CALGARY, ALBERTA--(Marketwired - May 3, 2017) - Trican Well Service (TSX:TCW) ("Trican" or the "Company") is
pleased to announce its First Quarter 2017 results. The following press release should be read in conjunction with the
Management's Discussion and Analysis, the unaudited interim consolidated financial statements and related notes of Trican for the
quarter ended March 31, 2017, as well as the Annual Information Form for the year ended December 31, 2016. All of the above
documents are available on Trican's website at www.tricanwellservice.com and on SEDAR at www.sedar.com.
Continuing Operations - Financial Review
|
|
Three months ended |
|
|
|
|
($ millions, except per share amounts; unaudited) |
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
Revenue |
$ |
149.4 |
|
$ |
99.8 |
|
$ |
114.8 |
|
Gross profit / (loss) |
|
17.8 |
|
|
(31.3 |
) |
|
(10.1 |
) |
Operating income / (loss) (1) |
|
22.7 |
|
|
(26.4 |
) |
|
(7.4 |
) |
Adjusted operating income / (loss) (1) |
|
26.0 |
|
|
(16.2 |
) |
|
1.1 |
|
Net income / (loss) |
|
(48.9 |
) |
|
(42.5 |
) |
|
56.9 |
|
Per share - basic and diluted |
$ |
(0.25 |
) |
$ |
(0.29 |
) |
$ |
0.29 |
|
Notes:
(1) Trican makes reference to operating income / (loss), adjusted operating income / (loss), and adjusted
general and administrative expenses. These measures are not recognized under International Financial Reporting Standards (IFRS)
and are considered non-GAAP measures. Management believes that, in addition to gross profit / (loss) and net income / (loss),
operating income / (loss), adjusted operating income / (loss); and adjusted general and administrative expenses are useful
supplemental measures.
- Operating income / (loss) provides investors with an indication of profit / (loss) before depreciation and
amortization, foreign exchange gains and losses, asset impairments, other (income) / loss, finance costs and income tax expense
/ (recovery).
- Adjusted operating income / (loss) provides investors with an indication of operating income before equity-settled
share-based compensation, amortization of debt costs, severance costs and excludes items that are significant but not in the
normal course of operations. It provides investors with an indication of comparable operating income / (loss) between
periods.
- Adjusted general and administrative expenses provide investors with an indication of total overhead costs before
equity-settled share-based compensation, amortization of debt costs and severance costs.
Investors should be cautioned that operating income / (loss) and adjusted operating income / (loss) should not be
construed as alternatives to gross profit / (loss) or profit / (loss) determined in accordance with IFRS as an indicator of
Trican's performance. Trican's method of calculating operating income / (loss), adjusted operating income / (loss) and adjusted
general and administrative expenses may differ from that of other companies and accordingly may not be comparable to measures
used by other companies. See also "Non-GAAP Disclosure" section of this report.
Revenue increased 50% compared to Q1 2016 and the adjusted operating margin improved to 17.4% due to an increase in activity,
improved pricing and larger job sizes combined with control over our costs as activity increased. Fracturing intensity increased
significantly as the Company pumped approximately 64% more proppant this quarter compared to the same period last year and 28%
more than Q4 2016. Q1 2017 represented the highest volume of proppant pumped during a quarter since Q3 2014.
Utilization of our active equipment was high throughout the first quarter as weather conditions remained favorable through to
the end of the quarter and demand remained strong. Our headcount increased as we expanded our fracturing capacity by 30,000
horsepower and our cementing capacity by six crews since the fourth quarter. Hiring qualified personnel to activate
parked equipment continues to be the most significant challenge to meeting customer demand.
Strong demand led to increased pricing during the first quarter of 2017, as average fracturing pricing for our customers
increased by approximately 14% from Q4 2016 levels, and 20% from Q3 2016.
Our first quarter results represent a significant improvement from recent years. This could not have been achieved without the
hard work and dedication of our staff whether in the field, the lab, or the office. It has been an extremely challenging
period in the oilfield services space and we want to thank all of our employees for their commitment and perseverance during the
past couple of years.
OUTLOOK
There was a pronounced undersupply of manned equipment in the industry in the first quarter, which resulted in many customers
not completing their work programs in the first quarter and pushing their programs into the second quarter. This backlog of
work, combined with planned Q2 programs for some of our anchor clients, will result in second quarter activity levels
considerably higher on a year-over-year basis for fracturing and coiled tubing. The incremental revenue from the increased
workload is expected to cover a meaningful portion of our fixed cost structure which should allow us to improve our second
quarter financial results and maintain our headcount in anticipation of activity picking up coming out of spring break-up.
Management's current expectations are that activity and pricing will continue building from first quarter levels after spring
break-up as many work programs have been, or are being, repriced for the third and fourth quarters of 2017. Although pricing
improved in the quarter, our average pricing improvement was reduced by legacy agreements with long term clients that were below
leading edge pricing in the industry. As these agreements roll over, we anticipate a continued improvement in pricing
through the second half of the year. Approximately 80% of our pricing agreements are negotiated quarterly and we are
currently in discussions with most of our clients regarding second half work programs and pricing. Pricing improvements will
be required to cover cost increases in our business as well as return our business to sustainable profitability levels. If
demand remains high, we anticipate that we will see inflationary pressures when we exit spring break-up, particularly on our
proppant and chemicals. In addition, we anticipate wage inflation in the second half of the year.
With the current commodity price environment, we believe that demand is sufficient that two more fracturing crews can be added
in the third quarter, with the possibility for a third crew to be activated during the fourth quarter of 2017 which would
represent the activation of approximately 50% of our currently parked fracturing equipment. If activity levels remain high
and sufficient personnel are recruited, we could potentially have our entire fracturing fleet activated in the next twelve
months. We expect that these activations would secure work on the leading edge of pricing and would have an accretive impact
on operating margins.
Hiring remains a significant challenge, and we have continued hiring and training during spring break-up to meet our equipment
activation targets for the third and fourth quarters. We are early in the hiring process, but are optimistic that we will
meet our hiring targets. Hiring efforts are ongoing at all bases from Estevan to Fort St. John, and for all service
lines.
On March 21, 2017, Trican and Canyon Services Group Inc. announced that they had entered into an arrangement agreement
pursuant to which Trican agreed to acquire all of the issued and outstanding common shares of Canyon. The transaction is
subject to customary approvals, including approval from the shareholders of each of Trican and Canyon, as well as regulatory
approval from the Competition Bureau. On April 10, 2017, Trican and Canyon made their respective filings to the Competition
Bureau of Canada. If the Competition Bureau does not issue a supplementary information request in respect of the
transaction, the Bureau will work towards clearing the transaction by the end of its non-binding service standard period on May
25, 2017. Shareholder votes will be held on May 31st.
We are excited by our acquisition of Canyon and believe that the combined company will achieve significant cost and
operational synergies, provide greater service to our customers, offer numerous opportunities for Trican and Canyon employees,
and generate competitive margins. Our companies share a similar culture, and we look forward to welcoming Canyon employees
to the Trican family.
NON-GAAP DISCLOSURE
Please see the discussion in the non-GAAP Disclosure section of the MD&A for the reconciliation of non-GAAP items to IFRS
measures.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document constitute forward-looking information and statements (collectively
"forward-looking statements"). These statements relate to future events or our future performance. All statements other than
statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified
by the use of words such as "anticipate", "achieve", "estimate", "expect", "intend", "plan", "planned", and other similar terms
and phrases. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such forward-looking statements. We believe the expectations reflected in
these 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 document should not be unduly relied upon. These statements speak only as of
the date of this document.
In particular, this document contains forward-looking statements pertaining to, but not limited to, the following:
- the Company's ability to maintain a strong market position and secure work;
- anticipated industry activity levels and overall supply and demand in jurisdictions and service lines where the
Company operates, as well as customer work programs and equipment utilization levels;
- anticipated adjustments to our active equipment fleet, related adjustments to cost structure, and the ability to
control our fixed cost structure;
- expectations regarding workforce recruitment and retention;
- expectations regarding the Company's cost structure;
- expectations regarding the Company's financial results, working capital levels, liquidity and profits;
- expectations regarding stages per well and quantity of proppant pumped per well;
- expectations regarding pricing of the Company's services;
- expectations regarding the completion and timing of the closing of the Canyon Transaction;
- anticipated benefits and synergies of the Canyon Transaction and risks associated with completing the
Transaction; and
- expectations surrounding weather and seasonal slowdowns.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk
factors set forth below and in the "Risk Factors" section of our Annual Information Form dated March 29, 2017:
- volatility in market prices for oil and natural gas;
- liabilities inherent in oil and natural gas operations;
- competition from other suppliers of oil and gas services;
- competition for skilled personnel;
- the satisfaction of conditions, including regulatory approvals, to closing the Canyon Transaction including in a
timely manner;
- changes in income tax laws or changes in other laws and incentive programs relating to the oil and gas industry;
and
- changes in political, business, military and economic conditions in key regions of the world.
Readers are cautioned that the foregoing lists of factors are not exhaustive. Forward-looking statements are based on a number
of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect.
Although management of Trican believes that the expectations reflected in such forward-looking statements or information are
reasonable, undue reliance should not be placed on forward-looking statements because Trican can give no assurance that such
expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document,
assumptions have been made regarding, among other things: crude oil and natural gas prices; the impact of increasing competition;
the general stability of the economic and political environment; the timely receipt of any required regulatory approvals;
Trican's, Canyon's and the combined company's ability to continue its operations for the foreseeable future and to realize its
assets and discharge its liabilities and commitments in the normal course of business; industry activity levels; Trican's
policies with respect to acquisitions; the ability of Trican to obtain qualified staff, equipment and services in a timely and
cost efficient manner; the ability to operate our business in a safe, efficient and effective manner; the ability of Trican to
obtain capital resources and adequate sources of liquidity; the performance and characteristics of various business segments; the
regulatory framework; the timing and effect of pipeline, storage and facility construction and expansion; and future commodity,
currency, exchange and interest rates.
The forward-looking statements contained in this document are expressly qualified by this cautionary statement. We do not
undertake any obligation to publicly update or revise any forward-looking statements except as required by applicable law.
Additional information regarding Trican including Trican's most recent Annual Information Form is available under Trican's
profile on SEDAR (www.sedar.com).
CONFERENCE CALL AND WEBCAST DETAILS
The Company will host a conference call on Thursday, May 4, 2017 at 9:00 a.m. MT (11:00 a.m. ET) to discuss the Company's
results for the 2017 First Quarter.
To listen to the webcast of the conference call, please enter: http://edge.media-server.com/m/p/yf32yhja in your web browser or visit the
Investors section of our website at www.tricanwellservice.com/investors and click on "Reports".
To participate in the Q&A session, please call the conference call operator at 1-844-358-9180 (North America) or
478-219-0187 (outside North America) 15 minutes prior to the call's start time and ask for the "Trican Well Service Ltd. First
Quarter 2017 Earnings Results Conference Call".
The conference call will be archived on Trican's website at www.tricanwellservice.com/investors
Headquartered in Calgary, Alberta, Trican provides a comprehensive array of specialized products, equipment and services
that are used during the exploration and development of oil and gas reserves.