DAL Dalmac Energy Inc

TSX Venture: "DAL"

EDMONTON, Nov. 21, 2013 /CNW/ - John Babic, President and CEO of Dalmac Energy Inc. ("Dalmac") (TSX Venture "DAL") is pleased to announce fiscal 2014 second quarter financial results for the three month and six month periods ended October 31, 2013.

Revenue in the second quarter was $9.3 million as compared with $10.1 million in the second quarter of the prior year. Net Earnings for Q2'14 were $313K as opposed to $719K in the previous year. Gross margin of 27% for the current quarter represents an increase of 9% over Q1'14 and is only 2% shy of the 29% for YTD'13. Given that the majority of Dalmac's service activity in Q2'14 was production related this is a positive indicator of improving profitability as production operations are more price sensitive than drilling and completions. The margin is expected to continue to improve with the advent of more drilling and completion activity.  The Q2'14 EBITDAS declined 25% to $1.3M and was down 52% for the year to date.

The current quarter (Q2'14) was impacted by Canadian natural gas prices which fell sharply in July on the announcement that TransCanada Corp. intended to raise its short-term tolls on its cross-country natural gas pipelines in an effort to get shippers to sign up for long-term contracts. Producers reacted by putting more gas into storage rather than shipping it. This set the stage for lower gas pricing which is expected to linger until the onset of the winter heating season. According to a Bloomberg News Report on September 13, gas shipped from the Alberta AECO hub traded at a discount of $1.72 per MMBtu which is the widest since November 2009. The average discount price last year was about $0.54. Oil prices were also impacted by pipeline charges. As of the aforementioned date, western Canadian Select prices were discounted by $27/bbl from the WTI price. This was the steepest discount since March 4, 2013. The net impact of all this to Dalmac is that it pushed back the start of the drilling and completion season by about 2 months.

Outlook

Dalmac continues to believe oilfield services activity for the remainder of 2013 will improve as the cold weather kicks in and narrows the oil and gas price differentials by increasing demand. Also in October 2013, Dalmac entered into a rental agreement with a frac tank provider which will enable the Company to bid on entire frac jobs requiring water storage capacities ranging from 1420m3 to 6550m3. This will not only help our customers increase their water management efficiencies but will also create more demand for our fluid hauling operations. The outlook for the longer term is equally gratifying as new liquefied natural gas projects gain approval and crude oil transportation capacity increases as a result of rail and pipeline development. Dalmac expects that the forecasted drilling activity increases in the Duvernay and Montney resource plays of Alberta will not only stimulate more production opportunities but will also create more demand for all of the Company's products and services. Currently, the largest challenges facing the oilfield services industry are producer spending constraints, pricing differentials on Canadian crude oil, historically low natural gas prices, and the challenge to attract and retain skilled labour.  Dalmac believes that its new and expanded product and equipment mix along with its corporate culture will provide a distinct advantage in retaining and attracting qualified individuals.  Dalmac is of the view that its strong customer base and solid reputation will provide a compelling competitive advantage which will enable the Company to continue its growth strategy and enable it to perform better than its current industry peers.

Conference call

A conference call to discuss the results will be held Thursday, November 21, 2013, at 1:30 pm EST/11:30 am MST.

To participate in the conference call, please dial 416-644-3417 local in Toronto or toll-free 1-800-814-4861 and request the Dalmac Energy conference.

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

SOURCE Dalmac Energy Inc.