CALGARY, ALBERTA--(Marketwired - Oct. 28, 2015) - Formation Fluid Management Inc. ("Formation Fluid" or the "Company") (TSX VENTURE:FFM) announces its consolidated financial results for the years ended June 30, 2015 and 2014.
FISCAL 2015 RESULTS
KEY FINANCIAL TAKEAWAYS
- Revenues of over $1.15 million;
- Gross Margin of over $0.75 million;
- Decline of oil and gas prices have affected activity levels in the petroleum industry resulting in significantly decreased earnings and cash flow for the industry.
KEY MILESTONES
The following results from pilot projects create significant new applications for the Hydro-Cycle system beyond the historic remediation uses for the system;
- Cleaned waste water at class II disposal site facility with turbidity of 787 NTU and hydrocarbon content of 186 ppm,
- Cleaned frac flow back water with turbidity of 287 NTU and hydrocarbon content of 130 ppm,
- Cleaned processed water with turbidity of 841 NTU and hydrocarbon content of 1890 ppm.
The success in these projects will allow the Company to develop year round commercial applications for the Hydro-Cycle system which result in clean water available for re-use.
FINANCIAL SUMMARY
| |
|
|
| |
|
Year ended
June 30, |
| |
|
2015 |
|
|
2014 |
| Revenues |
|
$1,154,480 |
|
|
$3,751,430 |
| EBITDA (1) |
|
($1,029,205 |
) |
|
$1,420,170 |
| Diluted per share (1) |
|
($0.02 |
) |
|
$0.03 |
| EBITDA as % of revenues (1) |
|
(89% |
) |
|
38% |
| Funds from operations (1) |
|
($1,029,205 |
) |
|
$1,405,687 |
| Diluted per share (1) |
|
($0.02 |
) |
|
$0.03 |
| Net earnings (loss) |
|
($1,672,710 |
) |
|
$1,015,584 |
| Basic per share |
|
($0.03 |
) |
|
$0.03 |
| Diluted per share |
|
($0.03 |
) |
|
$0.02 |
| Equipment additions; net cash |
|
$1,929,344 |
|
|
$346,577 |
| Weighted average shares outstanding: |
|
|
|
|
|
| |
Basic |
|
51,551,079 |
|
|
40,578,514 |
| |
Diluted |
|
51,551,079 |
|
|
44,766,608 |
| |
|
|
| |
|
|
| |
|
As at June 30, |
| |
|
2015 |
|
|
2014 |
| Working capital |
|
($248,960 |
) |
|
$2,486,314 |
| Total assets |
|
$5,794,451 |
|
|
$6,404,029 |
| Loans excluding current portion |
|
$359,235 |
|
|
$184,595 |
| Total shareholders' equity |
|
$4,795,640 |
|
|
$5,965,146 |
| |
|
|
|
|
|
(1) Refer to Non-GAAP discussion below.
Business Outlook
The Company expects to see growth as a result of the following factors:
- Fabrication of an additional Hydro Pure unit is complete, this addition now provides the company with two sets of equipment. Manufacturing has also completed a combination (Hydro Clear and Hydro Pure) unit. Both new units were completed and started work in September 2015;
- The successful completion of two major remediation projects has demonstrated the efficiency and robustness of the Company's equipment, allowing Formation Fluid to offer clients the ability to clean saline spills and decontaminate produced water to potable water standards;
- The industry's continued focus on contaminated water issues is providing the Company with expanding market opportunities to provide water for fracs, water flood, polymer flood, and SAGD;
- An aggressive marketing program in Western Canada has resulted in numerous inquiries from several major producers;
- The Company's expanded shop facilities now includes testing facilities allowing the Company to provide clients with complete evaluation for their water and processing options; and,
- The oil industry is focusing on ways to reduce costs. The Hydro-Cycle system can clean produced water for re-use, recycling or release in oilfield operations and this can save money and conserve surface water for other uses.
The Company has seen a slower growth rate than previously anticipated due to the following factors:
- Decline of oil and gas prices have affected activity levels in the petroleum industry. During the past year oil prices have ranged from a high of approximately US$105/ bbl to a low of US$44/ bbl. This volatility has resulted in significantly decreased earnings and cash flow for the industry. At the time of writing the oil price was approximately US$44/bbl.
- As result of decreased earnings and cash flow oil and gas companies have delayed and cancelled both capital and operating projects; and,
- Oil and gas companies are refocusing their efforts on ways to cuts costs and save money. This has been detrimental to the Company in the short term as projects have been delayed. The Company believes that in the long term this focus on costs will be to our benefit. Our Hydro-Cycle system can save oil companies in excess of 50% on their water management program. The silver lining of the industry down turn is that companies now have the time and the incentive to look at cost saving technologies like our Hydro-Cycle system.
Financial Results
During the year ended June 30, 2015, the Company generated $1,154,480 (2014: $3,751,430) in revenue from water remediation services and incurred field expenses of $400,739 (2014: $1,555,891) resulting in gross margin of $753,741 (2014: $2,195,539) or 65% (2014: 59%), and net loss of $1,672,710, $0.03 basic and diluted loss per share (2014: net income of $1,015,584; $0.03 basic and $0.02 diluted income per share). EBITDA for the year ended June 30, 2015 was negative $1,029,205 (2014: positive $1,420,170). Field expenses consist of the direct costs associated with providing the water remediation services generating the Company's revenues.
In the year ended June 30, 2015 the Company used cash in operations of $391,737 (2014: cash generated from operations of $199,119). The Company used net cash of $1,929,344 during the year ended June 30, 2015 for capital expenditures (2014: $346,577). The capital expenditures in the current fiscal period were incurred to commence construction of additional water processing plants to meet expected customer demand.
The Company's financing activities in the year ended June 30, 2015 generated cash of $545,570 from a long term bank loan agreement for the construction of capital equipment (net: $455,570) and the exercise of stock options ($90,000). During the year ended June 30, 2014 the Company generated cash of $2,280,914 from financing activities from proceeds of $2,199,992 less share issuance costs of $33,174 from a private placement financing, repayment of short term bank indebtedness of $70,499 and a long term bank loan agreement for the construction of capital equipment (net: $184,595). Total cash outflows exceeded total cash inflows during the year ended June 30, 2015 by $1,775,511. During the year ended June 30, 2014, total cash inflows exceeded total cash outflows by $2,133,456.
At June 30, 2015, the Company had cash of $357,945 and negative working capital of $248,960, (2014: cash of $2,133,456, working capital of $2,486,314). Shareholders' equity at June 30, 2015 was $4,795,640 (2014: $5,965,146).
This financial information has been prepared on a going concern basis, with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. In assessing whether or not there are material uncertainties that may lend doubt as to the ability of the Company to continue as a going concern, management takes into account all available information about the future, which is at least but not limited to twelve months from the end of the reporting period. Management is aware of the material uncertainties that could cast significant doubt upon the Company's ability to continue as a going concern. The Company has negative cash flows from operations of $391,737 and a net loss and comprehensive loss of $1,672,710 for the year ended June 30, 2015, and negative working capital of $248,960 at June 30, 2015. As a result, the Company will need to raise additional financing within the next twelve months in order to meet its liabilities as they come due and to continue with its business activities.
The Company's full financial statements and management discussion and analysis are available online at SEDAR at www.sedar.com.
Non-GAAP Measures
The Company uses certain performance measures throughout this document that are not recognizable under International Financial Reporting Standards ("IFRS"). These performance measures include EBITDA, EBITDA per share, funds from operations and funds from operations per share. Management believes that these measures provide supplemental financial information that is useful in the evaluation of the Company's operations and are commonly used by other oil and natural gas service companies.
Investors should be cautioned, however, that these measures should not be construed as alternatives to measures determined in accordance with IFRS as an indicator of Formation Fluid's performance. The Company's method of calculating these measures may differ from that of other organizations, and accordingly, these may not be comparable. Per share amounts are calculated using the treasury stock method whereby deemed proceeds on the exercise of the share options are used to reacquire common shares at an average share price. The calculations of per share amounts on a dilutive basis do not include anti-dilutive options.
EBITDA
EBITDA, defined as earnings before interest, taxes, share-based compensation, depreciation and amortization, is not a financial measure that is recognized under GAAP. Investors should be cautioned that EBITDA should not be construed as an alternative measure to net earnings determined in accordance with GAAP.
The following is a reconciliation of net earnings to EBITDA:
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| |
|
Year ended June 30, |
| |
|
2015 |
|
|
2014 |
| Net earnings (loss) |
|
($1,672,710 |
) |
|
$1,015,584 |
| Add: |
|
|
|
|
|
| Depreciation |
|
215,999 |
|
|
201,817 |
| Share-based compensation |
|
413,204 |
|
|
201,425 |
| Interest expense, net |
|
14,302 |
|
|
1,344 |
| EBITDA as reported |
|
($1,029,205 |
) |
|
$1,420,170 |
Funds from Operations
Funds from operations is defined as cash flows generated from operating activities before changes in non-cash working capital. Investors should be cautioned that this financial measure should not be construed as an alternative measure to cash flows from operating activities determined in accordance with IFRS.
The following is a reconciliation of cash flows from operating activities to funds from operations:
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Year ended June 30, |
| Net cash (used in) provided by |
|
2015 |
|
|
2014 |
| Operating activities |
|
($391,737 |
) |
|
$199,119 |
| Add: |
|
|
|
|
|
| Changes in non-cash working capital |
|
(651,770 |
) |
|
1,205,224 |
| Interest expense, net |
|
14,302 |
|
|
1,344 |
| Funds from operations |
|
($1,029,205 |
) |
|
$1,405,687 |
Subsequent Events
Effective July 1, 2015, the Company amalgamated with its wholly owned subsidiary, Formation Fluid Technology Inc. Concurrent with the amalgamation, the Company changed its name to Formation Fluid Technology Inc. The Company continues to trade on the TSX-V under the stock trading symbol FFM.
About Formation Fluids
Formation Fluid Technology has developed a three stage waste water treatment plant (Hydro-Cycle) that uses a proprietary process to clean waste water. Each plant is mobile and can process up to 1000 m3 of water per day. This system treats water to meet or exceed CCME Guidelines (Canadian Environmental Quality Guidelines), resulting in reusable water that can be used for: Boilers, Frac Water, Water Floods, and Drilling Operations. Formation Fluids has identified commercial applications for the Hydro-Cycle system within the oil and gas industry. The waste water treatment system has a primary use to reduce producers costs of dealing with produced water. The system also satisfies the need to reuse and recycle an increasing valuable resource. For more information, please visit: www.formationfluid.com or contact Investor Relations at 403 887-8874.
On behalf of the Board of Directors,
Ken Rose, Chief Executive Officer
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.
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
Certain statements contained in this news release, including references to the Company's receipt of applicable approvals, may constitute forward-looking information under applicable Canadian securities legislation. These statements relate to future events and are prospective in nature. All statements other than statements of historical fact may constitute forward-looking statements or contain forward-looking information. Forward-looking statements are often, but not always, identified by the use of words such as "may", "will", "project", "predict", "potential", "plan", "continue", "estimate", "expect", "targeting", "intend", "could", "might", "seek", "anticipate", "should", "believe" or variations thereof. Forward-looking information may relate to management's future outlook and anticipated events or results and may include statements or information regarding the future plans or prospects of the Company. Forward-looking information is subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements. The Company believes that the expectations reflected in the forward-looking statements contained in this news release are reasonable, but no assurance can be given that they will prove to be correct. Actual results and future events may differ materially from those anticipated and accordingly forward-looking statements should not be unduly relied upon. Forward-looking statements contained in this document speak only as of the date of this news release. Except as required by applicable law, the Company disclaims any obligation to update any forward-looking information.
