CALGARY, ALBERTA--(Marketwired - Nov. 24, 2015) - CORDY OILFIELD SERVICES INC. (the "Corporation" or "Cordy") (TSX VENTURE:CKK) released today its third quarter 2015 results.
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Three months ended September 30 |
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Nine months ended September 30 |
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| ($ millions) |
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2015 |
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2014 |
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($) Change |
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2015 |
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2014 |
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($) Change |
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| Revenue |
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| Environmental Services |
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3.7 |
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4.4 |
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(0.7 |
) |
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13.8 |
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17.8 |
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(4.0 |
) |
| Heavy Construction |
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1.1 |
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15.4 |
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(14.3 |
) |
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4.2 |
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40.2 |
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(36.0 |
) |
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4.8 |
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19.8 |
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(15.0 |
) |
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18.0 |
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58.0 |
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(40.0 |
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| Direct operating expenses |
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| Environmental Services |
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3.4 |
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4.6 |
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(1.2 |
) |
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12.7 |
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16.3 |
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(3.6 |
) |
| Heavy Construction |
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1.0 |
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14.2 |
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(13.2 |
) |
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4.7 |
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39.0 |
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(34.3 |
) |
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4.4 |
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18.8 |
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(14.4 |
) |
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17.4 |
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55.3 |
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(37.9 |
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| General and administrative expenses |
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| Environmental Services |
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0.4 |
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0.4 |
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- |
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0.9 |
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1.2 |
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(0.3 |
) |
| Heavy Construction |
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0.1 |
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1.0 |
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(0.9 |
) |
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0.3 |
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1.7 |
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(1.4 |
) |
| Corporate |
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0.5 |
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0.7 |
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(0.2 |
) |
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2.0 |
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2.9 |
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(0.9 |
) |
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1.0 |
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2.1 |
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(1.1 |
) |
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3.2 |
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5.8 |
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(2.6 |
) |
| EBITDAS(1) |
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| Environmental Services |
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- |
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(0.5 |
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0.5 |
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0.2 |
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0.2 |
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- |
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| Heavy Construction |
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(0.1 |
) |
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0.2 |
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(0.3 |
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(0.8 |
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(0.4 |
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(0.4 |
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| Corporate |
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(0.5 |
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(0.6 |
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0.1 |
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(2.0 |
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(2.9 |
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0.9 |
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(0.6 |
) |
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(0.9 |
) |
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0.3 |
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(2.6 |
) |
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(3.1 |
) |
|
0.5 |
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| Depreciation |
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0.5 |
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1.1 |
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(0.6 |
) |
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1.2 |
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3.1 |
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(1.9 |
) |
| Finance costs |
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0.3 |
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0.4 |
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(0.1 |
) |
|
1.4 |
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1.4 |
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- |
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| Loss (gain) on disposal |
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- |
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(0.1 |
) |
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0.1 |
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(0.6 |
) |
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- |
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(0.6 |
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| Share-based payments |
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(0.1 |
) |
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- |
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(0.1 |
) |
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(0.3 |
) |
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0.1 |
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(0.4 |
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| Loss before tax |
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(1.3 |
) |
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(2.5 |
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1.2 |
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(4.3 |
) |
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(7.7 |
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3.4 |
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| Income tax expense |
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- |
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4.1 |
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(4.1 |
) |
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0.1 |
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2.8 |
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(2.7 |
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| Net loss from continuing operations |
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(1.3 |
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(6.6 |
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5.3 |
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(4.4 |
) |
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(10.5 |
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6.1 |
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| (1) EBITDAS is a non-IFRS term and is defined as earnings before interest. taxes, depreciation, amortization, impairment, and share-based payments. See reconciliation on page 10 of this document. |
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THIRD QUARTER ENDED SEPTEMBER 30, 2015
For the nine month period ended September 30, 2015, Cordy's consolidated revenues decreased by $40 million, from the comparative period in 2014. This significant drop is attributable to Cordy's initiatives in response to the cancellation of significant contracts and the decline in oil and gas activity in western Canada. Despite the large drop in revenue, Cordy's consolidated EBITDA increased $0.5 million compared to the prior year.
These initiatives include:
- The shutdown of all operations in the Heavy Construction segment except for the Pipeline and Facilities division based in Sundre, Alberta. For the nine month period ended September 30, 2015 this has resulted in a decline of revenue in the Heavy Construction segment of $36 million, from the comparative period in 2014.
- Cordy sold the Manufacturing and Supply segment and has treated this as discontinued operations. As a result, Cordy has exited the manufacturing and supply business and now carries on business in two segments, Environmental Services and Heavy Construction.
- In Q3 Cordy renegotiated the terms of its operating lease resulting in a change of classification from operating to finance leases and helping to relieve cash flow pressure for the short term.
- Cordy incurred additional expenses related to the restructuring included in both direct operating and general and administrative expenses. These expenses include severances, consulting, legal fees, bringing equipment to market and other shut down costs. Despite these costs, Cordy has increased EBTIDAS by $0.5 million compared to the prior period. This is directly attributable to Cordy's significant cost cutting initiatives.
The Environmental Services segment saw a decline in revenue for the nine month period ended September 30, 2015, of $4.0 million, from the comparative period in 2014. The volatility of commodity prices has resulted in reduced capital expenditures of Cordy Environmental's oilfield customers, which in turn has resulted in a pressure on rates and overall reduced demand for services. Despite the significant reduction of revenue, the segment produced the same EBITDAS compared to the comparative period in 2014. This can be attributable to the restructuring of Cordy and significant cost reductions implemented Company wide.
CORPORATE RESTRUCTURING AND OUTLOOK
The international oil and gas crisis continues to fuel the economic storm in Alberta. Depressed crude oil and natural gas prices, as a result of excess supply and shrinking demand from a slowing global economy, continue to create significant headwinds for oilfield service companies such as Cordy. Management expects the energy industry will continue to underinvest in capital projects, infrastructure and drilling programs until commodity prices improve; which, management feels, will likely not occur until the 2017-18 winter drilling season for the global oil and gas industry. Lack of a national energy strategy continues to hamper oil and gas infrastructure projects, which are critical to ensure the take away capacity and access to foreign markets, that the new capital investment demands.
Our foresight at Cordy, allowed us to take the necessary steps, early in the down cycle, to survive the headwinds Cordy has faced thus far. Management acted swiftly and relentlessly, in late 2014 and early 2015, to right size the business before the full force of the downturn was felt. Those early, yet tough decisions, enabled the business to retreat to the strongest corners of Cordy's foundation, where we remain hopeful that Cordy can weather the storm. Management will continue to rationalize the business and ensure it is responding to economic demands and uncertainties, with the goal of creating a stronger foundation to build on, when the headwinds subside.
Cordy continues to put additional focus on sales and service to non-oilfield customers. Management believes that diversity across industries will better equip Cordy to handle the future uncertainty, and volatility, in the oil and gas services sector. The business model will require new opportunities which will evolve through strategic partnerships, cross selling between divisions and creative deployment of Cordy's equipment.
In an effort to continue as a going concern, Cordy will use cash flow from operating activities, the proceeds on disposition of equipment and other assets, to finance working capital requirements, debt repayments, lease repayments and capital expenditures. Cordy has worked with all lenders and established new lending agreements with more favourable terms, relieving cash flow pressures. Cordy will continue to pay down high interest debt, while seeking additional financing.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the X Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
READER ADVISORY
This News Release contains certain statements that constitute forward-looking statements. These statements relate to future events or the Corporation's future performance. All statements, other than statements of historical fact, that address activities, events or developments that the Corporation or a third party expects or anticipates will or may occur in the future, are forward-looking statements. These include the Corporation's future growth, results of operations, performance and business prospects and opportunities; prevailing economic conditions; commodity prices; sourcing, pricing and availability of raw materials, components and parts, equipment, suppliers, facilities and skilled personnel; dependence on major customers; uncertainties in weather and temperature affecting the duration of the service periods and the activities that can be completed; regional competition; and other factors, many of which are beyond the Corporation's control. These other factors include future prices of oil and natural gas and oil and natural gas industry activity, including the effect of changes in commodity prices on oil and natural gas exploration and development activity, the ability to complete strategic acquisitions and realize the anticipated benefits of any acquisitions that are completed, the Corporation's outlook regarding the competitive environment it operates in, and the assumptions underlying any of the foregoing. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. These statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Corporation's control, including those discussed under "Risks and Uncertainties" and elsewhere in this News Release, that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Corporation believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this News Release should not be unduly relied upon. These statements speak only as of the date of this News Release. The Corporation does not intend, and does not assume any obligation, to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable securities laws. The forward-looking statements contained in this News Release are expressly qualified by this cautionary statement.
Cordy uses the measures Earnings Before Interest, Taxes, Depreciation, Amortization and Impairment and Share Based Compensation (EBITDAS) in this news release. This measure does not have any standardized meaning prescribed by International Financial Reporting Standards (IFRS). It is, therefore, considered to be non-IFRS term and may not be comparable to similar measures presented by other entities. Management of Cordy uses these non-IFRS measures to improve its ability to compare financial results among reporting periods and to enhance its understanding of operating performance, liquidity and ability to generate funds to finance operations. This non-IFRS measure is also provided to readers as additional information on Cordy's operating performance, liquidity and ability to generate funds to finance operations. EBITDAS is an approximate measure of the Cordy's pre-tax operating cash flow and is generally used to better measure performance and evaluate trends of individual assets. EBITDAS comprises earnings before deducting interest and other financial charges, income taxes, depreciation and amortization, net income attributable to non-controlling interests and preferred share dividend.
