Leader Energy Services Reports a Significant Increase in 2010 Results
Press Release Source: Leader Energy Services Ltd. On Tuesday April 19, 2011, 6:00 am EDT
CALGARY, ALBERTA--(Marketwire - April 19, 2011) - Leader Energy Services Ltd. ("Leader" or the "Company") (TSX VENTURE:LEA - News) is pleased to announce financial results for the year ended December 31, 2010.
Performance Summary (000's)
----------------------------------------- Year Year over over Year Year Years ended December 31, 2010 2009 $ Change % Change ----------------------------------------- Revenue - continuing operations $ 26,474 $ 13,282 13,192 99% Operating Expenses - continuing operations 14,022 8,907 5,115 57% General and Administrative - continuing operations 4,104 3,288 816 25% Provision for Bad Debts - continuing operations (174) 235 (409) n/a -----------------------------------------EBITDA - continuing operations(i) 8,522 852 7,670 900% Amortization - continuing operations 3,517 2,271 1,246 55% Loss on Debenture - 195 (195) n/a Stock Compensation - continuing operations 56 51 5 10% Interest - continuing operations 3,339 3,209 130 4% Other - continuing operations (273) 68 (341) n/a -----------------------------------------Net Income (Loss) before Tax - continuing operations 1,883 (4,942) 6,825 n/a Provision for taxes - continuing operations - - - n/a -----------------------------------------Net Income (Loss) - continuing operations 1,883 (4,942) 6,825 n/a -----------------------------------------Net Income - discontinued operations 208 2,018 (1,810) (90)% -----------------------------------------Net Income (Loss) 2,091 (2,924) 5,015 n/a ----------------------------------------- -----------------------------------------(i) EBITDA means earnings from continuing operations before interest, taxes, amortization, and stock based compensation. Readers are cautioned that EBITDA is generally regarded as an indirect measure of operating cash flow, and, as such, the Company believes it is a significant indicator of success of public companies, and is particularly relevant to readers within the investment community. EBITDA is not a measure that has a standardized meaning prescribed by Canadian GAAP, and accordingly may not be comparable to similar measures used by other companies.
Overview
Headquartered out of Calgary, Alberta, the Company's operations are managed from its operations base in Grande Prairie, Alberta. From this base the Company offers well stimulation services across the Western Canadian Sedimentary Basin ("WCSB").
The Company reported a 99% increase in revenue and 900% increase in EBITDA as compared to the prior year. This increase can be attributed to an improvement in western Canadian oil and gas development activity, and an increase in horizontal drilling activity leading to greater demand for larger diameter coil and deeper job applications.
The Company's net income from continuing operations of $1.9 million ($0.14 per basic share) for 2010 represents a $6.8 million improvement over the prior year's net loss from continuing operations of $4.9 million (loss of $0.37 per basic share). This improvement is due to an increase in revenue resulting from greater demand for deeper and larger diameter coil applications, an increase in the utilization of both coiled tubing and nitrogen pumping equipment in the field, and the benefits of continued cost control efforts in the field partially offset by higher general and administrative and amortization expenses.
Results of Continuing Operations
Well Stimulation Services (000's)
---------------------------------------- Year over Year over Year Year Years ended December 31, 2010 2009 $ Change % Change ---------------------------------------- Revenue $ 26,474 $ 13,282 13,192 99%Operating Expenses 14,022 8,907 5,115 57% ----------------------------------------Field profit(i) 12,452 4,375 8,077 185% (i) Field profit is a measure not recognized under Canadian GAAP. Management believes that field profit provides investors with an indication of earnings before administrative costs, depreciation, interest, and taxes. Readers are cautioned that field profit should not be considered as an alternative to net income determined in accordance with Canadian GAAP as an indicator of the Company's performance.
Revenues in well stimulation services increased 99% in 2010 as compared to 2009. In every quarter of 2010, the Company reported an increase in revenue as compared to the revenue reported in the prior year. The proliferation of horizontal drilling activity in northwest Alberta and northeast British Columbia along with an improvement in the economic environment have been key contributors to the increase in revenue. Horizontal drilling activity in areas such as the Montney, Cardium and Horn River is driving demand for deeper and larger diameter coil applications which normally translates to higher daily revenues. The Company had five coiled tubing units including two larger diameter 2" coil units operating during the year. In 2011, the Company is adding both a 2" unit and a 2-3/8" unit to its fleet. The improvement in revenue can also be attributed to the Company offering its services in a larger area within the WCSB along with a higher utilization of nitrogen equipment as compared to the prior year. The Company offers nitrogen services in conjunction with coiled tubing applications and on a stand-alone basis. In 2010, the Company operated seven nitrogen pumpers and reported revenue from nitrogen services of $11.5 million as compared to $5.8 million in 2009.
In December 2010, the Company expanded its service line by adding a fluid pumper to its fleet of equipment. Applications for this equipment include pumping fluids down the wellbore to activate downhole motors used in drilling out composite plugs in the horizontal sections, and providing chemical injections.
Operating costs totaled $14.0 million (53% of revenue) in 2010 as compared to $8.9 million (67% of revenue) in 2009. Operating costs declined as a percentage of revenues in 2010 due to the increase in deeper and larger diameter coil work during the year which equates to higher day rates and higher margins as compared to the work performed in 2009. Throughout 2010, the Company continued to benefit from efficiencies achieved through a larger percentage of higher margin work, ongoing cost control initiatives associated with operations and the Company's labour resources, and the centralization of its operational efforts out of one facility located in Grande Prairie, Alberta.
Liquidity and Capital Resources
At December 31, 2010, the Company held cash of $2.4 million and positive working capital of $5.3 million as compared to $1.0 million and $1.8 million respectively for the December 31, 2009 year end. For the year ended December 31, 2010 cash flow from continuing operations before changes in non-cash working capital was $6.2 million, an improvement of $6.7 million over the previous year.
The Company maintained a positive working capital balance throughout 2010, and reported $2.0 million in cash flow from continuing operations before changes in non-cash working capital during the fourth quarter of 2010. An increase in operations has driven this improvement in working capital in both the fourth quarter and on an annual basis.
Outlook
The Petroleum Services Association of Canada (PSAC) is forecasting a total of 12,750 wells drilled across Canada for 2011, of which 8,390 will be drilled in Alberta, representing increases of 5% and 4% respectively over 2010 levels. Exploration and development activities in western Canada remain focused on horizontal wells and multistage completions in liquids-rich gas plays such as the Montney and unconventional light oil plays such as the Cardium and Viking. Leader is well positioned to provide large diameter coiled tubing, nitrogen and fluid pumping services through this very active corridor from northeastern BC through south-central Alberta. We expect to continue seeing an escalation in the amount of horizontal wells drilled over the foreseeable future and in the depth of the wells that are drilled, activities that require each of Leader's service offerings. As a result, the Company expects to
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