DAL Dalmac Energy Inc

DALMAC ENERGY INC. TSX Venture: "DAL"

EDMONTON, Sept. 28, 2015 /CNW/ - John Babic, President and CEO of Dalmac Energy Inc. ("Dalmac") (TSX Venture "DAL") is pleased to announce first quarter results for the fiscal year ended July 31, 2015

The first month of Q1`16 impacted Dalmac harder than what was normally expected. Apart from the usual spring break up conditions and the ensuing road bans, there was a further delay of activity resulting from E&P producers pressing the pause button on capital expenditures in order to review their priorities. In the second and third month of Q1`16, seasonal road bans began to lift and activity levels began to bounce back albeit modestly. Some of our major customers began implementing a vendor consolidation initiatives. The object of these initiatives was to reduce internal overhead loads by concentrating field service operations amongst a smaller group of select service providers of which Dalmac was successful in being selected as the business partner of choice. The full effect of restructuring was scheduled to be phased in over the next 2-3 months. While this process was underway much of the production and service activates along with much needed capital expenditures were delayed until the initiatives where complete. The effect of these developments resulted a revenue reduction of about 26% to $5.3M from the same period last year. The net loss for the quarter increased by $400K to $762K as compared to the same period last year. Despite a decrease in revenues of $1.8M, we only experienced an increase in to the net loss of $401K. This is largely in part to cost cutting measures that were implemented at the end of Q4'15 and the results of which were largely felt in Q1'16. Losses in the first quarter are not unusual, taking into account the seasonality of Dalmac's business.

Gross Margin, as defined as revenue less direct operating costs as a percentage of revenue, was 16% for the quarter as compared to 22% for the same period in the previous year.  A significant reason why gross margin has decreased for the quarter is due to the pressure from customers to cut rates, as previously mentioned in the YE'15 MD&A. Reacting to these rate cuts, which were in the vicinity of 20%, Dalmac has endeavored mitigate the impact by right sizing staffing requirements and focusing on greater efficiencies in the delivery of our product and service mix to our customers.

Outlook
Dalmac's revenue is primarily derived from the provision of specialized transportation and oilfield services to companies engaged in exploration, development of petroleum production. As such the demand for Dalmac's services are inextricably connected to the general economic conditions of the energy industry and the utilization levels of drilling and completion activity. The low oil prices are not only impacting the oil and gas industry, but are having a trickle down negative impact on many of companies servicing the energy sector.  Although the energy industry is less robust than expected, some of our key customers have indicated that they will proceed with planned drilling and completions projects targeted for this fall-winter season and certain others are not anticipating real growth for the remainder of the year. The degree of timing variation for the commencement of scheduled projects may create fluctuations in revenue over the balance of the year. Though these conditions may present challenges, we will continue to focus on our commitment to operational excellence by tightening up on cost controls, rationalizing capital expenditures and improving asset utility wherever possible. Dalmac will also continue to focus on building a strong balance sheet while keeping close watch on maintaining low debt levels which will allow us to take advantage of revenue growth opportunities that may require new capital or opportunistic acquisitions that match our strategic growth objective of delivering value for our shareholders.

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.