QIS Update #10 2012 - March 13th 2012
Included in this update:
- Dalmac Energy announces third quarter results. Conference call this afternoon.
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Dalmac Energy Inc. (DAL:TSX-V)
Current Price: $0.55 (coverage commenced Nov 15/11 - $0.37)
Dalmac Energy Inc. announced this morning its third quarter financial results for the three and nine month periods ended January 31, 2012.
|LATEST FINANCIAL RESULTS|
|3 Mos. Ended Jan 31||9 Mos. Ended Jan 31|
Revenues for third quarter 2012 increased by 33 per cent to $11-million in comparison with $8-million in third quarter 2011. Year-to-date 2012 revenues increased 38 per cent to $25-million as compared with $18-million for year-to-date 2011. The gross margin for the quarter was $3.7-million and $7.7-million for the year to date. The gross margin, as a percentage of revenue, remained firm at 34 per cent for both third quarter 2012 and third quarter 2011. The year-to-date 2012 gross margin was 31 per cent compared with 34 per cent reported in year-to-date 2011. This slight decrease is in good part associated with the implementation of safety ($250,000) and employee training ($75,000) costs referenced in the first quarter 2012 management discussion and analysis.
Pretax net earnings for third quarter 2012 increased by 54 per cent over third quarter 2011 to $1.8-million (nine cents per share) compared wih $1.1-million (six cents per share). Year-to-date 2012 pretax net earnings increased by 52 per cent over year-to-date 2011 to $2.4-million (12 cents per share) compared with $1.6-million (nine cents per share). Following a $448,605 future tax allocation in the current quarter, the company's net earnings increased by 15 per cent, to $1.3-million (seven cents per share) on the quarter and 24 per cent to $1.9-million (10 cents per share) for the year to date. There were no future tax accruals entered in third quarter 2011 or year-to-date 2011.
Despite the relatively mild winter which signalled a delayed start to the normal winter well servicing demands, third quarter 2012 turned out to be a record setting quarter for Dalmac, one in which the activity levels significantly surpassed those of third quarter 2011. This trend is consistent with the overall industry usage rates which are surging at record levels. The metrics driving the current activity stem mainly from strong oil prices. The producers are being compensated for the weaker natural gas prices by making a shift from natural gas to liquids and crude oil. Concurrent with this development is the resulting trend toward more complex well completions which are deeper and take longer to drill. This trend is serving to provide an increased revenue stream for Dalmac's servicing of the drilling and production sectors. In order to gain more exposure to the increased oil field service activity Dalmac decided to focus more attention on the west-central Alberta resource play known as the Deep basin which is situated along the eastern slope of the Rocky Mountains and is expected to generate a great deal of drilling and production activity for many years to come.
In comparison with the comparable periods in the previous year, the expenses for third quarter 2012 increased by 16 per cent to $2.0-million and the year-to-date 2012 expenses also increased by 16 per cent to $5.3-million.
The long-term debt, excluding capital leases, decreased by 32 per cent to $2.6-million from the $3.9-million reported at year-end 2011. Working capital also showed significant improvement in third quarter 2012 and now sits at a current ratio of 0.97:1, from 0.76:1.
In third quarter 2012 the company increased its line of credit with its main lender to $8.0-million from $6.0-million. This increase is also concurrent with a 1-per-cent reduction in the overall interest rate which now stands at 2.75 per cent above bank prime. Other developments in the quarter include previously issued warrants were fully exercised raising additional proceeds of $745,000, and the company disposed of two older under-used hydro vac units for $625,000 plus GST. The proceeds of the above were used to reduce the levels of existing debt and to improve the company's balance sheet.
Usage rates in the industry are continuing at record levels and the forecast for the upcoming year is expected to continue on an equally strong footing. The metrics driving the current activity stem mainly from strong oil prices. The current weakness in natural gas prices has been offset by the producers making a shift from natural gas to liquids and crude oil. Concurrent with this development is the resulting trend toward more complex well completions which are deeper and take longer to drill. Over the past decade, vertical wells would yield about 500 metres of exposure to a formation whereas the new horizontal wells are yielding 2,000 to 4,000 directional metres in optimal positions within the formations. This trend is serving to provide an increased revenue stream for Dalmac's servicing of the drilling and production sectors. The company is confident that current positive industry indicators will continue to translate into higher revenues and earnings for Dalmac throughout the remainder of fiscal 2012 and well into the future.
Dalmac’s strategy is to continue to focus on optimizing operating efficiencies, trimming costs, improving safety and service while forging ahead with building strong customer relationships. All the foregoing is helping to position the company as the first call choice. In summary, management is very optimistic that the expanding applications for horizontal drilling and multi stage fracturing technology into Dalmac’s service area will keep the demand for services strong throughout the winter and well into the next year.
A conference call to discuss the results will be held on Tuesday March 13, 2012 at 4:15 pm EST, 2:15 pm MST.
To participate in the conference call please dial, 416-644-3414 Local in Toronto, or Toll free, 1-800-814-4859 and request the Dalmac Energy Conference.
QIS Capital Comments:
Please take the opportunity to participate in the conference call this afternoon. This is an excellent time to ask questions of management and get their personal outlook.
Record third quarter numbers showed a significant increase in revenues, EBITDAS, and pre-tax earnings. It is important to point out the tax situation as the company booked a deferred income tax expense of $448,605 during the third quarter. Based on the available tax pools, we do not expect Dalmac to be in a current tax position until late fiscal 2013 or early fiscal 2014. On a pre-tax basis, net earnings for Q3 increased by 54% to $1.8-million ($0.09 per share). For the 9 mths, pretax net earnings increased by 52% to $2.4-million ($0.12 per share). The outlook for Q4 appears favourable with utilization rates continuing at a healthy pace. The company appears to be well on track to meet or exceed its 2012 financial projections and is currently trading at about 4 times earnings for fiscal 2012 (ending Apr 30/12).
Disclaimer: This article is for informational purposes only. The information contained within this article should not be construed as offering investment advice. Those seeking direct investment advice should consult a qualified, registered, investment professional. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The company profiled assumes no liability for the information presented. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock. The author(s) owns directly or indirectly 23,500 shares and 200,000 options of Dalmac Energy Inc. QIS Capital has a financial relationship with Dalmac Energy and may trade in the stocks mentioned. No stock exchange has approved or disapproved of the information contained herein. Copyright © 2003 - 2012 QIS Capital Corporation.