CALGARY, ALBERTA--(Marketwired - Feb 25, 2014) - Trican Well Service Ltd. ( TCW.TO ) -
|Three months ended||Twelve months ended|
|Dec. 31,||Dec. 31,||Sept. 30,||Dec. 31,||Dec. 31,|
|($ millions, except per share amounts; unaudited)||2013||2012||2013||2013||2012|
|Operating income *||35.5||35.1||72.7||179.6||240.1|
|Profit / (loss)||(20.8||)||(7.7||)||5.7||(45.9||)||53.3|
|Earnings / (loss) per share||(basic)||$||(0.14||)||$||(0.05||)||$||0.04||$||(0.31||)||$||0.37|
|Adjusted profit / (loss) *||(9.9||)||(5.4||)||9.7||(31.5||)||63.0|
|Adjusted profit / (loss) per share*||(basic)||$||(0.07||)||$||(0.04||)||$||0.07||$||(0.21||)||$||0.43|
|Funds provided by / (used in) operations*||30.4||(14.5||)||71.1||130.8||126.8|
* Trican makes reference to operating income, adjusted net income (loss) and funds provided by (used in) operations. These are measures that are not recognized under International Financial Reporting Standards (IFRS). Management believes that, in addition to net income (loss), operating income, adjusted net income (loss) and funds provided by (used in) operations are useful supplemental measures. Operating income provides investors with an indication of earnings before depreciation, foreign exchange, taxes and interest. Adjusted net income (loss) provides investors with information on net income (loss) excluding one-time non-cash charges and the non-cash effect of stock-based compensation expense. Funds provided by (used in) operations provide investors with an indication of cash available for capital commitments, debt repayments and other expenditures. Investors should be cautioned that operating income, adjusted net income (loss), and funds provided by (used in) operations should not be construed as an alternative to net income (loss) and cash flow from operations determined in accordance with IFRS as an indicator of Trican's performance. Trican's method of calculating operating income, adjusted net income (loss) and funds provided by (used in) operations may differ from that of other companies and accordingly may not be comparable to measures used by other companies.
FOURTH QUARTER HIGHLIGHTS
Consolidated revenue for the fourth quarter of 2013 was $552.1 million, an increase of 14% compared to the fourth quarter of 2012. The adjusted consolidated loss was $9.9 million compared to $5.4 million, and adjusted loss per share was $0.07 compared to $0.04 for the same period in 2012.
Due to a rise in fracturing intensity per well in Canada, including increased sand usage per well, we have seen increased wear on fluid ends over the past year. As a result, the useful life of a fluid end has decreased and led to a $14.3 million charge to depreciation expense in the fourth quarter of 2013 ($10.7 million net of tax) to write-off fluid ends no longer in use. Effective January 1, 2014, we will change our accounting estimate on the useful life of a fluid end to more accurately reflect current operating conditions. We assessed the useful life of fluid ends in our other operating regions and concluded that no further changes in estimates were required in those regions.
Our Canadian operations earned quarterly revenue of $286.9 million in the fourth quarter of 2013, an increase of 17% compared to the fourth quarter of 2012. Fourth-quarter operating income was $53.1 million, which was up 4% on a year-over-year basis. Canadian revenue increased sequentially by 3% due to the strong demand in October and November; however, operating margins decreased sequentially by 660 basis points. Fourth-quarter margins were negatively impacted by cost increases and pricing declines. Cost increases were driven primarily by higher third-party hauling, fuel, and repairs and maintenance expenses. Canadian fracturing prices decreased by approximately 3% and cementing prices decreased by approximately 1%, on a sequential basis, which also had a negative impact on fourth-quarter operating margins.
Revenue in the fourth quarter of 2013 for our U.S. operations was relatively consistent with the fourth quarter of 2012, but decreased by 4% on a sequential basis. Revenue for our U.S. pressure pumping business was down sequentially, largely due to reduced activity in the Marcellus play. As expected, our key customers in the Marcellus play decreased spending levels as 2013 capital budgets were completed. In addition, winter weather led to reduced industry activity in the Permian play during the fourth quarter of 2013. Lower revenue from our pressure pumping business was partially offset by a 50% increase in revenue for our U.S. completion tools business. Our U.S. operations incurred an operating loss of $8.3 million during the fourth quarter as operating margins were negatively impacted by reduced pressure pumping activity.
Revenue from International operations was $91.8 million compared to $68.0 million in the fourth quarter of 2012. The majority of international revenue is generated by our Russian operations and pressure pumping demand was strong in this region throughout the fourth quarter of 2013. Favorable weather conditions allowed our Russian customers to remain active throughout the quarter and catch-up on 2013 capital spending plans that were behind schedule for most of 2013. Although Russian operating margins improved on a year-over-year basis, continued cost inflation limited the margin increase. Weak results for our Algerian operations and start-up costs in both Saudi Arabia and Colombia also had a negative impact on International operating margins during the fourth quarter of 2013.
MANAGEMENT'S DISCUSSION AND ANALYSIS
|COMPARATIVE QUARTERLY INCOME STATEMENTS ($ thousands, unaudited)|
|% of||% of||Quarter||%|
|Three months ended December 31,||2013||Revenue||2012||Revenue||Change||Change|
|Materials and operating||490,713||88.9||%||422,999||87.1||%||67,714||16.0||%|
|General and administrative||25,931||4.7||%||27,743||5.7||%||(1,812||)||(6.5||%)|
|Depreciation and amortization||70,085||12.7||%||41,564||8.6||%||28,521||68.6||%|
|Foreign exchange gain||(5,968||)||(1.1||% )||(3,467||)||(0.7...|