DALMAC ENERGY INC. TSX Venture: "DAL"

EDMONTON, Dec. 22, 2015 /CNW/ - John Babic, President and CEO of Dalmac Energy Inc. ("Dalmac") (TSX Venture "DAL") is pleased to announce second quarter results for the period ended October 31, 2015.

Q2 is usually a flat quarter for Dalmac. It is a time when oil and gas companies begin readying themselves for the upcoming fall and winter drilling season that follows after the spring break up season. The following are of significant developments which factored in pushing our Q2'16 down by 34% from Q2'15.

• The "Big Stone", a major arterial oilfield haul road near Fox Creek, was largely out of commission from about June to mid-November due to upgrading and construction. This caused major transportation delays and also resulted in numerous wells being shut in during this period.
• The Alliance Pipeline system was down for repairs for about 3 weeks in August which prevented the transportation of about 1.6 billion cubic feet per day of liquids rich natural gas from reaching the Chicago markets from western Canada.
• Various distressed smaller competitors began offering discounted prices at below cost to get a share of the fluid transfer market which drove down the overall rates for these services.

The first two bullet points address non-recurring events that managed to significantly curtail oilfield production and well service operations, in a key part of the Duvernay basin over the course of the current quarter. The third bullet point speaks to the current state of conditions in the oil and gas services industry. Earlier in the year, many of our key customers requested a 20-30% rate cut. Dalmac responded accordingly with a varied price schedule whereby the higher margin services would be discounted more than the low margin services. This was satisfactory to many of our customers.  Dalmac made a strategic decision not to match pricing on certain contracts that were below cost and chose to stick to higher margin service related work.  As a result of this decision, the Company managed to maintain a healthy 30% gross profit margin for Q2'16. The effect of all the aforementioned events resulted culminated in a net loss of $74K for the quarter and $836K for the year to date.

Gross Margin
Gross Margin, defined as revenue less direct operating costs as a percentage of revenue, had actually improved 1% to 30% for on the quarter. This speaks favorably to the efficiency improvement efforts and cost control initiatives implemented by Dalmac over there course of the quarter, especially in the light of the 20% rate cut that was requested by our key customers earlier in the year.  The year to date gross margin was down by 3% to 23% which mainly impacted by a slower than expected Q1'16 along with the equipment certifications and repair that were scheduled for that spring breakup quarter.

Outlook
Dalmac's revenue is primarily derived from the provision of specialized transportation and oilfield services to companies engaged in exploration, development of petroleum production. As such the demand for Dalmac's services are inextricably connected to the general economic conditions of the energy industry and the utilization levels of drilling and completion activity. The low oil prices are not only impacting the oil and gas industry, but are having a trickle down negative impact on many of companies servicing the energy sector.  Although the energy industry is less robust than expected, some of our key customers have indicated that they will proceed with planned drilling and completions projects targeted for this fall-winter season and certain others are not anticipating real growth for the remainder of the year. The degree of timing variation for the commencement of scheduled projects may create fluctuations in revenue over the balance of the year. Though these conditions may present challenges, we will continue to focus on our commitment to operational excellence by tightening up on cost controls, rationalizing capital expenditures and improving asset utility wherever possible. Dalmac will also continue to focus on improving the balance sheet while keeping close watch on debt levels which will allow us to take advantage of revenue growth opportunities that may require new capital or opportunistic acquisitions that match our strategic growth objective of delivering value for our shareholders.

Statements throughout this report that are not historical facts may be considered 'forward looking statements'.  Such statements are based on current expectations that involve risks and uncertainties, which could cause actual results to differ from those anticipated.  Important factors that can cause anticipated outcomes to differ materially from actual outcomes include the impact of general economic conditions, industry conditions, competition from other industry participants, volatility of petroleum prices, the ability to attract and retain qualified personnel, changes in laws or regulation, currency fluctuations, continued ability to access capital from available facilities and environmental risks.  References to "Dalmac', the "Corporation", "Company", "us", "we", and "our" mean Dalamc Energy Inc. and its subsidiary Dalmac Oilfield Services Inc.  The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.  We seek safe harbor.

SOURCE Dalmac Energy Inc.