Stock Name: ISC
Amount: CAD 0.025
Announcement Date: 14/08/2012
Record Date: 03/10/2012
Dividend Detail:
CALGARY, Aug. 14, 2012 /CNW/ - IROC Energy Services Corp. ("IROC" or the
"Corporation") (TSXV: "ISC") is pleased to present a summary of its
operating and financial results for the three and six months ended June
30, 2012. For a complete copy of IROC's interim financial statements
and management's discussion and analysis ("MD&A") please visit www.sedar.com.
Basis of Presentation
Throughout this news release amounts are presented on a continuing
operations basis to more accurately reflect the way in which IROC
intends to operate on a continuing basis.
Highlights for the three month quarter ended June 30, 2012:
Total revenue increased 43% to $16.7 million for the three months ended
June 30, 2012 as compared to $11.7 million in the second quarter of
2011.
Gross margin increased 46% to $5.1 million for the three months ended
June 30, 2012 as compared to $3.5 million in the second quarter of
2011.
EBITDAS increased 93% to $3.2 million for the three months ended June
30, 2012 as compared to $1.6 million in the second quarter of 2011.
Net income from continuing operations was $0.1 million for the three
months ended June 30, 2012 as compared to a net loss of $0.3 million in
the second quarter of 2011 marking the first time in the Corporation's
history that the Corporation was profitable during the spring breakup
period.
Highlights for the six months ended June 30, 2012:
Total revenue increased 36% to $49.1 million for the six months ended
June 30, 2012 as compared to $36.1 million during the comparable period
of the prior year.
Gross margin increased 39% to $19.5 million for the six months ended
June 30, 2012 as compared to $14.0 million during the comparable period
of the prior year.
EBITDAS increased 49% to $14.9 million for the six months ended June 30,
2012 as compared to $10.0 million during the comparable period of the
prior year.
Net income from continuing operations increased 61% to $6.9 million for
the six months ended June 30, 2012 as compared to $4.3 million during
the comparable period of the prior year.
Operations
IROC's operations are reported in three segments; the Drilling and Production Services segment, the Rental Services segment and Corporate Services and Other.��The following is a discussion of the reporting segments in which IROC
operates.
DRILLING AND PRODUCTION SERVICES
The Drilling and Production Services segment provides services to oil
and gas exploration, development and production companies with most of
our customers and operations being located in western Canada, in the
provinces of Alberta and Saskatchewan.
The Drilling and Production Services segment consists of two divisions:
Eagle Well Servicing ("Eagle") contracts service rigs to oil and gas
companies to perform various completion, work-over and maintenance
services on oil and natural gas wells.��Eagle has offices and equipment
in Red Deer and Grande Prairie in Alberta and Lloydminster and Estevan
in Saskatchewan with equipment being used in those geographic areas.
Helix Coil Services ("Helix") contracts coil tubing units to oil and gas
companies to perform various completion, workover and maintenance
services on oil and natural gas wells.��Helix is based in Red Deer,
Alberta with equipment generally being used in Alberta and
Saskatchewan, Canada.
�� | �� | ||||||||
�� | Three months ended | ||||||||
�� | June 30, 2012 �� | March 31, 2012 �� | December 31, 2011 �� | September 30, 2011 �� | |||||
Eagle Well Servicing: | �� | �� | �� | �� | |||||
�� | Number of service rigs (end of period) | 46 | 44 | 41 | 38 | ||||
�� | Service rig utilization(1) | 43% | 74% | 69% | 69% | ||||
�� | �� | �� | �� | �� | |||||
Commodity prices: | �� | �� | �� | �� | |||||
�� | NYMEX crude oil $US/bbl | 93.49 | 102.93 | 94.06 | 89.76 | ||||
�� | ��AECO Monthly index natural gas $CAD/GJ | 1.74 | 2.39 | 3.29 | 3.53 | ||||
�� | �� | �� | �� | �� |
�� | Three months ended | |||
�� | June 30, 2011 | March 31, 2011 | December 31, 2010 | September 30, 2010 |
Eagle Well Servicing: | �� | �� | �� | �� |
����Number of service rigs (end of period) | 36 | 36 | 35 | 35 |
����Service rig utilization(1) | 42% | 78% | 66% | 57% |
�� | �� | �� | �� | �� |
Commodity prices: | �� | �� | �� | �� |
������NYMEX crude oil $US/bbl | 102.60 | 94.08 | 85.17 | 76.20 |
������AECO Monthly index natural gas CAD/GJ | 3.54 | 3.58 | 3.39 | 3.52 |
(1)���������� | IROC calculates utilization based on full utilization being 10 hours days, 365 days per year consistent with the CAODC standard.��IROC commences calculation of utilization for a new rig on the first day it goes into the field for active service. |
�� | �� |
As at June 30, 2012, Eagle had a fleet of 46 service rigs having added
two double service rigs in the quarter and three single service rigs
into our fleet since the start of the year. Eagle's service rig fleet
and equipment are among the newest in the industry.��All of Eagle's
service rigs are free standing mobile service rigs and are internally
guyed with no requirement for external anchors.��This reduces set up
time and corresponding costs when compared to service rigs which
require external anchors or are skid mounted. During the past nine
months Eagle has deployed its first two slant rigs.��Slant rig designs
are optimized for use in the heavy oil and SAGD markets and our slant
rigs have been well received by the customers who have put them into
service.��These rigs tend to work on locations with multiple well bores
referred to in the industry as "pads" which can mean more hours of
operation due to shorter rig moves and less impact from spring breakup
conditions.��Eagle's third slant rig was delivered following quarter end
and went into service in July, 2012.
Currently Eagle's service rig fleet consists of 47 rigs, all of which
are fully crewed and operated.�� In addition, 3 new service rigs are
currently being built, with expected delivery and deployment of one rig
by September 30, 2012 and the other two before year end.��This will give
Eagle 50 service rigs in operation by December 31, 2012.��One key
challenge facing the energy services industry is staffing, particularly
of field personnel.��Eagle has been and continues to be able to fully
crew its assets in this very tight labour market across the service
industry.
The trend toward increased oil-related activity continues to provide
benefit for the Corporation's service rig division. Current activity
levels are estimated to be in excess of 80% levered to oil, with
completion, workover and abandonment activity all providing continued
strong demand for the Corporation's services in the foreseeable future.
Commodity prices are the main activity driver as the Corporation's
customers' exploration and development programs are directly impacted
by oil and natural gas prices.��Oil and gas producers spend capital on
new wells and service operations when they are economic within the
context of current and forecasted commodity prices.��Crude oil prices
have continued to be strong during the first seven months of 2012.��Year
over year, prices for the first six months of 2012 were on par with
2011 with NYMEX crude oil averaging $US 98.21/barrel in 2012 as
compared to $US 98.34/barrel in 2011.��In contrast, the historically low
natural gas prices in 2011 have given way to a near collapse in 2012.
For the first six months of 2012 Alberta natural gas prices have
averaged $2.06/GJ as compared to $3.56/GJ in the first half of
2011.��This quarter's $1.74/GJ average price is the lowest in over four
years and has created hardship for many of our natural gas weighted
customers.��In Alberta, the AECO monthly index for May settled at
$1.5586, marking the lowest AECO index settlement since February 1998,
a period of 14 years and three months.��At these price levels, natural
gas development has been focused on resource type development projects
and liquids rich reservoirs as much conventional shallow gas is not
economic.
Service rig utilization for the second quarter was 43% in the current
year as compared to 42% in the prior year quarter.��The second quarter
is typically our weakest quarter due to spring breakup when the frost
comes out of the ground and spring rainfall makes many well sites and
roads unusable by heavy equipment.��Seasonality is a significant
activity driver for all of our businesses as certain areas are only
accessible by service rigs and other heavy equipment during winter when
the ground is frozen.��Activity levels in 2012 continue to be driven by
horizontal drilling focussed largely on oil production.��The complexity
of horizontal wells typically make completion operations more time
consuming and therefore impact utilization percentages.�� In the second
quarter of 2011 crude oil prices were on an increasing trend reaching
levels not seen since before the economic downturn in 2008 and 2009,
oil and gas producers equity values were also increasing rapidly, and
the equity markets had opened up to allow producers to raise additional
equity and expand their capital programs. In short, producers were
optimistic and investing in new capital projects, at least new oil or
liquids rich natural gas projects.��In contrast, in 2012 crude oil
prices peaked in the first quarter and declined for three consecutive
months in April, May and June. This declining trend in oil prices and
volatility in the equity markets for oil and natural gas producers has
tempered the optimism and moderated or delayed the capital spending
plans of many of our customers.��Considering the very strong activity
levels in the last half of 2011 and the recent oil, natural gas and
equity price declines, we anticipate year over year declines in demand
and activity levels relative to last year as we move into the third and
fourth quarters of the current year due to producers reducing their
spending relative to last year.
Helix Coil Services began operations in July 2011 with the deployment of
two truck mounted coil tubing units, each with 2" capabilities placing
the equipment in the intermediate size range. In the fourth quarter of
2011 Helix added one trailer unit with 2" capabilities, along with
crane support equipment. We have not achieved the performance targets
initially set for this division in 2012.��Increased competition in the
coiled tubing services segment of the industry is expected to continue
to put pressure on this division of our business.��The Corporation has
taken a measured approach to the growth of this new business line,
focussing on developing both the internal business processes to support
this business and a customer base from which we can scale growth going
forward.
RENTAL SERVICES
The Rental Services segment consists of the Aero Rental Services
division.��Aero provides rental equipment for surface pressure control
in drilling and workover operations and tubular handling equipment used
for the workover, re-entry and completion operations.��Aero has an
office in Red Deer, Alberta with equipment being rented for use
primarily in Alberta.
�� | �� | �� | �� | �� |
�� | Three months ended | |||
$ 000's | June 30, 2012 | March 31, 2012 | December 31, 2011 | September 30, 2011 |
Aero Rental Services: | �� | �� | �� | �� |
����Gross margin | 1,136 | 3,409 | 2,653 | 2,533 |
����Book value of rental equipment (end of period) | 17,866 | 16,099 | 14,641 | 12,887 |
�� | �� | �� | �� | �� |
�� | Three months ended | |||
$ 000's | June 30, 2011 | March 31, 2011 | December 31, 2010 | September 30, 2010 |
Aero Rental Services: | �� | �� | �� | �� |
����Gross margin | 826 | 2,793 | 1,739 | 784 |
����Book value of rental equipment (end of period) | 11,799 | 11,249 | 10,121 | 8,802 |
�� | �� | �� | �� | �� |
Aero continues to have strong absolute margin growth on a year over year
basis.��The trend of seasonality adjusted increases in gross margin has
been driven by the increasing size of our rental asset base in each of
the past eight quarters.
CORPORATE SERVICES AND OTHER
IROC's non-operating segment, Corporate Services and Other, captures
general and administrative expenses associated with supporting each of
the reporting segments operations noted above, plus costs associated
with being a public company.��Also included in Corporate Services is
interest expense for debt servicing and income tax expense and other
amounts not relating to the two main operating segments.
Comparison of results from the three and six month periods ended June
30, 2012 to the same periods last year
REVENUE
�� | �� | �� | �� | �� |
�� | Three months ended | �� | ||
$ 000's | June 30, 2012 | June 30, 2011 | Change $ | Change % |
Revenue: | �� | �� | �� | �� |
����Drilling and Production Services | 13,813 | 9,552 | 4,261 | 45% |
����Rental Services | 2,925 | 2,175 | 750 | 34% |
����Inter-segment eliminations | (48) | (35) | (13) | 37% |
Total revenue | 16,690 | 11,692 | 4,998 | 43% |
�� | �� | �� | �� | �� |
�� | Six months ended | �� | ||
$ 000's | June 30, 2012 | June 30, 2011 | Change $ | Change % |
Revenue: | �� | �� | �� | �� |
����Drilling and Production Services | 40,778 | 29,230 | 11,548 | 40% |
����Rental Services | 8,778 | 6,994 | 1,784 | 26% |
����Inter-segment eliminations | (408) | (124) | (284) | 229% |
Total revenue | 49,148 | 36,100 | 13,048 | 36% |
�� | �� | �� | �� | �� |
Total revenues for the second quarter increased 43% over the prior year
quarter reflecting the growth in the Corporation's service rig fleet,
coil tubing units, and rental assets. Activity in both the current and
prior year quarters was weaker than other quarters due to the seasonal
impact of spring breakup. In both the current and prior year periods we
saw relatively strong demand for the Corporation's products and
services.
The increase in revenues for the Drilling and Production Services
segment in the current year quarter is due primarily to an increase in
the number of service rig hours with utilization being 43% based on an
average of 44.6 active rigs as compared to 42% based on 36 service rigs
in the comparative quarter of the prior year.��Also contributing to the
increases on a year over year basis was increased pricing and the
additional revenue from our three new coil tubing units which were put
into service during the third and fourth quarters of 2011.
Helix Coil Services began operations in July 2011.��Currently, Helix has
two truck mounted coil tubing units and one trailer mounted coil tubing
unit, each with 2" coil capabilities placing the equipment in the
intermediate size range. Additionally, Helix owns related crane and
support equipment. Coil tubing demand was impacted more on a relative
basis than demand for our service rigs due to the coil tubing
division's focus being concentrated on completion and fracturing
operations, which were impacted by prolonged periods of wet weather
throughout the second quarter.
The increase in revenue for the Rental Services segment in the current
year quarter as compared to the prior year quarter is primarily due to
the increase in the amount of rentable equipment in the current year as
compared to the prior year. Over the past two years, Aero has more than
doubled the amount of rental equipment in its inventory. This increase
has provided a larger and more diverse range of rental
equipment.��Additionally, as we grow our rental equipment assets,
proportionately less of our rental revenue is related to third party
equipment rentals, reducing operating expenses as we are not required
to incur third party rental fees.
Crude oil and natural gas prices are activity drivers for all of our
businesses as our customers make capital and operating expenditure
decisions based on their revenue streams generated by selling crude oil
and natural gas.��NYMEX Crude oil prices in the current year quarter
were weaker, averaging $US 93.49 / barrel as compared to $US 102.60 /
barrel in the prior year quarter.��As well, natural gas prices were
weaker averaging just 49% of the prior level at $1.74 per GJ in the
current year quarter as compared to $3.54 per GJ in the prior year
quarter. The AECO monthly index for May 2012 settled at $1.5586,
marking the lowest AECO index settlement since February 1998, a period
of 14 years and three months. Low natural gas prices have significantly
reduced natural gas focused activity by our customers.
OPERATING COSTS AND GROSS MARGIN
�� | �� | �� | �� | �� | �� | |
�� | Three months ended | �� | ||||
$ 000's | June 30, 2012 | June 30, 2011 | Change $ | Change % | ||
Operating costs: | �� | �� | �� | �� | ||
����Drilling and Production Services | 9,882 | 6,896 | 2,986 | 43% | ||
����Rental Services | 1,789 | 1,349 | 440 | 33% | ||
����Inter-segment eliminations | (48) | (35) | (13) | 37% | ||
Total operating costs | 11,623 | 8,210 | 3,413 | 42% | ||
�� | �� | �� | �� | �� | ||
Gross margin:(1) | �� | �� | �� | �� | ||
����Drilling and Production Services | 3,931 | 2,656 | 1,275 | 48% | ||
����Rental Services | 1,136 | 826 | 310 | 38% | ||
Total gross margin | 5,067 | 3,482 | 1,585 | 46% | ||
�� | �� | �� | �� | �� | ||
Gross margin %(1): | �� | �� | �� | �� | ||
����Drilling and Production Services | 28% | 28% | �� | - % | ||
����Rental Services | 39% | 38% | �� | 1% | ||
Total gross margin % | 30% | 30% | �� | -% | ||
(1)See Non-GAAP Measures. | �� | �� | �� | �� | ||
�� | �� | �� | �� | �� | �� | |
�� | Six months ended | �� | ||||
$ 000's | June 30, 2012 | June 30, 2011 | Change $ | Change % | ||
Operating costs: | �� | �� | �� | �� | ||
����Drilling and Production Services | 25,872 | 18,878 | 6,994 | 37% | ||
����Rental Services | 4,233 | 3,375 | 858 | 25% | ||
����Inter-segment eliminations | (408) | (124) | (284) | 229% | ||
Total operating costs | 29,697 | 22,129 | 7,568 | 34% | ||
�� | �� | �� | �� | �� | ||
Gross margin:(1) | �� | �� | �� | �� | ||
����Drilling and Production Services | 14,906 | 10,352 | 4,554 | 44% | ||
����Rental Services | 4,545 | 3,619 | 926 | 26% | ||
Total gross margin | 19,451 | 13,971 | 5,480 | 39% | ||
�� | �� | �� | �� | �� | ||
Gross margin %(1): | �� | �� | �� | �� | ||
����Drilling and Production Services | 37% | 35% | �� | 2% | ||
����Rental Services | 52% | 52% | �� | -% | ||
Total gross margin % | 40% | 39% | �� | 1% | ||
(1)See Non-GAAP Measures. | �� | �� | �� | �� | ||
�� | �� | �� | �� | �� | ||
In the Drilling and Production Services segment, most operating costs
are variable in nature and increase or decrease with activity levels
such that much of the change in operating costs in the year over year
periods is due to the increases in revenues in the current year periods
as compared to the prior year periods.��The largest cost in this segment
is service rig crew salaries and wages with most employees being hourly
in nature and paid only when they are working on service rigs. In
contrast to service rig crews, coil tubing crews are paid both a base
salary plus an hourly wage when working.��This results in the cost
structure for coil tubing operations being less variable than for our
service rig operations.
Gross margin is calculated as revenue minus operating costs and provides
a measure of cash flow available to cover all of the other costs of the
business.�� Gross margin percentages are calculated as gross margin
divided by revenue and is used by management as a measure of relative
profitability.
EBITDAS
�� | �� | �� | �� | �� | �� | |
�� | Three months ended | �� | ||||
$ 000's except per share amounts | June 30, 2012 | June 30, 2011 | Change $ | Change % | ||
EBITDAS(1): | �� | �� | �� | �� | ||
����Drilling and Production Services | 3,212 | 2,035 | 1,177 | 58% | ||
����Rental Services | 867 | 607 | 260 | 43% | ||
����Corporate and other | (915) | (1,000) | 85 | (9%) | ||
Total EBITDAS | 3,164 | 1,642 | 1,522 | 93% | ||
�� | �� | �� | �� | �� | ||
EBITDAS per common share(1) | �� | �� | �� | �� | ||
����- Basic | $ 0.063 | $�� 0.033 | $ 0.030 | 91% | ||
����- Diluted | $ 0.061 | $�� 0.033 | $ 0.028 | 85% | ||
(1) See Non-GAAP Measures.
�� | �� | �� | �� | �� | �� | |
�� | Six months ended | �� | ||||
$ 000's except per share amounts | June 30, 2012 | June 30, 2011 | Change $ | Change % | ||
EBITDAS(1): | �� | �� | �� | �� | ||
����Drilling and Production Services | 12,955 | 8,838 | 4,117 | 47% | ||
����Rental Services | 3,896 | 3,083 | 813 | 26% | ||
����Corporate and other | (1,920) | (1,882) | (38) | 2% | ||
Total EBITDAS | 14,931 | 10,039 | 4,892 | 49% | ||
�� | �� | �� | �� | �� | ||
EBITDAS per common share(1) | �� | �� | �� | �� | ||
����- Basic | $ 0.297 | $�� 0.219 | $ 0.078 | 36% | ||
����- Diluted | $ 0.290 | $�� 0.214 | $ 0.076 | 36% | ||
�� | �� | �� | �� | �� | ||
Earnings before interest, income taxes, depreciation, amortization, and
stock based compensation ("EBITDAS"), is used by the Corporation as a
measure of cash flow and liquidity.�� Positive EBITDAS provides cash
needed to grow our business through the purchase of new equipment or
business acquisitions, reduce outstanding bank debt, repurchase common
shares, or pay dividends to our shareholders.
GENERAL AND ADMINISTRATIVE EXPENSES
�� | �� | �� | �� | �� | �� | |
�� | Three months ended | �� | ||||
$ 000's | June 30, 2012 | June 30, 2011 | Change $ | Change % | ||
General and administrative | �� | �� | �� | �� | ||
����Drilling and Production Services | 719 | 621 | 98 | 16% | ||
����Rental Services | 269 | 219 | 50 | 23% | ||
����Corporate services and other | 915 | 1,000 | (85) | (9%) | ||
Total general and administrative | 1,903 | 1,840 | 63 | 3% | ||
�� | �� | �� | �� | �� | �� | |
�� | Six months ended | �� | ||||
$ 000's | June 30, 2012 | June 30, 2011 | Change $ | Change % | ||
General and administrative | �� | �� | �� | �� | ||
����Drilling and Production Services | 1,951 | 1,514 | 437 | 29% | ||
����Rental Services | 649 | 536 | 113 | 21% | ||
����Corporate services and other | 1,920 | 1,882 | 38 | 2% | ||
Total general and administrative | 4,520 | 3,932 | 588 | 15% | ||
�� | �� | �� | �� | �� | ||
Increased year over year activity levels are the primary driver for the
increase in general and administrative costs.�� Year over year
percentage increases in revenue and EBITDAS, as highlighted in those
sections of this MD&A, were larger than the percentage increases in
general and administrative expenses.��General and administrative
expenses are a combination of fixed and variable costs. A portion of
the increase in general and administrative expenses is related to the
increase in EBITDAS as some employees have a component of variable
compensation based on EBITDAS performance.
NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE
�� | �� | �� | �� | �� |
�� | Three months ended | �� | ||
$ 000's except share and per share amounts | June 30, 2012 | June 30, 2011 | Change $ or number | Change % |
�� | �� | �� | �� | �� |
Net income (loss) from continuing operations�� | 145 | (331) | 476 | (144%) |
�� | �� | �� | �� | �� |
Net income from discontinued operations | - | 23 | (23) | (100%) |
�� | �� | �� | �� | �� |
Net income (loss) and comprehensive income (loss)�� | 145 | (308) | 453 | (147%) |
�� | �� | �� | �� | �� |
Earnings (loss) per share from continuing operations: | �� | �� | �� | �� |
����- Basic | $0.00 | ($0.01) | $0.01 | (100%) |
����- Diluted | $0.00 | ($0.01) | $0.01 | (100%) |
�� | �� | �� | �� | �� |
Weighted average common shares outstanding: | �� | �� | �� | �� |
����- Basic | 50,287,715 | 49,083,995 | 1,203,720 | 2% |
����- Diluted | 51,513,371 | 49,083,995 | 2,429,376 | 5% |
�� | �� | �� | �� | �� |
�� | Six months ended | �� | ||
$ 000's except share and per share amounts | June 30, 2012 | June 30, 2011 | Change $ or number | Change % |
�� | �� | �� | �� | �� |
Net income from continuing operations�� | 6,895 | 4,271 | 2,624 | 61% |
�� | �� | �� | �� | �� |
Loss from discontinued operations | - | (216) | 216 | (100%) |
�� | �� | �� | �� | �� |
Net income and comprehensive income�� | 6,895 | 4,055 | 2,840 | 70% |
�� | �� | �� | �� | �� |
Earnings per share from continuing operations: | �� | �� | �� | �� |
����- Basic | $0.14 | $0.09 | $0.05 | 37% |
����- Diluted | $0.13 | $0.09 | $0.04 | 34% |
�� | �� | �� | �� | �� |
Weighted average common shares outstanding: | �� | �� | �� | �� |
����- Basic | 50,246,119 | 45,867,848 | 4,378,271 | 10% |
����- Diluted | 51,480,568 | 46,819,846 | 4,660,722 | 10% |
�� | �� | �� | �� | �� |
On April 11, 2011, the Corporation completed a short form prospectus
offering of 7,200,361 common shares. This share issue is the primary
reason for the increased the average number of shares outstanding
during the six months ended June 30, 2012 as compared to the six months
ended June 30, 2011.
The diluted number of common shares is directly impacted by the trading
price of the Corporation's common shares.��Increased trading prices will
also increase the number of diluted shares calculated for options
issued under the Corporation's stock option plan.
Capital Expenditures
IROC's capital expenditures were as follows:
�� | �� | �� | �� | �� | �� |
�� | �� | �� | Six months ended | Three months ended | |
$ 000's | �� | �� | June 30, 2012 | June 30, 2012 | March 31, 2012 |
Capital expenditures: | �� | �� | �� | �� | �� |
����Drilling and production services | �� | �� | 12,630 | 5,792 | 6,838 |
����Rental services | �� | �� | 4,845 | 2,908 | 1,937 |
����Corporate | �� | �� | 104 | 65 | 39 |
����Discontinued operations | �� | �� | - | - | - |
Total capital expenditures | �� | �� | 17,579 | 8,765 | 8,814 |
�� | �� | �� | �� | �� | �� |
�� | �� | �� | Six months ended | Three months ended | |
$ 000's | �� | �� | June 30, 2011 | June 30, 2011 | March 31, 2011 |
Capital expenditures: | �� | �� | �� | �� | �� |
����Drilling and production services | �� | �� | 8,352 | 4,783 | 3,569 |
����Rental services | �� | �� | 2,385 | 860 | 1,525 |
����Corporate | �� | �� | 38 | 17 | 21 |
����Discontinued operations | �� | �� | 360 | 329 | 31 |
Total capital expenditures | �� | �� | 11,135 | 5,989 | 5,146 |
�� | �� | �� | �� | �� | �� |
The Corporation's strategy to organically grow its capital asset base,
focused on our core businesses, has resulted in IROC having capital
assets, as a whole, in new or like new condition.��Our service rigs
represent the largest percentage of the Corporation's overall net book
value of fixed assets and they are among the newest fleet of service
rigs in the industry.
The Corporation has budgeted $29.4 million for capital expenditures
during 2012 consisting of the following:
$20.9-million -- for construction of eight new service rigs in the Eagle
Well Servicing division (includes $4.8 million from assets which were
purchased in the fourth quarter of 2011);
$8-million -- for expansion of rental inventory assets in the Aero
Rental division;
$0.5-million -- for maintenance and infrastructure expenditures.
As at June 30, 2012, the Corporation estimates $22.4 million of the
$29.4 million 2012 capital budget has been spent with $7.0 million
remaining to be spent.��Management continuously evaluates opportunities
to grow the business and will adjust or increase the capital program if
the opportunities and conditions warrant.
Dividends and Outstanding Share Data:
The following table summarizes outstanding share data and potentially
dilutive securities:
�� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� |
�� �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | August 14, 2012 |
��Common shares | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | 50,344,663 |
��Stock options | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | 1,740,330 |
��Restricted share units | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | 424,838 |
�� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� |
The following table summarizes dividends declared or paid since December
31, 2011:
�� | �� | �� | �� | �� | �� | �� | �� | �� | �� | �� |
Declaration Date | �� | �� | �� | Record Date | �� | �� | ����Payment Date | �� | �� | Amount of Dividend per Common Share |
December 20, 2011 | �� | �� | �� | January 9, 2012 | �� | �� | ����January 13, 2012 | �� | �� | ����������������$0.025 |
March 20, 2012 | �� | �� | �� | April 6, 2012 | �� | �� | ����April 13, 2012 | �� | �� | ����������������$0.025 |
May 23, 2012 | �� | �� | �� | July 6, 2012 | �� | �� | ����July 13, 2012 | �� | �� | ����������������$0.025 |
August 14,2012 | �� | �� | �� | October 5, 2012 | �� | �� | ����October 12, 2012 | �� | �� | ����������������$0.025 |
�� |
Outlook
IROC Energy Services Corp. had a record second quarter, posting a second
quarter net income for the first time in the Corporation's
history.��This also marked the 32nd consecutive quarter of positive EBITDAS, underscoring the fundamental
strength of our core businesses and the ability of our assets to
generate positive operating cash flow. Our ability to address the needs
of our customers as they continue to expand their use of horizontal
drilling and multistage fracturing technologies remains the focus of
each of our operating divisions.
Until recently, we expected activity levels in 2012 would be similar to
those experienced in 2011. This expectation was based on oil prices in
the first quarter of 2012 being the highest since 2008 and the robust
capital spending programs of producers.��However, NYMEX crude oil prices
declined for three consecutive months during the second quarter, and
Alberta oil price levels were further impacted by wider differentials,
reducing the price received by our customers for their crude oil even
further than the declines in the NYMEX prices.��Natural gas prices also
declined further in the second quarter, but since natural gas activity
had already become a minor part of our business these declines have had
a negligible impact on the demand for our services.��As a result of
these commodity price declines, and equity market volatility for oil
and gas companies, we have seen capital budget reductions at many oil
and gas companies and we expect demand for the last half of 2012 to
fall short of the levels experienced in the last half of 2011 for most
services.
Despite our expectations of lower year over year industry activity
levels in the second half of 2012, each of our business segments are
expected to be profitable and provide positive operating cash flow and
EBITDAS through the last half of the year.
Our service rig division is expected to continue to be the largest
contributor of revenues and profits in our company.�� Eagle averaged
37.3 rigs during 2011, starting the year with 36 rigs and ending with
41 rigs in the field.��Eagle averaged 43.6 service rigs during the first
half of 2012 with 46 rigs in service at June 30 and another 4 service
rigs on track to be in service by the end of the year.��We plan to
average 45 rigs for calendar 2012 as compared to the 37.3 rigs in 2011,
an increase of 7.7 rigs or 21%.�� Even with lower industry activity
levels, we expect year over year growth in revenue, margin and EBITDAS
for this division for the last half and full year 2012.
Eagle's new equipment specifically addresses the current needs of our
customers or targeted areas of operation and provides greater operating
efficiency with minimal downtime. We continue to build equipment that
is lighter and more adaptable to the various areas where we operate.��
This new and innovative equipment continues to attract both work and
competent personnel, enabling Eagle to achieve high equipment
utilization, a benefit to our employees and customers alike.
Our rental business continues to operate very well and the demand for
its products and services continues to increase as our customers
exploit oil opportunities in both the application of horizontal
technology, and the SAGD operating segments of the oil and gas business
in Western Canada.�� We continue to unlock the operating leverage
available to us in this division as we add more equipment with
increasing revenues and margins. As industry acceptance of the new
equipment and services remains strong, we anticipate being able to
continue to profitably add assets in this division and are on track to
meeting our budgeted $8 million in asset acquisitions for 2012, having
spent $4.8 million in the first six months.�� Geographic expansion
remains a priority focus for this business.
The contribution from our new start-up coil tubing assets was positive
for the first six months of 2012, but performance is lower than the
targets we had set for these assets.�� We continue to expect some growth
from our coiled tubing operations as we add additional auxiliary
equipment and continue to work through the operational challenges of
starting a new service line. The coiled tubing operation is very
complementary to our other services and we expect it will continue to
provide a positive contribution to our bottom line over the coming
quarters and years.
Given the continuing growth of our businesses, our ability to attract
and retain personnel in a very tight labour market is critical to all
of our businesses. We have been able to fully crew all of our service
rigs and coil tubing units through the first half of 2012 and continue
to be able to do so.�� Our recent and planned growth continues to make
IROC an attractive employer and provides opportunities to our workforce
for career advancement. We continue to have a strong balance sheet, the
newest in equipment, and a talented group of employees that will allow
us to continue to grow and capitalize on opportunities as they present
themselves.
Declaration of Quarterly Dividend
The Board of Directors has declared a quarterly cash dividend of $0.025
per common share. The dividend will be payable October 12, 2012 to
shareholders of record at the close of business on October 5, 2012.
This dividend is an eligible dividend for Canadian income tax purposes.
Conference Call and Webcast
IROC will conduct a conference call on Wednesday August 15, 2012 at 9:00
a.m. MST (11:00 a.m. EST).��Thomas Alford, President and CEO, and Ryan
Michaluk, CFO, will both be presenting during the call.
To access the conference call, contact the conference call operator at
(888) 231-8191 (North America) or (647) 427-7450 (Toronto and outside
North America) approximately 10 minutes prior to the call and request
the "IROC Energy Services Corp. 2012 Second Quarter Results Conference
Call".�� The call will be open to all analysts, investors and other
interested parties.
The conference call will also be available via webcast by visiting http://www.newswire.ca/en/webcast/detail/1008861/1090015 from a web browser.
About IROC Energy Services Corporation
IROC Energy Services Corp. is an Alberta oilfield services company that,
through the IROC Energy Services Partnership, provides a diverse range
of products, services and equipment to the oil and gas industry that
are among the newest and most innovative in the WCSB.�� IROC Energy
Services Partnership operates under the business names of Eagle Well
Servicing, Aero Rental Services and Helix Coil Services.�� IROC combines
cutting-edge technology with depth of experience to deliver a product
and services offering in the following core areas: well servicing &
equipment, rental services and coil tubing services. For more
information on IROC Energy Services Corp., visit our website at
www.iroccorp.com.
Cautionary Statement Regarding Forward Looking Information and
Statements
Certain information contained in this news release, including
information related to the completion and timing of the construction,
delivery and deployment of IROC's new service rigs and new coiled
tubing units, the expected demand for our services, the Corporation's
planned capital expenditures and growth opportunities, outlook for
future oil and gas prices, cyclical industry fundamentals, drilling,
completion, work over and abandonment activity levels, the
Corporation's ability to fund future obligations and capital
expenditures, and information or statements that contain words such as
"could", "should", "can", "anticipate", "expect", "believe", "will",
"may", "likely", "estimate", "predict", "potential", "continue",
"maintain", "retain", "grow", and similar expressions and statements
relating to matters that are not historical facts, constitute
"forward-looking information" within the meaning of applicable Canadian
securities legislation.��This information or these statements are based
on certain assumptions and analysis made by the Corporation in light of
its experience and its perception of historical trends, current
conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances. In particular, the
Corporation's expectation of uncertain demand and prices for oil and
natural gas and the resulting future industry activity, is premised on
the Corporation's understanding of customers' capital budgets and their
ability to access capital, the focus of its customers on deeper and
horizontal drilling opportunities in the current natural gas pricing
environment, and the continuing impact of the recent global financial
crisis and the current economic recovery all of which affects the
demand for oil and gas. Whether actual results, performance or
achievements will conform to the Corporation's expectations and
predictions is subject to a number of known and unknown risks and
uncertainties which could cause actual results to differ materially
from the Corporation's expectations.��Such risks and uncertainties
include, but are not limited to: fluctuations in the price and demand
for oil and natural gas; fluctuations in the level of oil and natural
gas exploration and development activities; the lack of availability of
qualified personnel or management; fluctuations in the demand for well
servicing; the effects of weather conditions on operations and
facilities; the existence of competitive operating risks inherent in
well servicing; general economic, market or business conditions;
changes in laws or regulations, including taxation, environmental and
currency regulations; the other risk factors set forth under the
heading "Risks" in the annual MD&A for the year ended December 31, 2011
and other unforeseen conditions which could impact on the use of
services supplied by the Corporation.
Consequently, all of the forward-looking information and statements made
in this news release are qualified by this cautionary statement and
there can be no assurance that the actual results or developments
anticipated by the Corporation will be realized or, even if
substantially realized, that they will have the expected consequences
to or effects on the Corporation or its business or operations. Except
as may be required by law, the Corporation assumes no obligation to
update publicly any such forward-looking information and statements,
whether as a result of new information, future events, or otherwise.
This press release is not for dissemination in United States or to any
United States news services.�� The Common Shares of IROC have not and
will not be registered on the United States Securities Act of 1933, as amended (the "United States Securities Act") or any state securities laws and are not offered or sold in the
United States or to any US person except in certain transactions exempt
from the registration requirements of the United States Securities Act and applicable state securities laws.
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.
Non-GAAP Measures
The financial statements have been prepared in accordance with
IFRS.��Certain supplementary information and measures not recognized
under IFRS are provided where Management believes they assist the
reader in understanding IROC's results.��These measures include:
EBITDAS and EBITDAS per share- EBITDAS is defined as earnings before
interest, taxes, depreciation and amortization, stock-based
compensation expense, foreign exchange gains and losses, goodwill
impairment, note receivable impairment, and gains or losses on disposal
of property and equipment.��EBITDAS and EBITDAS per share are not
recognized measures under GAAP or IFRS.�� The Corporation believes that
EBITDAS is provided as a measure of operating performance without
reference to financing decisions, income tax impacts and non-cash
expenses, which are not controlled at the operating management
level.��Accordingly, the Corporation believes EBITDAS is a useful
measure for prospective investors in evaluating the financial
performance of the Corporation, and specifically, the ability of the
Corporation to service the interest on its indebtedness.��Investors
should be cautioned that EBITDAS should not be construed as an
alternative to net income determined in accordance with IFRS as an
indicator of the Corporation's performance.��IROC's method of
calculating EBITDAS may differ from those of other companies, and
accordingly, EBITDAS may not be directly comparable to measures used by
other companies. EBITDAS % is calculated as EBITDAS divided by revenue.
Gross margin is defined as revenue less operating expenses.��Gross margin
% is defined as gross margin divided by revenue.��The Company believes
that gross margin and gross margin % are useful measures which provide
an indicator of the Corporation's fundamental ability to make money on
the products and services it sells.��The Corporation believes the
relationship between revenues and costs expressed by the gross margin %
is a useful measure when compared between different financial periods
as it demonstrates the trending relationship between revenues, costs
and margins.��Gross margin and gross margin % are not recognized
measures of IFRS and do not have any standardized meaning prescribed by
IFRS.��IROC's method of calculating gross margin and gross margin % may
differ from those of other companies, and accordingly, may not be
directly comparable to measures used by other companies.
The following is a reconciliation of EBITDAS and EBITDAS per share to
net income from continuing operations:
�� | �� | �� | �� | �� | �� |
�� | Six months ended | Three months ended | |||
$ 000's except number of shares and per share amounts | June 30, 2012 | June 30, 2012 | March 31, 2012 | December 31, 2011 | September 30, 2011 |
Net income from continuing operations | 6,895 | 145 | 6,750 | 4,778 | 4,330 |
�� | �� | �� | �� | �� | �� |
Depreciation and amortization | 4,938 | 2,546 | 2,392 | 2,111 | 1,920 |
Loss (gain) on foreign exchange | 4 | 10 | (6) | (1) | 23 |
Stock based compensation expense | 313 | 168 | 145 | 167 | 169 |
Loss (gain) on disposal of equipment | (28) | (8) | (20) | (8) | 7 |
Interest and financing costs | 349 | 168 | 181 | 163 | 164 |
Income taxes: | �� | �� | �� | �� | �� |
����Current | - | (1,185) | 1,185 | - | - |
����Deferred | 2,460 | 1,320 | 1,140 | 1,432 | 1,619 |
�� | �� | �� | �� | �� | �� |
EBITDAS - continuing operations | 14,931 | 3,164 | 11,767 | 8,642 | 8,232 |
�� | �� | �� | �� | �� | �� |
EBITDAS per share - continuing operations | �� | �� | �� | �� | �� |
����Basic | $0.30 | $0.06 | $0.23 | $0.18 | $0.16 |
����Diluted | $0.29 | $0.06 | $0.23 | $0.18 | $0.16 |
�� | �� | �� | �� | �� | �� |
�� | Six months ended | Three months ended | |||
$ 000's except number of shares and per share amounts | June 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 | September 30, 2010 |
Net income (loss) from continuing operations | 4,271 | (331) | 4,602 | 2,703 | 1,068 |
�� | �� | �� | �� | �� | �� |
Depreciation and amortization | 3,365 | 1,715 | 1,650 | 1,857 | 1,755 |
Loss (gain) on foreign exchange | 8 | 8 | - | - | (2) |
Stock based compensation expense | 268 | 115 | 153 | 105 | 82 |
Loss (gain) on disposal of equipment | (18) | 7 | (25) | (17) | (24) |
Interest and financing costs | 476 | 190 | 286 | 305 | 304 |
Note receivable recovery | - | - | - | - | (300) |
Income taxes: | �� | �� | �� | �� | �� |
����Current | - | - | - | - | - |
����Deferred | 1,669 | (62) | 1,731 | 367 | 414 |
�� | �� | �� | �� | �� | �� |
EBITDAS - continuing operations | 10,039 | 1,642 | 8,397 | 5,320 | 3,297 |
�� | �� | �� | �� | �� | �� |
EBITDAS per share - continuing operations | �� | �� | �� | �� | �� |
����Basic | $0.20 | $0.03 | $0.20 | $0.12 | $0.08 |
����Diluted | $0.20 | $0.03 | $0.19 | $0.12 | 0.08 |
��
��
��
SOURCE: IROC Energy Services Corp.
For further information:
IROC Energy Services Corp.
Mr. Thomas M. Alford, President and CEO,
Telephone:�� (403) 263-1110
Email:��investorrelations@iroccorp.com��
or
Mr. Ryan A. Michaluk, Chief Financial Officer
Telephone:�� (403) 263-1110
Email:��investorrelations@iroccorp.com
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