November 7, 2018 - 5:53 PM EST
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Hanwei Energy Services Reports Second Quarter Fiscal 2019 Financial and Operational Results

VANCOUVER, British Columbia, Nov. 07, 2018 (GLOBE NEWSWIRE) -- Hanwei Energy Services Corp. (TSX: HE) (“Hanwei” or the “Company”), today reported its financial results for the six months ended September 30, 2018. All amounts are in Canadian Dollars unless otherwise noted.

The Company has two reportable segments for its continuing operations: its FRP pipe manufacturing and its oil and gas production. The pipe segment produces and sells fiberglass reinforced plastic (“FRP”) pipe for the oil and gas industry and other infrastructure applications. The oil and gas segment is engaged in the exploration and production of oil and natural gas in Western Canada.

For the three months ended September 30, 2018:

  • Total revenues were $3.3 million as compared to $1.8 million for same period of the prior year. The $1.5 million or 87% increase in revenue was driven by both the FRP pipe business and oil and gas business. Revenues from the FRP pipe business increased by $0.8 million and was mainly due to China orders being delivered. Revenues from the oil and gas business increased by $0.7 million and was mainly due to the workover investments at the Company’s Leduc Lands being completed and the property placed back on production.
     
  • FRP pipe sales totalled $2.1 million as compared to $1.3 million for the same period of the prior year. The increase was due to timing of deliveries in the company’s China market. Gross profit was $0.8 million (or a 39% gross margin) as compared to $0.3 million (or a 21% gross margin) for the same period of the prior year. The increase was an outcome of the higher sales during the period being managed against the Company’s fixed costs in the FRP pipe business.
     
  • Oil and gas production revenues net of royalties amounted to $1.1 million (producing approximately 194 boed, gross revenue of $68.75 per boe with a netback of $23.59 per boe) as compared to $0.4 million for the same period of the prior year (producing approximately 154 boed, gross revenue of $35.29 per boe with a netback of $8.26 per boe). The increase in revenues and netback from the oil and gas business was driven by higher oil prices and production upon the completion of the Leduc Lands work over activities. Operating expenses per boe increased due to costs of system commissioning and improvements at the Leduc Lands.
     
  • The Company generated income of $3,000 as compared to a loss from continuing operations of $0.4 million for the same period of the prior year. The increase in income was due to the Company’s continued management of its fixed costs in the FRP pipe business against the increase in sales.
     
  • Adjusted EBITDA was $0.5 million as compared to $0.1 million for the same period of the prior year. The improvement in Adjusted EBITDA was mainly due to FRP pipe sales delivered in the quarter. 

For the six months ended September 30, 2018:

  • Total revenues were $4.9 million as compared to $5.3 million for the same period of the prior year. The decrease in revenues for the period was driven by a 0.9 million or 22% decrease in FRP pipe sales (mainly due to timing of orders) offset by a $0.6 million or 45% increase in oil and gas production revenues (mainly due to the Company’s Leduc Lands being back on production and higher oil prices during the period).
     
  • FRP pipe sales were $3.1 million as compared to $4.0 million. The decrease was due to timing of projects in the company’s China and Canadian markets. Gross profit for the FRP business was $1.0 million (or a 33% gross margin) as compared to $1.1 million (or a 27% gross margin) for the same period of the prior year. Despite sales reducing for the period, net income for the FRP pipe business increased to $0.9 million from $0.3 million for the same period of the prior year. The increase in gross margin and net income was due to the Company’s continued management of its fixed costs in the FRP pipe business.
     
  • Oil and gas production revenues net of royalties amounted to $1.6 million (producing approximately 154 boed, with gross revenue of $66.59 per boe with a netback of $16.72 per boe) as compared to $1.2 million for the same period of the prior year (producing approximately 189 boed, gross revenue of $36.35 per boe with a netback of $14.24 per boe). The increase in revenues and netback from the oil and gas business was driven by higher oil prices. The increase in operating expenses per boe was driven by costs of system commissioning and improvements at the Leduc Lands. The oil and gas business generated a net loss of $0.6 million as compared to a net loss of $0.5 million for the same period of the prior year.
     
  • The Company had a loss from continuing operations of $1.0 million and equal to that for the same period of the prior year.
     
  • Adjusted EBITDA was negative $0.1 million as compared to $0.1 million for the same period of the prior year. 

As of September 30, 2018, the Company had:

  • A cash balance (inclusive of short-term investments) of $0.8 million
  • A Net Asset Value per share for its continuing operations of $0.12 (on total shares outstanding of approximately 194.2 million)
  • A total principal amount of all loans of $6.2 million, representing a 50% debt to equity ratio.

Subsequent to the quarter ended September 30, 2018, the Company received a final payment of $1.3 million (RMB 7.0 million) related to the sale of its equipment inventory of discontinued wind power business, the payment includes a carrying amount of $1.4 million (RMB7.4 million), cumulated interest and reimbursement of court fees, minus legal fees.

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp.’s principal business operations are in two complementary key segments of the oil and gas industry as both an equipment supplier to the industry (as a leading manufacturer of high pressure, fiberglass reinforced plastic (“FRP”) pipe products and associated technologies serving major energy customers in the global energy market) and as oil and gas producer with properties in Alberta and joint venture interests in Manitoba.

www.hanweienergy.com

For more information, please contact:

Graham Kwan
Executive Vice President, Strategic Development and Corporate Affairs
604-685-2239
[email protected]

Irene Mai
Chief Financial Officer
604-685-2239
[email protected]

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

FORWARD-LOOKING INFORMATION AND NON-GAAP MEASURES

Certain information in this press release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions a description of which is set out in the risk factors section of the Company’s Annual Information Form dated June 19, 2018 and Management Discussion and Analysis for the year ended March 31, 2018 both of which are filed with Canadian securities regulators and available on SEDAR at www.sedar.com. The forward-looking information in this press release describes the Company’s expectations as of the date of this press release.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.

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Source: GlobeNewswire (November 7, 2018 - 5:53 PM EST)

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