Dalmac Energy (DAL)
Posted: Tuesday Sep 11 9:55:22AM 2012
Dalmac Energy article in the Edmonton Journal this week.
Lamphier: Edmonton-based Dalmac Energy deserves a little r-e-s-p-e-c-t
Dalmac Energy CEO John Babic, who led his Edmonton-based company to record results in fiscal 2012, sees continued growth in 2013.
Photograph by: Bruce Edwards , Edmonton Journal
EDMONTON — Like many small players in the oilpatch, Dalmac Energy (TSXV:DAL) has a tough time getting noticed.
So when the Edmonton-based oilfield services firm posted record financial results two weeks ago, investors reacted as they usually do: with a shrug.
Although Dalmac’s thinly-traded shares did climb a few pennies on the news, the party fizzled out before it began. The stock closed Friday at just 47 cents on the Venture Exchange — back to where it was in April.
The lack of market recognition obviously annoys Dalmac CEO John Babic, a serial entrepreneur who founded Nisku-based Hyduke Energy Services in 1995, before leaving in 2003 to form Dalmac.
“We’re just getting hammered out there and it’s due to a combination of things,” says Babic, who grew up in Hinton and later studied business at the University of Alberta.
“A lot of investors have a day trader mentality now. Everyone has lowered their expectations. A lot of it stems from the uncertainty in Europe and the financial meltdown we saw (in 2008) that almost brought the world banking system to its knees,” he says.
“So there’s a lot of money sitting on the sidelines. Memories of 2008 are still fresh.”
That could change, of course. Indeed, U.S. stocks hit a five-year high this week, after the head of the European Central Bank said the ECB would prop up the debt-laden economies of Spain and Italy through unlimited purchases of their government bonds.
A weak U.S. jobs report Friday has also heightened expectations that the U.S. central bank will roll out another round of economic stimulus. Those hopes also gave stocks a boost.
Whether the market rally is sustainable or not is anyone’s guess, however. So Babic says he’s more focused on growing his company rather than Dalmac’s share price.
So far, so good. From a standing start in 2003, Dalmac has grown steadily. For the year ended Apr. 30, it posted net earnings of $2.6 million or 13 cents a share on revenues of $35.7 million, up from a profit of $1.9 million or 10 cents a share on revenues of $26.2 million a year earlier.
Babic expects Dalmac to do even better in 2013, driven by growing oil and gas drilling programs in the foothills of west-central Alberta, where it serves the needs of major energy producers like Chevron, Apache, Penn West, Shell and ConocoPhillips.
“There’s more than enough work for a company our size and for the type of work we do, so we’re very fortunate,” he says.
“A lot of the resurgence of activity in the oilpatch is happening right here, in the Fox Creek area, the Edson area or the Drayton Valley area. And a lot of it is due to the new drilling technologies that are being used, such as directional drilling and multi-stage fracking. It’s enabling producers to extract oil and gas from hard rock, in zones that were deemed inaccessible five years ago.”
Dalmac supports those field activities in various ways — by hauling water or other fluids to remote well sites, by trucking crude oil or natural gas liquids to processing facilities, or by hauling waste material to disposal sites.
“There’s a lot of forest in Alberta and a lot of wells aren’t located by the side of a highway or near a pipeline. And everything that comes out of the ground has to be filtered. So we’re like a pipeline on wheels. That’s kind of what we do,” says Babic.
“Our equipment is used at different stages of the well production cycle. So when they’re drilling a well they might need a pressure truck or a hydro-vac to help clean things up. And after a well is drilled they’ll want to fracture the well (to enable the oil or gas to flow). So the amount of water that’s required increases exponentially and it all has to be hauled to that location.”
To support all that field work, Dalmac has steadily built up the size of its staff to about 180, and its fleet of mobile equipment to the current 207 units. It plans to spend $6 million this year to add another 10 or 12 units to its fleet.
“We’ve grown a lot. We started out nearly 10 years ago at about $5 million in revenues and we’ll likely be north of $40 million next year and you have to have the infrastructure to sustain that size of operation. So from where we started there’s been a big change,” says Babic.
“We’re very fortunate that with all these drilling programs there’s a lot of new production they want to tap into and that’s going to keep us going for the forseeable future. So it should bode quite well for Dalmac and for our employees.”
Posted: Tuesday Mar 13 11:24:46AM 2012