New West Energy Services Inc. Announces Financial Results for Third Quarter 2018

By December 3, 20182018, News Releases

CALGARY, Nov. 28, 2018 /CNW/ – New West Energy Services Inc. (TSX Venture: NWE), an oil and gas and environmental services company focused on Western Canada, today announced its financial results for the third quarter of 2018.

NOTE REGARDING CHANGE IN FINANCIAL YEAR-END

NWE has changed its financial year-end from April 30 to December 31 to better conform with other similar energy services companies in the industry and to line up the company’s quarterly filings with more traditional quarters.  Consequently, in this new financial year commencing January 1, 2018, NWE is reporting unaudited third quarter interim financial results for the nine months ended September 30, 2018 compared to the nine months ended October 31, 2017.

Going forward, NWE will use a customary quarterly reporting calendar based on a December 31 financial year-end, with fiscal quarters ending on the last day in March, June, September and December each year.

FINANCIAL HIGHLIGHTS

Gerry E. Kerkhoff, President and Chief Executive Officer of NWE stated “Since 2016, New West has recorded top line improvement driven primarily by growth in our Vacuum Truck and Fluid Transportation Services division.  In the third quarter, our drilling services equipment was at near full utilization and recorded a 71% increase in revenue from the year before, but our revenue from completions and production was down 49% due to producers delaying projects as a result of deteriorating market conditions.”

Mr. Kerkhoff continued: “Over the past two months, the decrease in the price of benchmark WTI crude and a sharp increase in the price differential between US and Canadian crude has created industry volatility.  Management expects sector fundamentals to improve in 2019 with an increase in rail transportation capacity, the completion of the Enbridge Inc. Line 3 pipeline replacement and additional U.S. refineries going online following maintenance shutdowns.  Overall equipment rates have started to increase, which should help to improve our margins.  Also, we have completed major repairs on our fluid transportation equipment, which has reduced our reliance on low margin third-party contractors.  Subject to increasing activity in the completions and production sector, management expects top and bottom line improvement in the fourth quarter of 2018 and first quarter of 2019.”

  • Revenue was $14,827,975 in the nine months ended September 30, 2018 compared to $14,588,531 in the nine months ended October 31, 2017, and $4,297,083 in the three months ended September 30, 2018 compared to $5,515,060 in the three months ended October 31, 2017. While there was a consistency between the two nine-month periods, in the current period, NWE realized much stronger revenue in the first quarter which was offset by a significant decrease in revenue in the second and third quarters – mostly due to a longer period of spring break up across all sectors and a reduction in completions activity in the third quarter.
  • Gross margin decreased to 15% in the nine months ended September 30, 2018 from 19% in the nine months ended October 31, 2017, due primarily to a significant reduction in revenue in the second and third quarter of 2018 with an increase proportionally in direct costs, including higher fuel and labour costs relative to NWE’s service rates and proportionally higher repair and maintenance costs for equipment in the first and second quarter. In the three months ended September 30, 2018, gross margin increased to 26% when compared to 21% in the three months ended October 31, 2017. This increase is due primarily to the Vacuum Truck and Fluid Transportation Services division where, in the drilling sector, revenue increased by 71% and gross margin improved from 28 to 35%. In the completions and production sectors, revenue decreased by 49% but was offset by a significant decrease in associated expenses, coupled with a decrease in reliance on low margin third-party contractors, resulting in gross margin decreasing slightly from 13 to 11%.
  • General and administrative expenses were $2,777,314 in the nine months ended September 30, 2018 compared to $2,509,516 in the nine months ended October 31, 2017, due mainly to expenses associated with the hiring of personnel and the continued establishment of operations in Grande Prairie servicing the completions and production sectors, and $901,188 in the three months ended September 30, 2018 compared to $910,310 in the three months ended October 31, 2017, reflecting a consistency between the two reporting periods.
  • Normalized EBITDAC was $19,875 in the nine months ended September 30, 2018 compared to $779,765 in the nine months ended October 31, 2017, and $224,655 in the three months ended September 30, 2018 compared to $243,573 in the three months ended October 31, 2017.

                    For the nine months ended September 30,   

                    For the nine months ended October 31, 

2018

2017

Vacuum Truck &

Fluid

Transportation

Services

Environmental

Services

Corporate

Total

Vacuum Truck &

Fluid

Transportation

Services

Environmental

Services

Corporate

Total

$

$

$

$

$

$

$

$

Revenue

11,714,051

3,113,924

14,827,975

11,021,536

3,566,995

14,588,531

Direct costs

9,985,819

2,092,105

12,077,924

8,918,572

2,386,847

11,305,419

Gross margin

1,728,232

1,021,819

2,750,051

2,102,964

1,180,148

3,283,112

G & A expenses

1,454,070

1,059,417

263,827

2,777,314

1,210,708

1,027,885

270,923

2,509,516

Share base pmts

109,043

109,043

540,269

540,269

Finance charges

443,112

45,745

77,993

566,850

530,240

38,959

121,695

690,894

Depreciation

1,112,002

1,112,002

1,311,700

1,311,700

Disposal of assets

141,894

141,894

79,213

79,213

Net loss before tax

(1,422,846)

(83,343)

(450,863)

(1,957,052)

(1,028,897)

113,304

(932,887)

(1,848,480)

Total assets 

11,643,203

771,752

13,822

12,428,777

14,238,484

1,341,434

60,889

15,640,807

EBITDAC*

310,029

(37,598)

(252,556)

19,875

892,256

158,432

(270,923)

779,765

                  For the three months ended September 30,  

               For the three months ended October 31, 

2018

2017

Vacuum Truck &

Fluid

Transportation

Services

Environmental

Services

Corporate

Total

Vacuum Truck &

Fluid

Transportation

Services

Environmental

Services

Corporate

Total

$

$

$

$

$

$

$

$

Revenue

3,360,041

937,042

4,297,083

4,266,120

1,248,940

5,515,060

Direct costs

2,574,902

607,609

3,182,511

3,562,477

798,700

4,361,177

Gross margin

785,139

329,433

1,114,572

703,643

450,240

1,153,883

G & A expenses

458,112

341,640

101,436

901,188

482,004

341,902

86,404

910,310

Share base pmts

92,532

92,532

Finance charges

145,886

13,290

30,450

189,626

159,207

19,032

41,174

219,413

Depreciation

375,221

375,221

444,343

444,343

Disposal of assets

70,013

70,013

68,647

68,647

Net loss before tax

(264,093)

(25,497)

(224,418)

(514,008)

(450,558)

89,306

(127,578)

(488,830)

Total assets 

11,643,203

771,752

13,822

12,428,777

14,238,484

1,341,434

60,889

15,640,807

EBITDAC*

327,027

(12,207)

(90,165)

224,655

221,639

108,338

(86,404)

243,573

* Normalized EBITDAC is earnings from continuing operations before interest, taxes, depreciation, amortization and share-based payments and is a measure of NWE’s operating profitability. The calculation is further adjusted to normalize EBITDAC by removing any non-reoccurring transactions that are not in the normal course of operations.  ** Copies of NWE’s financial statements, MD&A and other public filings are available under the company’s profile on SEDAR at www.sedar.com.

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.

Cautionary Note Regarding Forward-Looking Information

Certain statements in this news release may constitute “forward-looking information” within the meaning of applicable securities laws that involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward-looking information and financial outlook.  Forward-looking information is identified by the use of terms and phrases such as “anticipate”, “believe”, “could”, “should”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, “would”, and similar terms and phrases, including references to assumptions.  Such information may involve, but is not limited to, comments with respect to strategies, expectations, planned operations or future actions.  Forward-looking information in this news release includes, without limitation, statements with respect to: the use of proceeds of its loans; the use of the acquired equipment; planned changes in NWE’s business and revenues; the competitive environment in which NWE operates; and the assessment of future plans and operations.  Actual events or results may differ materially.  The forward-looking information in this news release is based on assumptions which includes, but is not limited to: NWE realizing the expected benefits of its loans and acquired equipment; the general state of the economy and the oil and gas industry not worsening; NWE not losing any key personnel; NWE sustaining or increasing their level of revenues and EBITDAC  NWE growing its businesses long term and managing its growth; NWE complying with existing regulations and not becoming subject to more stringent regulations; and, NWE’s insurance being sufficient to cover losses that may occur as a result of its operations.  The forward-looking information in this news release is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information.  The factors which could cause results to differ from current expectations include, but are not limited to: failure to realize the expected benefits of its loans and acquired equipment; potential undisclosed liens associated with the acquired equipment; NWE’s results being dependent upon the general state of the economy and the oil and gas industry; NWE being dependent on key personnel, the loss of which could harm its business; NWE may not be able to sustain or increase their revenues or EBITDAC; NWE may be unable to grow its business long term or to manage any growth; NWE may be unable to integrate the acquired equipment into its business; competition in NWE’s markets may lead to reduced revenues and EBITDAC; NWE may fail to comply with existing regulations or become subject to more stringent regulations; NWE’s insurance may be insufficient to cover losses that may occur as a result of NWE’s operations; the market price of NWE’s common shares will fluctuate; and, there is a possibility of dilution of existing holders of NWE’s common shares due to future financings or acquisitions.  Although NWE has attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements in this news release, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Also, many of the factors are beyond the control of NWE.  Accordingly, readers should not place undue reliance on the forward-looking information in this news release.  The forward-looking information is made as of the date of this news release, and NWE does not assume any obligation to publicly update or revise such forward-looking information to reflect new information, subsequent or otherwise, except as may be required by applicable law.  The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement.

SOURCE New West Energy Services Inc.

For further information: Contact Information: New West Energy Services Inc., Attention: Gerry E. Kerkhoff, President and Chief Executive Officer, Phone: 403.984.9798 or 1.888.977.2327 (BEAR), Fax: 403.984.9799, Email: gkerkhoff@newwestenergyservices.com, Website: www.newwestenergyservices.com or The Howard Group Inc. (Investor Relations), Attention: Dave Burwell, Vice President, Phone: 403.221.0915 or 1.888.221.0915, Email: dave@howardgroupinc.com, Website: www.howardgroupinc.com

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