Divestco Inc. (TSX VENTURE:DVT) ("Divestco" or the "Company"), an exploration
services company dedicated to providing a comprehensive and integrated portfolio
of data, software and services to the oil and gas industry worldwide, today
announced its financial and operating results for the three and nine months
ended September 30, 2013.
Financial Highlights
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Summary Financial Results (Thousands, Except Per Share Amounts)
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Three months ended September 30
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2013 2012 $ Change % Change
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Revenue $ 4,883 $ 6,409 $ (1,526) -24%
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Operating Expenses 5,219 6,013 (794) -13%
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Other Loss (Income) (24) 40 (64) N/A
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EBITDA (1) (312) 356 (668) N/A
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Finance Costs 301 309 (8) -3%
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Depreciation and Amortization 1,372 1,178 194 16%
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Income (Loss) before Income Taxes (1,985) (1,131) (854) N/A
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Income Tax Expense (Reduction) - (51) 51 N/A
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Net Income (Loss) $ (1,985) $ (1,080) $ (905) N/A
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Per Share - Basic and Diluted (0.03) (0.02) (0.01) N/A
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Funds from (used in) Operations
(2) $ (291) $ 191 $ (482) N/A
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Per Share - Basic and Diluted - - - N/A
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Shares Outstanding 66,921 66,717 N/A N/A
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Weighted Average Shares
Outstanding
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Basic and Diluted 66,909 66,715 N/A N/A
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Summary Financial Results (Thousands, Except Per Share Amounts)
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Nine months ended September 30
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2013 2012 $ Change % Change
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Revenue $ 23,584 $ 32,358 $ (8,774) -27%
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Operating Expenses 17,822 20,229 (2,407) -12%
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Other Loss (Income) 1,666 41 1,625 3963%
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EBITDA (1) 4,096 12,088 (7,992) -66%
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Finance Costs 792 280 512 183%
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Depreciation and Amortization 5,435 9,354 (3,919) -42%
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Income (Loss) before Income Taxes (2,131) 2,454 (4,585) N/A
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Income Tax Expense (Reduction) - (51) 51 N/A
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Net Income (Loss) $ (2,131) $ 2,505 $ (4,636) N/A
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Per Share - Basic and Diluted (0.03) 0.04 (0.07) N/A
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Funds from (used in) Operations
(2) $ 6,093 $ 11,664 $ (5,571) -48%
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Per Share - Basic and Diluted 0.09 0.17 (0.08) -47%
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Shares Outstanding 66,921 66,717 N/A N/A
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Weighted Average Shares
Outstanding
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Basic and Diluted 66,896 66,657 N/A N/A
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(1) EBITDA means earnings before finance Costs, taxes and depreciation and
amortization. Readers are cautioned that EBITDA is generally regarded
as an indirect measure of operating cash flow, and, as such, the
Company believes it is a significant indicator of success of public
companies, and is particularly relevant to readers within the
investment community. EBITDA is not a measure that has a standardized
meaning and accordingly may not be comparable to similar measures used
by other companies.
(2) Funds from (used in) operations is not a calculation based on IFRS and
should not be considered an alternative to cash from operating
activities on consolidated statements of cash flows. Investors should
be cautioned that funds from operations as reported by the Company may
not be comparable in all instances to funds from operations as reported
by other companies. The measure is used by management to evaluate its
performance and to assess the ability of the Company to finance
operating and investing activities. Funds from operations excludes
certain working capital changes and other sources and uses of cash,
which are disclosed in the consolidated statements of cash flows.
Divestco had a net loss of $2 million for the third quarter of 2013 ($0.03 per
share - basic and diluted) compared to a net loss of $1.1 million ($0.02 per
share - basic and diluted) for the same period in 2012. For the nine the months
ended September 30, 2013, the Company had a net loss of $2.1 million ($0.03 per
share - basic and diluted) compared to net income of $2.5 million ($0.04 per
share - basic and diluted) for the same period in 2012. The loss for Q3 2013 was
due to lower revenues and higher depreciation partially offset by lower
operating costs. The loss for the nine months ended September 30, 2013 included
an accounting loss of $1 million and an impairment charge of $0.7 million
related to an asset sale and leasehold improvement write-down, respectively.
Excluding the loss and impairment, the Company would have had a net loss of $0.4
million ($0.01 per share - basic and diluted) for the nine months ended
September 30, 2013
For Q3 2013, Divestco generated revenue of $4.9 million compared to $6.4 million
in Q3 2012, a decrease of $1.5 million (24%). Revenues in the Services segment
improved due to stronger results from seismic processing and land management
services while the Seismic Data and Software & Data segments were weaker. For
the nine months ended September 30, 2013, the Company generated revenue of $23.6
million compared to $32.4 million for the same period in 2012, a decrease of
$8.8 million (27%) due primarily to lower speculative seismic survey activity.
Operating expenses decreased by $0.8 million (13%) to $5.2 million in Q3 2013
from $6 million in Q3 2012. Operating expenses decreased by $2.4 million (12%)
to $17.8 million for the nine months ended September 30, 2013 from $20.2 million
during the same period in 2012. On both a quarterly and year-to-date basis,
salaries and wages were down due to lower headcount and occupancy costs were
lower as the Company surrendered a floor of office space effective January 1,
2013 and another floor effective June 1, 2013.
Depreciation and amortization increased from Q3 2012 to Q3 2013 mainly due to
higher depreciation on seismic data offset by lower amortization of deferred
development costs. For the nine months ended September 30, depreciation and
amortization decreased due to lower depreciation on seismic data as the Company
acquired more data in 2012 as compared to 2013.
Operating highlights for the nine months ended September 30, 2013 included:
-- Reduction of $2.4 million (12%) in operating expenses
-- Surrendered 44,000 square feet office space for a cost savings of
$200,000 per month (22,000 square feet effective January 1, 2013 and
22,000 square feet effective June 1, 2013)
-- Completed $2.2 million in seismic data library sales and completed an 89
km2 seismic data survey
-- Completed $0.9 million of a $1.3 million seismic processing project for
a major client
Financial Position
As at September 30, 2013, Divestco had a working capital deficit of $20,000
(excluding deferred revenue of $4.1 million) compared to a deficit of $7.5
million at December 31, 2012, (excluding deferred revenue of $2.4 million). The
improvement in working capital from the end of 2012 was as a direct result of
debt restructuring, strong seismic cash sales and significant reductions in
operating costs. This allowed the Company to significantly reduce its payables.
The Company's funded debt to equity ratio was 0.74:1 at September 30, 2013
compared to 0.64:1 at December 31, 2012.
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Financial Position (Thousands) Balance as at
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Sep 30 Dec 31 Dec 31
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2013 2012 2011
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Total Assets $ 34,167 $ 41,945 $ 43,761
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Working Capital (Deficit) (1) (20) (7,483) 297
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Long-Term Financial Liabilities (2) 9,514 7,622 8,610
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(1) Working Capital is not a calculation based on IFRS. It is calculated as
current assets minus current liabilities (excluding deferred revenue)
and provides a measure that can be used to gauge Divestco's ability to
meet its current obligations. Excludes the current portion of deferred
revenue of $4.1 million (December 31, 2012: $2.4 million; December 31,
2011: $4.6 million).
(2) Includes long-term debt obligations, deferred rent obligations,
sublease loss provision and other long-term liabilities. The long- term
debt obligations are comprised of the Company's subordinated debt,
shareholder loans and finance leases.
Operations Update
Divestco has filled key leadership positions to further enhance corporate
development and to better align its people with its business strategy. The
Company is realizing significant success in its international expansion efforts
and has secured several multi-year contracts. Although the outlook for 2014 is
somewhat uncertain, management believes its debt restructuring and cost
reduction initiatives have positioned the Company to focus on revenue growth to
maximize cash flows. With the last major occupancy cost reduction having been
completed with the surrender of 22,000 square feet office space effective June
1, 2013, Divestco believes 2014 will realize sustained profitability and
increased shareholder value through improved focus and operational alignment.
Mr. Stephen Popadynetz, CEO commented: "During times when the Western Canadian
oil and gas industry is in contraction, we at Divestco must be ever vigilant of
our costs. We can't increase the industry activity levels, but we can continue
to be efficient with our resources. Despite the challenging economic
environment, Divestco's working capital position is substantially improved from
the end of fiscal 2012. This has been achieved through the restructuring of the
Company's debt, our dedication to cost control and realizing the value of its
assets. Our seismic inventory sales in the first nine months of 2013 remained
strong and, despite the softness in our Services segment as we entered 2013, we
are seeing increased activity levels internationally and domestically which
should result in improved results going forward. Additionally, our Software &
Data segment is rapidly developing new products which are about to hit the
marketplace which we believe will lead to significant growth early next year.
With all of these positive growth catalysts, we remain optimistic that Divestco
will continue to strengthen its balance sheet and reward our shareholders with
significant appreciation in our underlying assets."
About the Company
Divestco is an exploration services company that provides a comprehensive and
integrated portfolio of data, software, and services to the oil and gas
industry. Through continued commitment to align and bundle products and services
to generate value for customers, Divestco is creating an unparalleled set of
integrated solutions and unique benefits for the marketplace. Divestco's breadth
of data, software and services offers customers the ability to access and
analyze the information required to make business decisions and to optimize
their success in the upstream oil and gas industry. Divestco is headquartered in
Calgary, Alberta, Canada and trades on the TSX Venture Exchange under the symbol
"DVT".
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term
is defined in the policies of the TSX Venture Exchange) accepts responsibility
for the adequacy or accuracy of this news release.
This press release contains forward-looking information related to the Company's
capital expenditures, projected growth, view and outlook with respect to future
oil and gas prices and market conditions, and demand for its products and
services. Statements that contain words such as "could', "should", "can",
"anticipate", "expect", "believe", "will", "may" and similar expressions and
statements relating to matters that are not historical facts constitute
"forward-looking information" within the meaning applicable by Canadian
securities legislation. Although management of the Company believes that the
expectations reflected in such forward-looking information are reasonable, there
can be no assurance that such expectations will prove to have been correct
because, should one or more of the risks materialize, or should the assumptions
underlying forward-looking statements or forward-looking information prove
incorrect, actual results may vary materially from those described in this press
release as intended, planned, anticipated, believed, estimated or expected.
Readers should not place undue reliance on forward-looking statements or
forward-looking information. All of the forward-looking statements and
forward-looking information of the Company contained in this press release are
expressly qualified, in their entirety, by this cautionary statement. Except
where required by law, the Company does not assume any obligation to update
these forward-looking statements or forward-looking information if conditions or
opinions should change.
In particular, this press release contains forward-looking statements pertaining
to the following: Company's ability to keep debt and liquidity at acceptable
levels, improve/maintain its working capital position and maintain profitability
in the current economy; availability of external and internal funding for future
operations; relative future competitive position of the Company; nature and
timing of growth; oil and natural gas production levels; planned capital
expenditure programs; supply and demand for oil and natural gas; future demand
for products/services; commodity prices; impact of Canadian federal and
provincial governmental regulation on the Company; expected levels of operating
costs, finance costs and other costs and expenses; future ability to execute
acquisitions and dispositions of assets or businesses; expectations regarding
the Company's ability to raise capital and to add to seismic data through new
seismic shoots and acquisition of existing seismic data; treatment under tax
laws; and new accounting pronouncements.
These forward-looking statements are based upon assumptions including: future
prices for crude oil and natural gas; future interest rates and future
availability of debt and equity financing will be at levels and costs that allow
the Company to manage, operate and finance its business and develop its software
products and various oil and gas datasets including its seismic data library,
and meet its future obligations; the regulatory framework in respect of
royalties, taxes and environmental matters applicable to the Company and its
customers will not become so onerous on both the Company and its customers as to
preclude the Company and its customers from viably managing, operating and
financing its business and the development of its software and data; and that
the Company will continue to be able to identify, attract and employ qualified
staff and obtain the outside expertise as well as specialized and other
equipment it requires to manage, operate and finance its business and develop
its properties.
These forward-looking statements are subject to numerous risks and
uncertainties, certain of which are beyond the Company's control, including:
general economic, market and business conditions; volatility in market prices
for crude oil and natural gas; ability of Divestco's clients to explore for,
develop and produce oil and gas; availability of financing and capital;
fluctuations in interest rates; demand for the Company's product and services;
weather and climate conditions; competitive actions by other companies;
availability of skilled labour; failure to obtain regulatory approvals in a
timely manner; adverse conditions in the debt and equity markets; and government
actions including changes in environment and other regulation.
FOR FURTHER INFORMATION PLEASE CONTACT:
Divestco Inc.
Mr. Stephen Popadynetz
CEO, President and CFO
587-952-8152
Divestco Inc.
Mr. Danny Chiarastella
Vice President, Finance
587-952-8027
www.divestco.com
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