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Octane
Release Date: September 24, 2003
Octane Announces Financial Results for the Second Quarter Ended June 30, 2003 and Appointment of President and COO
19:19 EDT Wednesday, August 27, 2003
CALGARY, Aug. 27 /CNW/ – Octane Energy Services Ltd. (TSX-VEN: OES) today announced its financial results for the second quarter ended June 30, 2003. The second quarter includes the consolidated results from Octane’s subsidiaries, Hughes Oilfield Construction Inc., K-TEK Construction Ltd., Pronghorn Controls Ltd. and Octane Energy Services Corp. Selected financial information is as follows, with all per share amounts presented on a diluted basis.
SUMMARY FINANCIAL INFORMATION
(unaudited) 3 Months Ended 3 Months Ended 6 Months Ended 6 Months Ended
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
————————————————————————-
Revenue $13,951,752 $5,541,533 $25,869,101 $15,614,838
Gross Margin $1,686,076 $682,978 $3,256,832 $360,316
Earnings Before
Interest,
Taxes,
Depreciation
and
Amortization
(EBITDA) ($152,128) ($268,534) $269,037 ($1,652,978)
EBITDA per
share ($0.01) ($0.02) $0.01 ($0.11)
Net Loss ($636,269) ($615,542) ($997,544) ($1,718,241)
Net Loss
per share ($0.02) ($0.04) ($0.05) ($0.11)
Total Assets $35,769,497 $23,631,609 $35,769,497 $23,631,609
Total Long
Term Debt
and Lease
Obligations
(including
the current
portion
thereof) $12,139,383 $10,462,191 $12,139,383 $10,462,191
Shares
Outstanding
-Basic 28,167,504 15,145,526 21,586,838 15,141,990
-Diluted 31,075,106 15,231,185 24,292,868 15,236,378
(x) EBITDA is not a recognized earnings measure under Canadian generally
accepted accounting principles (GAAP) and may not be comparable to
similar measures presented by other companies. It is provided because
management believes that it is a useful supplemental measure as it
provides an indication of the results generated prior to a
consideration of how those activities are financed or taxed.
Operational Review
During the second quarter of 2003, the oil and gas services industry experienced spring break up conditions that restricted the deployment of equipment in certain areas and reduced the level of drilling activity. As a result, Octane experienced weaker demand and pricing for many of its services during the months of April and May. Commencing in June, the Company saw its activity levels increase dramatically and it returned to operational profitability. During the second quarter, Octane completed the installation phase of its field process improvement plan and incurred one time costs of $139,860 relating to this project. This project is now complete. In addition, the Company incurred severance costs in the amount of $209,375 relating to certain management changes that occurred in the second quarter. There will be no severance obligations relating to the management changes announced in August, 2003.
The oilfield construction division maintained a strong backlog of work that it was unable to complete during the months of April and May due to adverse weather and field conditions. During this downtime, the division completed repair and maintenance work in order to prepare its fleet of equipment for the busier summer construction season. In addition to higher repair and maintenance costs in the period, the division experienced higher rental and mobilization costs relating to a work program that it was not able to complete due to weather conditions. Commencing in June, this division began experiencing substantially higher activity levels and operating margins, which have continued into the third quarter to date.
The second quarter was the first quarter that included the operating results of Pronghorn Controls Ltd. Pronghorn contributed revenue of approximately $5.6 million during the quarter, but saw its gross margin fall behind expectations due to weather related operating restrictions and lower than expected labour margins. During the month of June, Pronghorn closed one unprofitable location and increased its labour rates. This has resulted in significantly stronger operating results during the month of June and the third quarter to date.
The facilities and pipeline construction division saw its activity levels increase compared to the prior year and maintained margins that were considerably improved from the prior year. The Company has continued to maintain discipline in its bid prices.
Financing Initiatives
Octane has recognized the need to continue to improve its balance sheet through operational performance and other financing initiatives. On August 6, 2003, the Company announced a number of financing initiatives, including the implementation of a new $5.6 million banking facility for its subsidiary, Pronghorn Controls Ltd., the completion of a bridge financing in the amount of $1.0 million, the initiation of a rights offering in the amount of $1.4 million and the conversion of up to $2.225 million of debt into equity. It is expected that the completion of these initiatives, combined with further improvements in operating performance, will result in a substantially improved balance sheet for the Company as the year progresses.
Appointment of President and Chief Operating Officer
Octane is pleased to announce that, effective September 2, 2003, Terry Doyle will be joining the Company as President and Chief Operating Officer. Mr. Doyle is an oilfield service executive with over 33 years of senior managerial and operational experience encompassing a broad spectrum of drilling, completions, well servicing and production assignments. Mr. Doyle spent over 12 years as a senior Canadian executive of the world’s largest international land drilling contractor. He has also been the President of several public oilfield service companies providing services such as drilling, well servicing, coiled tubing, production testing, wireline services, rental equipment and manufacturing. Mr. Doyle obtained a Bachelor of Engineering degree from the Royal Military College of Canada and served three years as a pilot in the Royal Canadian Air Force. He is a member of the Association of Professional Engineers of Alberta and is a past President of the Canadian Association of Oilwell Drilling Contractors.
Mr. Arthur Bray, the Chairman and CEO of Octane stated, “We are extremely pleased to welcome Terry to his new position at Octane and are certain that the operations of Octane will benefit from his leadership, knowledge and experience”.
In connection with the foregoing appointment, Octane elected to restructure its Electrical and Instrumentation division by having Mr. Douglas Corcoran, the President of Pronghorn Controls Ltd. report directly to the President and COO of Octane. As a result, Peter Kalutich will no longer be serving as Vice President, Electrical & Instrumentation. The board of directors of Octane would like to thank Mr. Kalutich for his assistance in the successful operation and growth of Pronghorn during his tenure.
Outlook
Improved weather conditions and drilling levels in the third quarter to date are expected to result in continued improvements in the operating results of Octane during the third quarter. During the coming months, Octane will maintain its focus on improving profitability, maintaining service quality and enhancing its relationship with key customers.
About Octane
Octane is an emerging, diversified oilfield services company. The Company has grown rapidly through a series of seven acquisitions and currently provides services in four main areas: oilfield construction services, facilities construction services, small diameter pipeline construction services and electrical and instrumentation services. The Company employs approximately 500 persons at its 14 field offices strategically located across western Canada. The common shares of Octane trade on the TSX Venture Exchange under the symbol “OES”.
THE TSX VENTURE EXCHANGE HAS NEITHER APPROVED OR DISAPPROVED OF THE INFORMATION CONTAINED HEREIN.
%SEDAR: 00011275E
For further information: Myron Tetreault, VP Corporate Development, (403) 509-3931, Arthur Bray, Interim CEO, (403) 509-3936
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