CALGARY, March 29, 2018 /CNW/ - Zedcor Energy Inc. (the
"Company") (TSX VENTURE: ZDC) today announced its financial and
operating results for the year ended December 31, 2017.
Highlights
Amounts in the
following tables are presented in thousands of dollars, except for
per share amounts and percentages.
|
|
Three months
ended December
31
|
Twelve months
ended December
31
|
(in
$000s)
|
2017
|
2016
|
2017
|
2016
|
Revenue
|
4,306
|
3,444
|
14,636
|
10,598
|
|
|
|
|
|
Adjusted
EBITDA1,2
|
1,417
|
258
|
3,931
|
(349)
|
|
|
|
|
|
Adjusted
EBIT1,2
|
(555)
|
(3,346)
|
(2,579)
|
(18,114)
|
|
|
|
|
|
Net loss from
continuing operations
|
(2,618)
|
(3,106)
|
(8,369)
|
(19,617)
|
|
|
|
|
|
Net loss per share
from continuing
operations
|
|
|
|
|
|
Basic
|
($0.05)
|
($0.08)
|
($0.17)
|
($0.49)
|
|
Diluted
|
($0.05)
|
($0.08)
|
($0.17)
|
($0.49)
|
|
|
|
|
|
|
Amounts in table represents continuing operations, which
are comprised of the Energy Services segment and
Corporate
1Adjusted for severances,
business acquisition costs, provision for onerous lease and
refinancing costs
|
2See Financial Measures
Reconciliations below
|
SELECT FINANCIAL RESULTS
- Revenues for the quarter ended December
31, 2017 increased by $0.9
million or 20% from $3.4
million to $4.3 million
compared to the similar quarter in 2016. Commodity prices in the
fourth quarter of 2017 were stronger than the fourth quarter of
2016, which in part resulted in increased demand for drilling
services and ancillary support equipment.
- Net loss from continuing operations for the quarter ended
December 31, 2017 decreased by
$0.5 million from a loss of
$3.1 million to a loss of
$2.6 million compared to the similar
quarter in 2016. The decrease in the net loss from continuing
operations quarter over quarter, excluding the provision for
onerous lease, is $1.5 million. This
is directly related to the increase in revenues and a decrease in
general administrative costs quarter over quarter resulting from
the corporate restructuring that occurred in early 2017.
- Adjusted EBITDA for the quarter ended December 31, 2017 increased by $1.1 million or 82% from $0.3 million to $1.4
million compared to the similar quarter in 2016. This
increase is a result of increased revenue and a decrease in general
and administrative costs of $1.0
million resulting from the cost saving initiatives put in
place over the past year.
- For the year ended December 31,
2017, revenues increased by $4.0
million or 28% from $10.6
million to $14.6 million
compared to the year ended December 31,
2016. In direct relation, Adjusted EBITDA increased by
$4.3 million from $(0.3) million to $3.9
million. This is due in part to increased commodity prices
and in direct relation increased drilling activity in Western Canada when compared to 2016. As a
result there has been an increase in demand for rental equipment
and a modest improvement in rental rates.
- On April 27, 2017, the Company
entered into a Loan and Security Agreement with a new lender for a
term of 12 months. See Liquidity and Capital Resources
section.
- On January 31, 2017, the Company
announced that it had entered into an asset purchase and sale
agreement with Cooper Rentals Canada Inc. to sell all the assets of
4-Way Equipment Rentals. The transaction closed on February 9, 2017. Net proceeds were used to pay
down senior debt.
SELECTED QUARTERLY FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited – in
$000s)
|
Dec
31
2017
|
Sept
30
2017
|
June
30
2017
|
Mar
31
2017
|
Dec
31
2016
|
Sept
30
2016
|
June
30
2016
|
Mar
31
2016
|
|
|
|
|
|
|
|
|
|
Revenue
|
4,306
|
3,539
|
2,348
|
4,442
|
3,444
|
2,374
|
1,469
|
3,311
|
|
|
|
|
|
|
|
|
|
Net loss from
continuing
operations
|
(2,618)
|
(1,254)
|
(3,529)
|
(969)
|
(3,106)
|
(8,680)
|
(4,683)
|
(3,148)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
from
discontinued operation
|
—
|
211
|
—
|
(427)
|
(3,062)
|
(904)
|
(92)
|
(954)
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA¹
|
1,417
|
1,497
|
36
|
1,371
|
258
|
461
|
294
|
1,131
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
per share
|
|
|
|
|
|
|
|
|
|
-
basic¹
|
0.03
|
0.03
|
0.00
|
0.03
|
0.01
|
0.01
|
0.01
|
0.03
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
from
continuing operations
|
|
|
|
|
|
|
|
|
|
Basic
|
(0.05)
|
(0.02)
|
(0.07)
|
(0.02)
|
(0.08)
|
(0.21)
|
(0.12)
|
(0.08)
|
|
Diluted
|
(0.05)
|
(0.02)
|
(0.07)
|
(0.02)
|
(0.08)
|
(0.21)
|
(0.12)
|
(0.08)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
per share
from discontinued operation
|
|
|
|
|
|
|
|
|
|
Basic
|
—
|
0.00
|
—
|
(0.01)
|
(0.07)
|
(0.02)
|
0.00
|
(0.02)
|
|
Diluted
|
—
|
0.00
|
—
|
(0.01)
|
(0.07)
|
(0.02)
|
0.00
|
(0.02)
|
|
|
|
|
|
|
|
|
|
|
Adjusted free cash
flow¹
|
168
|
(707)
|
222
|
(488)
|
386
|
(1,807)
|
1,011
|
3,112
|
|
|
|
|
|
|
|
|
|
1See Financial Measures
Reconciliations below
|
LIQUIDITY AND CAPITAL RESOURCES
Revolving operating facility:
On February 16, 2017, the
Company's Syndicated Credit Facility was amended under the Sixth
Amending Agreement in which the lenders agreed to forbear from
demanding repayment or enforcing its security under the agreement
until April 28, 2017. The sixth
amending agreement included a reduction in the revolving facility
amount from $32.5 million to
$20.97 million.
On April 21, 2017, the Syndicated
Credit Facility was repaid in full and forthwith cancelled.
Loan and security facility:
On April 21, 2017, the Company
entered into a Loan and Security Agreement with a new
lender. The Loan and Security Agreement in the amount of
$20.4 million was used to repay the
Syndicated Credit Facility, bears interest at a rate of 12.75% and
has a term of 12 months with an option to extend for an additional
12 months at the satisfaction of the lender. The Loan and
Security Agreement is serviced by six months of interest only
payments, followed by six months of blended principal and interest
payments. The Loan and Security Agreement does not require
quantitative financial covenants, but imposes restrictions on the
Loan's collateral, being the property and equipment of the
Company.
The Company issued the lender 3,651,501 share purchase
warrants. Each warrant entitles the lender to acquire one
common share in the Company at an exercise price of $0.25 per warrant. The warrants expire 90
days after the term of the loan, July 21,
2019. The warrants fair value of $300 was recorded as a transaction cost of the
loan and will be expensed over the term of the loan.
On March 28, 2018, the Company
renewed the Loan and Security agreement in the amount of
$17.5 million for an additional six
months with an option to renew for an additional six months at the
satisfaction of the lender. The renewed Loan and Security agreement
bears interest at 12.75% and will be serviced by six months of
interest only payments, followed by six months of principal and
interest payments in the event that it is renewed. The Company
also entered into a Warrant Amendment Agreement which amended the
exercise price of the warrants to $0.27 per share from $0.25 per share and extended the expiry date to
July 21, 2020. The facility no longer
has any shareholder guarantees pledged as security, and all
covenants and collateral remain the same.
Operating loan facility:
On May 10, 2017, the Company
signed a $1 million operating loan
agreement bearing interest at a rate of prime plus 3.3% and secured
by the Company's accounts receivables and restricted cash. The
operating loan facility requires that the Company's current ratio
does not fall below 1.50:1.00 and effective September 30, 2017, the debt service coverage
ratio not be less than 1.50:1.00, calculated in accordance with the
formula set forth in the agreement. As at December 31, 2017 the Company's current ratio, as
defined to exclude the loan facility, was 4.4:1.00 and the debt
service coverage ratio was 1.5:1.00.
On March 28, 2018, the Company
signed a $13.5 million credit
facility with a tier 1 bank, comprised of a $3 million operating loan facility, which
replaces the previous $1 million
operating loan facility, a $2.5
million non-revolving term loan facility, which will be used
to pay out the guarantee from the Loan and Security agreement, and
a $8 million equipment finance term
loan facility. The operating loan facility is payable on
demand by the Lender, bears interest at a rate of prime plus 3.3%
and is secured by the Company's accounts receivable. The term
facility will mature in two years, bears interest at a rate of
prime plus 3.3% and is secured by a shareholder guarantee.
The shareholder guarantee bears interest at a rate of 5.0% per
annum and is paid monthly through the issuance of shares. The
equipment finance loan is amortized over 36 months, bears interest
at a rate of 6.1% and is repayable in equal monthly installments of
principal and interest over the term. The equipment finance
loan will be used to finance 75% of the cost of new equipment
purchased. The credit facility requires that the Company's
current ratio does not fall below 1.50:1.00, the debt service
coverage ratio does not fall below 1.25:1.00 and the share value of
the shares pledged under the shareholder guarantee not be less than
1.25 times the value of the outstanding term
facility.
OUTLOOK
While global commodity prices increased throughout 2017,
oilfield activity levels in Canada
only increased marginally year over year due to take away capacity
constraints and uncertainty surrounding a lack of governmental
support for the industry. This has limited investment in the
oil and gas sector in Canada when
compared to other global opportunities as these other opportunities
currently deliver far superior returns on invested capital. While
the Company was able to achieve some pricing increases in the first
half of 2017, the flat demand for rental equipment through the
second half of the year meant the Company was unable to achieve any
further pricing improvements.
The Company anticipates that demand for rental equipment in 2018
to support drilling activity in the Western Canadian Sedimentary
Basin ("WCSB") will be flat when compared to the 2017
demand. Equipment rentals in support of completions activities
however is likely to be stronger in 2018 when compared to 2017. The
Company is thus focusing on expanding customer relationship in
order to capture a greater portion of the completions related
rental equipment demand.
As there is currently much stronger demand for oil and gas
services in the United States,
especially in the Permian Basin, compared to the WCSB, the Company
is reviewing the utilization of all its assets to determine what
underutilized equipment can be sold into the United States at reasonable prices. The
sale of such equipment will result in improved equipment
utilization in Canada and a more
streamlined fleet of rental assets which will reduce repairs and
maintenance costs. Proceeds from any assets sales will be used to
pay down debt or reinvested in new equipment for which there is
strong demand in Canada.
The Company continues to expand its market reach and customer
base from beyond its traditional upstream energy services customers
to new industry segments including industrial facilities and
pipeline construction. This strategy includes purchasing new hybrid
solar light towers which reduce both the customers operating costs
for lighting and their carbon footprint. A number of these
light towers are also being equipped with high resolution security
cameras to provide the customer with surveillance
services. Although Zedcor has just begun to pursue this new
service offering, initial interest from new and existing customers
appears to be strong. Developing this market should lead to
more diversity in the Company's revenue streams and help increase
the utilization of existing rental equipment by penetrating market
segments that are less affected by seasonal fluctuations.
In order to finance the growth of the lighting and surveillance
business line and to also reduce the Company's cost of capital, the
Company recently signed a $13.5
million credit facility with a tier one bank that includes a
$8.0 million equipment financing
facility which bears interest at prime plus 3.3%. The Company
also renewed its Loan and Security facility in the amount of
$17.5 million for six months with
interest only payments required and bearing interest at 12.75%,
followed by an optional six month renewal with principle and
interest. The willingness of a tier one lender to support the
growth of the Company and the reduction in the more expensive loan
facility are milestones in the Company's plan to strengthen the
balance sheet through growth.
NON-IFRS MEASURES RECONCILIATION
The Company uses certain measures in this press release which do
not have any standardized meaning as prescribed by International
Financial Reporting Standards ("IFRS"). These measures which
are derived from information reported in the consolidated
statements of operations and comprehensive income may not be
comparable to similar measures presented by other reporting
issuers. These measures have been described and presented in
this press release in order to provide shareholders and potential
investors with additional information regarding the Company.
Investors are cautioned that EBITDA, adjusted EBITDA, adjusted
EBITDA per share, Adjusted EBIT and adjusted free cash flow are not
acceptable alternatives to net income or net income per share, a
measurement of liquidity, or comparable measures as determined in
accordance with IFRS.
EBITDA and Adjusted EBITDA
EBITDA refers to net income before finance costs, income taxes,
depreciation and amortization. Adjusted EBITDA is calculated as
EBITDA before costs associated with business acquisition costs,
refinancing, severance, gains or losses on disposal or
derecognition of property and equipment, provision for onerous
lease and share based compensation. These measures do not have a
standardized definition prescribed by IFRS and therefore may not be
comparable to similar captioned terms presented by other
issuers.
Management believes that EBITDA and Adjusted EBITDA are useful
measures of performance as they eliminate non-recurring items and
the impact of finance and tax structure variables that exist
between entities. "Adjusted EBITDA per share – basic" refers to
Adjusted EBITDA divided by the weighted average basic number of
shares outstanding during the relevant periods.
A reconciliation of
net income to Adjusted EBITDA is provided below:
|
|
|
|
|
Three months
ended
December 31
|
Twelve months
ended
December 31
|
(in
$000s)
|
2017
|
2016
|
2017
|
2016
|
Net loss from
continuing operations
|
(2,618)
|
(3,106)
|
(8,369)
|
(19,617)
|
Add:
|
|
|
|
|
|
Finance
costs
|
903
|
327
|
3,581
|
1,046
|
|
Depreciation
|
1,400
|
2,932
|
5,887
|
7,887
|
|
Amortization of
intangibles
|
165
|
165
|
660
|
661
|
|
Income taxes
(recovery)
|
6
|
(1,246)
|
(606)
|
(7,126)
|
EBITDA
|
(144)
|
(928)
|
1,153
|
(17,149)
|
Add:
|
|
|
|
|
|
Stock based
compensation
|
5
|
15
|
11
|
136
|
|
Loss on disposal of
property and equipment
|
285
|
672
|
336
|
9,878
|
|
Loss on
derecognition
|
287
|
—
|
287
|
—
|
|
Provision for onerous
lease
|
984
|
—
|
984
|
—
|
|
Impairment of
property and equipment
|
—
|
21
|
—
|
7,822
|
|
Purchase
gain
|
—
|
—
|
—
|
(2,664)
|
|
Severance
costs
|
—
|
478
|
121
|
1,156
|
|
Business acquisition
costs
|
—
|
—
|
—
|
472
|
|
Refinancing
costs
|
—
|
—
|
1,039
|
—
|
Adjusted
EBITDA
|
1,417
|
258
|
3,931
|
(349)
|
Adjusted EBIT
Adjusted EBIT refers to earnings before interest and finance
charges, stock based compensation, taxes, amortization, impairment
of property and equipment, purchase gain, refinancing costs,
severance costs, provision for onerous lease and business
acquisition costs.
A reconciliation of
net income to Adjusted EBIT is provided below:
|
|
|
|
|
Three months ended
December 31
|
Twelve months
ended December 31
|
|
|
|
(in
$000s)
|
2017
|
2016
|
2017
|
2016
|
Net loss from
continuing operations
|
(2,618)
|
(3,106)
|
(8,369)
|
(19,617)
|
Add:
|
|
|
|
|
|
Finance
costs
|
903
|
327
|
3,581
|
1,046
|
|
Stock based
compensation
|
5
|
15
|
11
|
136
|
|
Amortization of
intangibles
|
165
|
165
|
660
|
661
|
|
Provision for onerous
lease
|
984
|
—
|
984
|
—
|
|
Impairment of
property and equipment
|
—
|
21
|
—
|
7,822
|
|
Purchase
gain
|
—
|
—
|
—
|
(2,664)
|
|
Income taxes
(recovery)
|
6
|
(1,246)
|
(606)
|
(7,126)
|
|
Severance
costs
|
—
|
478
|
121
|
1,156
|
|
Business acquisition
costs
|
—
|
—
|
—
|
472
|
|
Refinancing
costs
|
—
|
—
|
1,039
|
—
|
Adjusted
EBIT
|
(555)
|
(3,346)
|
(2,579)
|
(18,114)
|
No Conference Call
No conference call will be held in conjunction with this
release. Full details of the Company's financial results, in the
form of the consolidated financial statements and notes for the
year ended December 31, 2017 and
Management's Discussion and Analysis of the results are available
on SEDAR at www.sedar.com and on the Company's website
at www.zedcor.ca.
About Zedcor Energy Inc.
Zedcor Energy Inc. is a Canadian public corporation and parent
company to Zedcor Energy Services Corp. ("Zedcor"). Zedcor is
engaged in the rental of surface equipment and accommodations to
the Western Canadian Oil and Gas Industry. The Company trades on
the TSX Venture Exchange under the symbol "ZDC".
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this
press release constitute forward-looking statements or
forward-looking information, including management's belief that
improvement in demand should begin to drive improvements in
equipment rental rates and that the expanded market reach and
customer base will lead to more diversity in the Company's revenue
stream and increase utilization. Forward-looking statements or
information may contain statements with the words "anticipate",
"believe", "expect", "plan", "intend", "estimate", "propose",
"budget", "should", "project", "would have realized', "may have
been" or similar words suggesting future outcomes or expectations.
Although the Company believes that the expectations implied in such
forward-looking statements or information are reasonable, undue
reliance should not be placed on these forward-looking statements
because the Company can give no assurance that such statements will
prove to be correct. Forward-looking statements or information are
based on current expectations, estimates and projections that
involve a number of assumptions about the future and uncertainties.
These assumptions include that the Company's cost cutting measures
that have been implemented will protect future margins and that the
Company's lean operations will protect against profound down swings
in the economic environment. Although management believes these
assumptions are reasonable, there can be no assurance that they
will be proved to be correct, and actual results will differ
materially from those anticipated. For this purpose, any
statements herein that are not statements of historical fact may be
deemed to be forward-looking statements. The forward-looking
statements or information contained in this press release are made
as of the date hereof and the Company assumes no obligation to
update publicly or revise any forward-looking statements or
information, whether as a result of new contrary information,
future events or any other reason, unless it is required by any
applicable securities laws. The forward-looking statements or
information contained in this press release are expressly qualified
by this cautionary statement.
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 release.
SOURCE Zedcor Energy Inc.