cost reductions in rig moving and our investments in specialized heavy haul capacity".
The Oilfield Transportation operating segment experienced a $1.3 million decrease in revenue over the first three months of the year compared to the same period in 2007 primarily due to competitive pricing in this segment as well as lower drilling activity levels in the first quarter of 2008 compared to 2007.
Tubular Management and Manufacturing revenues were down $8.1 million compared to last year as they were only impacted late in the quarter by the increased drilling activity. Drill pipe related services did not pick up until the stock of repaired and refurbished materials was in the cycle of use. Work on production related tubular goods remained constant but was not enough on its own to support the division's capacity without a certain level of drilling activity. In the United States, increased capacity in J.W. Williams continued to be utilized with the timing of deliveries, product mix and poor weather impacting revenue slightly.
The Production Services operating segment's revenue was down $6.7 million from the prior year due to the continued weakness in Canadian gas drilling throughout most of 2007 which lead to lower backlogs of well tie-ins during the first quarter of 2008. US activity in this segment remained even with 2007 due to robust gas drilling activity in the United States.
Facility Infrastructure revenues were lower by $4.5 million from the prior year due to the completion of the Long Lake project and the ramp up on contracts for Shell's Albian Sands and Suncor's Firebag oil sands projects.
Summary of Consolidated Financial Results
($ millions, except per share data)
Three months ended March 31 2008 2007
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Revenue $515.6 100.0% $502.7 100.0%
Direct costs 423.8 82.2 396.2 78.8
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Gross profit 91.8 17.8 106.5 21.2
General & administrative expense 38.1 7.4 46.9 9.3
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EBITDA(1) 53.7 10.4 59.6 11.9
Stock based compensation expense 1.2 0.2 1.1 0.2
Amortization 17.8 3.5 17.8 3.6
Interest 5.9 1.1 6.8 1.4
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Earnings before income taxes 28.8 5.6 33.9 6.7
Income taxes 10.4 2.0 11.7 2.3
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Net earnings 18.4 3.6% 22.2 4.4%
Per common share - basic 0.39 0.47
Per common share - diluted 0.38 0.46
Total assets 1,566.7 1,546.7
Total long-term liabilities 465.7 485.3
Funds provided by operations
before changes in non-cash
working capital(1) 30.0 26.2
(1) The Company presents "EBITDA" as a supplemental earnings measure as
it is used by the chief operating decision makers of the Company to
measure operating segment profitability. EBITDA is equal to earnings
before interest, taxes, depreciation, amortization and stock based
compensation. Management uses EBITDA to establish performance benchmarks
for incentive compensation for employees, to evaluate the performance of
its operating segments and valuing its existing operations to determine
potential goodwill impairment. It also presents "funds provided by
operations before changes in non-cash working capital" as it is used to
measure funds generated from operations. Funds provided by operations
before changes in non-cash working capital is equal to net earnings
adjusted for items not affecting cash. EBITDA and funds provided by
operations before changes in non-cash working capital are non-GAAP
financial measure that does not have any standardized meaning prescribed
by GAAP, and may not be comparable to similar measures presented by other
issuers.
Selected Segmented Information
($ millions)
Three months ended March 31 2008 2007
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Revenue by operating segment
Production Services $270.0 52.4% $276.7 55.0%
Facility Infrastructure 101.0 19.6 105.5 21.0
Oilfield Transportation 58.9 11.4 60.2 12.0
Tubular Management and Manufacturing 47.1 9.1 55.2 11.0
Plant Maintenance and Other 38.6 7.5 5.1 1.0
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Total $515.6 100.0% $502.7 100.0%
EBITDA(1) by operating segment
Production Services $27.5 51.3% $28.5 47.8%
Facility Infrastructure 8.0 14.9 6.5 10.9
Oilfield Transportation 10.0 18.6 13.9 23.3
Tubular Management and Manufacturing 5.4 10.0 10.4 17.5
Plant Maintenance and Other 2.8 5.2 0.3 0.5
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Total $53.7 100.0% $59.6 100.0%
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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.
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Outlook
Crude oil and natural gas prices have continued to rise since the end of the first quarter with crude oil prices exceeding $120 per barrel and NYMEX natural gas prices for June delivery stand near $12.00. This compares with pricing of $63.40 for crude oil and $7.55 for natural gas in June 2007.
Interest in shale gas in northeast British Columbia and conventional sweet crude oil in southeast Saskatchewan are leading to increased drilling activity outside of Alberta where recent changes to provincial royalties have impacted drilling expenditures.
Canadian rig activity, though down seasonally for spring breakup, recorded 122 active rigs last week up from 103 rigs at the same time last year. Forecasts for Canadian oil and gas drilling activity for 2008 were revised upwards to between 16,000 and 17,000 wells compared to 19,500 wells drilled last year. With improving commodity prices, we should see further improvements in drilling activity in the second half of this year.
Improvements in Canadian drilling activity in the second half should benefit the Company's Oilfield Transportation and Tubular Management and Manufacturing operating segments directly while Production Services gas well connections lag drilling and will see a resulting lift in activity in the latter part of the year.
U.S. rig counts continue to hold at record levels with over 1,820 active rigs in April, and forecasts are calling for close to 57,000 wells in the U.S. in 2008. This continued strength of U.S. drilling, especially gas drilling, has led to strong backlogs of work for our U.S. based Production Services and our J.W. Williams manufacturing operations.
Oil sands capital investment activity in Alberta is expected to rise to $19 billion this year from $16 billion spent in 2007. Industry forecasts estimate $100 billion in announced oil sands capital spending over the next five to seven years and an additional $40 billion in refinery capital spending in Alberta in the same time frame.
The Company has $1 billion in oil sands construction backlog in two projects; one with Shell Albian Sands; and one with Suncor Energy. Work is underway on both projects which will continue through 2008 and 2009.
FT Services, the Company's 50% owned plant maintenance and asset management company, recently was awarded a one year extension onto the five year asset management contract with Suncor Energy signed in 2007. FT Services will also be taking over responsibility for Suncor Energy's Sarnia, Ontario refinery later this year. A contract for maintenance work at Canadian Natural Resources Ltd. was added to FT Services' backlog in the first quarter of 2008.
During 2008, Flint expects to see continued growth in all divisions associated with heavy oil and oil sands development.
The threat of a slowdown in the U.S. economy could affect overall demand for energy resulting in weaker energy prices and reduced demand for the Company's services. The Company anticipates any reduction in demand for its services resulting from weaker energy prices will be offset by oil sands project and maintenance work, which is generally not directly impacted by short-term commodity price volatility.
Additional Information
Complete copies of the Company's Q1 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, May 16, 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
133.18 (0.94%)
