RE: Winter Seasonal 2 QtrsMD&A of Aug 16th
OUTLOOK
The Company anticipates an increase in activity for the remainder of the fiscal year and further indications that a strengthening of the oilfield services sector may occur in 2008.
Projects that were adversely affected by poor weather conditions during the third quarter have been delayed with several projects pushing their start dates into the Company’s fourth quarter which has
proven to be a more favourable dryer climate period.
Canadian spot natural gas prices decreased over the duration of the Company’s third quarter of 2007 as North American gas storage levels were higher than normal. On the other hand, oil pricing was positive
over the Company’s third quarter. The Company expects producers of oil assets to continue to be active in development of their oil based reserves into 2008.
Utilities and directional drilling services were also affected by wet conditions during the third quarter.
Substantially all of the projects booked during this period did go ahead when conditions improved. The Company still maintains a significant backlog with some of its major customers stretching out 2 years.
The outlook for this sector is exceptional.
The acquisition of TC will be a major contributor to the economic growth of the company in the future. TC generated over $1.8 million of revenue for the month of July, 2007. TC will be operating at 100% capacitythroughout the fourth quarter of 2007 and into the first quarter of fiscal 2008. TC is realizing a gross margin of over 50% which will have a major contribution to the Company’s overall gross margin, EBITDAS and net income.
The introduction of directional drilling services to existing and prospective customers of the oil and gas industry will enhance continued revenue growth within the energy and construction services sector. The non-seasonal nature of TC provides the Company with a steady source of revenue and positive cash flow. The Company’s introduction of providing directional drilling and installation of underground power,telecommunications and natural gas lines enables it to expand its customer base independent of oil and gas customers. The Company’s objective is to provide capital equipment, human resources and management expertise to TC to continue to expand its utility and directional drilling services, realizing on the high customer demands within this sector.
The synergies created between the two subsidiaries AGG and TKO continue to create sales growth opportunities. Both subsidiaries operated at 100% capacity during the past winter months. The company
expanded its geographical regions where work is being performed to now include central, northern and western Alberta. The customer base has expanded to include Rustler Petroleum, Apache Canada,
Beren’s Energy, Devon Canada, Harvest Operations, Titan Exploration, Burlington Resources, Breaker Energy and Zargon Gas and Oil in addition to the quality customers the company already had. The
Company anticipates increased revenue for the energy and construction services commencing in the first and second quarter of fiscal 2008 based on the customer activities and proposed plans currently being reviewed on an ongoing basis.
Corporate office has invested extensively in administration and management to improve the infrastructure within the company commencing September, 2006. Internal control and reporting systems have been drastically improved to meet public company reporting requirements of the TSX Exchange. The Company’s commitment to developing a strong management team, while incorporating sound business practices and efficient, effective accounting and management reporting systems ensures that growth through synergies and acquisitions. The Company’s current management team is capable of supporting the other reasonable sized acquisitions without incurring any substantial increase in management and administrative expenses Indicates very good 4th qtr results