/NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA/
CALGARY, March 6, 2013 /CNW/ - Cathedral Energy Services Ltd. (the
"Company" or "Cathedral" / TSX: CET) announces its consolidated
financial results for the three months and year ended December 31, 2012
and 2011. Dollars in 000's except per share amounts.
This news release contains "forward-looking statements" within the
meaning of applicable Canadian securities laws. For a full disclosure
of forward-looking statements and the risks to which they are subject,
see "Forward-Looking Statements" later in this news release.
2012 Q4 KEY TAKEAWAYS
-
Operating results were negatively affected by market wide reduction in
drilling and completions activity on both a year-over-year and
sequential quarter basis
-
U.S. directional drilling operations base is set up in Oklahoma City,
Oklahoma
-
U.S. Production Testing division receives request to provide five
testing units for deployment in the Eagleford (Texas) resource plan
with first two units operational in January 2013 and remaining three in
2013 Q2
-
Cathedral announces initial 2013 capital budget of $22,000 which
includes $10,000 of growth capital and $12,000 of maintenance capital
2012 Q4 FINANCIAL SUMMARY
|
|
|
|
|
|
Three months ended December 31
|
Year ended December 31
|
|
2012
|
2011
|
2012
|
2011
|
Revenues
|
$
|
44,836
|
$
|
70,359
|
$
|
203,194
|
$
|
220,363
|
Adjusted gross margin % (1)
|
|
27.8%
|
|
35.0%
|
|
28.2%
|
|
32.5%
|
EBITDAS (1)
|
$
|
8,296
|
$
|
20,969
|
$
|
42,858
|
$
|
56,085
|
|
Diluted per share
|
$
|
0.22
|
$
|
0.56
|
$
|
1.14
|
$
|
1.47
|
EBITDAS (1) as % of revenues
|
|
18.5%
|
|
29.8%
|
|
21.1%
|
|
25.5%
|
Funds from continuing operations (1)
|
$
|
6,586
|
$
|
17,814
|
$
|
33,270
|
$
|
50,011
|
|
Diluted per share
|
$
|
0.18
|
$
|
0.47
|
$
|
0.88
|
$
|
1.31
|
Net earnings
|
$
|
1,578
|
$
|
12,551
|
$
|
14,797
|
$
|
27,634
|
|
Basic per share
|
$
|
0.04
|
$
|
0.34
|
$
|
0.40
|
$
|
0.75
|
|
Diluted per share
|
$
|
0.04
|
$
|
0.33
|
$
|
0.39
|
$
|
0.73
|
Dividends declared per share
|
$
|
0.075
|
$
|
0.060
|
$
|
0.300
|
$
|
0.240
|
Property and equipment additions
|
$
|
6,934
|
$
|
7,072
|
$
|
30,650
|
$
|
44,413
|
Weighted average shares outstanding
|
|
|
|
|
|
Basic (000s)
|
|
37,209
|
|
37,220
|
|
37,376
|
|
37,062
|
|
Diluted (000s)
|
|
37,400
|
|
37,631
|
|
37,756
|
|
38,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
December 31
|
|
|
|
|
|
|
2012
|
2011
|
Working capital
|
|
|
|
|
$
|
29,173
|
$
|
40,052
|
Total assets
|
|
|
|
|
$
|
224,080
|
$
|
231,923
|
Loans and borrowings excluding current portion
|
|
|
|
|
$
|
46,151
|
$
|
50,694
|
Total shareholders' equity
|
|
|
|
|
$
|
137,932
|
$
|
136,107
|
|
|
|
|
|
(1) Refer to "NON-GAAP MEASUREMENTS"
|
|
|
|
|
OVERVIEW
The Company completed 2012 Q4 with quarterly revenues of $44,836
compared to 2011 Q4 revenues of $70,359. The 2012 Q4 revenues were
comprised of 66% (2011 Q4 - 75%) from the directional drilling
division; 29% (2011 Q4 - 25%) from the production testing division; and
5% (2011 Q4 - 0%) from international resale and rentals.
2012 Q4 EBITDAS was $8,296 ($0.22 per share diluted) which represents a
$12,673 decrease or 60% decrease from 2011 Q4 EBITDAS of $20,969 ($0.56
per share diluted). For the three months ended December 31, 2012, the
Company's net earnings were $1,578 ($0.04 per share diluted) as
compared to $12,551 ($0.33 per share diluted) in 2011.
The decline in revenues and was primarily attributed to slow down of
drilling and completions work in the Canadian market as well as more
moderate declines in the U.S.
OUTLOOK
On a year-over-year basis, 2013 overall industry activity levels are
expected to remain relatively flat over 2012. Within the Canadian
market, industry experts are projecting the oil price differential to
narrow in the second half of 2013 which should lead to more dollars in
the hands of producer and this may result in increased funding for
drilling and completions programs. So far in 2013, industry activity
levels in Canada are at lower levels than the prior year. This is
expected as the industry did not experience the overall decline in
market activity until after the 2012 spring breakup.
The Company continues to see significant opportunities in the U.S.
market for both directional drilling and frac flowback services; in
particular in the Texas and Oklahoma regions where the Company's market
share is minimal. In late 2012, Cathedral's U.S. Directional Drilling
division opened an operations base in Oklahoma City, Oklahoma and for
2013 the Company is expecting to experience an expanding work base from
this area. For 2013 Cathedral is planning for increased activity
levels from its Texas and Rocky Mountain regions. Despite being in a
dry gas market, Cathedral's north east U.S. (Marcellus) area is
expected to remain flat from an activity level basis.
Commencing in January 2013, our U.S. Production Testing division
expanded its operations into the Eagleford (Texas) resource play with
two units that were relocated from other area within the U.S. As well,
the Company has three high pressure units being manufactured for this
region and these new builds are expected to be operating in 2013 Q2.
As Cathedral pursues and obtains additional work in the U.S. market, it
will reallocate equipment where there is demand.
In 2013 Cathedral will continue to convert its mud motor fleet over to
its in-house proprietary design. At the end of 2012 approximately 21%
of the fleet had been converted. As part of the conversion process,
parts from the motors being torn down are reused when repairing like
mud motors. This allows Cathedral to obtain value for such parts. The
rate of conversion is dependent on a number of factors including the
availability of motor parts manufacturing by third parties and the
ability of Cathedral to consume in operations the parts of the mud
motors that are being replaced.
On the technology front, Cathedral anticipates commencing its build out
of its MWD "at-bit" technology in 2013 Q4. The "at-bit" technology
allows for MWD measurements (inclination and gamma) that are sourced
from directly behind the drill bit and this allows for improved
geosteering and optimum well placement. As well, in 2013 Cathedral
will expand its rollout of the enhanced Fusion MWD platform
electronics.
The Company continues to move forward with the startup of its Venezuela
operations. With the near completion of the final agreements and the
movement of equipment into the country, Cathedral continues to focus on
being prepared for its first field operations.
CAPITAL PROGRAM
Cathedral's 2013 capital budget is $22,000 which includes $10,000 of
growth capital and $12,000 of maintenance capital.
The major items within the 2013 of growth capital are for the drilling
division are addition of mud motors and drill collars for the expected
expansion of Company's Houston and Oklahoma City operation bases and
the commencement of the build-out of the Company's "at-bit" technology
system. In addition, the production testing division plans to add 3
frac flowback units and related ancillary equipment.
The maintenance capital is expected to allow for: i) expanded rollout of
the Company's enhanced Fusion MWD platform electronics; ii) addition of
mud pulse transmitters to the fleet to allow for expanded Fusion MWD
platform capabilities; iii) continued conversion to Cathedral's
proprietary mud motor bearing section; and iv) expansion of mud motor
power section fleet to accommodate extended repair times and new
configurations requested by customers.
These capital expenditures are expected to be financed by way of cash
flow from operations and the Company's credit facility.
During 2012 the Company invested an additional $31,422 (2011 - $44,413)
in property and equipment and intangible assets. The main 2012
additions were 11 MWD systems, replacement of downhole tools that were
lost-in-hole, 7 production testing units, auxiliary production testing
equipment and maintenance capital of $7,800. Maintenance capital
includes: i) costs incurred on conversion of the Company's mud motor
fleet to its proprietary designed mud motor; ii) upgrading of EM-MWD
systems to the Company's Fusion MWD platform; and iii) expansion of mud
motor power section fleet to meet customers' requests for specific
configuration.
The following is a summary of major equipment owned by the Company:
|
|
|
|
|
December 31
|
December 31
|
December 31
|
|
2012
|
2011
|
2010
|
Directional drilling - MWD systems (1)
|
136
|
125
|
102
|
Production testing units
|
69
|
62
|
56
|
|
|
|
|
(1) December 31, 2012 and 2011 MWD systems are net of 10 systems that
are removed from service.
|
|
|
|
DIVIDENDS
It is the intent of the Company to pay quarterly dividends to
shareholders. The Board of Directors will review the amount of
dividends on a quarterly basis with due consideration to current
performance, historical and future trends in the business, the expected
sustainability of those trends and enacted tax legislation which will
affect future taxes payable as well as required long-term debt
repayments, maintenance capital expenditures required to sustain
performance and future growth capital expenditures. The Directors have
approved a 2013 Q1 dividend in the amount of $0.075 per share which
will have a date of record March 31, 2013 and a payment date of April
15, 2013.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of liquidity is cash generated from
operations. The Company also has the ability to fund liquidity
requirements through its credit facility and the issuance of debt
and/or equity. At December 31, 2012, the Company had an operating loan
with a major Canadian bank in the amount of $20,000 (December 31, 2011
- $20,000) of which $880 (December 31, 2011 - $12,797) was drawn. In
addition, the Company has a non-reducing revolving term loan facility
in the amount of $55,000 (December 31, 2011 - $55,000) of which $45,000
was drawn as at December 31, 2012 (December 31, 2011 - $50,000.) In
addition, at December 31, 2012, the Company had finance lease
liabilities of $1,862 (December 31, 2011 - $1,492) and other long-term
debt of $nil (December 31, 2011 - $5).
RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 2012
|
|
|
|
|
Three months ended December 31, 2012
|
|
Three months ended December 31, 2011
|
|
Directional
|
Production
|
Resale and
|
|
|
Directional
|
Production
|
|
Revenues
|
drilling
|
testing
|
rental
|
Total
|
|
drilling
|
testing
|
Total
|
Canada
|
$
|
16,777
|
$
|
6,791
|
$
|
-
|
$
|
23,568
|
|
$
|
35,890
|
$
|
10,223
|
$
|
46,113
|
United States
|
|
12,682
|
|
6,391
|
|
-
|
|
19,073
|
|
|
16,808
|
|
7,438
|
|
24,246
|
International
|
|
-
|
|
-
|
|
2,195
|
|
2,195
|
|
|
-
|
|
-
|
|
-
|
Total
|
$
|
29,459
|
$
|
13,182
|
$
|
2,195
|
$
|
44,836
|
|
$
|
52,698
|
$
|
17,661
|
$
|
70,359
|
Revenues and gross margin Revenues in Q4 have decreased to $44,836 in 2012 from $70,359 in
2011, a decrease of $25,523 or 36%. The decrease was primarily
attributed to slow down of drilling and completions work in the
Canadian market as well as more moderate declines in the U.S.
The directional drilling division revenues have decreased from $52,698
in 2011 Q4 to $29,459 in 2012 Q4; a 44% decrease. This decrease was
the result of: i) a 42% decrease in activity days from 4,656 in 2011 Q4
to 2,691 in 2012 Q4; and ii) a decrease in the average day rate from
$11,319 in 2011 Q4 to $10,950 in 2012 Q4, which was driven by market
pressures in the Canadian market. Canadian activity days decreased
from 3,014 to 1,425 and U.S. activity days decreased from 1,642 to
1,266.
The Company's production testing division contributed $13,182 in
revenues during 2012 Q4 which was a 25% decrease over 2011 revenues of
$17,661. The division ended 2012 Q4 with 39 units (2011 - 38) in
Canada and 30 (2011 - 24) in the U.S. The decline in revenues was due
mainly to the decline in completions work in 2012 Q4 compared with the
high activity levels in 2011 Q4.
The gross margin for 2011 Q4 was 29.6% compared to 2012 Q4 at 16.3%, a
decline of 13.3%; 6.1% of this decline related to increase in non-cash
depreciation and share-based compensation. There was a decline in
adjusted gross margin of 7.2%. There was no single significant
increase in operating expenses in the year, but there were several
items that had slight increases including increase in non-field wages
due to the expansion into new geographic areas, costs for accommodation
of field staff and the cost of equipment resold. Despite Cathedral's
highly variable field cost structure, non-field salaries are of a fixed
nature and therefore when the Company's revenue declines, such costs
become a higher percentage of revenues. The Company will continue with
its on-going review of all operating costs and general and
administrative expenditures with the goal of enhancing profitability.
Depreciation allocated to cost of sales increased from $3,712 in 2011 Q4 to $5,071 in 2012 Q4 due to capital additions in the period from 2011 Q4 to 2012
Q4. Depreciation included in cost of sales as a percentage of revenue
was 11% for 2012 Q4 and 5% for 2011 Q4.
For 2012 Q4 the Company had share-based compensation included in cost of
sales of $76 compared to $136 recognized in 2011 Q4. The fair value of the related
options is being amortized against income over the three-year vesting
periods.
Selling, general and administrative expenses ("SG&A") SG&A expenses were $5,573 in 2012 Q4; an increase of $397 when
compared with $5,176 in 2011 Q4 with $57 of this increase related to
non-cash depreciation and share-based compensation. The remaining
increase was primarily related to increases in payroll expenses related
to staff positions added to accommodate growth that occurred in 2011 Q4
and 2012 Q1 and wage increases for existing staff net of a decrease in
variable compensation and a decline in legal expenses. As a percentage
of revenues, general and administrative expenses were 12% in 2012 Q4
and 7% in 2011 Q4.
Depreciation allocated to SG&A increased from $56 in 2011 Q4 to $164 in 2012 Q4 which has mainly increased due to the depreciation of the new
head office location which was not depreciated until it was
available-for-use until mid-way through 2011 Q4.
For 2012 Q4 the Company had share-based compensation included in SG&A of
$284 compared to $335 recognized in 2011 Q4. The fair value of the related
options is being amortized against income over the three-year vesting
periods.
Gain on disposal of property and equipment During 2012 Q4 the Company had a gain on disposal of property and
equipment of $957, compared to $1,944 in 2011 Q4. The Company's gains
are mainly due to recoveries of lost-in-hole equipment costs including
previously expensed depreciation on the related assets. The timing of
lost-in-hole recoveries is not in the control of the Company and
therefore can fluctuate significantly from quarter-to-quarter.
Foreign exchange gain (loss) The Company's foreign exchange loss was $335 in 2011 Q4 compared to
a $136 in 2012 Q4 due to the fluctuations in the Canadian dollar compared to
U.S. dollars and Venezuelan bolivars. The Company's foreign operations
are denominated in a currency other than the Canadian dollar and
therefore, upon consolidation gains and losses due to fluctuations in
the foreign currency exchange rates are recorded in other comprehensive
income ("OCI") on the balance sheet as a component of equity. However,
gains and losses in the Canadian entity on U.S. denominated
intercompany balances continue to be recognized in the statement of
income. Included in the 2012 Q4 foreign currency gain are unrealized
losses of $156 (2011 Q4 - $515 gain) related to intercompany balances.
Finance costs Finance costs consist of interest expenses on operating loans, loans
and borrowings and bank charges of $464 for 2012 Q4 versus $589 for 2011 Q4. The net decrease in finance costs
mainly relate to a decrease in the outstanding balances for the secured
revolving term loan and operating loans as well as a reduction in the
interest rate.
Income tax For 2012 Q4, the Company recorded a tax expense of $456 ($753
current net of $297 deferred recovery) compared to the 2011 Q4 of
$4,105 ($1,211 current and $2,894 deferred). In 2012 Q4, the effective
tax rate was 22% as compared to 25% in 2011 Q4. Most of the Company's
current tax expense relates to its U.S. subsidiary.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
December 31, 2012 and 2011
Dollars in '000s
|
|
|
|
|
|
|
December 31
|
|
December 31
|
|
|
2012
|
|
2011
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
8,470
|
$
|
2,902
|
|
Trade receivables
|
|
36,094
|
|
65,568
|
|
Current taxes recoverable
|
|
153
|
|
-
|
|
Prepaid expenses and deposits
|
|
10,419
|
|
2,217
|
|
Inventories
|
|
13,006
|
|
13,278
|
Total current assets
|
|
68,142
|
|
83,965
|
Property and equipment
|
|
135,093
|
|
129,929
|
Intangible assets
|
|
719
|
|
230
|
Deferred tax assets
|
|
9,379
|
|
11,951
|
Investment in associate
|
|
4,899
|
|
-
|
Goodwill
|
|
5,848
|
|
5,848
|
Total non-current assets
|
|
155,938
|
|
147,958
|
Total assets
|
$
|
224,080
|
$
|
231,923
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Operating loans
|
$
|
880
|
$
|
12,797
|
|
Trade and other payables
|
|
21,773
|
|
28,046
|
|
Dividends payable
|
|
2,768
|
|
2,238
|
|
Loans and borrowings
|
|
711
|
|
803
|
|
Current taxes payable
|
|
-
|
|
29
|
|
Deferred revenue
|
|
12,837
|
|
-
|
Total current liabilities
|
|
38,969
|
|
43,913
|
Loans and borrowings
|
|
46,151
|
|
50,694
|
Deferred tax liabilities
|
|
1,028
|
|
1,209
|
Total non-current liabilities
|
|
47,179
|
|
51,903
|
Total liabilites
|
|
86,148
|
|
95,816
|
Shareholders' equity:
|
|
|
|
|
|
Share capital
|
|
74,408
|
|
74,208
|
|
Contributed surplus
|
|
8,863
|
|
7,845
|
|
Accumulated other comprehensive loss
|
|
(2,679)
|
|
(2,141)
|
|
Retained earnings
|
|
57,340
|
|
56,195
|
Total shareholders' equity
|
|
137,932
|
|
136,107
|
Total liabilities and shareholders' equity
|
$
|
224,080
|
$
|
231,923
|
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Years ended December 31, 2012 and 2011
Dollars in '000s except per share amounts
|
|
|
|
|
|
|
|
|
|
Three months ended December 31
|
Year ended December 31
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Revenues
|
$
|
44,836
|
$
|
70,359
|
$
|
203,194
|
$
|
220,363
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
Direct costs
|
|
(32,388)
|
|
(45,699)
|
|
(145,902)
|
|
(148,689)
|
|
Depreciation
|
|
(5,071)
|
|
(3,712)
|
|
(18,479)
|
|
(14,884)
|
|
Share-based compensation
|
|
(76)
|
|
(136)
|
|
(322)
|
|
(381)
|
Total cost of sales
|
|
(37,535)
|
|
(49,547)
|
|
(164,703)
|
|
(163,954)
|
Gross margin
|
|
7,301
|
|
20,812
|
|
38,491
|
|
56,409
|
Selling, general and administrative expenses:
|
|
|
|
|
|
|
|
|
|
Direct costs
|
|
(5,125)
|
|
(4,785)
|
|
(21,012)
|
|
(19,724)
|
|
Depreciation
|
|
(164)
|
|
(56)
|
|
(642)
|
|
(174)
|
|
Share-based compensation
|
|
(284)
|
|
(335)
|
|
(1,054)
|
|
(1,440)
|
Total selling, general and administrative expenses
|
|
(5,573)
|
|
(5,176)
|
|
(22,708)
|
|
(21,338)
|
|
|
1,728
|
|
15,636
|
|
15,783
|
|
35,071
|
Gain on disposal of property and equipment
|
|
957
|
|
1,944
|
|
6,421
|
|
4,264
|
Earnings from operating activities
|
|
2,685
|
|
17,580
|
|
22,204
|
|
39,335
|
Foreign exchange gain (loss)
|
|
(136)
|
|
(335)
|
|
269
|
|
(356)
|
Finance costs
|
|
(464)
|
|
(589)
|
|
(2,041)
|
|
(1,877)
|
Share of loss from associate
|
|
(51)
|
|
-
|
|
(51)
|
|
-
|
Earnings from continuing operations before income taxes
|
|
2,034
|
|
16,656
|
|
20,381
|
|
37,102
|
Income tax (expense) recovery:
|
|
|
|
|
|
|
|
|
|
Current
|
|
(753)
|
|
(1,211)
|
|
(3,167)
|
|
(1,362)
|
|
Deferred
|
|
297
|
|
(2,894)
|
|
(2,417)
|
|
(8,435)
|
Total income tax expense
|
|
(456)
|
|
(4,105)
|
|
(5,584)
|
|
(9,797)
|
Net earnings from continuing operations
|
|
1,578
|
|
12,551
|
|
14,797
|
|
27,305
|
Net earnings from discontinued operations
|
|
-
|
|
-
|
|
-
|
|
329
|
Net earnings
|
|
1,578
|
|
12,551
|
|
14,797
|
|
27,634
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences for foreign
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
724
|
|
(254)
|
|
(538)
|
|
673
|
Total comprehensive income
|
$
|
2,302
|
$
|
12,297
|
$
|
14,259
|
$
|
28,307
|
|
|
|
|
|
|
|
|
|
Net earnings from continuing operations per share
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.04
|
$
|
0.34
|
$
|
0.40
|
$
|
0.74
|
|
Diluted
|
$
|
0.06
|
$
|
0.33
|
$
|
0.39
|
$
|
0.72
|
Net earnings from discontinued operations per share
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
0.01
|
Net earnings
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.04
|
$
|
0.34
|
$
|
0.40
|
$
|
0.75
|
|
Diluted
|
$
|
0.04
|
$
|
0.33
|
$
|
0.39
|
$
|
0.73
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, 2012 and 2011
Dollars in '000s
|
|
|
|
|
|
|
2012
|
|
2011
|
Cash provided by (used in):
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
Net earnings from continuing operations
|
$
|
14,797
|
$
|
27,305
|
|
Items not involving cash:
|
|
|
|
|
|
|
Depreciation
|
|
19,121
|
|
15,058
|
|
|
Total income tax expense
|
|
5,584
|
|
9,797
|
|
|
Unrealized foreign exchange gain on intercompany balances
|
|
(77)
|
|
(221)
|
|
|
Finance costs
|
|
2,041
|
|
1,877
|
|
|
Share-based compensation
|
|
1,341
|
|
1,821
|
|
|
Gain on disposal of property and equipment
|
|
(6,421)
|
|
(4,264)
|
|
|
Share of loss from associate
|
|
51
|
|
-
|
|
Cash flow from continuing operations
|
|
36,437
|
|
51,373
|
|
Changes in non-cash operating working capital
|
|
27,724
|
|
(21,857)
|
|
Income taxes paid
|
|
(3,350)
|
|
(1,377)
|
Cash flow from operating activities
|
|
60,811
|
|
28,139
|
Investing activities:
|
|
|
|
|
|
Property and equipment additions
|
|
(30,650)
|
|
(44,413)
|
|
Intangible asset additions
|
|
(772)
|
|
-
|
|
Proceeds on disposal of property and equipment
|
|
11,596
|
|
6,538
|
|
Proceeds on disposal of assets held for sale
|
|
-
|
|
3,793
|
|
Investment in equity accounted investee
|
|
(3,600)
|
|
-
|
|
Changes in non-cash investing working capital
|
|
1,809
|
|
(3,633)
|
Cash flow from investing activities
|
|
(21,617)
|
|
(37,715)
|
Financing activities:
|
|
|
|
|
|
Change in operating loan
|
|
(12,108)
|
|
4,609
|
|
Interest paid
|
|
(2,057)
|
|
(2,063)
|
|
Advances of loans and borrowings
|
|
-
|
|
15,500
|
|
Repayments on loans and borrowings
|
|
(5,509)
|
|
(598)
|
|
Proceeds on exercise of share options
|
|
1,387
|
|
2,744
|
|
Repurchase of common shares
|
|
(3,962)
|
|
-
|
|
Dividends paid
|
|
(10,671)
|
|
(8,882)
|
Cash flow from financing activities
|
|
(32,920)
|
|
11,310
|
Effect of exchange rate on changes in cash and cash equivalents
|
|
(706)
|
|
(572)
|
Change in cash and cash equivalents
|
|
5,568
|
|
1,162
|
Cash and cash equivalents, beginning of period
|
|
2,902
|
|
1,740
|
Cash and cash equivalents, end of period
|
$
|
8,470
|
$
|
2,902
|
FORWARD-LOOKING STATEMENTS
This news release contains certain forward-looking statements and
forward-looking information (collectively referred to herein as
"forward-looking statements") within the meaning of applicable Canadian
securities laws. All statements other than statements of present or
historical fact are forward-looking statements. Forward-looking
statements are often, but not always, identified by the use of words
such as "anticipate", "achieve", "believe", "plan", "intend",
"objective", "continuous", "ongoing", "estimate", "outlook", "expect",
"may", "will", "project", "should" or similar words suggesting future
outcomes. In particular, this news release contains forward-looking
statements relating to, among other things: production testing units
expected to be deployed to Eagleford (Texas) resources play and timing
thereof; components of expected 2013 capital budget and financing
thereof; expected commencement of build-out of "at-bit" technology;
areas of expected growth and opportunities; expected activity levels;
projected narrowing of oil price "differential" and possible
consequences thereof; future expansion; commencement of operations in
Venezuela; intent to pay quarterly dividends; and sources to fund
liquidity requirements. The Company believes the expectations
reflected in such forward-looking statements are reasonable as of the
date hereof but no assurance can be given that these expectations will
prove to be correct and such forward-looking statements should not be
unduly relied upon.
Various material factors and assumptions are typically applied in
drawing conclusions or making the forecasts or projections set out in
forward-looking statements. Those material factors and assumptions are
based on information currently available to the Company, including
information obtained from third party industry analysts and other third
party sources. In some instances, material assumptions and material
factors are presented elsewhere in this news release in connection with
the forward-looking statements. You are cautioned that the following
list of material factors and assumptions is not exhaustive. Specific
material factors and assumptions include, but are not limited to:
-
the performance of the Company's businesses, including current business
and economic trends;
-
oil and natural gas commodity prices and production levels;
-
capital expenditure programs and other expenditures by the Company and
its customers;
-
the ability of the Company to retain and hire qualified personnel;
-
the ability of the Company to obtain parts, consumables, equipment,
technology, and supplies in a timely manner to carry out its
activities;
-
the ability of the Company to maintain good working relationships with
key suppliers;
-
the ability of the Company to market its services successfully to
existing and new customers;
-
the ability of the Company to obtain timely financing on acceptable
terms;
-
currency exchange and interest rates;
-
risks associated with foreign operations including Venezuela;
-
the ability of the Company to realize the benefit of its conversion from
an income trust to a corporation;
-
risks associated with finalizing ancillary joint venture agreements that
are required prior to the commencement of operations of the Venezuela
joint venture;
-
risks associated with Venezuela joint venture company being awarded work
by the Venezuela state run oil and natural gas corporation;
-
changes under governmental regulatory regimes and tax, environmental and
other laws in Canada, United States ("U.S.") and Venezuela; and
-
a stable competitive environment.
Forward-looking statements are not a guarantee of future performance and
involve a number of risks and uncertainties some of which are described
herein. Such forward-looking statements necessarily involve known and
unknown risks and uncertainties, which may cause the Company's actual
performance and financial results in future periods to differ
materially from any projections of future performance or results
expressed or implied by such forward-looking statements. These risks
and uncertainties include, but are not limited to, the risks identified
in this news release and in the Company's Annual Information Form under
the heading "Risk Factors". Any forward-looking statements are made as
of the date hereof and, except as required by law, the Company assumes
no obligation to publicly update or revise such statements to reflect
new information, subsequent or otherwise.
All forward-looking statements contained in this news release are
expressly qualified by this cautionary statement. Further information
about the factors affecting forward-looking statements is available in
the Company's current Annual Information Form and Annual Report which
have been filed with Canadian provincial securities commissions and are
available on www.sedar.com.
NON-GAAP MEASUREMENTS
This news release refers to certain non-GAAP measurements that do not
have any standardized meaning within IFRS and therefore may not be
comparable to similar measures provided by other companies. Management
utilizes these non-GAAP measurements to evaluate Cathedral's
performance.
The specific measures being referred to include the following:
i) "Adjusted gross margin" - calculated as gross margin plus non-cash
items (depreciation and share-based compensation); is considered a
primary indicator of operating performance (see tabular calculation
below);
ii) "Adjusted gross margin %" - calculated as adjusted gross margin
divided by revenues; is considered a primary indicator of operating
performance (see tabular calculation below);
iii) "EBITDAS" - defined as earnings before finance costs, unrealized
foreign exchange on intercompany balances, unrealized foreign exchange
due to hyper-inflation accounting, taxes, depreciation and share-based
compensation; is considered an indicator of the Company's ability to
generate funds flow from operations prior to consideration of how
activities are financed, how the results are taxed and measured and
non-cash expenses (see tabular calculation below);
iv) "Maintenance capital expenditures" - refers to capital expenditures
required to maintain existing levels of service but excludes
replacement cost of lost-in-hole equipment to the extent the
replacement equipment is financed from the proceeds on disposal of the
equipment lost-in-hole; and
v) "Funds from continuing operations" - calculated as cash provided by
operating activities before changes in non-cash working capital, cash
flow from discontinued operations and income taxes paid less current
tax expense; is considered an indicator of the Company's ability to
generate funds flow from operations on an after tax basis but excluding
changes in non-cash working capital which is financed using the
Company's operating loan (see tabular calculation below).
The following tables provide reconciliations from GAAP measurements to
non-GAAP measurements referred to in this news release:
Adjusted gross margin
|
|
|
|
Three months ended December 31
|
Year Ended December 31
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Gross margin
|
$
|
7,301
|
$
|
20,812
|
$
|
38,491
|
$
|
56,409
|
Add non-cash items included in cost of sales:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
5,071
|
|
3,712
|
|
18,479
|
|
14,884
|
|
Share-based compensation
|
|
72
|
|
136
|
|
287
|
|
381
|
|
|
|
|
|
|
|
|
|
Adjusted gross margin
|
$
|
12,444
|
$
|
24,660
|
$
|
57,257
|
$
|
71,674
|
|
|
|
|
|
|
|
|
|
Adjusted gross margin %
|
|
27.8%
|
|
35.0%
|
|
28.2%
|
|
32.5%
|
EBITDAS
|
|
|
|
|
|
|
|
|
|
Three months ended December 31
|
Year Ended December 31
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Earnings from continuing operations before income taxes
|
$
|
2,034
|
$
|
16,656
|
$
|
20,381
|
$
|
37,102
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
Gain on disposal of property and equipment from discontinued operations
|
|
-
|
|
-
|
|
-
|
|
448
|
|
Depreciation included in cost of sales
|
|
5,071
|
|
3,712
|
|
18,479
|
|
14,884
|
|
Depreciation included in selling, general and administrative expenses
|
|
164
|
|
56
|
|
642
|
|
174
|
|
Share-based compensation included in cost of sales
|
|
72
|
|
136
|
|
287
|
|
381
|
|
Share-based compensation included in selling, general
|
|
|
|
|
|
|
|
|
|
|
and administrative expenses
|
|
284
|
|
335
|
|
1,054
|
|
1,440
|
|
Unrealized foreign exchange (gain) loss on intercompany balances
|
|
156
|
|
(515)
|
|
(77)
|
|
(221)
|
|
Finance costs
|
|
464
|
|
589
|
|
2,041
|
|
1,877
|
|
Share of loss from associate
|
|
51
|
|
-
|
|
51
|
|
-
|
|
|
|
|
|
|
|
|
|
EBITDAS
|
$
|
8,296
|
$
|
20,969
|
$
|
42,858
|
$
|
56,085
|
|
|
|
|
|
|
|
|
|
|
Funds from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31
|
Year ended December 31
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Cash flow from operating activities
|
$
|
4,094
|
$
|
9,969
|
$
|
60,811
|
$
|
28,139
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
Changes in non-cash operating working capital
|
|
2,694
|
|
8,870
|
|
(27,724)
|
|
21,857
|
|
Income taxes paid
|
|
551
|
|
186
|
|
3,350
|
|
1,377
|
|
Current tax expense
|
|
(753)
|
|
(1,211)
|
|
(3,167)
|
|
(1,362)
|
|
|
|
|
|
|
|
|
|
|
Funds from continuing operations
|
$
|
6,586
|
$
|
17,814
|
$
|
33,270
|
$
|
50,011
|
Cathedral Energy Services Ltd. (the "Company" or "Cathedral") is
incorporated under the Business Corporations Act (Alberta) (the
"Act"). The Company is publicly traded on the Toronto Stock Exchange
under the symbol "CET". The Company together with its wholly owned
subsidiary, Cathedral Energy Services Inc., is engaged in the business
of providing selected oilfield services to oil and natural gas
companies in western Canada and selected oil and natural gas basins in
the U.S. The Company is in the process of establishing operations in
Venezuela for providing directional drilling services through a joint
venture with Petroleros de Venezuela, S.A. ("PDVSA"), the state owned
oil and gas corporation of the Bolivarian Republic of Venezuela. The
Company strives to provide its clients with value added technologies
and solutions to meet their drilling and production testing
requirements. For more information, visit www.cathedralenergyservices.com.
SOURCE: Cathedral Energy Services Ltd.