SinoTech Energy swings to profit as sales soar2011-05-19 by Brad Lemaire
China-based SinoTech Energy (NASDAQ:CTE) released second quarter fiscal year earnings on Thursday, swinging to a profit from a prior-year loss, as sales more than tripled.
"Our very strong second quarter results offer a clear indication of both the very exciting growth prospects in China's enhanced oil recovery market and SinoTech's growing ability to take advantage of these opportunities," said CEO Guoqiang Xin.
For the first three months of 2011, the Chinese provider of enhanced oil recovery (EOR) services reported a net income for second fiscal year 2011 of US$10.8 million, or 17 cents per share, compared to a net loss of US$2.6 million, a year earlier.
The company said it benefited from the extinguishment of several non-operating expenses relating to warrant conversion and debt, resulting in more normalized financial results for the latest quarter.
Taking out amortization of intangible assets and share-based compensation, adjusted earnings per share were 20 cents for the second quarter.
Sino Tech also reported sales increased to US$25 million from $8.29 million a year earlier. Growth was mainly due to the expansion of its Lateral Hydraulic Drilling (LHD) fleet as two new units were delivered in late March of this year, and the expansion of its Molecular Deposition Film (MDF) service coverage, the company said.
Sales for the LHD business rose by more than five times to US$18.71 million on increased demand, while sales from the MDF business reached US$5.8 million in the second quarter of fiscal year 2011, representing over 20% year-over-year growth. MDF growth was mainly attributable to additional revenue from a new service contract that began in January.
"With the rapid pace of economic development in China driving rising demand for energy, the country's oil producers are increasingly reliant upon EOR solutions to improve productivity," added Xin.
"We are confident in our prospects for the year ahead, and that confidence is reflected in our decision last week to update our revenue guidance for the full fiscal year to a range of US$100 million to US$105 million."
In addition, the company's expenses for the second quarter dropped to US$3.02 million, down from US$3.3 million in the prior-year quarter.
Sino Tech said it plans to add four LHD units to its fleet in fiscal year 2011, bringing the total number of operational LHD units to 16 by its fiscal year-end, and to 20 by the end of December 2011.
On Thursday, SinoTech was trading at $5.72, up 6.12% as of 9:50 a.m. EST.
