Posted: Friday Aug 29 9:26:06AM 2014
Dalmac posted year-end numbers this morning. Hopefully an end to what has been a very challenging year. One-time leasing costs killed them in Q4 but EBITDAS showed huge improvement. Goal this next year is to get margins back to 30% and revenues back to $40 million. If they can do that then earnings should turn around significantly.
I would invite everyone to listen to the conference call today at 1:30EST. Instructions are at the bottom of the press release.
DALMAC ENERGY REPORTS YEAR END 2014 FINANCIAL RESULTS
Dalmac Energy Inc. has released fourth-quarter and annual financial results for the fiscal year ended April 30, 2014.
Fourth-quarter and annual financial highlights:
- EBITDA (earnings before interest, taxes, depreciation and amortization) increases 83 per cent to $2.1-million for fourth-quarter 2014.
- Non-recurring adjustments concerning equipment lease expenses decrease net income by $1.6-million.
- Two thousand fourteen revenue was down by $4.0-million due to the cancellation of committed drilling programs by a key customer.
- Dalmac hired a new chief financial officer.
- Over $175,000 was spent on modern information-technology system development, designed to reduce costs.
SELECTED FINANCIAL INFORMATION (in thousands of dollars, except per-share data) Q4 2014 Q4 2013 2014 2013 Revenues $9,923 $11,476 $37,132 $41,304 Gross margin 1,954 2,535 8,577 10,504 General and administrative expenses 757 640 2,233 2,359 EBITDA (loss) 2,074 1,130 5,131 5,222 EBIDTA per share -- basic 0.09 0.05 0.22 0.23 Amortization 1,006 683 3,179 2,446 Net income (loss) (710) (30) (520) 1,512 Net income (loss) per share -- basic (0.03) (0.00) (0.02) 0.07 Net income (loss) per share -- diluted (0.03) (0.00) (0.02) 0.06
Revenue for 2014 came in at $37-million, which represents a decrease of about 10 per cent or $4.1-million from the previous year. Fiscal 2014 was weighed down by factors such as a slower-than-expected first quarter and a lower-than-normal utilization of well servicing equipment. As stated in earlier management's discussion and analyses, this year's first-quarter operations were hampered by rainy and wet seasonal conditions, which resulted in the cancellation of many work projects. The latter issue, which concerns the lower-than-expected well service equipment utilizations, is attributed to a late cancellation of committed drilling projects by one of the company's main customers. Given that the bookings for drilling and completion work were made months in advance, this late cancellation resulted in lost opportunities for bidding on other drilling and completion projects. This decrease in service revenue also affected fourth-quarter 2014, which was down 14 per cent or $1.5-million in comparison with the same quarter last year. Responding to this development, Dalmac has redressed its handling of committed equipment contracts by making provisions for non-performance in the event a similar situation arises.
Gross margin as a percentage for 2014 was 23 per cent compared with 25 per cent for 2013. The decline is a direct result of non-recurring lease payments expensed in the amount of $1.6-million in 2014 related to operating lease agreements entered into by the company in 2013. During fourth-quarter 2014 the company exercised the buyout clause of these lease agreements as the buyout amount was at a significant discount to fair value. Even after factoring in new finance costs, the decision to exercise the buyout resulted in a further monthly cash savings of about $100,000 by eliminating the lease payments. Other factors impacting the gross margin in 2014 were rising fuel and maintenance costs.
Net income in 2014 was impacted by $1.6-million in non-reoccurring lease payment expenses, referenced earlier in the gross margin section of this management's discussion and analysis, which resulted in a net loss of $520,000 as compared with a net income of $1.5-million in the previous year.
EBITDA for the fourth quarter improved by an impressive 83 per cent to $2.1-million, as compared with the same period last year. Year-end EBITDA dropped marginally by 2 per cent to $5.1-million as compared with 2013. Had it not been for the rough start to the beginning of the year and the cancellation of seasonal drilling programs by one of the company's key customers, EBITDA would have been in the proximity of record levels.
In May of 2014, Dalmac's chief financial officer resigned for personal reasons. On Aug. 22, 2014, the company announced the hiring of Jonathan Gallo, CA, MBA, as its new chief financial officer and released a news release on the same date.
Also as part of its continuous improvement process, Dalmac has invested over $175,000 in the development and implementation of a modern IT system, which is part and parcel of the process control system for dispatching, fleet management and tracking, invoicing, and journey management. Management feels that this system will enable the company to operate more efficiently and effectively and will enable it to reduce costs and improve profits and revenues.
Dalmac remains optimistic looking forward as rig counts are projected to continue to improve over the remainder of 2014 and into 2015. Confidence in the Canadian oil and gas market is further illustrated through the approximately $15-billion worth of mergers and acquisitions in the first six months of 2014 as compared with $12.4-billion during all of 2013. The driving factor for all of this activity is mainly the increased interest in the shale oil and gas plays. Dalmac's focus for the remainder of 2014 will be on continued productivity improvements, such as the implementation of a new computerized dispatching and invoicing system. Not only will these improvements aid in streamlining labour costs, optimize equipment deployment, monitor and expedite improvements in fleet operations and maintenance, but they will also shed more light as to how to better utilize excess capacity. Management feels these processes will not only help lower operating costs but will also afford Dalmac the opportunity to better position itself for increased growth and profitability in fiscal 2015.
A conference call to discuss the results will be held Friday, Aug. 29, 2014, at 1:30 p.m. EST/11:30 a.m. MST.
To participate in the conference call, please dial 416-847-6330 local in Toronto or toll-free 1-866-530-1553 and request the Dalmac Energy conference.