Flint Energy Services Ltd. Announces Fourth Quarter and Full Year 2011 Results
Posted on March 05, 2012 at 18:24 PM EST
(TSX - FES)
CALGARY, March 5, 2012 /PRNewswire/ - Flint Energy Services Ltd. ("Flint", the "Company") released its fourth quarter and full year 2011 financial results after markets closed today.
Highlights for the Quarter
On February 20, 2012, the Company announced it had entered into an arrangement with URS Corporation ("URS"), in which URS will acquire all of the issued and outstanding common shares of Flint by way of a plan of arrangement for $25.00 per Flint Share or approximately $1.25 billion in aggregate. URS would also assume approximately $225 million in Flint debt.
Revenue for the three months ended December 31, 2011 was $528.1 million compared to $294.8 million in the prior year's comparative quarter, representing an increase of $233.3 million or 79.1 percent. Including Maintenance Services, the total revenue in the fourth quarter was $589.6 million compared to $394.3 million in 2010, making this the second highest revenue quarter in the Company's history. Previously, the highest quarterly revenue was in the fourth quarter of 2008. The increase in revenue for the fourth quarter of 2011 was the result of increased revenue from the Oilfield Services and Production Services segments, which included revenue from the acquisition of Carson Energy Services Ltd. The record levels of revenue in the quarter were achieved despite a period of declining revenues from the Facility Infrastructure and Maintenance Services segments.
The Company's profit for the fourth quarter of 2011 was $11.9 million compared to a loss of $1.0 million in the comparable quarter of 2010. Fully diluted earnings per share were $0.25 for the fourth quarter of 2011, an increase of $0.27 per share from the loss of $0.02 per fully diluted share for the comparative period in 2010. The rise was the result of increased revenues and improved gross margins.
Production Services revenue was $374.3 million, an increase of $185.5 million or 98.3 percent from the fourth quarter of 2010. Approximately 21% percent of the increase was attributable to the Carson operations, with the fourth quarter being the first time its operations were included in the Company's consolidated financial reporting. Canadian Production Services revenue, including Carson, was $261.4 million, up $143.3 million, while United States Production Services revenue was $117.6 million, up $45.8 million over the same period in 2010. Production Services' activity in both Canada and the United States, which typically lags drilling activity by six to eight months, was much busier in the second half of 2011 as a result of stronger levels of drilling over the previous twelve-month period.
Oilfield Services revenue was $83.0 million, up $17.6 million over the fourth quarter of 2010. Revenue was much stronger in the fourth quarter as a result of increased rig moving and improved pricing across most of the Company's active locations in Canada and the United States.
Facility Infrastructure revenue in the fourth quarter of 2011 was $70.8 million, down sequentially from the third quarter of 2011 as a result of decreased oil sands major project revenue, as the Company was finishing work on one major project. In 2011, Flint announced the award of three major oil sands contracts on which the ramp up commenced in early 2012.
Maintenance Services fourth quarter revenue was $61.6 million, down $38.0 million from the same period in 2010, as a result of fewer planned turnarounds and unplanned shutdowns compared to the previous year.
EBITDA for the quarter was $52.2 million, up $28.6 million over the fourth quarter of 2010. As a percentage of revenue, EBITDA was 9.9 percent compared to 8.0 percent in the fourth quarter of the previous year. Production Services reported EBITDA of $45.4 million, up $26.7 million from the fourth quarter of 2010. As a percentage of revenue, Production Services EBITDA was 12.1 percent compared to 9.9 percent in the fourth quarter of 2010. Canadian EBITDA was $29.3 million, up $19.7 million, while United States EBITDA was $16.1 million, up $9.1 million from the fourth quarter of 2010. Improved pricing and equipment utilization were the main factors behind the improved EBITDA.
Oilfield Services EBITDA was $16.3 million, up $4.9 million from the previous year. As a percentage of revenue, Oilfield Services EBITDA was 19.6 percent compared to 17.4 percent in the previous year.
Facility Infrastructure EBITDA was $2.7 million for the quarter, even with EBITDA in the fourth quarter of 2010. EBITDA margin as a percentage of revenue was 3.8 percent compared to 6.5 percent in the fourth quarter of 2010. EBITDA was lower as a result of increased non-reimbursable costs for contract bidding activities, and lower profit fees on one of the Company's cost plus contracts.
Highlights for the Year 2011
Revenue for the year ended December 31, 2011 was $1,616.2 million, up $256.5 million from $1,359.7 million in 2010. Canadian Operations generated $1,160.8 million in revenue, up $111.8 million compared to 2010. Including Maintenance Services, total revenues were $1,923.3 million in 2011 compared to $1,781.3 million in 2010. The increase in revenue was a result of increased activity levels in both Production Services and Oilfield Services, and the acquisition of Carson Energy Services Ltd. in the fourth quarter of 2011. United States revenue for 2011 was $455.4 million, up $144.7 million over 2010, due to increased activity within Oilfield Services and Production Services, notably in Texas and North Dakota. These increases were offset by lower revenues in Facility Infrastructure due to less major contract work in 2011. Facility Infrastructure revenues were $282.6 million, down $72.4 million from 2010. Maintenance Services revenues were $307.1 million for 2011, down $114.6 million compared to $421.7 million in 2010, as a result of reduced major turnaround work in 2011 compared to 2010.
EBITDA for 2011 was $128.2 million, compared to $130.7 million in 2010. As a percentage of revenue, 2011 EBITDA was 7.9 percent compared to 9.6 percent in 2010. The lower EBITDA was due primarily to lower revenues and weaker pricing in the first half of 2011.
EBITDA for the Production Services segment was $100.2 million compared to $95.0 million in 2010. The EBITDA margin percentage in this segment was 9.8 percent, a decrease of 2.3 percent from 12.1 percent in 2010. The decrease resulted from low utilization of equipment and resources due to delays in work in Canada, and poor weather in parts of the United States during the first six months of the year.
Oilfield Services segment EBITDA was $57.7 million, up $28.8 million from 2010. EBITDA margins increased to 18.3 percent compared to 13.1 percent in 2010, as a result of improved asset utilization and a profitable expansion into the US market.
The EBITDA margin in the Facility Infrastructure segment was 6.5 percent, compared to 14.0 percent in 2010, a decrease of 7.5 percent as a result of lower revenue and higher non-reimbursable costs for ongoing bidding and estimating for future projects.
EBITDA for Maintenance Services, not included in total EBITDA, was $24.4 million, down $5.7 million from 2010. EBITDA margin for the Maintenance Services segment increased to 7.9 kpercent from 7.2 percent in 2010 due to decreased general and administrative expenses during the year.
Profit for 2011 was $23.8 million, down $11.3 million from $35.1 million in 2010. Excluding non-recurring debt restructuring costs of $7.8 million, severance costs relating to an internal reorganization of $1.3 million, and gain on sale of business of $1.8 million (net of tax), the adjusted profit was $29.6 million.
Fully diluted earnings per share for the year were $0.51 compared to $0.76 in the prior year. Excluding non-recurring debt restructuring costs, severance costs relating to an internal reorganization, and gain on sale of business, the adjusted earnings per share was $0.63 per common share - diluted.
W. J. (Bill) Lingard, President and Chief Executive Officer said, "The strong results during the fourth quarter will be largely overshadowed by the announcement on February 20, 2012, that URS Corporation plans to acquire Flint for $1.25 billion. This was our highest revenue quarter since 2008. I want to acknowledge the strong performance provided by the Oilfield Services segment, the Production Services segment, and the Carson Energy Services team in the fourth quarter. Our Facility Infrastructure backlog of close to $800 million will provide good visibility in revenues for the segment through 2012 and 2013, and our Production Services segment is seeing stronger activity levels as a result of a growing backlog of recently drilled wells, and pipeline and field facilities projects. Maintenance Services is likewise well positioned for steady revenues in 2012, with 2013 looking like a big growth year." Mr. Lingard went on to say, "Subject to shareholder and regulatory approvals, we expect URS' transaction to purchase the Company will be completed in the second quarter. In the meantime, we are very busy in the first quarter of 2012 and it is business as usual at Flint."
While natural gas prices have been pushed to 15-year lows by increased production and weaker seasonal demand, oil prices continue to hold at or near US$100 per barrel. Stable crude oil pricing is expected to support continued high levels of oil and liquids rich gas drilling in both Canada and the United States through 2012.
Oil-directed drilling currently represents 60 percent of activity in the United States and 70 percent in Canada. Management expects the strong oil and liquids-rich gas drilling activity will offset any weakness resulting from low natural gas pricing in 2012, especially in liquids-rich plays such as the Eagle Ford in Texas and the Bakken shale oil production in both Saskatchewan and North Dakota. As a result, demand for upstream energy services is currently much higher than supply, with lack of experienced people as the primary reason for the tight supply.
Production Services and Oilfield Services activities in both Canada and the United States are benefitting from the current level of oil and gas drilling, with rig activity in 2011 up 27 percent over 2010, and with new wells totaling an estimated 66,424 in 2011, up 4 percent over 2010. Current active rig counts in the United States are at levels seen in the previous peak of activity in 2008, while current Canadian activity is the strongest seen in the past five years.
As a result, the Company's Production Services segment has increased levels of well tie-in, gathering line, pipeline and field facility project backlog in both Canada and the United States. This should lead to increased levels of activity throughout 2012 for Production Services in both Canada and the United States. Along with the acquisition of Carson Energy Services Ltd. late in 2011 and the expansion into North Dakota and Texas, additional revenues are expected from the new geographic operations established in 2011.
Oilfield Services rig moving contract volumes and pricing in both Canada and the United States are up as a result of increased well drilling activity, while fluid hauling contracts in both Canada and the United States have also benefitted from increased shale oil and heavy oil production. In February, rig activity averaged at 706 active rigs in Canada, and 1,990 active rigs in the US. Management expects a typical seasonal slow-down in Canada in Q2 2012, followed by levels of activity similar to 2011 in the second half of 2012. In the United States, Management expects rig activity to remain at 2011 levels.
Oil sands capital spending in 2011 reached an estimated $16 billion and, according to the Canadian Association of Petroleum Producers (CAPP), spending is projected to increase to as much as $22 billion per year by 2014. Many new projects have been announced and have completed regulatory approval. The Company's backlog of oil sands construction work currently stands close to $800 million and is expected to grow in 2012. The Company has existing contracts with four oil sands producers; two of which are underway, and two that will begin to ramp up in the second half of 2012. As a result, revenues in the Facility Infrastructure segment are expected to increase throughout the year.
FT Services, the Company's Maintenance Services operation, expects lower levels of plant turnaround work; however, ongoing maintenance contract work on the four existing multi-year maintenance contracts is expected to provide stable revenues throughout 2012.
Management's focus for 2012 will be on improving operating margins and building capacity. Management will also be focused on recruiting the necessary labour for our major projects, and completing the successful integration of Carson Energy Services Ltd.
Flint Energy Services Ltd. is a market leader providing an expanding range of integrated products and services for the oil and gas industry including: production services; infrastructure construction; oilfield transportation; and maintenance services. With more than 10,000 employees, Flint provides this unique breadth of products and services through over 82 strategic locations in the oil and gas producing areas of Western North America, from Inuvik in the Northwest Territories to Mission, Texas on the Mexican border. Flint is a preferred provider of infrastructure construction management, module fabrication, maintenance services for upgrading, and production facilities in Alberta's oil sands sector.
FORWARD LOOKING STATEMENTS
A conference call with management to discuss the Company's fourth quarter and full year 2011 results and outlook is scheduled for 10:00 AM Eastern Time on Tuesday, March 6, 2012. Details on how to participate in or listen to the call are available on the Company's website: www.flintenergy.com.
SOURCE Flint Energy Services Ltd.
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