CALGARY, March 5, 2015 /CNW/ - Canyon Services Group Inc.
("Canyon" or the "Company") is pleased to announce its fourth
quarter 2014 results. The following results should be read in
conjunction with the Management's Discussion and Analysis, the
audited consolidated financial statements and notes of Canyon
Services Group Inc. for the year ended December 31, 2014 and should also be read in
conjunction with the audited consolidated financial statements and
Annual Information Form for the year ended
December 31, 2013, which are available on SEDAR at
www.sedar.com.
The current quarter includes the results of Canyon's pressure
pumping business as well as the results of Fraction Energy Services
Ltd., ("Fraction") a leading provider of fracturing fluid
management, including water sourcing, transfer, wellsite storage,
fluid heating, flowback transfer and produced water storage
services, which was acquired by Canyon effective July 1, 2014.
HIGHLIGHTS
The operating and financial highlights for the three and twelve
months ended December 31, 2014 are summarized as
follows:
- Q4 2014 was very active for Canyon, with consolidated revenues
increasing by 81% to $188.3 million
compared to $104.2 million in Q4
2013. For the year ended December 31,
2014, consolidated revenues almost doubled to $591.0 million, an increase of 97% over the
$299.6 million recorded in the 2013
year.
- As at December 31, 2014, Canyon
had available bank credit facilities combined with positive working
capital totaling $92 million.
As a result, Canyon remains in a very strong financial position and
is well positioned to withstand the dramatically reduced industry
activity levels expected in 2015 and to fund potential attractive
investment opportunities.
- The increased activity and the inclusion of Fraction resulted
in a four-fold increase in consolidated EBITDA before share based
payments to $45.6 million in the
current quarter from $11.0 million in
Q4 2013. Consolidated income and comprehensive income
increased to $22.3 million in Q4 2014
from $0.4 million in Q4 2013.
For the year ended December 31, 2014
consolidated EBITDA before share based payments increased to
$121.5 million from $32.5 million in 2013, while consolidated income
and comprehensive income significantly increased to $49.1 million from a loss and comprehensive loss
of $4.4 million for the comparable
2013 period.
- Effective July 1, 2014, Canyon
acquired Fraction, a leading provider of water and fracturing fluid
logistics, containment, transfer and storage for the oil and gas
industry in Northwest Alberta and
Northeast British Columbia. In Q4 2014, Fraction contributed
$12.9 million to consolidated revenue
and $3.3 million to consolidated
EBITDA before share-based payments expense. Water access
restrictions, enacted in the third quarter but carrying on into the
fourth quarter, impacted fourth quarter results for Fraction.
These restrictions were lifted late in the fourth quarter,
resulting in increased water transfer and storage tank utilization
in 2015 to date.
- In 2014, Canyon added 30,000 Hydraulic Horsepower ("HHP") to
its equipment fleet, including 20,000 HHP purchased from a
competitor in March and 10,000 HHP of newly constructed equipment
added in Q4 2014. These additions brought Canyon's pressure
pumping equipment capacity to 255,500 HHP as at December 31, 2014.
- Canyon's previously announced 2015 capital program totaling
$63 million has been significantly
reduced in response to anticipated lower industry activity levels
in 2015. Canyon's 2015 capital program is now estimated at
approximately $12 million, mostly for
maintenance capital, which combined with a carryover of about
$8 million to complete the 2014
program results in total capital expenditures of approximately
$20 million for 2015.
- On December 18, 2014, Canyon
declared a quarterly dividend of $0.15 per common share, or $10.3 million, which was paid to shareholders on
January 26, 2015.
INDUSTRY COMMENTARY & 2015 OUTLOOK
To date in 2015, overall Canadian oilfield industry activity
levels have rapidly declined in response to the ongoing dramatic
drop in oil and natural gas prices since the summer of 2014.
As our customers adjust to lower commodity prices, they have
reduced or deferred drilling and completions' activities, and have
further high-graded their projects. The deterioration of oil
and natural gas prices over the last 8 months has significantly
altered industry and Canyon's expectations of activity levels and
job pricing for 2015. Leading indicators such as drilling rig
utilization in the WCSB is down about 33% over the first half of Q1
2015 compared to the same period in Q1 2014. As expected,
declining activity levels lead to pricing pressure and this is
already evident in Q1 2015, with the pricing gains achieved
throughout 2014 already eroding margins. To soften the impact
on 2015 operating margins from lower job pricing, Canyon continues
to implement measures to reduce our operating costs. Our
suppliers have also been very cooperative and have been lowering
some of our cost of services, including proppants, diesel, nitrogen
and third party trucking costs. Although the Company has very
low debt levels and an industry‑leading cost structure, we are not
immune to what will likely be the worst year‑over‑year drilling and
completions activity reduction in decades. Canyon will take a
defensive stance and will implement cost saving initiatives such as
reducing compensation levels for staff, management and the board of
directors, to reduce the negative impact reduced pricing and
activity levels are expected to have on operating margins and cash
flow. We believe that Canyon has never been better positioned
to not only navigate through this downturn, but to also grow our
market share. The key to a successful emergence from this
downturn will be keeping the impact of cost saving initiatives on
staff to the minimum so that our valued employees are able to stay
focused on adding value for our customers and
shareholders.
Despite sharply declining oilfield activity levels and pricing
pressure, Canyon has actually remained relatively active in both
our pressure pumping and fluid management divisions in Q1
2015. These relationships will help to reduce margin pressure
by increasing efficiencies in our pad-based, 24 hour work programs
resulting in improved value for our customers. With the
recent acquisition of the fluid management business, Canyon is able
to bundle fracturing and water services for the customer thereby
avoiding well completion delays. To date in 2015, our fluid
management business has had a strong start to the year. In
addition, the increased demand for 24 hour operations by our
customers presents the opportunity for us to improve operating cost
efficiency. Canyon expects to remain active for the remainder
of Q1 2015 as we are essentially fully booked until break up
2015.
LNG driven activity levels and timing remain a big question in
this industry. Although Canada is still several years from seeing the
first LNG exports, visibility has sharpened, overall risks have
been marginalized and upstream momentum has been building.
The Federal Government's recent announcement to accelerate the
capital cost allowance for certain LNG based expenditures combined
with British Columbia's
announcement detailing the proposed LNG tax structure have been
viewed favourably by the energy industry. Numerous projects
have been proposed, representing approximately 15 – 20 billion
cubic feet per day in combined export capacity. Project
approvals were granted in 2013, while site preparation and
front-end engineering were initiated for some projects. We
continue to anticipate a positive final investment decision
announcement for a west coast of British Columba project in
2015. The timing of meaningful ramp‑up in activity remains
uncertain.
As a result of our strong balance sheet and our lean cost
structure, Canyon's strategy remains essentially unchanged.
Our goal is to build a Canadian service provider that can succeed
and grow over the long term and provide superior return on invested
capital to our investors by reducing finding and development costs
for our customers. In the short-term, with our strong balance
sheet and prudent fiscal management, we can endure the approaching
period of reduced oilfield services activity levels brought on by
the recent commodity price degradation without having to make
significant adjustments to how we implement our strategy.
During this difficult operating period for the industry, our
strong financial position also allows us to seek out attractive
investment opportunities. Canyon will actively screen,
evaluate and pursue attractive oilfield acquisition opportunities
that will add both long-term value on a per share basis and enhance
our relative competitive position with customers. Our plan is
to continue to grow Canyon's operating assets over the next five
years, primarily to service the anticipated demand for
pressure-pumping services in Western Canada. We are actively
working to cement relationships with top-tier multinational
customers and continuing to grow in activity and reputation in the
region's premier unconventional plays. Growth in our market
share in Northwest Alberta and
Northeast British Columbia will be
complemented by pursuit of attractive opportunities in the Cardium,
Bakken and Lower Shaunavon plays. We continue to believe that
Western Canada is still a highly
attractive pressure pumping market as it continues to hold
significant growth potential and offers superior supply-demand
fundamentals to many other international markets.
Canyon will continue our pursuit to continue building a
high-quality, growing service provider with a robust organization
that can accommodate much higher revenue. This creates the
foundation for rapidly growing revenue, operating margins and
EBITDA on a per share basis.
OVERVIEW OF FOURTH QUARTER AND YEAR ENDED 2014
|
|
|
|
000's except per
share, job amounts and
hydraulic pumping capacity
(Unaudited)
|
Three Months
Ended
December 31
|
|
Year Ended
December 31
|
|
2014
|
2013
|
2012
|
|
2014
|
2013
|
2012
|
Consolidated
revenues
|
$188,265
|
$104,227
|
$84,809
|
|
$591,022
|
$299,614
|
$353,119
|
Profit (loss) and
comprehensive income (loss)
|
$22,280
|
$377
|
$7,146
|
|
$49,094
|
$(4,375)
|
$54,409
|
Per
share-basic
|
$0.32
|
$0.01
|
$0.12
|
|
$0.75
|
$(0.07)
|
$0.89
|
Per
share-diluted
|
$0.32
|
$0.01
|
$0.11
|
|
$0.74
|
$(0.07)
|
$0.87
|
EBITDA before
share-based payments(1)
|
$45,576
|
$11,026
|
$18,814
|
|
$121,478
|
$32,496
|
$107,774
|
Funds from
operations(1)
|
$38,084
|
$17,574
|
$18,501
|
|
$103,819
|
$38,716
|
$95,535
|
Adjusted profit
(loss) and comprehensive income (loss) (1)
|
$24,870
|
$1,690
|
$7,836
|
|
$56,120
|
$(45)
|
$55,584
|
Adjusted per
share-basic (1)
|
$0.36
|
$0.03
|
$0.12
|
|
$0.85
|
$(0.00)
|
$0.91
|
Adjusted per
share-diluted (1)
|
$0.36
|
$0.03
|
$0.11
|
|
$0.84
|
$(0.00)
|
$0.89
|
Total jobs completed
(2)
|
818
|
654
|
489
|
|
2,942
|
1,828
|
2,198
|
Consolidated average
revenue per job (2)
|
$215,784
|
$159,835
|
$176,162
|
|
$192,004
|
$164,529
|
$161,668
|
Average fracturing
revenue per job
|
$318,705
|
$225,675
|
$280,671
|
|
$269,894
|
$232,460
|
$240,369
|
Hydraulic Pumping
Capacity:
|
|
|
|
|
|
|
|
Average
HHP
|
245,500
|
225,500
|
225,500
|
|
240,500
|
225,500
|
215,000
|
Exit HHP
|
255,500
|
225,500
|
225,500
|
|
255,500
|
225,500
|
225,500
|
Capital
expenditures
|
$36,830
|
$7,442
|
$5,419
|
|
$112,677
|
$14,840
|
$69,940
|
|
|
|
|
000's except per
share amounts
(Unaudited)
|
As at
December 31, 2014
|
As at
December 31,
2013
|
As at
December 31,
2012
|
Cash and cash
equivalents
|
$20,613
|
$21,308
|
$22,584
|
Working
capital
|
$21,880
|
$41,730
|
$56,245
|
Total long-term
financial liabilities
|
$36,193
|
$3,096
|
$3,475
|
Total
assets
|
$638,770
|
$402,707
|
$406,113
|
Cash dividends
declared per share
|
$0.60
|
$0.60
|
$0.60
|
|
|
Note
(1):
|
See Non-GAAP
Measures.
|
Note
(2):
|
Includes all jobs
from each service line, specifically hydraulic fracturing; coiled
tubing; nitrogen fracturing;
acidizing and remedial cementing.
|
The current quarter and the twelve months ended December 31, 2014 includes the results of
Canyon's pressure pumping business. The results of Fraction
Energy Services Ltd., ("Fraction") are included for the second half
of 2014. Fraction was acquired by Canyon effective
July 1, 2014 and is a leading
provider of fracturing fluid management, including water sourcing,
transfer, wellsite storage, fluid heating, flowback transfer and
produced water storage services.
Continuing on from the record previous quarter, Q4 2014 was very
busy for Canyon, with consolidated revenues increasing by 81% to
$188.3 million compared to
$104.2 million in Q4 2013. For
the year ended December 31, 2014,
consolidated revenues almost doubled to $591.0 million, an increase of 97% over the
$299.6 million recorded in the 2013
year. The Company did experience an 8% sequential decline in
consolidated revenues in Q4 2014 over Q3 2014. This was a
result of redeploying equipment from a major customer to other
customers, non-typical operational and weather delays, as well as
the holiday break.
Consolidated EBITDA before share-based payments (see Non-GAAP
Measures) increased over 300% to $45.6
million in Q4 2014 from $11.0
million in Q4 2013. For the year ended December 31, 2014, consolidated EBITDA before
share-based payments expense increased almost 300% to $121.5 million from $32.5
million in 2013.
The increased activity and revenues in 2014 combined with
Canyon's considerable operating leverage in its pressure pumping
business and the inclusion of Fraction resulted in a significant
improvement in profitability, with consolidated income and
comprehensive income increasing to $22.3
million in Q4 2014 compared to $0.4
million in Q4 2013. Adjusted consolidated income and
comprehensive income (see Non-GAAP Measures) for Q4 2014 increased
to $24.9 million from $1.7 million in Q4 2013. For the year ended
December 31, 2014 consolidated income and comprehensive
income increased significantly to $49.1
million from a consolidated loss and comprehensive loss of
$4.4 million for 2013. Adjusted
consolidated income and comprehensive income (see Non-GAAP
Measures) increased to $56.1 million
from a consolidated loss and comprehensive loss of $45 thousand in 2013.
Pressure Pumping Services
The fourth quarter was very strong for Canyon's pressure pumping
business, with jobs completed and revenues earned increasing by 25%
and 68%, respectively, compared to Q4 2013. Jobs completed
did not increase proportionately with the percentage revenue
increase due to the growing trend for larger job sizes as discussed
below. Pressure pumping revenues in the current quarter
totaled $175.4 million from 818 jobs
completed compared to $104.2 million
from 654 jobs in the comparable quarter of 2013. For the year
ended December 31, 2014, pressure
pumping revenues increased by 88% to $561.9
million compared to $299.6
million in 2013, while jobs completed increased by 61% to
2,942 from 1,828 over the same year. In 2014, Canyon added
30,000 Hydraulic Horsepower ("HHP") to its equipment fleet
including 20,000 HHP purchased from a competitor in March and
10,000 HHP of newly constructed pumps delivered in Q4 2014.
These additions bring Canyon's equipment capacity to 255,500 HHP as
at December 31, 2014.
Canyon's equipment fleet was essentially fully utilized
throughout most of 2014 due to higher industry activity in the year
as well as the Company's ongoing sales initiatives which have
resulted in increased market share with oil and gas exploration
companies ("E&P Companies") operating in the deep basin.
Market share continues to expand in Southeast Saskatchewan and Southwest
Manitoba. In 2014, drilling activity across the Western
Canadian Sedimentary Basin ("WCSB") increased by about 9% to an
industry utilization rate of 46% from 42% in 2013. Industry
activity remained strong throughout the second half of 2014 despite
the significant decline in commodity prices since July. Our
customers' activity levels were buoyed by strong commodity prices
in the first half of the year, improved access to capital markets
to fund capital programs, as well as ongoing LNG-related reserve
delineation drilling in Northeast British Columbia. Also
contributing to the higher pressure pumping activity in the year
were changing well designs resulting in increased fracturing
intensity on a per well basis in the form of more fractures per
wellbore and/or larger fracture designs. One of the main
predictors of service intensity for pressure pumping is the average
total length in metres per well. The industry experienced an
increase of 11% in the total metres per well drilled in 2014 over
2013. In addition, increased proppant usage per stage has
increased dramatically in 2014 with fourth quarter total proppant
volumes pumped by Canyon increasing by 91% compared to Q4 2013, and
by 111% for the year ended December 31,
2014 compared to 2013. The growing trend by customers
to use more proppant per stage and in particular more expensive
"Ottawa White" sand rather than domestic sand has also contributed
to larger job sizes reflected in the increased revenue per
job. Therefore, Canyon's average fracturing revenue per job
increased by 41% to $318,705 in Q4
2014 from $225,675 in Q4 2013 mostly
due to the larger job sizes. Overall, job pricing and cost
recovery had only a modest impact on revenue per job and revenues
in Q4 2014 as pricing improved by approximately 10% from the
beginning of the year.
Pressure pumping cash flow and profitability remains highly
levered to changes in revenue due to the fixed cost nature of the
business. The increased activity and revenues in the year led
to significantly improved margins in Q4 2014 compared to the
comparable quarter of 2013. In Q4 2014, EBITDA before
share-based payments expense from pressure pumping was $44.0 million, or 25% of revenues, compared to
$12.8 million or 12% of revenues in
the comparable 2013 quarter. The increased activity has also
significantly increased EBITDA before share-based payments expense
from pressure pumping to $119.0
million, or 21% of revenues, for the year ended December 31, 2014 from $38.4 million or 13% of revenues for 2013.
In 2014, Canyon increased its pressure pumping field staff by
approximately 20% from the beginning of the year. In addition
to hiring new staff, we continued to increase our training and
staff development and upgraded business systems throughout the
organization until late in 2014. Unfortunately, with the
significant decline in commodity prices and the expected pullback
in E&P companies' capital programs in 2015, Canyon began
implementing cost cutting measures in Q4 2014 including a slow down
of hiring new staff.
Fluid Management Services
Fraction was acquired by Canyon effective July 1, 2014 and continues as a wholly-owned and
independent operating subsidiary. Fraction is a leading
provider of fracturing fluid logistics, containment, transfer and
storage for the oil and gas industry in Northwest Alberta and Northeast British
Columbia. The acquisition of Fraction complements Canyon's
current offering of services to our customers.
For the three months ended December 31,
2014 Fraction contributed $12.9
million in revenue and $3.3
million in EBITDA before share-based payments expense (see
Non-GAAP Measures). For the six month period, the division
contributed $29.1 million in revenue
and $9.5 million in EBITDA before
share-based payments (see Non-GAAP Measures).
As previously reported, water access restrictions in the
northern regions of the WCSB were imposed in the latter half of the
third quarter and continued to impact water transfer and fluid
logistics revenues during the fourth quarter. As a result,
there were a limited number of long distance water transfer
projects in the region limiting Fraction's water transfer projects
during the quarter to lease site fluid management. Storage tank
rental revenues were also lower in Q4 2014 compared to the prior
quarter due to lower activity by certain customers in response to
the declining commodity prices as well as the deferral of a final
investment decision by an LNG project sponsor.
The water access restrictions were lifted in December 2014 allowing Fraction to gain larger
fluid transfer and logistics projects late in Q4 2014 and has
resulted in a strong start to Q1 2015. In addition, storage
tank rental revenues have rebounded in Q1 2015 to date with higher
utilization rates of the division's tank fleet. The division
took delivery of its two Super Heater units, which were part of the
2014 capital program, in December 2014. This has further
enhanced Fraction's full service water management solutions and
helped contribute to a strong start to Q1 2015.
2015 Capital Expenditure Budget Update
On November 6, 2014 in our Q3
press release and MD&A, Canyon reported a forecast 2015 capital
expenditure budget of approximately $63
million. This budget included both maintenance and
growth capital for each of the pressure pumping and fluid
management service lines. Given the unexpected and
significant decrease in oil and natural gas prices that has caused
material cuts to our customers' drilling and completions budgets,
Canyon has effectively suspended all growth capital
expenditures. Our revised 2015 capital expenditure budget
will consist of approximately $12
million for maintenance capital and approximately
$8 million for 2014 capital items
that have experienced delays into the first half of 2015.
Canyon expects that our revised capital budget totaling
$20 million will be funded from
operating cash flow and existing banking facilities.
Dividend
The Board of Directors (the "Board") continuously reviews the
long-term capital structure of the Company and its corresponding
dividend policy each fiscal quarter. The Board sets a
dividend rate that it believes will be sustainable over the
long-term in the context of future cash flows and capital spending
opportunities. The Board has determined that the liquidity
and financial capacity of the Company allow it to maintain the
quarterly dividend at the current rate of $0.15 per common share per quarter.
NON-GAAP MEASURES
The Company's Consolidated Financial Statements have been
prepared in accordance with International Financial Reporting
Standards ("IFRS"). Certain measures in this document do not have
any standardized meaning as prescribed by IFRS and are considered
NON-GAAP measures.
EBITDA before share-based payments, funds from operations,
adjusted profit (loss) and comprehensive income (loss) and adjusted
per share amounts are not recognized measures under IFRS.
Management believes that in addition to profit (loss) and
comprehensive income (loss), EBITDA before share-based payments,
funds from operations and adjusted profit (loss) and comprehensive
income (loss) are useful supplemental measures as they provide an
indication of the results generated by the Company's business
activities prior to consideration of how those activities are
financed, amortized or taxed, as well as the cash generated by the
Company's business activities without consideration of the timing
of the monetization of non-cash working capital items.
Readers should be cautioned, however, that EBITDA before
share-based payments, funds from operations and adjusted profit
(loss) and comprehensive income (loss) and per share amounts should
not be construed as an alternative to profit and comprehensive
income determined in accordance with IFRS as an indicator of the
Company's performance. Canyon's method of calculating EBITDA
before share-based payments, funds from operations and adjusted
profit (loss) and comprehensive income (loss) may differ from other
companies and accordingly, EBITDA before share-based payments,
funds from operations and adjusted profit (loss) and comprehensive
income (loss) may not be comparable to measures used by other
companies. Canyon calculates EBITDA before share-based
payments as profit and comprehensive income for the year adjusted
for depreciation and amortization, equity settled share-based
payment transactions, gain or loss on sale of property and
equipment, finance costs, foreign exchange gains and losses and
income tax expense. Adjusted profit (loss) and comprehensive
income (loss) per share is calculated using the weighted average
shares outstanding consistent with the calculation of earnings per
share. Reconciliations of these NON-GAAP measures to the most
directly comparable IFRS measures are outlined below.
The Company describes revenue less cost of services as gross
profit (loss).
EBITDA before share-based payments
|
|
|
000's
(Unaudited)
|
Three Months
Ended December 31
|
Year Ended
December 31
|
|
2014
|
2013
|
2014
|
2013
|
Profit (loss) and
comprehensive income (loss)
|
$22,280
|
$377
|
$49,094
|
$(4,375)
|
Add
(Deduct):
|
|
|
|
|
Depreciation and
amortization
|
15,225
|
9,568
|
49,320
|
33,035
|
Finance
costs
|
534
|
192
|
1,512
|
658
|
Foreign exchange
(gain) loss
|
(155)
|
22
|
746
|
(171)
|
Share-based payment
transactions
|
1,026
|
1,238
|
3,985
|
4,189
|
(Gain) Loss on sale
of property and equipment
|
(127)
|
7
|
(315)
|
(5)
|
Income tax expense
(recovery)
|
6,793
|
(378)
|
17,136
|
(835)
|
EBITDA before
share-based payments
|
$45,576
|
$11,026
|
$121,478
|
$32,496
|
Funds from Operations
|
|
|
000's
(Unaudited)
|
Three Months
Ended December 31
|
Year Ended
December 31
|
|
2014
|
2013
|
2014
|
2013
|
Net cash from
operating activities
|
$56,123
|
$22,777
|
$81,823
|
$51,450
|
Income tax (received)
paid
|
(2,286)
|
-
|
(6,747)
|
5,135
|
Change in
non-cash working capital
|
(8,644)
|
(11,965)
|
44,113
|
(24,576)
|
Less: current tax
recovery (expense)
|
(7,109)
|
6,762
|
(15,370)
|
6,707
|
Funds from
operations
|
$38,084
|
$17,574
|
$103,819
|
$38,716
|
Adjusted Profit (Loss) and Comprehensive Income
(Loss)
|
|
|
000's
(Unaudited)
|
Three Months
Ended
December 31
|
Year Ended
December 31
|
|
2014
|
2013
|
2014
|
2013
|
Profit (loss) and
comprehensive income (loss)
|
$22,280
|
$377
|
$49,094
|
$(4,375)
|
Amortization expense
on intangibles
|
1,564
|
75
|
3,041
|
141
|
Share-based payment
transactions
|
1,026
|
1,238
|
3,985
|
4,189
|
Adjusted profit
(loss) and comprehensive income (loss)
|
$24,870
|
$1,690
|
$56,120
|
$(45)
|
Adjusted per
share-basic
|
$0.36
|
$0.03
|
$0.85
|
$(0.00)
|
Adjusted per
share-diluted
|
$0.36
|
$0.03
|
$0.84
|
$(0.00)
|
QUARTERLY CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
000's except per
share amounts
(Unaudited)
|
Three Months Ended
December 31
|
|
2014
|
|
2013
|
Revenues
|
$188,265
|
|
$104,227
|
Cost of
services
|
(147,617)
|
|
(96,764)
|
Gross
profit
|
40,648
|
|
7,463
|
Administrative
expenses
|
(11,323)
|
|
(7,243)
|
Results from
operating activities
|
29,325
|
|
220
|
Finance
costs
|
(534)
|
|
(192)
|
Foreign exchange gain
(loss)
|
155
|
|
(22)
|
Gain (loss) on sale
of property and equipment
|
127
|
|
(7)
|
Profit (loss)
before income tax
|
29,073
|
|
(1)
|
Income tax (expense)
recovery
|
(6,793)
|
|
378
|
Profit and
comprehensive income
|
$22,280
|
|
$377
|
EBITDA before
share-based payments(1)
|
$45,576
|
|
$11,026
|
Earnings per
share:
|
|
|
|
|
Basic
|
$0.32
|
|
$0.01
|
|
Diluted
|
$0.32
|
|
$0.01
|
|
|
Note
(1):
|
See NON-GAAP
Measures.
|
Pressure Pumping Services
|
|
000's except per
share amounts
(Unaudited)
|
Three Months Ended
December 31, 2014
|
|
2014
|
|
2013
|
Revenues
|
$175,398
|
|
|
$104,227
|
|
Cost of
services
|
(137,997)
|
78.7%
|
|
(96,764)
|
92.8%
|
Gross
profit
|
37,401
|
21.3%
|
|
7,463
|
7.2%
|
Administrative
expenses
|
(5,888)
|
3.4%
|
|
(4,671)
|
4.5%
|
Results from
operating activities
|
31,513
|
17.9%
|
|
2,792
|
2.7%
|
Add non-cash
items:
|
|
|
|
|
|
|
Depreciation and
amortization
|
12,057
|
6.9%
|
|
9,568
|
9.2%
|
|
Share-based payments
expense
|
390
|
0.3%
|
|
462
|
0.4%
|
EBITDA before
share-based payments(1)
|
$43,960
|
25.1%
|
|
$12,822
|
12.3%
|
|
|
Note
(1):
|
See NON-GAAP
Measures.
|
Revenues
Improved industry activity in 2014 led to Canyon having a very
busy second half to the year and resulted in jobs completed and
revenues earned by the pressure pumping division increasing by 25%
and 68%, respectively, compared to Q4 2013. Jobs completed
did not increase proportionately with the percentage revenue
increase due to the growing trend for larger job sizes as
previously discussed. Pressure pumping revenues in the
current quarter totaled $175,398 from
818 jobs completed compared to $104,227 from 654 jobs in the comparable quarter
of 2013 In Q4 2014, Canyon added 10,000 HHP of newly
constructed equipment bringing Canyon's equipment capacity to
255,500 HHP as at December 31,
2014.
Over 90% of Q4 2014 pressure pumping revenues were provided by
hydraulic fracturing services with average fracturing revenue per
job increasing by 41% to $318,705
from $225,675 in Q4 2013. The
increase in average fracturing revenue per job is more a function
of larger job sizes than pricing increases due to a huge increase
in product consumption, particularly proppants. Fourth
quarter total proppant volumes pumped by Canyon increased by 91%
compared to Q4 2013, and by 111% for the year ended December 31, 2014 compared to 2013. The
growing trend by customers to use more proppant per stage and in
particular more expensive "Ottawa" sand rather than domestic sand
has also contributed to larger job sizes with resulting increased
revenue per job. On the other hand, Q4 2014 pricing averaged
about 10% higher than at the beginning of the year and as a result
only had a modest impact on revenue per job and revenues in the
quarter.
Cost of services
Cost of services for the three months ended December 31, 2014 totaled $137,997 (2013: $96,764) and includes materials, products,
transportation and repair costs of $96,631 (2013: $64,992), employee benefits expense of
$29,836 (2013: $22,743), and depreciation of property and
equipment of $11,530 (2013:
$9,029).
Materials, products, transportation and repair costs increased
by 49% to $96,631 in the current
quarter from $64,992 in Q4 2013, due
to the increased job count in the quarter and due to the increase
in materials consumed per well, especially sand as previously
discussed. The increase in employee benefits expense is
mainly due to field staff additions to support the higher activity
levels, increased variable pay as a result of the higher activity
and inflation in labour rates. The increase in depreciation
of property and equipment is due to additional depreciation
pertaining to equipment introduced into service in late 2013 and in
2014, and accelerated depreciation relating to the replacement of a
number of pump components.
Administrative expenses
Administrative expenses for the three months ended December 31, 2014 totaled $5,888 compared to $4,671 in Q4 2013 and include employee benefits
expense, share-based payments expense, amortization of intangibles,
depreciation of buildings and office equipment and other
administrative expenses. Share-based payments expense
represents the value assigned to the granting of options and
incentive-based units under the Company's Share Purchase Option
Plan and Stock Based Compensation Plan respectively, using the
Black-Scholes model. For Q4 2014, $390 (Q4 2013 - $462) was charged to expenses and included in
contributed surplus in respect of these two plans.
EBITDA Before Share-Based Payments (See NON-GAAP
MEASURES)
Pressure pumping profitability remains highly levered to changes
in revenue due to the fixed cost nature of the business and as a
result the aforementioned 25% increase in the job count and the 68%
increase in revenues led to significantly improved margins in Q4
2014 compared to the comparable quarter of 2013. As a result,
Q4 2014, EBITDA before share-based payments totaled $43,960 in the pressure pumping segment, or 25%
of revenues compared to $12,822, or
12% of revenues in Q4 2013.
Fluid Management Services
|
|
000's except per
share amounts (Unaudited)
|
Three Months
Ended
December 31
|
|
2014
|
|
2013
|
Revenues
|
$12,867
|
|
|
$-
|
|
Cost of
services
|
(9,620)
|
74.8%
|
|
-
|
-%
|
Gross
profit
|
3,247
|
25.2%
|
|
-
|
-%
|
Administrative
expenses
|
(3,094)
|
24.0%
|
|
-
|
-%
|
Results from
operating activities
|
153
|
1.2%
|
|
-
|
-%
|
Add non-cash
item:
|
|
|
|
|
|
|
Depreciation and
amortization
|
3,168
|
24.6%
|
|
-
|
-%
|
EBITDA before
share-based payments(1)
|
$3,321
|
25.8%
|
|
$-
|
-%
|
|
|
Note
(1):
|
See NON-GAAP
Measures.
|
Revenues
The water management services business, acquired effective
July 1, 2014, contributed
$12,867 of revenues to Canyon in Q4
2014. This compares to revenues of $16,256 recorded in the prior quarter. As
discussed above, water access restrictions in the northern regions
of the WCSB were enacted in the latter half of the third quarter
and continued to impact water transfer and fluid logistics revenues
during the fourth quarter until December when the restrictions were
lifted.
Cost of services
Cost of services for the three months ended December 31, 2014 totaled $9,620 and includes materials, products,
transportation and repair costs of $4,681, employee benefits expense of $3,274, and depreciation of property and
equipment of $1,665.
Administrative expenses
Administrative expenses for the three months ended December 31, 2014 totaled $3,094 and includes employee benefits expense,
depreciation of buildings and office equipment and amortization of
intangibles and other administrative expenses. Administrative
expenses include $1,443 relating to
the amortization of customer relationships and non-competition
agreements pursuant to the acquisition of Fraction.
EBITDA Before Share-Based Payments (See NON-GAAP
MEASURES)
Q4 2014 EBITDA before share-based payments totaled $3,321 in the fluid management services division,
or 26% of revenues.
Corporate
|
|
000's except per
share amounts (Unaudited)
|
Three Months
Ended
December 31
|
|
2014
|
|
2013
|
Revenues
|
$-
|
|
$-
|
Administrative
expenses
|
(2,341)
|
|
(2,572)
|
Results from
operating activities
|
(2,341)
|
|
(2,572)
|
Add non-cash
item:
|
|
|
|
|
Share-based payments
expense
|
636
|
|
776
|
EBITDA before
share-based payments(1)
|
$(1,705)
|
|
$(1,796)
|
|
|
Note
(1):
|
See NON-GAAP
Measures.
|
This segment consists of costs incurred to operate a public
company, including corporate management, head office costs,
corporate share-based payment expenses and professional fees.
Administrative expenses
Administrative expenses for the three months ended December 31, 2014 totaled $2,341 compared to $2,572 in Q4 2013 and include employee benefits
expense, share-based payments, and other head office administrative
expenses. The decrease in administrative expenses is mainly
due to lower share-based payments expense.
Share-based payments expense represents the value assigned to
the granting of options and incentive-based units under the
Company's Share Purchase Option Plan and Stock Based Compensation
Plan respectively, using the Black-Scholes model. For Q4
2014, $636 (Q4 2013 - $667) was charged to expenses and included in
contributed surplus in respect of these two plans. In
addition, obligations for payments under the Company's Deferred
Share Unit Plan are accrued as share-based payments expense over
the vesting period. The accrued liability increases or
decreases with fluctuations in the price of the Company's common
shares, with a corresponding increase or decrease in the
share-based payments expense. In Q4 2014, share-based
payments expense was nil (2013: $109)
for the Company's Deferred Share Unit Plan to reflect changes in
the price of the common shares of the Company.
Other Items – Quarterly Consolidated Statement of
Operations
Finance costs
Finance costs include interest on bank indebtedness and finance
lease obligations and totaled $534 in
Q4 2014 (2013: $192). The
increase in finance costs is due to the increase in loans and
borrowings used to partially fund the Company's 2014 capital
program.
Income tax expense
At the expected combined income tax rate of 25%, the income
before income tax for the three months ended December 31, 2014 of $29,073 would have resulted in an income tax
expense of $7,268, compared to the
actual income tax expense of $6,793. The actual income tax expense was
reduced by deductible expenses for income tax filing purposes
exceeding those for financial accounting purposes.
EBITDA before share-based payments (See Non-GAAP
Measures)
In Q4 2014, Canyon's increased activity resulted in consolidated
EBITDA before share-based payments (see NON-GAAP MEASURES) of
$45,576. The four-fold increase
over the $11,026 recorded in the
comparable 2013 quarter is due to the increase in activity and
improved pricing as discussed above.
Income and comprehensive income and earnings per
share
Income and comprehensive income increased significantly to
$22,280 in Q4 2014 from $377 in Q4 2013, due to the increase in activity
as previously discussed.
Basic and diluted earnings per share were $0.32 and $0.32,
respectively, for the three months ended December 31, 2014 compared to basic and diluted
earnings per share of $0.01 for the
comparable 2013 quarter.
YEAR-TO-DATE CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
000's except per
share amounts (Unaudited)
|
Year Ended
December 31
|
|
2014
|
|
2013
|
Revenues
|
$591,022
|
|
$299,614
|
Cost of
services
|
(486,261)
|
|
(279,805)
|
Gross
profit
|
104,761
|
|
19,809
|
Administrative
expenses
|
(36,588)
|
|
(24,537)
|
Results from
operating activities
|
68,173
|
|
(4,728)
|
Finance
costs
|
(1,512)
|
|
(658)
|
Foreign exchange
(loss) gain
|
(746)
|
|
171
|
Gain on sale of
property and equipment
|
315
|
|
5
|
Profit (loss)
before income tax
|
66,230
|
|
(5,210)
|
Income tax (expense)
recovery
|
(17,136)
|
|
835
|
Profit (loss) and
comprehensive income (loss)
|
$49,094
|
|
$(4,375)
|
EBITDA before
share-based payments(1)
|
$121,478
|
|
$32,496
|
Earnings (loss)
per share:
|
|
|
|
|
Basic
|
$0.75
|
|
$(0.07)
|
|
Diluted
|
$0.74
|
|
$(0.07)
|
|
|
Note
(1):
|
See Non-GAAP
Measures.
|
Pressure Pumping Services
|
|
000's except per
share amounts (Unaudited)
|
Year Ended
December 31, 2014
|
|
2014
|
|
2013
|
Revenues
|
$561,899
|
|
|
$299,614
|
|
Cost of
services
|
(467,006)
|
83.1%
|
|
(279,805)
|
93.4%
|
Gross
profit
|
94,893
|
16.9%
|
|
19,809
|
6.6%
|
Administrative
expenses
|
(21,417)
|
3.8%
|
|
(16,826)
|
5.6%
|
Results from
operating activities
|
73,476
|
13.1%
|
|
2,983
|
1.0%
|
Add non-cash
items:
|
|
|
|
|
|
|
Depreciation and
amortization
|
43,338
|
7.7%
|
|
33,035
|
11.0%
|
|
Share-based payments
expense
|
2,175
|
0.4%
|
|
2,391
|
0.8%
|
EBITDA before
share-based payments(1)
|
$118,989
|
21.2%
|
|
$38,409
|
12.8%
|
|
|
Note
(1):
|
See NON-GAAP
Measures.
|
Revenues
Canyon's equipment fleet was essentially fully utilized
throughout most of 2014 due to higher industry activity in the year
as well as the Company's ongoing sales initiatives which have
resulted in market share growth with companies operating in the
deep basin as well as market share expansion in Southeast Saskatchewan and Southwest
Manitoba. Accordingly, for the year ended December 31, 2014, pressure pumping revenues
increased by 88% to $561.9 million
compared to $299.6 million in 2013,
while jobs completed increased by 61% to 2,942 from 1,828 over the
same years. Over 90% of 2014 pressure pumping revenues were
provided by hydraulic fracturing services with average fracturing
revenue per job increasing by 16% to $269,894 from $232,460 in 2013. The increase in average
fracturing revenue per job is more a function of larger job sizes
than pricing increases due to an increase in product consumption by
customers, particularly proppants. Proppants pumped by Canyon
in 2014 increased by 111% over the tonnages pumped in 2013. On the
other hand, over the course of the year, 2014 pricing
increased by about 10% from the beginning of the year In
2014, Canyon added 30,000 Hydraulic Horsepower ("HHP") to its
equipment fleet including 20,000 HHP purchased from a competitor in
March and 10,000 HHP of newly constructed equipment added in Q4
2014.
Cost of services
Cost of services for the twelve months ended December 31, 2014 totaled $467,006 (2013: $279,805) and includes materials, products,
transportation and repair costs of $318,155 (2013: $174,965), employee benefits expense of
$107,433 (2013: $73,539), and depreciation of property and
equipment of $41,418 (2013:
$31,301).
Materials, products, transportation and repair costs increased
by 82% to $318,155 in the current
period from $174,965 as the job count
increased by 61% in the current year compared to the 2013
year. The increase in materials, products, transportation and
repair costs was greater than the percentage increase in the job
count mainly due to the larger job sizes in 2014 characterized by
higher quantities of materials consumed per well, especially sand,
as previously discussed. The increase in employee benefits
expense is mainly due to field staff additions to support the
higher activity levels, increased variable pay as a result of the
higher activity and inflation in labour rates. Canyon had
1,115 employees in its pressure pumping business as at December 31, 2014 compared to about 900 at the
same time last year. The increase in depreciation of property
and equipment is due to additional depreciation pertaining to
equipment introduced into service in late 2013 and in 2014 and
accelerated depreciation relating to the replacement of pump
components.
Administrative expenses
Administrative expenses for the twelve months ended December 31, 2014 totaled $21,417 (2013: $16,826) and include employee benefits expense,
share-based payments expense, depreciation of buildings and office
equipment and amortization of intangibles and other administrative
expenses. Employee benefits expense increased mainly due to
staff additions and the implementation of a cost of living increase
effective Q4 2013.
Share-based payments expense represents the value assigned to
the granting of options and incentive-based units under the
Company's Share Purchase Option Plan and Stock Based Compensation
Plan respectively, using the Black-Scholes model. For the
year ended December 31, 2014,
$2,175 (2013: $2,392) was
charged to expenses and included in contributed surplus in respect
of these two plans.
EBITDA before share-based payments (See Non-GAAP
Measures)
For the year ended December 31,
2014, Canyon's increased activity resulted in EBITDA before
share-based payments (see NON-GAAP MEASURES) for pressure pumping
services of $118,989, or 21% of
revenues, compared to $38,409, or 13%
of revenues for the comparable 2013 year.
Fluid Management Services
|
|
000's except per
share amounts (Unaudited)
|
Year Ended
December 31
|
|
2014
|
|
2013
|
Revenues
|
$29,123
|
|
|
$-
|
|
Cost of
services
|
(19,255)
|
66.1%
|
|
-
|
-%
|
Gross
profit
|
9,868
|
33.9%
|
|
-
|
-%
|
Administrative
expenses
|
(6,305)
|
21.7%
|
|
-
|
-%
|
Results from
operating activities
|
3,563
|
12.2%
|
|
-
|
-%
|
Add non-cash
item:
|
|
|
|
|
|
|
Depreciation and
amortization
|
5,983
|
20.6%
|
|
-
|
-%
|
EBITDA before
share-based payments(1)
|
$9,546
|
32.8%
|
|
$-
|
-%
|
|
|
Note
(1):
|
See NON-GAAP
Measures.
|
Revenues
The water management services business contributed $29,123 of revenues in 2014 over the period from
acquisition of Fraction by Canyon on July 1,
2014 to December 31,
2014. As discussed above, water access restrictions in the
northern regions of the WCSB were enacted late in the third quarter
which impacted water transfer and fluid logistics revenues during
in the current quarter. Storage tank rental revenues were also
lower in the current quarter compared to the prior quarter due to
lower activity by certain customers in response to the declining
commodity prices as well as the deferral of a final investment
decision by an LNG project sponsor.
Cost of services
Cost of services for the period ended December 31, 2014 totaled $19,255 and includes materials, products,
transportation and repair costs of $9,941, employee benefits expense of $6,335, and depreciation of property and
equipment of $2,979.
Administrative expenses
Administrative expenses for the period ended December 31, 2014 totaled $6,305 and include employee benefits expense,
depreciation of buildings and office equipment and amortization of
intangibles and other administrative expenses. Amortization
of intangibles totals $2,884 and
includes amortization of customer relationships and non-competition
agreements pursuant to the acquisition of Fraction by Canyon
effective July 1, 2014.
EBITDA Before Share-Based Payments (See NON-GAAP
MEASURES)
2014 EBITDA before share-based payments totaled $9,546 in the fluid management services division,
or 33% of revenues.
Corporate
|
|
000's except per
share amounts (Unaudited)
|
Year Ended
December 31
|
|
2014
|
|
2013
|
Revenues
|
$-
|
|
$-
|
Administrative
expenses
|
(8,866)
|
|
(7,711)
|
Results from
operating activities
|
(8,866)
|
|
(7,711)
|
Add non-cash
item:
|
|
|
|
|
Share-based payments
expense
|
1,809
|
|
1,798
|
EBITDA before
share-based payments(1)
|
$(7,057)
|
|
$(5,913)
|
|
|
Note
(1):
|
See NON-GAAP
Measures.
|
This segment consists of costs incurred to operate a public
company, including corporate management, head office costs,
corporate share-based payment expenses and professional fees.
Administrative expenses
Administrative expenses for the year ended December 31, 2014 totaled $8,866 (2013: $7,711) and include employee benefits expense,
share-based payments, and other head office administrative
expenses.
For the year ended December 31,
2014, employee benefits expense increased due to the larger
scale of Canyon's operations and due to transaction costs
pertaining to the acquisition of Fraction. Share-based
payments expense represents the value assigned to the granting of
options and incentive-based units under the Company's Share
Purchase Option Plan and Stock Based Compensation Plan
respectively, using the Black-Scholes model. For the year
ended December 31, 2014 $1,809 (2013 - $1,798) was charged to expenses and included in
contributed surplus in respect of these two plans.
Other Items – Year Ended December 31,
2014 Statements of Operations
Finance costs
Finance costs include interest on bank indebtedness and finance
lease obligations which total $1,512
for the year ended December 31, 2014
(2013: $658). The increase in
finance costs is due to the increase in loans and borrowings used
to partially fund the Company's 2014 capital program.
Income tax expense
At the expected combined income tax rate of 25%, the income
before income tax for the year ended December 31, 2014 of $66,230 would have resulted in an income tax
expense of $16,558, compared to the
actual income tax expense of $17,136. The actual income tax expense was
increased by non-deductible expenses.
EBITDA before share-based payments (See Non-GAAP
Measures)
For the year ended December 31,
2014, improved industry-wide conditions as previously
discussed, resulted in an increase in consolidated EBITDA before
share-based payments (see NON-GAAP MEASURES) to $121,478 from $32,496 recorded in the comparable 2013
year.
Income (loss) and comprehensive income (loss) and earnings
(loss) per share
Income and comprehensive income totaled $49,094 for the year ended December 31, 2014 compared to loss and
comprehensive loss of $4,375 in
2013. The significant improvement in income and comprehensive
income was due to the increase in activity as previously
discussed.
Basic and diluted earnings per share were $0.75 and $0.74
respectively for the year ended December 31,
2014 compared to basic and diluted loss per share of
$0.07 in 2013.
FORWARD-LOOKING STATEMENTS
This document contains certain forward-looking information and
statements within the meaning of applicable securities laws.
The use of any of the words "expect", "anticipate", "continue",
"estimate", "objective", "ongoing", "may", "will", "should",
"believe", "plans" and similar expressions are intended to identify
forward-looking information or statements. In particular, but
without limiting the foregoing, this document contains
forward-looking information and statements pertaining to the
following: future oil and natural gas prices; future results from
operations; future liquidity and financial capacity and financial
resources; future costs, expenses and royalty rates; future
interest costs; future capital expenditures; future capital
structure and expansion; the making and timing of future regulatory
filings; and the Company's ongoing relationship with major
customers.
The forward-looking information and statements contained in this
document reflect several material factors and expectations and
assumptions of the Company including, without limitation: that the
Company will continue to conduct its operations in a manner
consistent with past operations; the general continuance of current
or, where applicable, assumed industry conditions; the continuance
of existing (and in certain circumstances, the implementation of
proposed) tax, royalty and regulatory regimes; certain commodity
price and other cost assumptions; the continued availability of
adequate debt and/or equity financing and cash flow to funds its
capital and operating requirements as needed; and the extent of its
liabilities. The Company believes the material factors,
expectations and assumptions reflected in the forward-looking
information and statements are reasonable but no assurance can be
given that these factors, expectations and assumptions will prove
to be correct.
The forward-looking information and statements included in this
document are not guarantees of future performance and should not be
unduly relied upon. 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
including, without limitation: changes in commodity prices; changes
in the demand for or supply of the Company's services;
unanticipated operating results; changes in tax or environmental
laws, royalty rates or other regulatory matters; changes in the
development plans of third parties; increased debt levels or debt
service requirements; limited, unfavourable or a lack of access to
capital markets; increased costs; a lack of adequate insurance
coverage; the impact of competitors; reliance on industry partners;
attracting and retaining skilled personnel and certain other risks
detailed from time to time in the Company's public disclosure
documents (including, without limitation, those risks identified in
this document and the Company's Annual Information Form).
The forward-looking information and statements contained in this
document speak only as of the date of the document, and none of the
Company or its subsidiaries assumes any obligation to publicly
update or revise them to reflect new events or circumstances,
except as may be required pursuant to applicable laws.
SOURCE Canyon Services Group Inc.