Dalmac Energy Reports Q3’18 Financial Results

EDMONTON, Alberta, March 29, 2018 (GLOBE NEWSWIRE) -- John Babic, President and CEO of Dalmac Energy Inc. (“Dalmac”) (TSX Venture:DAL) is pleased to announce third quarter and six-month results for the reporting period ended January 31, 2018.

FINANCIAL HIGHLIGHTS Change Change
(000’s Cdn Dollars, except per share data)Q3'18Q3'17%YTD '18YTD '17%
Revenues5,123 4,326 18%14,924 12,175 23%
Gross Profit1,297 1,276 2%2,940 2,858 3%
Gross Margin (%)25%29%(14)%28%26%8%
EBITDAS (loss)580 596 (3)%2092 1414 48%
Net earnings (loss)(495)(338)(47)%(873)(1,551)44%
Earnings (loss) per share - basic(0.02)(0.01)(100)%(0.03)(0.05)40%
Earnings (loss) per share - diluted(0.02)(0.01)(100)%(0.03)(0.05)40%

Business Highlights
Compared to the same period last year:

  • Q3’18 revenues were up 18% and gross margins were down 14% to 25% for the quarter.
  • YTD revenues were up 23% and gross margins were up 8%
  • Quarterly EBITDAS was relatively flat – down 3%, on the YTD EBITDAS was up 48%
  • Net loss for the quarter was $(495)K and YTD was $(873)K
  • On December 6th, 2017, the Company refinanced its credit facility with a new lender. Interest savings are expected to be about $2105K annually.
  • Also, in Q3 many of our major customer curtailed planned expansion activities as related to new drilling due to softening of natural gas prices. Due to restricted access to US markets because of overloaded pipeline capacity the price differential on Canadian gas widened and the AECO 12-month strip price dropped to below $1.50/mcf (Canadian). With many of our customers already carrying significant inventories of natural gas – a decision was made to defer new well drilling projects, which were scheduled for this quarter, until later in 2018. This created an unexpected adjustment to forecasted activity levels. The Company remains confident that these drilling programs will be reactivated later in the year.
  • In Additional, lower activity levels put downward pressure on charge out rates for the quarter thereby pushing our gross margins down to 25% from 29%.

On December 6 of 2017, the Company refinanced the PNC senior debt facility with Servus Credit Union Ltd., The new facility provides the company with a $5-million revolving overdraft credit facility to assist with daily operating expenses and a $7-million equipment evergreen credit facility to assist with equipment refinancing and acquisitions. Both the overdraft and equipment credit facilities will bear an annual rate of interest equal to the Servus prime lending rate plus 1%, floating, calculated daily and payable monthly in arrears. Pursuant to the terms of the credit agreement, Dalmac will be required to maintain certain financial covenants, which will be measured annually based on the company's year-end statements. As per the conditions of the new credit facility, the new financial covenants include the annual testing of debt to equity ratio, current ratio, and debt service ratio.

Q3'18 Non-recurring and unusual costs
Q3'18
PNC Break up fees - Senior lender178,565
Bank Fees5,958
Interest expense -deferred legal write-off18,648
Refinancing loan payouts - interest expense4,425
Loss on sale of assets66,837
Tank farm repurposing - CES60,460
Sub contractor expense13,600
Total348,494

Q3’18 extraordinary cost details:

  • PNC breakup fees – as a result of refinancing with a new senior lender, the corporation incurred a one-time break up charge in the amount of $179K
  • Other refinancing related fees totaled $29K
  • Loss on disposition of assets $67K on sale of related party and other redundant asset
  • As result of a joint venture agreement with CES Energy Solutions Corp, Dalmac would become a drilling fluids distributor in Fox Creek. As a result of which Dalmac made some adjustments to its tank farm in Fox Creek which included upgrading the tank farm and taking a loss on certain chemical inventory – these costs amounted to $74K. During the quarter only existing CES customers with contracts in the area benefited from the distribution agreement. More drilling fluid services are coming up for tender over the course of 2018 and the Corporation is expecting increased trucking and product related revenue between $1 – 2 million annually in the first year.
  • Total extraordinary charges amounted to $349K for the quarter, which if not adjusting for tax would have netted a net income of $(146)K for the quarter.

Outlook
The third quarter of fiscal 2018 continues to exhibit signs that the oil and gas industry is in recovery mode. The Canadian market still continues to face challenges specifically focused on market accessibility. We are still labouring under pipeline capacity issues regarding getting our product to market. The limited pipeline capacity is creating domestic natural gas inventory builds caused by access constraints. This has caused some of our key customers to postpone scheduled drilling and workover projects until later in 2018. Based on these developments Dalmac will continue to monitor events relating to these projects and will defer any significant capital expenditures until we are sure our customers increasing their activity levels regarding their ability to get their product to market.

Apart from the aforementioned, management remains confident in its outlook for 2018. We are continuing to maintain a priority emphasis on streamlining and maximizing efficiencies while focusing on a strong and well-structured balance sheet. We have secured various drilling, maintenance and plant certification projects which will tide us over the spring and summer months, The log books for the fall and winter season is already being populated with various drilling and work over projects that are scheduled to come on line, Accordingly, the Company is mindful of improving its utilization levels through service equipment activation and refurbishment programs, which are ongoing, in addition to upgrading and enhancing the capabilities of various other of the Company’s assets.

For the balance of this year and into the next it is expected that higher industry activity will result in a higher demand for our services, improved equipment rates and better operating and financial results.

For more information contact:

John Babic - CEO - Dalmac Energy
Tel: 780-988-8510
Email: jbabic@dalmac.ca

Statements throughout this report that are not historical facts may be considered ‘forward looking statements’. Such statements are based on current expectations that involve risks and uncertainties, which could cause actual results to differ from those anticipated. Important factors that can cause anticipated outcomes to differ materially from actual outcomes include the impact of general economic conditions, industry conditions, competition from other industry participants, volatility of petroleum prices, the ability to attract and retain qualified personnel, changes in laws or regulation, currency fluctuations, continued ability to access capital from available facilities and environmental risks. References to “Dalmac’, the “Corporation”, “Company”, “us”, “we”, and “our” mean Dalmac Energy Inc. and its subsidiary Dalmac Oilfield Services Inc. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release. We seek safe harbor.

Source:Dalmac Energy, Inc.