ENTREC Provides Operational Update, Lowers 2014 Revenue Guidance
SPRUCE GROVE, ALBERTA--(Marketwired - Apr 11, 2014) - ENTREC
Corporation (TSX-VENTURE:ENT) ("ENTREC" or the "Company"), a
leading provider of heavy lift and heavy haul services, today
provided an operational update and lowered its 2014 revenue
guidance.
As was guided in ENTREC's Q4 and year-end financial results
press release on March 10, 2014, the Company has been experiencing
lower levels of equipment utilization to begin 2014. ENTREC expects
these lower levels of business activity to continue into the second
quarter. These reduced expectations primarily relate to the timing
and delays in oil sands construction projects.
Based on current expectations for future business activity, and
assuming no business acquisitions are completed, ENTREC estimates
revenue for the year ending December 31, 2014 could range between
$230 and $250 million. This range represents a decline from
ENTREC's previous revenue estimate of between $250 million and $270
million and compares to pro forma revenue of $237 million that
ENTREC and each of its acquired businesses achieved on a combined
basis in the year ended December 31, 2013.
"Our competitive position in our industry and long term outlook
remains positive," said John M. Stevens, ENTREC's President and
CEO. "We believe this period of lower activity will be temporary.
We are now geographically positioned where we want to be, with a
growing equipment fleet offering the complete range of crane and
heavy haul transportation services in markets that will drive
significant growth in our business over the long-term. These
markets include the Alberta oil sands region, the development of
LNG supply and infrastructure in northern British Columbia and
north-west Alberta, and the Bakken region of North Dakota."
Subject to finalization of ENTREC's first quarter financial
results, the Company estimates its first quarter 2014 revenue will
approximate $61 million. ENTREC's 2014 first quarter revenue
remains subject to final quarter-end billing and accounting
adjustments, and as a result, may be different from current
expectations. The Company expects revenue to trend upward in the
second half of 2014 as project work begins to ramp up and
utilization levels increase. ENTREC expects higher utilization
levels in later 2014 could also continue into 2015, 2016, and 2017
due to the long-term nature of many oil sands projects.
With ENTREC's lowered revenue outlook for 2014, the Company also
expects its 2014 adjusted EBITDA margin will decline from 2013.
Lower equipment utilization levels will result in lower absorption
of the fixed components of the Company's operating costs. In
addition, the Company has experienced pricing pressure related to
its heavy haul transportation services due to the current lag in
oil sands construction projects. The Company has experienced
significant increases in fuel costs over the past several months,
which have also reduced the Company's profitability.
ENTREC currently estimates its adjusted EBITDA margin for 2014
could range between 20% and 22%. Consistent with the anticipated
trend in revenue, ENTREC believes its adjusted EBITDA margin will
also begin 2014 lower and then increase as the year progresses and
utilization improves. Subject to finalization of ENTREC's first
quarter financial results, the Company expects its 2014 first
quarter adjusted EBITDA margin could approximate 17%. ENTREC's 2014
first quarter adjusted EBITDA margin remains subject to final
quarter-end accounting adjustments, and as a result, may be
different from current expectations.
ENTREC continues to review its overall capital expenditures
needs and reiterates its $46 million capital expenditure program
for 2014, which will position ENTREC to continue to expand its
crane fleet in anticipation of future demand. As part of this
review, the Company has reallocated approximately $5 million of
capital expenditures to equipment types currently experiencing
higher levels of utilization.
Company Lowering its Cost Structure
ENTREC is working to diligently manage its cost structure to
drive higher profitability in the future. These measures included a
15% reduction in ENTREC's salary workforce in late March 2014 and
closure of two branches. ENTREC is also working with its customers
to recover a portion of the higher fuel costs through rate
increases and fuel surcharges.
Normal Course Issuer Bid (NCIB)
In November 2013 ENTREC implemented a NCIB to purchase for
cancellation, from time to time, its issued and outstanding common
shares. Pursuant to the NCIB, ENTREC may purchase for cancellation
up to a maximum of 8,561,671 common shares, being approximately 10%
of the public float, during the NCIB's term. The NCIB commenced
November 20, 2013 and will terminate on November 19, 2014 or such
earlier time as it is completed or otherwise terminated at ENTREC's
option.
In March and April 2014, the Company acquired 1,474,800 common
shares for cancellation (representing 1.3% of ENTREC's issued and
outstanding common shares) pursuant to the NCIB at an average
purchase price of $1.49 per share.
Despite ENTREC's reduced guidance for 2014, the Company does not
believe it will need to raise any additional equity to fund its
2014 capital expenditure program or NCIB. The Company intends to
fund its 2014 capital expenditure program and NCIB purchases from
its new asset-based debt facility, finance leases and cash from
operating activities.
About ENTREC
ENTREC is a leading provider of heavy lift and heavy haul
services with offerings encompassing crane services, heavy haul
transportation, engineering, logistics and support. ENTREC provides
these services to the oil and natural gas, construction,
petrochemical, mining and power generation industries. ENTREC's
common shares trade on the TSX Venture Exchange under the trading
symbol "ENT".
Non-IFRS Financial Measures
Adjusted EBITDA is defined as earnings before interest,
income taxes, depreciation, amortization, loss (gain) on disposal
of property, plant and equipment, change in fair value of embedded
derivative, share-based compensation, and non-recurring business
acquisition and integration costs. In addition to net income,
Adjusted EBITDA is a useful measure as it provides an indication of
the financial results generated by ENTREC's principal business
activities prior to consideration of how these activities are
financed or how the results are taxed in various jurisdictions and
before certain non-cash expenses.
Adjusted EBITDA also illustrates what ENTREC's EBITDA is,
excluding the effect of non-recurring business acquisition and
integration costs. Adjusted EBITDA margin is calculated as adjusted
EBITDA divided by revenue.
Please see ENTREC's Management Discussion & Analysis for
the year ended December 31, 2013 for reconciliations of adjusted
EBITDA and adjusted net income to net income, the most directly
comparable financial measure calculated and presented in accordance
with IFRS.
Forward-looking Statements
This press release contains forward-looking statements which
reflect ENTREC's current beliefs and are based on information
currently available to ENTREC. These statements require ENTREC to
make assumptions it believes are reasonable and are subject to
inherent risks and uncertainties. Actual results and developments
may differ materially from the results and developments discussed
in the forward-looking statements as certain of these risks and
uncertainties are beyond ENTREC's control.
Examples of such forward-looking statements in this MD&A
include, but are not limited to: expectation that ENTREC's
equipment utilization will remain lower throughout the first half
of 2014; estimate that revenue for the year ending December 31,
2014 could range between $230 million and $250 million; estimate
that revenue for the first quarter ended March 31, 2014 could
approximate $61 million; expectation that demand for the Company's
services in the Alberta oil sands region will gain momentum as the
year progresses; estimate that overall adjusted EBITDA margin for
fiscal 2014 will decline from 2013 and could range between 20% and
22% for the year ending December 31, 2014 and approximate 17% for
the quarter ended March 31, 2014; plan to complete a 2014 capital
expenditure program of $46 million; intention that the 2014 capital
expenditure program and NCIB purchases will be funded from the
Company's asset-based debt facility, finance leases and cash from
operating activities; and that ENTREC will not need to raise
additional equity to fund its 2014 capital expenditure program or
NCIB.
ENTREC's forward-looking statements involve a number of
significant assumptions. Key assumptions utilized in developing
forward-looking statements related to ENTREC's growth and revenue
expectations include achieving its internal revenue, net income and
cash flow forecasts for 2014 and beyond. Key assumptions involved
in preparing ENTREC's internal forecasts include, but are not
limited to, its expectations and estimates that: demand for crane
and heavy haul transportation services in western Canada increase
from current levels in the second half of 2014; ENTREC will be able
to retain key personnel and attract additional high-quality
personnel to support its planned revenue growth; construction
projects and production activity in the Alberta oil sands region
and in northern British Columbia continue at or above current
levels; ENTREC is able to achieve anticipated revenues on current
and future MRO contracts; the planned development of LNG facilities
proceeds and certain customers choose to utilize ENTREC's
services; there are no significant unplanned increases in ENTREC's
cost structure, including those costs related to fuel and wages;
market interest rates remain similar to current rates and that
additional debt financing remains available to ENTREC on similar
terms to its existing debt financing; there is no prolonged period
of inclement weather that impedes or delays the need for crane and
heavy haul transportation services; the competitive landscape in
western Canada for crane and heavy haul transportation services
does not materially change during the remainder of 2014; and there
is no material adverse change in overall economic
conditions.
Achieving these forecasts largely depends on a number of
factors beyond ENTREC's control including several of the risks
discussed further under "Business Risks" in ENTREC Management's
Discussion & Analysis for the year ended December 31, 2013. The
business risks that are most likely to affect ENTREC's ability to
achieve its internal revenue, net income and cash flow forecasts
for 2014 and beyond are the volatility of the oil and gas industry,
its exposure to the Alberta oil sands, workforce availability,
competition, weather and seasonality, availability of debt and
equity financing, competition, and business integration risks.
These risk factors are interdependent and the impact of any one
risk or uncertainty on a particular forward-looking statement is
not determinable.
ENTREC's intention to acquire shares pursuant to its NCIB is
subject to potential fluctuations in the market price of its shares
and the potential management may find another, more desirable use
for its available funds.
ENTREC's ability to finance its capital expenditure program
through its debt facilities depends on its ability to achieve debt
financing terms acceptable to the lenders and ENTREC as well as
meeting its internal cash flow forecasts.
Consequently, all of the forward-looking statements made in
this press release are qualified by these cautionary statements and
other cautionary statements or factors contained herein, and there
can be no assurance that the actual results or developments will be
realized or, even if substantially realized, that they will have
the expected consequences to, or effects on, ENTREC. These
forward-looking statements are made as of the date of this press
release. Except as required by applicable securities legislation,
ENTREC assumes no obligation to update publicly or revise any
forward-looking statements to reflect subsequent information,
events, or circumstances.
Neither the 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 release.
ENTREC CorporationJohn M. StevensPresident & CEO(780)
960-5625ENTREC CorporationJason VandenbergCFO(780)
960-5630www.entrec.com
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