Cathedral Energy Services reports results for 2010 Q1, updated 2010
capital budget and 2010 Q2 dividend
/NOT FOR DISSEMINATION IN THE UNITED STATES
OF AMERICA/
CALGARY, May
5 /CNW/ - Cathedral Energy Services Ltd. (the "Company"
or "Cathedral" / TSX: CET) is pleased to report its results
for 2010 Q1, updated 2010 capital budget and 2010 Q2 dividend. Dollars
are in '000's except for day rates and per share amounts.
FINANCIAL HIGHLIGHTS
Dollars in 000's except per share amounts
Three months ended March 31
2010 2009
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Revenues (excluding discontinued
operations 2010 - $1,927; 2009 - $4,839) $ 35,676 $ 26,529
Gross margin %(1) 50% 48%
EBITDAS(1) from continuing operations $ 11,616 $ 7,342
Per share - diluted $ 0.32 $ 0.23
EBITDAS(1) $ 10,479 $ 6,785
Per share - diluted $ 0.29 $ 0.21
Income before taxes and discontinued operations $ 9,091 $ 3,273
Net income $ 6,737 $ 1,404
Basic per share $ 0.19 $ 0.04
Diluted per share $ 0.18 $ 0.04
Dividends declared per share $ 0.06 $ 0.15
Property and equipment additions $ 7,714 $ 4,137
Weighted average shares outstanding:
Basic ('000) 36,400 32,582
Diluted ('000) 36,726 32,582
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March 31 December 31
2010 2009
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Working capital $ 23,854 $ 22,451
Long-term debt excluding current portion $ 39,519 $ 39,526
Shareholders' equity $ 101,758 $ 97,422
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(1) Refer to MD&A; see "NON-GAAP MEASUREMENTS"
MANAGEMENT'S DISCUSSION & ANALYSIS
This Management's Discussion & Analysis ("MD&A")
for the three months ended March 31, 2010
should be read in conjunction with the annual audited consolidated
financial statements and notes thereto for the year ended December
31, 2009, as well as the MD&A in the 2009 Annual Report of
Cathedral Energy Services Ltd. ("the Company" /
"Cathedral"). This MD&A has been prepared as of May
5, 2010. Dollar amounts are in '000's except for day rates and
per share amounts.
FORWARD LOOKING STATEMENTS
This MD&A contains certain forward-looking statements and
forward-looking information (collectively referred to herein as
"forward-looking statements") within the meaning of applicable
Canadian securities laws. All statements other than statements of
present or historical fact are forward-looking statements.
Forward-looking statements are often, but not always, identified by the
use of words such as "anticipate", "achieve",
"believe", "plan", "intend",
"objective", "continuous", "ongoing",
"estimate", "outlook", "expect",
"may", "will", "project",
"should" or similar words suggesting future outcomes. In
particular, this MD&A contains forward-looking statements relating
to: access to capital; projected capital expenditures and commitments
and the financing thereof; expected proceeds on disposal of wireline and
other property and equipment; equipment delivery dates; establishment of
new operating bases; customer commitments; financial results; activity
levels; technology advances; and dividends. The Company believes the
expectations reflected in such forward-looking statements are reasonable
as of the date hereof but no assurance can be given that these
expectations will prove to be correct and such forward-looking
statements should not be unduly relied upon.
Various material factors and assumptions are typically applied in
drawing conclusions or making the forecasts or projections set out in
forward-looking statements. Those material factors and assumptions are
based on information currently available to the Company, including
information obtained from third party industry analysts and other third
party sources. In some instances, material assumptions and material
factors are presented elsewhere in this MD&A in connection with the
forward-looking statements. You are cautioned that the following list of
material factors and assumptions is not exhaustive. Specific material
factors and assumptions include, but are not limited to:
- the performance of the Company's businesses, including current
business and economic trends;
- oil and natural gas commodity prices and production levels;
- capital expenditure programs and other expenditures by the Company and
its customers;
- the ability of the Company to retain and hire qualified personnel;
- the ability of the Company to obtain parts, consumables, equipment,
technology, and supplies in a timely manner to carry out its
activities;
- the ability of the Company to maintain good working relationships with
key suppliers;
- the ability of the Company to market its services successfully to
existing and new customers;
- the ability of the Company to obtain timely financing on acceptable
terms;
- currency exchange and interest rates;
- risks associated with foreign operations;
- the ability of the Company to realize the benefit of its conversion
from an income trust to a corporation;
- changes under governmental regulatory regimes and tax, environmental
and other laws; and
- a stable competitive environment.
Forward-looking statements are not a guarantee of future performance
and involve a number of risks and uncertainties some of which are
described herein. Such forward-looking statements necessarily involve
known and unknown risks and uncertainties, which may cause the Company's
actual performance and financial results in future periods to differ
materially from any projections of future performance or results
expressed or implied by such forward-looking statements. These risks and
uncertainties include, but are not limited to, the risks identified in
this MD&A and in the Company's Annual Information Form under the
heading "Risk Factors". Any forward-looking statements are
made as of the date hereof and, except as required by law, the Company
assumes no obligation to publicly update or revise such statements to
reflect new information, subsequent or otherwise.
All forward-looking statements contained in this MD&A are
expressly qualified by this cautionary statement. Further information
about the factors affecting forward-looking statements is available in
the Company's current Annual Information Form and Annual Report which
have been filed with Canadian provincial securities commissions and are
available on www.sedar.com.
NON-GAAP MEASUREMENTS
This MD&A refers to certain financial measurements that do not
have any standardized meaning within Canadian Generally Accepted
Accounting Principles ("GAAP") and therefore may not be
comparable to similar measures provided by other companies.
The specific measures being referred to include the following:
i) "Gross margin" - calculated as revenues less operating expenses is
considered a primary indicator of operating performance (see tabular
calculation under Results of Operations);
ii) "Gross margin %" - calculated as gross margin divided by revenues is
considered a primary indicator of operating performance (see tabular
calculation under Results of Operations);
iii) "EBITDAS" - defined as earnings before interest on long-term debt,
taxes, depreciation, amortization, non-cash compensation expense and
unrealized foreign exchange gain/loss; this measure is considered an
indicator of the Company's ability to generate funds from operations
prior to consideration of how activities are financed, how the
results are taxed and measured and non-cash expenses. The
definition of EBITDAS was changed in 2009 Q2 to adjust for
unrealized foreign exchange gain/loss. Comparative amounts presented
have been restated to the new calculation (see tabular calculation
under EBITDAS);
iv) "EBITDAS from continuing operations" - defined as earnings before
interest on long-term debt, taxes, depreciation, amortization, non-
cash compensation expense and unrealized foreign exchange gain/loss
excluding the portion due from discontinued operations in each
component of the calculation;
v) "Maintenance capital expenditures" - refers to capital expenditures
required to maintain existing levels of service but excludes
replacement cost of lost-in-hole equipment to the extent the
replacement equipment is financed from the proceeds on disposal of
the equipment lost-in-hole; and
vi) "Funds from continuing operations" - calculated as cash flow from
continuing operating activities before changes in non-cash working
capital is considered an indicator of the Company's ability to
generate funds flow from operations but excluding changes in non-
cash working capital which is financed using the Company's bank
indebtedness/line of credit facility.
OVERVIEW
The Company is incorporated under the Business Corporations Act
(Alberta) (the "Act"). The Company was created as a result of
the conversion of Cathedral Energy Services Income Trust (the
"Trust") to a corporation pursuant to a Plan of Arrangement
under the Act, entered into by various entities including the Trust,
Cathedral Energy Services Ltd. ("CES") and SemBioSys Genetics
Inc. ("SBS") (the "Reorganization"). The
Reorganization was completed on December 18, 2009
(see 2009 Annual Report for further details). As a result of the
application of the continuity of interests method of accounting, certain
terms such as shareholders'/unitholders', dividends/distributions and
share-based/unit-based may be used interchangeably throughout this
MD&A.
During the quarter, the Company made the decision to discontinue its
operations of the wireline division. On March 31,
2010, it closed its Canadian slickline operations and on April
20, 2010 it completed the sale of its U.S. wireline operations.
As such, for the three months ended March 31,
2010 and the related assets are classified as held for sale and
the revenues and expenses for the wireline business have been included
in the statements of operations and statements of cash flows as
discontinued operations. The 2009 figures have been reclassified to be
consistent with this presentation.
On April 20, 2010, the Company closed
the sale of its U.S. based electric wireline business to Pure Energy
Services Ltd. ("Pure") in exchange for the operating assets of
Pure's Motorworks division and approximately $2,100
cash. The Motorworks division includes 58 drilling motors, 23 drilling
jars, spare mud motor power sections and shop equipment valued at
approximately $5,000. The assets of the
Motorworks operations will be utilized in Cathedral's current
directional drilling business, and the net sale proceeds will be used to
reduce bank indebtedness.
The Company completed the first quarter of 2010 with quarterly
revenues of $35,676 compared to 2009 Q1 at
$26,529. The 2010 Q1 revenues were
comprised of 77% (2009 Q1 - 77%) from the directional drilling division
and 23% (2009 Q1 - 23%) from the production testing division.
2010 Q1 EBITDAS was $10,479 ($0.29
per share - diluted) which represents a $3,694
or 54% increase from $6,785 ($0.21
per share - diluted) in 2009. 2010 Q1 EBITDAS from continuing operations
was $11,616 ($0.32
per share - diluted) an increase of $4,274
or 58% increase from $7,342 ($0.23
per share - diluted) in 2009 Q1. The Company's net income for 2010 Q1
was $6,737 (2009 - $1,404)
or $0.18 (2009 - $0.04)
per share - diluted.
RESULTS OF OPERATIONS
Revenues and operating expenses
2010 Q1 2009 Q1 Change %
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Revenues (excluding
discontinued operations 2010
- $1,927; 2009 - $4,839) $ 35,676 $ 26,529 $ 9,147 34
Operating expenses (18,005) (13,664) 4,341 32
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Gross margin - $ $ 17,671 $ 12,865 $ 4,806 37
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Gross margin - % 50% 48% 2%
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Three months ended Three months ended
March 31, 2010 March 31, 2009
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Direct- Produc- Direct- Produc-
ional tion ional tion
Revenues drilling testing Total drilling testing Total
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Canada $ 18,398 $ 5,225 $ 23,623 $ 10,793 $ 3,725 $ 14,518
United States 9,000 3,053 12,053 9,556 2,455 12,011
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$ 27,398 $ 8,278 $ 35,676 $ 20,349 $ 6,180 $ 26,529
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2010 Q1 revenues were $35,676 which
represented an increase of $9,147 or 34%
from 2009 Q1 revenues of $26,529. The
increase is primarily attributed to the strengthening demand for oil
drilling services, an increased focus on shale gas drilling and
operations related to the unconventional gas and oil plays. Since the
third quarter 2009, the Company has experienced, on a
quarter-over-quarter basis, a sequential improvement in operating
activities across all of its service areas in both Canada
and the U.S. In Canada, the market has
improved as we are seeing old areas being redeveloped (i.e. Cardium) and
new zones being discovered (i.e. Duvernay) which are predominately
employing the use of horizontal, multi-stage fracturing technology and
this work is beneficial to both the directional drilling and production
testing divisions of the Company.
The directional drilling division revenues have increased from $20,349
in 2009 to $27,398 in 2010. This increase
is the net result of: i) a 69% increase in activity days from 1,929 in
2009 to 3,261 in 2010; and ii) a decrease in the average day rate from $10,253
in 2009 to $8,244 in 2010, which was due
in large part to the decrease in U.S. rates due to the increase in
exchange rate for the Canadian dollar compared with 2009 Q1 and due in
part in reduction in drilling rates to remain competitive. For 2009 Q4,
the average day rate was $8,517. Canadian
activity days increased from 1,129 to 2,303 and U.S. activity days
increased from 800 to 958.
The Company's production testing division contributed $8,278
in revenues during 2010 Q1 which is a 34% increase over 2009 revenues of
$6,180. This increase is attributable to
the overall increase in oilfield service activities on a year-over-year
basis.
The gross margin for 2010 Q1 was 50% compared to 48% in 2009 Q1. This
slight increase is primarily attributed to the net effect of a 1.5%
decline in labour costs, a 0.5% decrease in repairs and a 1% increase in
equipment rentals. Labour costs as a percentage of revenue decreased due
to changes in labour rates made throughout 2009. In 2009 Q1 the U.S.
directional drilling division incurred higher repair costs, this
division did not experience the same level of repairs. The Company's
production testing division incurred additional equipment rentals in
order to complete all of its work engagements.
General and administrative expenses
General and administrative expenses were $6,840
in 2010 Q1; an increase of $803 compared
with $6,037 in 2009. The increase was
primarily related to increases in payroll related expenses as well as
other general increases due to the increased activity levels.
Depreciation and amortization
Depreciation for 2010 Q1 was $2,154
which compares to $2,878 in 2009 Q1. This
slight decrease is due to in part the declining balance depreciation
method used by the Company and is expected as its assets get older. In
addition, the Company reviewed its estimate of useful lives of assets as
at January 1, 2010 and adjusted its
declining balance depreciation rates accordingly. As a percentage of
revenues, depreciation amounted to 6% for 2010 and 11% for 2009.
Share-based compensation expense
For 2010 Q1 the Company had share-based compensation expense of $690
compared to $277 recognized in 2009 Q1.
The increase is mainly due to options issued in the quarter. The value
of the options is being amortized against income over the three-year
vesting periods.
Interest expense
Interest expense related to long-term debt decreased from $366
in 2009 Q1 to $307 in 2010 Q1 due to the
decrease in the average level of debt outstanding. Other interest
expense, which decreased marginally on a year-over-year basis from $115
in 2009 Q1 to $111 in 2010 Q1, relates
mainly to interest charges on use by the Company of its bank
indebtedness/line of credit facility.
Foreign exchange gain/loss
The Company's foreign exchange gain/loss has changed from a $639
loss in 2009 Q1 to a gain of $676 in 2010
Q1 due to the fluctuations in the Canadian dollar. Upon consolidation
the Company's foreign operations are considered to be self-sustaining
and therefore gains and losses due to fluctuations in the foreign
currency exchange rates are recorded in other comprehensive income
("OCI") on the balance sheet as a component of equity.
However, gains and losses in the Canadian entity on U.S. denominated
intercompany balances continue to be recognized in the statement of
income. Included in the 2010 Q1 foreign currency gain are unrealized
gains of $626 related to intercompany
balances.
Gain on disposal of property and equipment
During 2010 Q1 the Company had a gain on disposal of property and
equipment of $846 which compares to $720
in 2009 Q1. The Company's gains are mainly due to recoveries of
lost-in-hole equipment costs including previously expensed depreciation
on the related assets. The timing of lost-in-hole recoveries is not in
the control of the Company and therefore can fluctuate significantly
from quarter-to-quarter.
Taxes
For 2010 Q1, the Company had a tax expense of $329
as compared to $826 in 2009 Q1. All of the
Company's Canadian taxable income was reduced to $Nil due to the
utilization of tax pools and tax loss carry-forwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of liquidity is cash generated from
operations. The Company also has the ability to fund liquidity
requirements through its credit facility and the issuance of debt and/or
equity. At March 31, 2010, the Company had
an operating line of credit with a major Canadian bank in the amount of $20,000
(December 31, 2009 - $20,000)
of which $4,917 (December
31, 2009 - $2,181) was drawn. In
addition, the Company has a non-reducing revolving term loan facility in
the amount of $45,000 (December
31, 2009 - $45,000) of which $39,500
(December 31, 2009 - $39,500)
was drawn as at March 31, 2010. In
addition, at March 31, 2010, the Company
had other long-term debt of $180 (December
31, 2009 - $234).
Operating activities
Cash flow from operating activities for the three months ended March
31, 2010 decreased from $12,304 in
2009 to $1,780, a decrease of $10,524
or 86%. This decrease reflects a further investment in working capital
in the amount of $8,108. Funds from
continuing operations (see Non-GAAP Measurements) for 2010 were $10,795
which compares to $2,631 for 2009 an
increase of $8,164. This increase was
caused mainly by the increase on earnings due to increased activity
levels. The Company has a working capital position at March
31, 2010 at $23,854 which compares
to $22,451 at December
31, 2009.
Investing activities
Cash used in investing activities for the three months ended March
31, 2010 amounted to $5,420 which
compares to $5,335 for the same period in
2009. During 2010 Q1 the Company invested an additional $7,714
(2009 - $4,137) in property and equipment
with the main additions being deposits made for resistivity (logging
while drilling) equipment and three additional production testing units.
At March 31, 2010, the Company's operating
entities had 96 MWD systems and 35 production testing units. On April
20, 2010, the Company closed the sale of its U.S. wireline
business including 10 electric line wireline units. The Company has 14
slickline wireline units which are classified as held for sale.
Financing activities
Cash from financing activities for the quarter ended March
31, 2010 amounted to $2,682 as
compared to cash used by financing activities of $11,386
in 2009 Q1. During 2010 Q1, the Company made repayments of other
long-term debt of $54 (2009 - $55).
Advances on bank indebtedness for 2010 Q1 were $2,736
(2009 - repayments of $6,966). The Company
received advances of long-term debt in the amount of $Nil (2009 - $1,500).
Dividends paid in 2010 Q1 were $Nil (2009 - $5,865).
The dividends declared in 2010 Q1 were paid April
15, 2010. As at March 31, 2010, the
Company was in compliance with all covenants under its credit facility.
At May 5, 2010, the Company has 36,405,361
shares and 3,081,969 share options outstanding.
Contractual obligations
In the normal course of business, the Company incurs contractual
obligations and those obligations are disclosed in the Company's
MD&A for the year ended December 31, 2009.
As at March 31, 2010, the Company has a
commitment to purchase approximately $5,647
of property and equipment.
UPDATED 2010 CAPITAL PROGRAM
For 2010, the Board of Directors of the Company has approved an
updated capital budget of $29,380
(excluding the $5,000 of directional
drilling equipment acquired in the asset swap with Pure). Included in
the 2010 capital budget is approximately $7,710
for maintenance capital and $3,800
allocated to the new head office and operations centre located in Calgary,
which was purchased in 2008. The maintenance capital includes the
retro-fit and upgrades to downhole tools. The balance of the 2010
capital program relates mainly to the purchase and integration of
resistivity (logging while drilling "LWD") equipment, 8
Electro-Magnetic Measurement-While-Drilling ("EM-MWD")
systems, 5 pulse MWD systems and 6 high pressure production testing
units. These capital expenditures are expected to be financed by way of
cash flow from operations, proceeds on the disposal of wireline and
other property and equipment and the Company's credit facility. The
Company anticipates proceeds from the disposal of wireline and other
property and equipment to be approximately $8,500
including approximately $2,100 related to
the asset swap transaction with Pure.
DIVIDENDS
It is the intent of the Company to pay quarterly dividends to
shareholders. The Board of Directors will review the amount of dividends
on a quarterly basis with due consideration to current performance,
historical and future trends in the business, the expected
sustainability of those trends and enacted tax legislation which will
affect future taxes payable as well as required long-term debt
repayments, maintenance capital expenditures required to sustain
performance and future growth capital expenditures. The Directors have
approved a 2010 Q2 dividend in the amount of $0.06
per share which will have a date of record of June
30, 2010 and a payment date of July 15,
2010.
CONTROLS AND PROCEDURES
Management is responsible for establishing and maintaining adequate
disclosure controls and internal control over financial reporting.
Internal control over financial reporting is a process designed to
provide reasonable, but not absolute, assurance regarding the
reliability of financial reporting and the preparation of consolidated
financial statements for external reporting purposes in accordance with
GAAP. Internal control over financial reporting may not prevent or
detect fraud or misstatements because of limitations inherent in any
system of internal control. There were no significant changes in the
design or effectiveness of the Company's disclosure controls or internal
controls over financial reporting in the first quarter of 2010.
NEW ACCOUNTING POLICIES
In February, 2008, the CICA confirmed that the use of International
Financial Reporting Standards ("IFRS") will be required in Canada
for publicly accountable profit oriented enterprises for fiscal years
beginning on or after January 1, 2011. The
Company will be required to report using IFRS beginning January
1, 2011.
The Company's IFRS project plan has four phases: education, analysis,
design and implementation and testing. The Company is continuing the
process of education for all levels of the organization and has
completed the analysis phase during which it identified specific
significant differences between Canadian GAAP and IFRS. The Company is
in the design phase in which it is determining its policies and
procedures for IFRS. This phase will be completed and the Company will
move into the implementation and testing phase in 2010 Q2 & Q3.
The Company is in the process of preparing draft accounting policy
choices and financial statement formats which will be presented and
vetted by the Company's external auditors and Audit Committee. During
2010 Q2 & Q3, the Company anticipates completion of this process and
to quantify the impact of any changes.
Based upon work completed to date, the Company has determined that
IFRS may have a significant impact on share-based compensation and the
valuation of goodwill. In addition, the Company anticipates that its
policies with respect to financial statement presentation and various
other items will change as a result of adopting IFRS. The areas impacted
by IFRS discussed above should not be regarded as a comprehensive list
of changes that will result from the transition to IFRS. The impact of
IFRS on the consolidated financial statements is not quantifiable at
this time.
BUSINESS RISKS
The MD&A for the year ended December 31,
2009, which is included in the Company's 2009 Annual Report,
includes an overview on business risks associated with the Company and
its operating entities. Those business risks remain in effect as at March
31, 2010.
EBITDAS
EBITDAS (refer to Non-GAAP Measurements) is calculated as follows:
Three months ended March 31
2010 2009
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Income from continuing operations $ 8,762 $ 2,447
Add (deduct):
Depreciation and amortization -
continuing operations 2,154 2,878
Interest - long-term debt -
continuing operations 307 366
Share-based compensation expense 690 277
Unrealized exchange gain (626) 548
Taxes - continuing operations 329 826
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EBITDAS from continuing operations 11,616 7,342
EBITDAS from discontinued operations (1,137) (557)
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EBITDAS $ 10,479 $ 6,785
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GOVERNANCE
The Audit Committee of the Board of Directors has reviewed this
MD&A and the related unaudited interim consolidated financial
statements and recommended they be approved to the Board of Directors.
Following a review by the full Board, the MD&A and financial
statements were approved.
SUMMARY OF QUARTERLY RESULTS
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Three month period ended Mar Dec Sep Jun
2010 2009 2009 2009
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Revenues(1) $ 35,676 $ 24,740 $ 20,176 $ 10,654
EBITDAS 10,479 5,864 5,724 (1,721)
Net income (loss) 6,737 2,236 3,125 (1,484)
Net income (loss) per share
- basic 0.19 0.06 0.09 (0.04)
Net income (loss) per share
- diluted 0.18 0.06 0.09 (0.04)
Dividends declared per share 0.06 - 0.04 0.12
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Three month period ended Mar Dec Sep Jun
2009 2008 2008 2008
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Revenues(1) $ 26,529 $ 43,514 $ 45,549 $ 25,384
EBITDAS 6,785 13,554 16,887 4,632
Net income (loss) 1,404 9,737 10,296 189
Net income (loss) per share
- basic 0.04 0.30 0.32 0.01
Net income (loss) per share
- diluted 0.04 0.30 0.32 0.01
Dividends declared per share 0.15 0.21 0.21 0.21
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(1) Revenue has been restated to exclude discontinued operations,
consistent with 2010 Q1 presentation
OUTLOOK
The focus on horizontal, multi-stage fracturing technology to
complete conventional and unconventional resource plays in both Canada
and the U.S. is benefitting Cathedral with increased activity levels.
This change in completion techniques has dramatically increased the
percentage of wells being drilled horizontally to over 60% of the total
wells drilled. With the rig count in both Canada
and the U.S. experiencing significant increases coupled with the
increased percentage of wells being drilled horizontally, demand for the
Company's services remains strong. After breakup, Cathedral is expecting
activity levels to be above those experienced in 2010 Q1.
The sale of our U.S. based electric wireline business effective April
20, 2010 and the closing of the Canadian slickline business will
result in a more focused oilfield services entity that provides
directional drilling and production testing services. The sale of the
wireline assets will allow for the redeployment of proceeds into
Cathedral's core business lines. Without expanding the overall capital
budget (net of proceeds on disposal of wireline assets) Cathedral will
add 8 EM-MWD systems and 5 mud pulse MWD systems to its fleet as well as
related equipment to expand overall job capacity.
Prior to the end of 2010 Q1, Cathedral's operations facility in
Washington, Pennsylvania, which services the Marcellus resource play,
was fully operational and commenced re-building equipment (mud motors
and MWD). The Company currently has a 10 job capacity in the U.S.
northeast region.
The Company has begun operating in the southern U.S. (Texas/Oklahoma
area) and expects to establish an operations base to service this region
in 2010 Q3 with an initial 5 job capability.
Cathedral is currently building six high pressure production testing
units to add to its fleet. Three of these units are contracted and will
be part of Cathedral's entry into the Marcellus shale play in the U.S.
northeast. The Company expects these units to be operational in 2010 Q2.
We expect the next three units to be contracted by the time they are
completed in the third quarter of 2010. As customer demand grows, the
Company expects it will continue to build new high pressure equipment.
CONSOLIDATED BALANCE SHEETS
Dollars in '000's March 31 December 31
(unaudited) 2010 2009
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Assets
Current assets:
Cash and cash equivalents $ - $ 491
Accounts receivable 35,673 27,727
Income taxes receivable 3,075 2,550
Inventory 5,778 5,389
Prepaid expenses and deposits 1,276 1,629
Assets held for sale 773 740
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46,575 38,526
Property and equipment 82,278 77,425
Assets held for sale 13,290 14,027
Future income taxes 21,596 23,491
Intangibles - 293
Goodwill 19,075 19,775
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$ 182,814 $ 173,537
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Liabilities and Shareholders' Equity
Current liabilities:
Cheques issued in excess of bank balance $ 476 $ -
Bank indebtedness 4,917 2,181
Accounts payable and accrued liabilities 14,983 13,686
Dividends payable 2,184 -
Current portion of long-term debt 161 208
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22,721 16,075
Long-term debt 39,519 39,526
Deferred credit 18,816 20,514
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81,056 76,115
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Shareholders' equity:
Share capital 68,995 68,995
Contributed surplus 5,080 4,390
Retained earnings 30,557 26,004
Accumulated other comprehensive income (loss) (2,874) (1,967)
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101,758 97,422
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$ 182,814 $ 173,537
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CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Dollars in '000's except per
share amounts Three months ended March 31
(unaudited) 2010 2009
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Revenues $ 35,676 $ 26,529
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Expenses:
Operating 18,005 13,664
General and administrative 6,840 6,037
Depreciation and amortization 2,154 2,878
Share-based compensation 690 277
Interest - long-term debt 307 366
Interest - other 111 115
Foreign exchange loss (gain) (676) 639
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27,431 23,976
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8,245 2,553
Gain on disposal of property and equipment 846 720
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Income before taxes and discontinued operations 9,091 3,273
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Taxes:
Current (recovery) (332) 3,625
Future income taxes (recovery) 661 (2,799)
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329 826
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Income from continuing operations 8,762 2,447
Loss from discontinued operations,
net of tax (2,025) (1,043)
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Net income 6,737 1,404
Retained earnings, beginning of period 26,004 31,559
Dividends (2,184) (4,887)
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Retained earnings, end of period $ 30,557 $ 28,076
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Income from continuing operations per share:
Basic $ 0.24 $ 0.07
Diluted $ 0.24 $ 0.07
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Loss from discontinued operations per share:
Basic $ (0.06) $ (0.03)
Diluted $ (0.06) $ (0.03)
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Net income per share:
Basic $ 0.19 $ 0.04
Diluted $ 0.18 $ 0.04
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS)
Dollars in '000's Three months ended March 31
(unaudited) 2010 2009
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Net income $ 6,737 $ 1,404
Other comprehensive income (loss):
Unrealized foreign exchange gain (loss)
on translation of self-sustaining
foreign operations (907) 1,072
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Comprehensive income $ 5,830 $ 2,476
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Accumulated other comprehensive income (loss),
beginning of period $ (1,967) $ 3,326
Other comprehensive income (loss) (907) 1,072
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Accumulated other comprehensive income (loss),
end of period $ (2,874) $ 4,398
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in '000's Three months ended March 31
(unaudited) 2010 2009
-------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Income from continuing operations $ 8,762 $ 2,447
Items not involving cash:
Depreciation and amortization 2,154 2,878
Future income taxes 661 (2,799)
Unrealized foreign exchange (gain) loss (626) 548
Share-based compensation 690 277
Gain on disposal of property and equipment (846) (720)
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Cash flow from continuing operations 10,795 2,631
Cash flow from discontinued operations (907) (88)
Changes in non-cash operating working capital (8,108) 9,761
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1,780 12,304
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Investing activities:
Property and equipment additions (7,714) (4,137)
Proceeds on disposal of property and equipment 1,262 1,078
Changes in non-cash investing working capital 1,032 (2,276)
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(5,420) (5,335)
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Financing activities:
Change in bank indebtedness 2,736 (6,966)
Advances (repayments) of long-term debt (54) 1,445
Dividends paid - (5,865)
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2,682 (11,386)
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Effect of exchange rate on changes in
cash and cash equivalents (9) 184
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Change in cash and cash equivalents (967) (4,233)
Cash and cash equivalents, beginning of period 491 7,551
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Cash and cash equivalents (cheques issued
in excess of bank balance), end of period $ (476) $ 3,318
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%SEDAR: 00000484E
For further information: Mark L. Bentsen, President and Chief
Executive Officer or P. Scott MacFarlane, Chief Financial Officer,
Cathedral Energy Services Ltd., 1700, 715 - 5th Avenue S.W., Calgary,
Alberta, T2P 2X6, Telephone: (403) 265-2560, Fax: (403) 262-4682, www.cathedralenergyservices.com