Hyduke Announces Second Quarter Fiscal 2015 Financial Results

NISKU, AB, Aug. 14, 2015 /CNW/ - Hyduke Energy Services Inc. (HYD - TSX), announced operating results for three and six months ended June 30, 2015 and 2014.  Hyduke's Financial Statements and Management's Discussion and Analysis have been filed with regulators and are available at www.hyduke.com and at www.sedar.com.

Highlights include the following:

• Revenue for the six months of $11.6 million, a decline of 47.5% from $22.2 million in 2014.
• Gross profit for the period of $1.3 million, a decline of $3.3 million from $4.6 million in the 2014.
• Gross profit margin of 10.9% decreased 47.1% from 20.7% in 2014.
• Net loss from continuing operations for the period of $2.2 million.
• Loss per share (basic) for the period of $0.09.
• Negative EBITDAS (Earnings Before Interest, Taxes, Depreciation, Amortization and Stock Based Compensation) for continuing operations for the period of $1.4 million.
• Working capital remains positive at $6.9 million with a current ratio at 1.6 to 1.00.
• Cash on hand at June 30, 2015 is $4.7 million.
• Debt to equity ratio remains low at 0.42 to 1.00
• Subsequent to June 30, 2015, the Company amended the terms of its term loan agreement

Total revenue for the six months ending June 30, 2015 was $11.7 million.  This represents a decline of $10.6 million or 47.5% over the same period in the year. 

Gross margin of $1.3 million or 10.9% of revenue declined 72.2% from 2014 gross margin of $4.6 million or 20.7%. 

Selling, general and administrative expenses decreased $563 thousand or 12.9% to $3.8 million.  Administrative and employment expenses of $2.5 million decreased $157 thousand from 2014 levels.   In the six months ended June 30, 2015, the Company recorded $584 of severances compared to $182 in the same period in 2014.  After normalizing for severance expenses for the period, administrative and employment decreased $556 year over year.   

Negative EBITDAS for continuing operations was $1.4 million for the six months ending June 30, 2015, a decline of $2.1 million from positive EBITDAS of $0.8 in 2014.  The decline in EBITDAS was largely the result of a 48% reduction in revenue and a 72% reduction in gross margin.  

At June 30, 2015, Hyduke maintained a strong balance sheet as measured by liquidity (current ratio of 1.6 to 1.00) and debt to equity (ratio of 0.42 to 1.00)

Total assets of $31.7 million as at June 30, 2015 represents a decrease of $6.3 million (17%) from December 31, 2014 and is due primarily to the collection of accounts receivable and a reduction in inventory offset by an increase in cash. 

Total liabilities of $12.6 million as at June 30, 2015 represents a decrease of $3.5 million (22%) from December 31, 2014.  Total current liabilities increase of $3.8 million relates primarily to the reclassification of term debt to current in the current year.

OUTLOOK
Hyduke continues to endure the economic headwinds brought on by the precipitous drop in oil prices and the subsequent drop in drilling activity and upstream oil and gas capital spending.  Waiting for prices to recover is not a viable solution.

Hyduke continues to operate from a position of financial strength relative to many of the players and competitors in the supply and manufacturing sectors in the upstream oil and gas industry.

At June 30 the Company had cash and cash equivalent on hand of $4.7 million and working capital (net of long term bank debt) of $14.7 million. Inventory and property, plant and equipment exceed all current and long term bank debt and capital lease obligations by $11.2 million.  The Company's relationship with its lenders has been positive and progress has been made in having debt capital providers recognize that Hyduke will emerge from the current downturn intact and possibly significantly larger and stronger than is apparent from current financial performance or market conditions.

Therefore, the Company has embarked on a two-pronged approach that will culminate in an expanded market presence for Hyduke.

The first is to attract key personnel from industries that service customers from other industry sectors that Hyduke has never dealt with before but utilize the same type of assets Hyduke owns. This initiative has already resulted in the formation of a small structural steel division and that has attracted over a million dollars worth of new work. As an example of how large diverse the opportunities are for Hyduke, the new steel structure that held all the stage lights for this year's Edmonton Folk Music Festival was built by Hyduke. This is a very public example of this division's new work and customers.

The second approach is to use Hyduke's financial and management strengths to look for distressed companies and take over their key personnel along with key customers. This immediately eliminates overhead costs for the distressed company and ensures the completion of the initial work for the customer along with the confidence that future maintenance will also be taken care of. This initiative has culminated in the formation of a "Field Style" oil storage construction, inspection and maintenance unit, a completely new business for Hyduke focused on the production side of the oil and gas industry, not just exploration and drilling. Immediately after a bank receiver shut down a local tank manufacturer, Hyduke hired the key displaced workers and inform the affected customers that their projects could continue. We have received some purchase orders in excess of a million dollars and our new crews are working in the field for customers who have never dealt with Hyduke before.

We continue to add new customers in all of our existing business units, though their total volume revenue impact at this time does not match the larger spends of years past. These are, however, the foundations for Hyduke to emerge from the current recession as a more diverse entity that ever before in terms of clients, products, and the industrial sectors which the Company serves.

Hyduke believes the road to survival and success is through improving our personnel and service offerings along with expanding our customer base. We continue to identify numerous areas where Hyduke can improve. Challenges remain in many areas however Hyduke believes it can take advantage of the current major correction in Canada's oil and gas industry and emerge as a competitive participant in multiple sectors of the upstream oil and gas industry.

FORWARD LOOKING STATEMENT
This report contains certain forward-looking statements under the heading "Outlook" and elsewhere concerning future events or the Company's operations, anticipated financial performance, business prospects and strategies of Hyduke.  Forward-looking information typically contains statements with words such as "anticipate", "believe", "estimate", "expect", "plan", "intend" or similar words suggesting future outcomes or outlooks on, without limitation, estimates of business activity, supply and demand for the Company's products, the estimated amounts and timing of capital expenditures, anticipated future debt levels, or other expectations, beliefs, plans, objectives, assumptions or statements about future events or performance.  Readers are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties both general and specific that may cause actual future results to differ materially from those contemplated and contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur.  These factors may affect anticipated earnings or assets and include, but are not limited to: industry activity levels, market liquidity, customer credit risk, competition, oil and gas prices, product liability, fixed price contracts, development of new products, uninsured and underinsured losses, access to additional financing, source of supply of raw material and third party components, availability of key personnel, agreements and contracts, government regulations, foreign exchange exposure, interest rate risk, international scope of operations, environmental health and safety regulations and Hyduke's anticipation of and success in managing the risks implied by the foregoing.  The Company cautions that the foregoing list of important factors is not exhaustive.  The Company believes that the expectations reflected in the forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon.  The forward-looking statements in this report speak only as of the date of this report.  Hyduke undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required pursuant to applicable securities legislation.

About Hyduke

Trading on the TSX under the symbol "HYD," Hyduke Energy Services Inc. is a supplier of equipment and services to the oil and gas drilling and well servicing industry. 

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this News Release.

SOURCE Hyduke Energy Services Inc.