QIS Update #6 2013 - March 4th 2013
Included in this update:
- Blackbird Energy announces the appointment of a Chief Geologist
- Dalmac Energy reports record revenues in a profitable third quarter of operations
- Virtutone Networks hires VP of Wholesale, grants options
Dalmac Energy will be hosting a conference call today (March 13) at 1:30PM Eastern/10:30AM Pacific to go over its Q3 results. 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.
As mentioned in the last update, there are about two company spots remaining in the upcoming Small-Cap Conference to be held in Calgary on April 16. This conference will host a wide variety of quality small-cap companies. Some of the participants are already listed on the website. To view these companies, pre-register to attend, or suggest additional presenting companies, please visit www.smallcapconference.ca or contact us at firstname.lastname@example.org.
Please feel free to email us anytime at email@example.com or call us at (250) 377-1182. We look forward to your comments, questions, and feedback.
Blackbird Energy Inc. (BBI:TSX-V)
Current Price: $0.06 (coverage commenced Aug 19/11 - $0.18)
Blackbird Energy Inc. has announced the appointment of Terry Skilnick as chief consulting geologist of the company.
Mr. Skilnick brings over 13 years of experience of successfully identifying economic resource opportunities in the oil and gas industry. Mr. Skilnick has served as a consultant to Donnycreek Energy Inc. since 2011 and as a consultant to Donnybrook Energy Inc. since 2010. Mr. Skilnick was the lead geologist in the identification of the Montney formation located in the Kakwa Wapiti area and the Montney formation located in the Bigstone area.
The team of Mr. Murray Scalf and Mr. Skilnick developed three junior oil and gas companies being: Dorado Energy, Denim Exploration, and Dorchester Energy. Mr. Skilnick has been a critical member of management teams in raising exploration capital and in the deployment of the capital for the origination of high impact projects.
Mr. Skilnick will be focusing on developing new high quality oil projects in Saskatchewan and Alberta.
Darrell Denney, COO of Blackbird stated, Terry was a critical member of two companies that I have been a principal of, being Dorado Energy and Denim Exploration. His work ethic and his ability to identify high impact projects make him a critical member of the Blackbird team in developing new projects for the Company.
Mr. Skilnick has a long history of successful operations on significant plays, particularly in the Montney formation. Blackbird is building its team for growth and is looking to aggressively pursue new opportunities.
Dalmac Energy Inc. (DAL:TSX-V)
Current Price: $0.48 (coverage commenced Nov 15/11 - $0.37)
Dalmac Energy Inc. has announced its third quarter financial results for the three and nine month periods ended January 31, 2013.
|LATEST FINANCIAL RESULTS (000s)|
|3 Mos. Ended Jan. 31||9 Mos. Ended Jan. 31|
(as at January 31, 2013)
|Current Assets||$ 11,631,844|
The company posted its highest quarterly sales in history for the third quarter with revenues reaching $11.5 million compared to $10.9 million during the same period in the prior year. For the 9 months, revenues were $29.8 million compared to $24.7 million YTD’12.
The gross margin in the third quarter was softer at just 24% due to a number of mitigating factors and one-time costs. This compares to gross margins of 34% during the third quarter of fiscal 2012. The YTD’13 gross margin was 27% compared to 31% reported in YTD’12. Management has put the necessary plans in place to ensure a prompt return to historical margins.
Net income for the third quarter was $0.6M ($0.03 per share) compared to $1.3M ($0.07 per share) in the prior year. For the 9 month period, net income was $1.5M ($0.07 per share) YTD’13 compared to $1.9M ($0.10 per share) YTD’12. Net income was impacted particularly by increasing wage pressures, professional fees associated with the line of credit put in place in September 2012, and excessive repair and maintenance costs necessary to transition equipment for 24/7 use due to upcoming demand.
Dalmac increased its revenues during a quarter when overall industry activity levels were slightly lower than in the previous year. Key customers depleted their 2012 capital expenditure budgets earlier than expected which put a hold on further expenditures until January 2013. In addition, many customers took advantage of an industry lull to have an extended Christmas break commencing the middle of December effectively creating a two week work month.
Notwithstanding the foregoing, in Q3’13 Dalmac managed to secure more work contracts with its major customers to service existing and new wells. Much of these work contracts are scheduled to start early in 2013 and will require equipment on a 24/7 basis. In order to ensure that its equipment is fully compliant to meet the challenges of a 24/7 work schedule, Dalmac completed a major retrofit of nearly a quarter of its fleet in Q3’13 which pushed up the repair and maintenance expenditures by over $540K as compared to the same quarter in the previous year. The positive side of these additional expenditures is that Dalmac will be taking on new work contracts which will contribute to increased revenues.
Dalmac also experienced an increase in operating costs, largely stemming from the tightening up of the labour markets. This has resulted in a labour shortage, which increased the cost of labour by over $240K or 20% over Q3’12. The tight labour market also placed more strain on company training costs which increased to about $300K in Q3’13. Collectively the Q3’13 retrofit, labour and training contributed to increased costs of about $1.1M. While Dalmac is not immune to the vagaries of the labour markets, management is confident that the company will offset most of these costs by increasing its charge out rates in the fourth quarter.
Overall, Q3’13 expenses increased by 9% or $174K to $2.2M, from Q3’12. The year to date expenses increased 18% or $941K to $6.2M from the same period in the previous year. Of particular note are professional fees which increased by $221K or 475% to $267K for Q3’13 ($222K or 170% to $352K for the YTD). Consistent with the refinancing which was completed September 10, 2012, non-recurring refinancing costs of $210K were included in Q3’13. The remaining balance of the non-recurring refinancing costs which is estimated to be about $142K, will be expensed in Q4’13.
The Q3’13 amortization expense increased by 16% to $627K (YTD’13 increased 13% to $1.8M) from the same period last year as is consistent with new asset purchases. As a result of improved borrowing costs, the overall interest expenses decreased by 28% to $132K on the quarter and decreased 19% to $431K for the year to date.
Dalmac reported record revenues in all three quarters of this fiscal year. Despite the slight industry wide drop in activity in Q3’13, the continued outlook for the future is quite robust. The Petroleum Service Association of Canada (PSAC), forecasts 11,775 well completions for 2013, which is down marginally from the 2012 levels of 12,500, however the number of metres drilled per well is on the rise. According to Oilweek magazine, the average metres drilled per well has risen dramatically in the last few years, from 1,202 metres in 2007 to 1,976 in 2012. The number of metres drilled per well is probably a more significant metric of health in the patch as opposed to looking at straight well completions. In addition, 70% of the wells drilled in 2013 will be of the horizontal variety, which take longer to drill than the traditional vertical wells. Despite the overall decrease in well completions, Alberta will see an increase of drilling to the tune of 3% or 7,045 new wells. The 2013 overall oilfield activity for Alberta is expected to be more active than it was in 2012.
Responding to the current surge of oilfield activity and production requirements, Dalmac remains on course for purchasing approximately $6.5 million dollars of additional oilfield equipment in this fiscal year. While much of this equipment is just now starting to trickle in, management is confident that the steps taken now will translate into higher revenues and earnings for Dalmac on a going forward basis. The company’s equipment has been booked near full capacity over the remainder of fiscal 2013 and with the continued robust activity in the sector, management expects to continue on record pace and with a stronger focus on the bottom line now that much of the repair, maintenance, and financing costs have been expensed.
A conference call to discuss the results will be held today, March 13, 2013, at 1:30 pm EST/11:30 am 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.
We encourage as many investors as possible to attend the conference call at 1:30pm EST today. While there was a high level of one-time and repair/maintenance costs in Q3, Dalmac is building for the future and is forecasting high levels of activity for the next 12 months. The company remains on track to reach its $40 million forecast for revenues, and with the new equipment arriving, should continue its record pace in the coming fiscal year. Dalmac is presently trading at about 4-5 times expected earnings for this fiscal year.
Virtutone Networks Inc. (VFX:TSX-V)
Current Price: $0.175 (coverage commenced Sep. 9/11 - $0.10)
Virtutone Networks Inc. has announced that that Louis Acevedo has been appointed as the company's new Vice President of Wholesale, subject to exchange approval. Mr. Acevedo has over 25 years experience in the wholesale VoIP industry. Prior to his new role with Virtutone, Mr. Acevedo served as Senior Vice President of Business Development with RenuTel Inc., a supplier of wholesale VoIP termination services.
We're very excited to have Louis on board, said Colin Campbell, Virtutone's Chief Financial Officer. Louis brings the experience and vision needed to transform Virtutone into a major player in the wholesale market. Louis will be focused on creating new business, and with the vast industry contact list he has generated over his long career, we believe he will quickly expand our wholesale customer base.
The company also announces that it has granted aggregate of 330,000 options to certain employees and consultants of the company at an exercise price of $0.20. The options granted will vest at the rate of one-third per year commencing on the first anniversary of the grant date and will expire five years from the grant date.
Virtutone is also building its team for growth and has appointed Mr. Acevedo to assist with the roll out of the large contract acquisition announced earlier this month as well as new Wholesale opportunities which are becoming available to the company. Virtutone is poised to grow from the current annual revenue rate of under $3 million to well in excess of $10 million with the new Wholesale minutes it has acquired.
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 351,500 shares and 450,000 options of Blackbird Energy Inc., 61,000 shares and 200,000 options of Dalmac Energy Inc. and 886,500 shares of Virtutone Networks Inc. QIS Capital may have a financial relationship with these companies and may trade in the stocks mentioned. No stock exchange has approved or disapproved of the information contained herein. Copyright © 2003 - 2013 QIS Capital Corporation.