News Releases

Strad Announces 2017 First Quarter Results

May 10, 2017

May 10, 2017

Strad Energy Services Announces First Quarter Results

CALGARY, ALBERTA – (Marketwired –May 10, 2017)

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES ("U.S.")

The news release contains “forward-looking information and statements” within the meaning of applicable securities laws. For full disclosure of the forward-looking information and statements and the risks to which they are subject, see the “Cautionary Statement Regarding Forward-Looking Information and Statements” later in this news release.

 

Strad Energy Services Ltd., (“Strad” or the “Company”), a North American-focused, energy services company, today announced its financial results for the three months ended March 31, 2017. All amounts are stated in Canadian dollars unless otherwise noted.

 

FIRST QUARTER SELECTED FINANCIAL AND OPERATIONAL HIGHLIGHTS:

  • Revenue of $27.7 million increased 81% compared to $15.3 million for the same period in 2016;
  • Adjusted EBITDA(1) of $4.5 million compared to $0.4 million for the same period in 2016;
  • Loss per share was $(0.04) compared to $(0.08) for the same period in 2016;
  • On February 7, 2017, the Company closed a bought deal financing with a syndicate of underwriters. A total of 8,928,572 Class A shares ("common shares") were issued, including 1,164,596 common shares issued pursuant to the exercise of the over-allotment option, for gross proceeds of $15.0 million.  Share issue costs of $1.0 million were incurred in relation to the financing;
  • On February 15, 2017, the Company closed the strategic acquisition of Got Mats?, a private company, located in Elkhorn, Manitoba. Consideration of $4.5 million was paid, consisting of $1.0 million in cash and the issuance of 2,143,375 common shares, valued at the closing February 15, 2017, share price of $1.65;
  • On February 22, 2017, the Company closed the acquisition of two private companies, located in Fort St. John, British Columbia. Consideration of $2.8 million was paid, consisting of $1.8 million of cash, and the issuance of 561,798 common shares, valued at the closing February 22, 2017, share price of $1.83 per share;
  • Capital additions totaled $3.5 million during the first quarter of 2017; and
  • Total funded debt(2) to EBITDA(3) ratio was 1.8 : 1.0 at the end of the first quarter of 2017.

Notes:

(1)       Earnings before interest, taxes, depreciation and amortization and other adjustments (“adjusted EBITDA”) is not a recognized measure under IFRS; see “Non-IFRS Measures Reconciliation”.

(2)       Funded debt includes bank indebtedness plus long-term debt plus current and long-term obligations under finance lease less cash.

(3)       EBITDA is based on trailing twelve months adjusted EBITDA plus share based payments, plus additional one time charges.

”Improving customer sentiment during the first quarter of 2017 combined with strategic acquisitions completed over the past nine months have resulted in a significant improvement in our financial performance compared to the first quarter of 2016,” said Andy Pernal, President and Chief Executive Officer. “In Canada, our business benefited from higher utilization of our expanded surface equipment fleet, increased rig activity levels and challenging weather conditions which resulted in the early activation of our matting fleet. In the U.S., market conditions continued to be challenging from a pricing perspective in our operating regions despite increases in demand during the first quarter.”

“We improved our financial flexibility and balance sheet strength through the successful completion of the bought deal financing as well as through cost management to ensure efficiencies gained over the past two years are maintained as the industry recovers and our business grows,” said Michael Donovan, Chief Financial Officer of Strad. “During the first quarter, we allocated $3.5 million to capital additions primarily to support the growth of our matting business and energy infrastructure customer vertical in the U.S. and Canada.”

The Company is also announcing the retirement of Mr. John Hagg from the Company’s Board of Directors effective May 31, 2017. Strad's Chairman of the Board, Rob Grandfield, said, "On behalf of Strad, I would  like to extend the Company's sincere thanks to John for his service to Strad over the last 10 years including his years as Chairman of the Board.  We wish him all the best with his retirement."

FIRST QUARTER FINANCIAL HIGHLIGHTS

($000's, except per share amounts)

Three months ended March 31,

 

2017

2016

% Chg.

Revenue

27,660

 

15,258

 

81

 

Adjusted EBITDA(1)

4,496

 

398

 

1,030

 

Adjusted EBITDA as a % of revenue

16

%

3

%

 

Per share ($), basic

0.08

 

0.01

 

700

 

Per share ($), diluted

0.08

 

0.01

 

700

 

Net loss

(2,347

)

(2,994

)

22

 

Per share ($), basic

(0.04

)

(0.08

)

50

 

Per share ($), diluted

(0.04

)

(0.08

)

50

 

Funds from operations(2)

5,527

 

1,737

 

218

 

Per share ($), basic

0.08

 

0.03

 

167

 

Per share ($), diluted

0.08

 

0.03

 

167

 

 

 

 

 

Capital expenditures(3)

3,470

 

421

 

724

 

 

 

 

 

Total assets

194,094

 

154,960

 

25

 

Long-term debt

15,589

 

15,500

 

1

 

Total long-term liabilities

27,601

 

22,111

 

25

 

Common shares - end of period ('000's)

60,013

 

37,280

 

 

Weighted avg common shares ('000's)

 

 

 

Basic

55,643

 

36,944

 

 

Diluted

55,643

 

36,944

 

 

Notes:

(1)       Earnings before interest, taxes, depreciation and amortization and other adjustments (“adjusted EBITDA”) is not a recognized measure under IFRS; see “Non-IFRS Measures Reconciliation”.

(2)       Funds from operations is cash flow from operating activities excluding changes in non-cash working capital. Funds from operations is not a recognized measure under IFRS; see “Non-IFRS Measures Reconciliation”.

(3)       Includes assets acquired under finance lease and purchases of intangible assets.


FINANCIAL POSITION AND RATIOS

 

As at March 31,

 

As at December

($000's except ratios)

2017

 

2016

 

 

 

 

Working capital(1)

17,495

 

15,636

Funded debt(2)

19,289

 

29,025

 

Total assets

194,094

 

185,321

 

 

 

 

Funded debt to EBITDA(3)

1.8 : 1.0

 

3.2 : 1.0

Notes:

(1)       Working capital is calculated as current assets less current liabilities.

(2)       Funded debt includes bank indebtedness plus long-term debt plus current and long-term obligations under finance lease less cash.

(3)     EBITDA is based on trailing twelve months adjusted EBITDA plus share based payments, plus additional one time charges. See “Non-IFRS Measures Reconciliation”.


FIRST QUARTER RESULTS

Strad reported an increase in revenue and adjusted EBITDA of 81% and 1,030%, respectively during the three months ended March 31, 2017, compared to the same period in 2016. Strad's first quarter results were impacted by higher drilling activity levels in the WCSB region and slightly higher revenue from the U.S. Operations offset by lower overall Product Sales compared to the prior period. Despite the overall increase in drilling activity and utilization of Strad's equipment fleets, pricing continued to be challenging across all of the Company's operating regions muting the impact of higher activity levels on revenue during the three months ended March 31, 2017. Adjusted EBITDA margin percentage increased 16% compared to 3% in the prior year, due to higher utilization and a relatively fixed cost structure.

Strad’s Canadian Operations reported an increase in revenue and adjusted EBITDA of 144% and 183%, respectively, during the three months ended March 31, 2017, compared to the same period in 2016. Increased revenue was a result of higher drilling activity throughout the first quarter and a corresponding increase in surface equipment utilization and an increase in the surface equipment fleet due to the acquisitions completed in the third quarter of 2016 and the first quarter of 2017. These revenue gains were offset by lower pricing during the first quarter of 2017 compared to the same period in 2016. Revenue during the first quarter was further impacted by the deployment of Strad's matting fleet earlier in the 2017 season compared to the prior year.

Strad's U.S. Operations reported an increase in revenue of 6% and an increase in adjusted EBITDA of 146% compared to the same period in 2016. Rig counts in two of Strad’s targeted U.S. resource plays were also higher during the first three months of 2017 compared to the same period in 2016. Rig counts in the Bakken, Rockies and Marcellus regions changed by (6)%, 56%, and 40%, respectively.

Strad's Product Sales operations reported a decrease in revenue of 13%,  primarily the result of a decrease in rental fleet equipment sales in the three months ending March 31, 2017, as compared to the same period in 2016.

During the first quarter of 2017, capital expenditures were $1.3 million in Canada and $2.2 million in the U.S. Capital expenditures related primarily to wood matting additions in Canada and the U.S. Strad's 2017 capital budget of $15.0 million will be evaluated during the year based on affordability and activity levels.


RESULTS OF OPERATIONS

 

Canadian Operations

 

Three months ended March 31,

($000’s)

2017

 

2016

 

% chg.

 

 

 

 

 

 

Revenue

20,946

 

 

8,575

 

 

144

 

Operating expenses

14,711

 

 

5,814

 

 

153

 

Selling, general and administrative

1,383

 

 

1,076

 

 

29

 

Share based payments

84

 

 

 

 

 

Net income

1,599

 

 

440

 

 

266

 

Adjusted EBITDA(1)

4,768

 

 

1,685

 

 

183

 

Adjusted EBITDA as a % of revenue

23

%

 

20

%

 

 

 

 

 

 

 

 

Capital expenditures(2)

1,260

 

 

83

 

 

1,418

 

Gross capital assets

157,446

 

 

114,108

 

 

38

 

Total assets

123,519

 

 

74,779

 

 

65

 

 

 

 

 

 

 

Equipment Fleet:

 

 

 

 

 

Surface Equipment

4,100

 

 

2,600

 

 

58

 

Utilization % (3)

41

%

 

20

%

 

 

Matting

64,200

 

 

48,800

 

 

32

 

Utilization %

39

%

 

36

%

 

 

Notes:

(1)       Earnings before interest, taxes, depreciation and amortization and other adjustments (“adjusted EBITDA”) is not a recognized measure under IFRS; see “Non-IFRS Measures Reconciliation”.

(2)       Includes assets acquired under finance lease and purchases of intangible assets.

(3)      Equipment utilization includes surface and matting equipment on rent only and is calculated using gross asset value.

 

Revenue for the three months ended March 31, 2017, of $20.9 million increased 144% compared to $8.6 million for the same period in 2016. Increased revenue during the quarter was primarily a result of higher utilization in matting and surface equipment rentals as compared to Q1 2016.  The increase in utilization is partially the result of the acquisitions that occurred in the third quarter of 2016 (Redneck acquisition) and first quarter of 2017 (Got Mats? acquisition) as well as an increase in drilling activity levels during the first quarter of 2017. Industry rig counts increased by approximately 89% during the three months ended March 31, 2017, as compared to the same period in 2016.  These factors were offset by a slight decrease in prices for the three months ended March 31, 2017, as compared to the same period in 2016.

During the first quarter, revenue from energy infrastructure projects was approximately $7.9 million or 38% of total revenue for Canadian Operations.  This has increased from $3.1 million of 36% of total Canadian Operations revenue in the first quarter of 2016.

During the first quarter, Strad’s matting rental fleet increased to approximately 64,200 pieces, compared to approximately 48,800 pieces as at March 31, 2016. Part of the increase was due to the Got Mats? acquisition that was completed in February 2017. Utilization increased by 8% during the first quarter of 2017, compared to the first quarter of 2016, due to the increase in energy infrastructure projects. During the first quarter, Strad’s surface equipment fleet increased to approximately 4,100 pieces, compared to approximately 2,600 pieces as at March 31, 2016. A key driver to the increase in fleet size was the Redneck acquisition in the third quarter of 2016. Utilization increased by 105% during the first quarter of 2017, compared to the same period in 2016, due to increased market share resulting from third quarter 2016 acquisition of Redneck and the first quarter 2017 acquisitions, as well as an increase in drilling activity.

Adjusted EBITDA for the three months ended March 31, 2017, of $4.8 million, increased 183% compared to $1.7 million for the same period in 2016. Adjusted EBITDA as a percentage of revenue, for the three months ended March 31, 2017, increased to 23% compared to 20% for the same period in 2016.

Operating expenses for the three months ended March 31, 2017, of $14.7 million increased 153% compared to $5.8 million for the same period in 2016. The increase in operating expenses during the first three months of 2017 is a result of increased activity levels, utilization rates, and fleet size, as well as an increase in repairs and maintenance costs, as compared to the same period in 2016. An increase in repairs and maintenance is expected during periods where utilization rates increase after a long period of lower utilization as the Company incurs reactivation costs prior to deployment.

Selling, general and administrative costs ("SG&A") for the three months ended March 31, 2017, of $1.4 million increased 29% compared to $1.1 million for the same period in 2016. SG&A costs increased as a result of the third quarter 2016 Redneck acquisition and first quarter 2017 acquisitions.

 

U.S. Operations

 

Three months ended March 31,

($000’s)

2017

 

2016

 

% chg.

 

 

 

 

 

 

Revenue

5,066

 

 

4,786

 

 

6

 

Operating expenses

3,952

 

 

4,130

 

 

(4

)

Selling, general and administrative

896

 

 

1,092

 

 

(18

)

Share based payments

17

 

 

 

 

 

Net loss

(2,207

)

 

(1,910

)

 

(16

)

Adjusted EBITDA(1)

201

 

 

(436

)

 

(146

)

Adjusted EBITDA as a % of revenue

4

%

 

(9

)%

 

 

 

 

 

 

 

 

Capital expenditures(2)

2,185

 

 

296

 

 

638

 

Gross capital assets

141,305

 

 

142,458

 

 

(1

)

Total assets

69,644

 

 

82,491

 

 

(16

)

 

 

 

 

 

 

Equipment Fleet:

 

 

 

 

 

Surface Equipment

2,050

 

 

2,070

 

 

(1

)

Utilization % (3)

25

%

 

18

%

 

 

Matting

18,600

 

 

12,550

 

 

48

 

Utilization %

18

%

 

20

%

 

 

Notes:

(1)       Earnings before interest, taxes, depreciation and amortization and other adjustments (“adjusted EBITDA”) is not a recognized measure under IFRS; see “Non-IFRS Measures Reconciliation”.

(2)      Includes assets acquired under finance lease and purchases of intangible assets.

(3)     Equipment utilization includes surface and matting equipment on rent only and is calculated using gross asset value.

Revenue for the three months ended March 31, 2017, increased 6% to $5.1 million from $4.8 million for the same period in 2016. The increase in revenue is due to a combination of higher surface equipment utilization rates and a strengthened U.S. dollar when compared to the same period in 2016, which is slightly offset by price declines quarter-over-quarter. The increase in surface equipment  utilization is the result of higher rig counts in the Rockies and Marcellus resource plays. Average rig counts in the Rockies and Marcellus regions increased by 56%, and 40%, respectively, during the first three months of 2017 compared to the same quarter in 2016.

The U.S. matting fleet increased by 6,050 pieces to 18,600 as at March 31, 2017, compared to 12,550 pieces as at March 31, 2016, which increased revenue generated from the matting business and was partially offset by a decrease in utilization from 20% in the first quarter of 2016 to 18% during the first quarter of 2017. The U.S. surface equipment fleet decreased slightly by 20 pieces of equipment to 2,050 pieces as at March 31, 2017, compared to 2,070 pieces as at March 31, 2016.

Adjusted EBITDA for the three months ended March 31, 2017, increased to $0.2 million compared to $(0.4) million for the same period in 2016. Adjusted EBITDA as a percentage of revenue, for the three months ended March 31, 2017, was 4% compared to (9)% for the same period in 2016. The increase in both adjusted EBITDA and adjusted EBITDA as a percentage of revenue is primarily due to an increase in utilization and activity levels, offset by lower pricing in the first quarter of 2017 compared to the same period in 2016.

Operating expenses for the three months ended March 31, 2017, of  $4.0 million decreased 4% compared to $4.1 million for the same period in 2016. SG&A costs for the three months ended March 31, 2017, of $0.9 million decreased 18% compared to $1.1 million for the same period in 2016. The decrease in operating and SG&A expenses is due to cost reductions implemented by management including staff reductions and reductions in discretionary spending.

Product Sales

 

Three months ended March 31,

($000’s)

2017

 

2016

 

% chg.

 

 

 

 

 

 

Revenue

1,648

 

 

1,897

 

 

(13

)

Operating expenses

1,083

 

 

1,845

 

 

(41

)

Selling, general and administrative

50

 

 

 

 

 

Share based payments

 

 

 

 

 

Net loss

(270

)

 

(294

)

 

 

Adjusted EBITDA(1)

515

 

 

51

 

 

910

 

Adjusted EBITDA as a % of revenue

31

%

 

3

%

 

 

 

 

 

 

 

 

Capital expenditures(2)

25

 

 

 

 

 

Total assets

27

 

 

67

 

 

(60

)

Notes:

(1)       Earnings before interest, taxes, depreciation and amortization and other adjustments (“adjusted EBITDA”) is not a recognized measure under IFRS; see “Non-IFRS Measures Reconciliation”.

(2)       Includes assets acquired under finance lease and purchases of intangible assets.

Product Sales are comprised of in-house manufactured products sold to external customers, third party equipment sales to existing customers and sales of equipment from Strad’s existing fleet to customers.

Revenue for the three months ended March 31, 2017, decreased 13% to $1.6 million from $1.9 million for the same period in 2016, resulting primarily from lower rental asset equipment sales. During the three months ended March 31, 2017, Product Sales consisted of $0.2 million of in-house manufactured products, $0.5 million of third party equipment sales and $0.9 million of rental fleet sales compared to $0.4 million, $0.1 million and $1.4 million, respectively, during the same period in 2016.

Adjusted EBITDA for the three months ended March 31, 2017, increased to $0.5 million from $50 thousand for the same period in 2016. Adjusted EBITDA as a percentage of revenue, for the three months ended March 31, 2017, was 31% compared to 3% for the same period in 2016.

 

Operating expenses for the three months ended March 31, 2017, of $1.1 million decreased 41% compared to $1.8 million for the same period in 2016. Operating expenses vary with individual transactions and business activity levels.


OUTLOOK

The increase in drilling activity we experienced during the fourth quarter of 2016 continued into the first quarter of 2017 resulting in improved revenue and adjusted EBITDA quarter-over-quarter. We particularly noted an increase in demand for our services in the WCSB during the first quarter where the average rig count increased from 158 in the first quarter of 2016 to 298 in the first quarter of 2017. The addition of Redneck in the third quarter of 2016 had a positive impact on our results this quarter due to our expanded equipment offering in the Deep Basin, one of the most active oil and gas basins in North America. 

Pricing for the majority of our products and services during the first quarter remained at levels consistent with the fourth quarter of 2016 as pricing with the majority of our customers was agreed to in the last six months of 2016. Wet weather conditions in the WCSB resulted in an early start to the matting season.  Stronger demand and a shortage of matting products translated into double digit price increases at the end of the first quarter and into the second quarter. We expect pricing in this segment to remain strong through the 2017 matting season, assuming demand levels continue. Increasing prices for all of our products and services will continue to be a primary focus for our team as activity levels continue to improve year-over-year. 

During the first quarter, we continued to progress on our strategic priorities being continued growth of the energy infrastructure customer vertical, continued focus on increasing our size and scale and maintaining our lean cost structure. 

Energy infrastructure revenue accounted for 32% of total revenue, 38% of total Canadian Operations revenue and 10% of total U.S. Operations revenue during the first quarter of 2017. We added approximately 4,050 sheets of wood matting to our U.S. fleet, which were subsequently deployed to various energy infrastructure projects in the U.S. We expect this segment to increasingly become a more significant portion of our U.S. Operations revenue as we continue to add new customers.

Growing our size and scale using a combination of growth capital and tuck-in acquisitions continued during the first quarter with the addition of Got Mats? and two private companies in British Columbia along with deploying $3.5 million in capital expenditures of the total $15.0 million 2017 capital budget. New capital was primarily allocated to matting opportunities in the U.S. to support the growth of the energy infrastructure customer vertical. We expect to deploy the remainder of our 2017 capital budget primarily to matting in both Canada and the U.S. as opportunities arise. 

Looking ahead to the second quarter of 2017 and beyond, we expect the trend of higher activity levels year-over-year and further price increases in both Canada and the U.S. to continue, assuming current demand for our products and services continues throughout 2017. We will continue our focus on managing our cost structure as activity levels increase to ensure the efficiencies we gained over the past two years are maintained driving margin improvement. Maintaining our balance sheet strength and financial flexibility is key to ensuring we are positioned to take advantage of further opportunities.


LIQUIDITY AND CAPITAL RESOURCES

($000’s)

March 31, 2017

 

December 31, 2016

 

 

 

 

Current assets

35,930

 

31,852

Current liabilities

18,435

 

16,216

Working capital(1)

17,495

 

15,636

 

 

 

 

Banking facilities

 

 

 

Operating facility

2,776

 

 

1,478

Syndicated revolving facility

15,589

 

26,501

Total facility borrowings

18,365

 

27,979

 

 

 

 

Total credit facilities(2)

48,500

 

48,500

Unused credit capacity

30,135

 

 

20,521

 

Notes:

(1)    Working capital is calculated as current assets less current liabilities.

(2)    Facilities are subject to certain limitations on accounts receivable, inventory, and net book value of fixed assets and are secured by a general security agreement over all of the Company's assets. As at March 31, 2017, Strad had access to $48.5 million of credit facilities.

As at March 31, 2017, working capital was $17.5 million compared to $15.6 million at December 31, 2016. The change in current assets is a result of a 16% increase in accounts receivable to $28.3 million for the first quarter of 2017 compared to $24.5 million for the fourth quarter of 2016. The increase in accounts receivable is due to an increase in rental equipment related revenue during the first quarter as compared to the fourth quarter of 2016. Inventory decreased by 8% to $3.6 million at March 31, 2017, from $3.9 million at December 31, 2016, and prepaid expenses remained consistent at $1.1 million. The decrease in inventory relates to the normal course of business.

The change in current liabilities is a result of a 7% increase in accounts payable and accrued liabilities to $14.9 million at March 31, 2017, compared to $13.9 million at year end.  The accounts payable increase correlates to the increase in activity and operating expenses during the first quarter of 2017 compared to the fourth quarter of 2016. Bank indebtedness increased to $2.8 million at the end of the first quarter compared to bank indebtedness of $1.5 million for the fourth quarter of 2016.

Funds from operations for the three months ended March 31, 2017, increased to $5.5 million compared to $1.7 million for the three months ended March 31, 2016. Capital expenditures totaled $3.5 million for the three months ended March 31, 2017. Strad's total facility borrowing decreased by $9.6 million for the three months ended March 31, 2017, compared to the fourth quarter of 2016. Management monitors funds from operations and the timing of capital additions to ensure adequate capital resources are available to fund Strad’s capital program.

As at March 31, 2017, the Company’s syndicated banking facility consists of an operating facility with a maximum principal amount of $7.0 million CAD and $5.0 million USD, and a $36.5 million syndicated revolving facility, both of which are subject to certain limitations on accounts receivable, inventory and net book value of fixed assets and are secured by a general security agreement over all of the Company’s assets. As at March 31, 2017, the Company has access to the maximum credit facilities. The syndicated banking facility bears interest at bank prime plus a variable rate, which is dependent on the Company’s funded debt to EBITDA ratio. The Company’s syndicated banking facility matures on September 29, 2018.

Based on the Company's current credit facility, the interest rate will increase to bank prime plus 3.50% on prime rate advances and at the prevailing rate plus a stamping fee of 4.50% on bankers’ acceptances during the covenant waiver period which continues through the first quarter of 2017. The covenant waiver was obtained as a result of the Redneck acquisition and not as a result of any covenant breach. For the three months ended March 31, 2017, the overall effective rates on the operating facility and revolving facility were 5.30% and 5.60%, respectively. As of March 31, 2017, $2.8 million  was drawn on the operating facility and $15.6 million was drawn on the revolving facility. Required payments on the revolving facility are interest only.

As at March 31, 2017, the Company was in compliance with all of the financial covenants under its credit facilities.

The relevant definitions of financial debt covenant ratio terms as set forth in the Company's syndicated banking facility are as follows:

 

  • Funded debt includes bank indebtedness plus long-term debt plus current and long-term obligations under finance lease less cash.
  • EBITDA is based on trailing twelve months adjusted EBITDA plus share based payments, plus charges.
  • Interest expense ratio is calculated as the ratio of trailing twelve months adjusted EBITDA plus share based payments to trailing twelve months interest expense on loans and borrowings.

 

The above noted definitions are not recognized under IFRS and are provided strictly for the purposes of the financial debt calculation.

 

Financial Debt Covenants

As at March 31,
 2017

As at December 31, 2016

Funded debt to EBITDA ratio (not to exceed 5.5:1.0)

 

 

Funded debt

19,289

29,025

EBITDA

10,774

9,119

Ratio

1.8

3.2

 

 

 

 

EBITDA to interest coverage ratio (no less than 1.75:1.0)

 

 

EBITDA

10,774

9,119

Interest expense

1,584

 

1,557

Ratio

6.8

5.9


NON-IFRS MEASURES RECONCILIATION

Certain supplementary measures in this press release do not have any standardized meaning as prescribed under IFRS and, therefore, are considered non-IFRS measures. These measures are described and presented in order to provide shareholders and potential investors with additional information regarding the Company’s financial results, liquidity and its ability to generate funds to finance its operations. These measures are identified and presented, where appropriate, together with reconciliations to the equivalent IFRS measure. However, they should not be used as an alternative to IFRS, because they may not be consistent with calculations of other companies. These measures are further explained below.

Earnings before interest, taxes, depreciation and amortization and other adjustments (“adjusted EBITDA”) is not a recognized measure under IFRS. Management believes that in addition to net income, adjusted EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Company’s principal business activities prior to consideration of how those activities are financed or how the results are taxed. Adjusted EBITDA is calculated as net income (loss) plus interest, finance fees, taxes, depreciation and amortization, loss on disposal of property, plant and equipment, loss on foreign exchange, less gain on foreign exchange and gain on disposal of property, plant and equipment. Segmented adjusted EBITDA is based upon the same calculation for defined business segments, which are comprised of Canadian Operations, U.S. Operations and Product Sales.

Funds from operations are cash flow from operating activities excluding changes in non-cash working capital. It is a supplemental measure to gauge performance of the Company before non-cash items. Working capital is calculated as current assets minus current liabilities. Working capital, cash forecasting and banking facilities are used by Management to ensure funds are available to finance growth opportunities.

Funded debt is calculated as bank indebtedness plus long-term debt plus current and long-term portion of finance lease obligations less cash.


Reconciliation of Funds from Operations

($000’s)

 

 

Three months ended March 31,

 

2017

 

2016

 

 

 

 

Net cash generated from operating activities

3,541

 

 

5,246

 

Less:

 

 

 

Changes in non-cash working capital

(1,986

)

 

3,509

 

Funds from Operations

5,527

 

 

1,737

 

 

 

Reconciliation of Adjusted EBITDA

($000’s)

 

 

Three months ended March 31,

 

2017

 

2016

 

 

 

 

Net loss

$

(2,347

)

 

$

(2,994

)

Add (deduct):

 

 

 

Depreciation and amortization

6,383

 

 

5,149

 

Gain on disposal of PP&E

(78

)

 

(193

)

Deferred income tax (recovery) expense

116

 

 

(1,201

)

Financing fees

73

 

 

47

 

Interest expense

436

 

 

244

 

Gain on foreign exchange

(87

)

 

(437

)

Current income tax recovery

 

 

(217

)

Adjusted EBITDA

4,496

 

 

398

 


 

Reconciliation of quarterly non-IFRS measures

($000’s)

 

Three months ended

 

 

Mar 31, 2017

 

Dec 31, 2016

 

Sep 30, 2016

 

Jun 30, 2016

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,347

)

 

$

(3,105

)

 

$

(3,746

)

 

$

(6,958

)

Add:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

6,383

 

 

7,610

 

 

4,930

 

 

4,516

 

Gain on disposal of PP&E

 

(78

)

 

(105

)

 

(35

)

 

(268

)

(Gain) loss on foreign exchange

 

(87

)

 

123

 

 

17

 

 

3

 

Current income tax (recovery ) expense

 

 

 

204

 

 

(242

)

 

(918

)

Deferred income tax (recovery) expense

 

116

 

 

(403

)

 

(39

)

 

1,438

 

Interest expense

 

436

 

 

415

 

 

318

 

 

157

 

Finance fees

 

73

 

 

43

 

 

44

 

 

47

 

Adjusted EBITDA

 

4,496

 

 

4,782

 

 

1,247

 

 

(1,983

)

 

Three months ended

 

 

Mar 31, 2016

 

Dec 31, 2015

 

Sep 30, 2015

 

Jun 30, 2015

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,994

)

 

$

(8,316

)

 

$

(20,362

)

 

$

(1,887

)

Add:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

5,149

 

 

7,126

 

 

9,616

 

 

7,020

 

Gain on disposal of PP&E

 

(193

)

 

(99

)

 

(30

)

 

(80

)

(Gain) loss on foreign exchange

 

(437

)

 

216

 

 

380

 

 

(81

)

Current income tax recovery

 

(217

)

 

(677

)

 

(432

)

 

(18

)

Deferred income tax recovery

 

(1,201

)

 

(4,033

)

 

(2,776

)

 

(1,541

)

Interest expense

 

244

 

 

427

 

 

311

 

 

391

 

Impairment loss

 

 

 

7,822

 

 

17,277

 

 

 

Finance fees

 

47

 

 

34

 

 

37

 

 

50

 

Adjusted EBITDA

 

398

 

 

2,500

 

 

4,021

 

 

3,854

 

 

Reconciliation of funded debt

($000’s)

 

 

 

Three months ended March 31, 2017

 

Year Ended     December 31, 2016

Bank indebtedness

 

2,776

 

 

1,478

 

Long term debt

 

15,589

 

26,501

 

Current and long term obligations under finance lease

 

924

 

1,046

 

Total funded debt

 

19,289

 

 

29,025

 

 

 

 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Certain statements and information contained in this press release constitute forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words “expect”, “plan”, “continue”, “estimate”, “anticipate”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “may”, “predict”, or “will” and similar expressions are intended to identify forward-looking information or statements. More particularly, this press release contains forward-looking statements concerning future capital expenditures of the Company and funding thereof, changes and expectations in margins to be experienced by Strad, anticipated cash flow, debt, demand for the Company’s products and services, drilling activity in North America, pricing of the Company’s products and services, introduction of new products and services and the potential for growth and expansion of certain components of the Company's business, anticipated benefits from cost reductions and timing thereof, and expected exploration and production industry activity including the effects of industry trends on demand for the Company's products. These statements relate to future events or to the Company’s future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.

Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this press release. The forward-looking information and statements included in this press release are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and 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 information or statements. In addition to other material factors, expectations and assumptions which may be identified in this press release and other continuous disclosure documents of the Company referenced herein, assumptions have been made in respect of such forward-looking statements and information regarding, among other things: the Company will continue to conduct its operations in a manner consistent with past operations; the general continuance of current industry conditions; anticipated financial performance, business prospects, impact of competition, strategies, the general stability of the economic and political environment in which the Company operates; exchange and interest rates; tax laws; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services and the adequacy of cash flow; debt and ability to obtain financing on acceptable terms to fund its planned expenditures, which are subject to change based on commodity prices; market conditions and future oil and natural gas prices; and potential timing delays. Although Management considers these material factors, expectations and assumptions to be reasonable based on information currently available to it, no assurance can be given that they will prove to be correct.

Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect the Company's operations and financial results are included in reports on file with the Canadian Securities Regulatory Authorities and may be accessed through the SEDAR website (www.sedar.com) or at the Company's website. The forward-looking statements and information contained in this press release are expressly qualified by this cautionary statement. The Company does not undertake any obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

 

This press release shall not constitute an offer to sell, nor the solicitation of an offer to buy, any securities in the United States, nor shall there be any sale of securities mentioned in this press release in any state in the United States in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

FIRST QUARTER EARNINGS CONFERENCE CALL
Strad Energy Services Ltd. has scheduled a conference call to begin promptly at
8:00 a.m. MT (10:00 a.m. ET) on Thursday, May 11th, 2017.

The conference call dial in number is 1-844-388-0561, followed by Conference ID code 934452009

The conference call will also be accessible via webcast at www.stradenergy.com

A replay of the call will be available approximately one hour after the conference call ends until Thursday, May 18th, 2017, at 1:00pm ET. To access the replay, call 1-855-859-2056, followed by pass code 93452009.


 


Strad Energy Services Ltd.

Interim Consolidated Statement of Financial Position

(Unaudited)

 

 

(in thousands of Canadian dollars)

As at March 31, 2017

 

As at December 31, 2016

 

$

 

$

 

 

 

 

Assets

 

 

 

Current assets

 

 

 

Cash

877

 

369

 

Trade receivables

28,303

 

24,460

 

Inventories

3,611

 

3,890

 

Prepaids and deposits

1,052

 

1,111

 

Income taxes receivable

2,087

 

 

2,022

 

 

35,930

 

31,852

 

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

155,074

 

150,622

 

Intangible assets

621

 

665

 

Long term assets

1,981

 

 

2,023

 

Deferred income tax assets

488

 

 

159

 

Total assets

194,094

 

185,321

 

 

 

 

Liabilities

 

 

 

Current liabilities

 

 

 

Bank indebtedness

2,776

 

 

1,478

 

Accounts payable and accrued liabilities

14,908

 

 

13,893

 

Current portion of obligations under finance lease

751

 

 

845

 

 

18,435

 

16,216

Non-current liabilities

 

 

 

Long-term debt

15,589

 

26,501

 

Obligations under finance lease

173

 

201

 

Deferred income tax liabilities

11,839

 

10,321

 

Total liabilities

46,036

 

53,239

 

 

 

 

Equity

 

 

 

Share capital

154,755

 

135,935

 

Contributed surplus

12,381

 

12,243

 

Accumulated other comprehensive income

26,328

 

26,963

 

Deficit

(45,406)

 

(43,059

)

Total equity

148,058

 

132,082

Total liabilities and equity

194,094

 

185,321

 


Strad Energy Services Ltd.

Interim Consolidated Statement of Loss and Comprehensive Loss

For the three months ended March 31, 2017 and 2016

(Unaudited)

 

 

(in thousands of Canadian dollars, except per share amounts)

 

Three Months Ended

 

March 31,

 

2017

 

2016

 

$

 

$

 

 

 

 

Revenue

27,660

 

 

15,258

 

Expenses

 

 

 

Operating expenses

19,746

 

 

11,789

 

Depreciation

6,316

 

 

4,944

 

Amortization of intangible assets

43

 

 

181

 

Amortization of long term assets

24

 

 

24

 

Selling, general and administration

3,280

 

 

3,030

 

Share-based payments

138

 

 

41

 

Gain on disposal of property, plant and equipment

(78

)

 

(193

)

Foreign exchange gain

(87

)

 

(437

)

Finance fees

73

 

 

47

 

Interest expense

436

 

 

244

 

Loss before income tax

(2,231

)

 

(4,412

)

Income tax expense (recovery)

116

 

 

(1,418

)

Loss for the period

(2,347

)

 

(2,994

)

 

 

 

 

Other comprehensive loss

 

 

 

Items that may be reclassified subsequently to net loss

 

 

 

Cumulative translation adjustment

(635

)

 

(5,790

)

Total comprehensive loss for the period

(2,982

)

 

(8,784

)

 

 

 

 

Loss per share:

 

 

 

Basic

($0.04

)

 

($0.08

)

Diluted

($0.04

)

 

($0.08

)

 

 

 

 


 

 

Strad Energy Services Ltd.

Interim Consolidated Statement of Cash Flow

For the three months ended March 31, 2017 and 2016

(Unaudited)

 

 

(in thousands of Canadian dollars)

Three months ended

 March 31,

 

2017

 

2016

Cash flow provided by (used in)

$

 

$

 

 

 

(revised)

 

 

 

 

Operating activities

 

 

 

Loss for the period

(2,347

)

 

(2,994

)

Adjustments for items not affecting cash:

 

 

 

Depreciation and amortization

6,383

 

 

5,149

 

Deferred income tax (recovery) expense

116

 

 

(1,201

)

Share-based payments

138

 

 

41

 

Interest expense and finance fees

509

 

 

291

 

Unrealized foreign exchange loss (gain)

559

 

 

(455

)

Gain on disposal of property, plant and equipment

(78

)

 

(193

)

Book value of used fleet sales in operating activities

247

 

 

1,099

 

Changes in items of non-cash working capital

(1,986

)

 

3,509

 

Net cash generated from operating activities

3,541

 

 

5,246

 

 

 

 

 

Investing activities

 

 

 

Purchase of property, plant and equipment

(3,470

)

 

(379

)

Proceeds from sale of property, plant and equipment

145

 

 

611

 

Purchase of intangible assets

 

 

(42

)

Cash paid on business acquisition

(2,750

)

 

 

Cash assumed on business acquisition

322

 

 

 

Changes in items of non-cash working capital

(549

)

 

(3

)

Net cash generated from (used in) investing activities

(6,302

)

 

187

 

 

 

 

 

Financing activities

 

 

 

Proceeds on issuance of long-term debt

 

 

3,000

 

Repayment of long-term debt

(10,912

)

 

(3,000

)

Repayment of finance lease obligations (net)

(258

)

 

(178

)

Issuance of shareholder loan (net of repayments)

 

 

58

 

Interest expense and finance fees

(509

)

 

(291

)

Issuance of common shares

15,000

 

 

 

Share issue costs

(1,020

)

 

 

Changes in items of non-cash working capital

(148

)

 

(2

)

Net cash generated from (used in) financing activities

2,153

 

 

(413

)

Effect of exchange rate changes on cash and cash equivalents

(182

)

 

(545

)

Increase (decrease) in cash and cash equivalents

(790

)

 

4,475

 

 

 

 

 

Cash and cash equivalents (including bank indebtedness) – beginning of year

(1,109

)

 

(2,874

)

Cash and cash equivalents (including bank indebtedness) – end of period

(1,899

)

 

1,601

 

 

 

 

 

Cash paid for income tax

 

 

 

Cash paid for interest

262

 

 

262

 

 


 

 

 

 

 

 

ABOUT STRAD ENERGY SERVICES LTD.

Strad is a North American energy services company that provides rental equipment and matting solutions to the oil and gas and energy infrastructure sectors.  Strad focuses on providing complete customer solutions in Canada and the United States.

Strad is headquartered in Calgary, Alberta, Canada. Strad is listed on the Toronto Stock Exchange under the trading symbol “SDY”.

For more information, please contact:

 
Strad Energy Services Ltd. 
Andy Pernal 
President and Chief Executive Officer 
(403) 775-9202 
Fax: (403) 232-6901
Email: apernal@stradenergy.com

 

Strad Energy Services Ltd.
Michael Donovan
Chief Financial Officer
(403) 775-9221
Fax: (403) 232-6901
Email: mdonovan@stradenergy.com

www.stradenergy.com