CALGARY, ALBERTA--(Marketwired - May 8, 2013) -
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2013
Management's discussion and analysis ("MD&A") of the financial condition and the results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements for the three months ended March 31, 2013 and the consolidated financial statements for the year ended December 31, 2012 of GASFRAC Energy Services Inc. ("GASFRAC" or the "Company") (GFS.TO), together with the accompanying notes. The interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") including International Accounting Standard ("IAS") 34, "Interim Financial Reporting" as issued by the International Accounting Standards Board ("IASB").
Readers should also refer to the "Forward-Looking Statements" legal advisory at the end of this MD&A. This MD&A has been prepared using information that is current to May 8, 2013.
All references to dollar amounts are in Canadian dollars. Figures are in '000s except share and per share data or as otherwise noted.
Unless the context otherwise requires, all references in this MD&A to "we", "us" or "our" mean the Company.
BUSINESS OF GASFRAC
GASFRAC Energy Services Inc. was incorporated on February 13, 2006 in Canada under the Business Corporations Act in the Province of Alberta. The Company is an oil and gas well fracturing company that has developed new technology, the "LPG Fracturing Process", to enable wells to be fractured safely with LPG, more specifically propane and butane. The Company operates in Canada and the United States through six wholly-owned subsidiaries, the GASFRAC Energy Services GP Inc., GASFRAC Energy Services Limited Partnership, GASFRAC Luxembourg Finance (a Luxembourg incorporated entity), GASFRAC Energy Services (US) Inc. (a U.S. incorporated entity), GASFRAC US Holdings Inc. (a U.S. incorporated entity), and GASFRAC Inc. (a U.S. incorporated entity).
COMPARATIVE QUARTERLY FINANCIAL INFORMATION
|March 31, 2013||March 31, 2012||March 31, 2011|
|Selling, general and administrative expenses||4,643||5,997||3,670|
|(Loss) for the period||(7,884||)||(4,926||)||(2,515||)|
|(Loss) Earnings per share - basic||(0.12||)||(0.08||)||(0.04||)|
|(Loss) Earnings per share - diluted||(0.12||)||(0.08||)||(0.04||)|
|Weighted average number of shares - basic||63,472||62,496||60,662|
|Total non-current liabilities||35,625||35,828||907|
|Revenue per revenue day||431||535||448|
|(1)||Defined under Non-IFRS Measures|
OVERVIEW OF THE QUARTER ENDED MARCH 31, 2013
Subsequent to its operations review in September 2012, the Company set three broad objectives: 1) bring the Company's cost structure into alignment with current revenue 2) enhance our service delivery capabilities and 3) broaden our customer base. To meet these objectives we focused our operations towards the Western Canadian Sedimentary Basin (WCSB), particularly the deep basin, and South Texas and Colorado in the USA.
As demonstrated in these financial results we have been successful in achieving a more prudent cost structure with significant reductions in fixed operating costs and SG&A. We will continue to seek efficiencies in both our fixed and variable costs as part of our continuous improvement efforts. However, the most significant results in this area have been achieved and revenue growth is our priority.
The Company has been successful in introducing two enhancements to its service delivery capabilities. Our Hybrid LPG system has eliminated our former 100 tonne daily proppant pumping limitation, allowing us to meet the demands of larger fracturing jobs efficiently and effectively. We have also introduced the ability to customize our fracturing fluid to specific formation characteristics enabling our customers to recover the fracturing fluid thus reducing the overall cost of the fracturing service. This capability is applicable to both our conventional and Hybrid LPG systems.
The ultimate objective from our operating review is the broadening of our customer base. The combination of our efficient cost structure and added service delivery capabilities position us well for success here. The service breadth of our conventional delivery, Hybrid LPG and fluid customization provide customers and potential customers with options to meet their specific needs. Based on interest already expressed by customers in both Canada and the USA, we believe this combination of production enhancement, cost efficiency (e.g. fluid recovery), and ease of integration will result in additional customers.
Revenue for the first quarter was disappointing but was largely caused due to delayed work, some of which we expect to realize during the second quarter. In the USA BlackBrush was idle for most of the quarter as it prepared wells for the remainder of the year. We performed one Hybrid LPG fracturing treatment for BlackBrush in February with positive results. As at May 1 they have restarted fracturing operations and have indicated a plan to fracture two wells per month for the remainder of the year until hunting bans. In Canada, we saw some of the work expected in the first quarter get pushed into the second and as such, expect a stronger second quarter. Second quarter work in Canada will include pad fracturing for two customers allowing work to continue during spring breakup.
From a balance sheet perspective, we have renegotiated our credit facility to better reflect our current operations and needs. Subsequent to quarter end we reached agreement with HSBC and ATB to structure the facility as a $50 million facility with an April 30, 2014 maturity. As at March 31, 2013 we had drawn $23.9 million on the facility ($19.2 million net of cash) and were largely using the facility to fund receivables and inventory. With only minimal capital expenditure requirements for 2013, the credit facility will effectively remain a working capital facility with additional draws required as revenues (receivables) increase. Thus the renegotiated facility provides more efficient financing for the Company.
FINANCIAL OVERVIEW - FOR THE THREE MONTHS ENDED
|March 31, 2013|
|Cost of sales||14,590||51.3||%||1,641||54.7||%||16,231||51.6||%|
|Variable operating costs||2,840||10.0||%||819||27.3||%||3,659||11.6||%|
|Fixed operating costs||3,891||13.7||%||2,263||75.5||%||6,154||19.6||%|
|Direct operating costs||21,321||74.9||%||4,723||157.6||%||-||26,044||82.8||%|
|Selling, general and administration||2,661||9.3||%||1,187||39.6||%||795||4,643||14.8||%|
|Number of revenue days||65||8||73|
|Revenue per day||438||375||431|
|March 31, 2012|
|Cost of sales||17,212||48.7||%||5,461||56.9||%||-||22,673||50.4||%|
|Variable operating costs||4,293||12.1||%||1,300||13.5||%||5,593||12.4||%|
|Fixed operating costs||4,881||13.8||%||2,096||21.8||%||-||6,977||15.5||%|
|Direct operating costs||26,386||74.6||%||8,857||92.3||%||-||35,243||78.4||%|
|Selling, general and administration||3,677||10.4||%||1,257||13.1||%||1,063||5,997||13.3||%|
|Number of revenue days||63||21||84|
|Revenue per day||561||457||535|
Revenue for the first quarter decreased 30.0% to $31.5 million from $45.0 million in the first quarter of 2012.
During the quarter, the company earned revenues from 8 customers with the top three customers representing 83.1% of the total revenue. During the first quarter of 2012, the top three customers represented 82.0% of the total revenue.
First quarter revenue from the Canadian operations decreased 19.5% to $28.5 million from $35.4 million in the first quarter of 2012. The reduction in revenue is due to the decrease in the price and cost of LPG. The Canadian operations executed 65 revenue days in the first quarter of 2013 with an average daily revenue of $438 compared to 63 revenue days in the first quarter of 2012 with an average daily revenue of $561. The reduced revenue per day largely reflects the reduction in propane costs year over year.
During the quarter, revenue was generated from 5 customers with the top 3 customers representing 91.9% of the total revenue. During the first quarter of 2012, the top 3 customers represented 93.9% of the total Canadian revenue.
First quarter revenue from the U.S. operations decreased 68.8% to $3.0 million from $9.6 million in the first quarter of 2012. The reduction in revenue is due to reduced activity from our core US customer. U.S. operations executed 8 revenue days in the first quarter of 2013 with an average daily revenue of $375 compared to 21 revenue days in the first quarter of 2012 with an average daily revenue of $457. The decrease in average daily revenue is due to our customers purchasing and supplying their own frac fluid.
During the quarter, revenue was generated from 3 customers with the top customer generating 52.6% of the total revenue. During the first quarter of 2012, the top three customers represented 87.7% of the total US revenue.
Operating expenses (comprised of cost of sales, variable operating costs, and fixed operating costs) decreased 26.1% to $26.0 million from $35.2 million in the first quarter of 2012. Cost of sales was 51.6% of revenue ($16.2 million) as compared to 50.4% of revenue ($22.7 million) in the first quarter of 2012. Variable operating costs were 11.6% of revenue ($3.7 million) as compared to 12.4% of revenue in the first quarter of 2012. Fixed operating costs decreased 19.6% to $6.2 million from $7.0 million in the first quarter of 2012.
Operating expenses in the first quarter of 2013 decreased 19.3% to $21.3 million from $26.4 million in the first quarter of 2012. Cost of sales was 51.3% of revenue ($14.6 million) as compared to 48.7% of revenue ($17.2 million) in the first quarter of 2012. The increase in cost of sales as a percentage of revenue was largely attributable to proppant margins. Variable operating costs was 10.0% of revenue ($2.8 million) compared to 12.1% of revenue ($4.3 million) in the first quarter of 2012. Fixed operating costs decreased 20.4% to $3.9 million from $4.9 million in the first quarter of 2012. The decrease in fixed costs was largely attributable to reduced payroll costs resulting from staff reductions initiated in the fourth quarter of 2012.
Operating expenses in the first quarter of 2013 were $4.7 million compared to $8.9 million in the first quarter of 2012. Cost of sales was 54.7% of revenue ($1.6 million) compared to 56.9% ($5.5 million) in the first quarter of 2012. Variable operating costs was 27.3% of revenue ($0.8 million) as compared to 13.5% of revenue ($1.3 million) in the first quarter of 2012. The increase in variable costs as a percentage of revenue reflects repair costs undertaken during the quarter. Fixed operating costs increased to $2.3 million as compared to $2.1 million in the first quarter of 2012. During the fourth quarter of 2012 the Company initiated staff reductions in the USA from peak levels reached in the second quarter of 2012 which were approximately $0.7 million higher than first quarter 2012 levels.
SALES, GENERAL & ADMINISTRATIVE ("SG&A") EXPENSES
For the first quarter, SG&A expenses decreased 23.3% to $4.6 million from $6.0 million in the first quarter of 2012. The decrease is primarily due to decreased salaries and benefits associated with the reductions of the executive and administrative staffing levels that occurred in the third quarter of 2012.
DEPRECIATION AND AMORTIZATION
For the first quarter, depreciation and amortization increased to $6.6 million as compared to $5.8 million in the first quarter of 2012. The increase is due to assets under construction being commissioned into service in Q2 2012.
For the first quarter, EBITDA decreased to $0.5 million as compared to $2.3 million in the first quarter of 2012. The decrease is mainly due to the decrease in activity from the US operations.
For the first quarter, the net loss was $7.9 million compared to a net loss of $4.9 million during the first quarter of 2012. The increase in the net loss is primarily due to the decreased activity in the US operations.
FINANCIAL OVERVIEW - SUMMARY OF QUARTERLY RESULTS
|Jun. 30 |
|Sep. 30 |
|Dec. 31 |
|Mar. 31 |
|Jun. 30 |
|Sep. 30 |
|Dec. 31 |
|Mar. 31 |
|(Loss) Profit for the period||(7,768||)||5,911||1,519||(4,926||)||(16,949||)||(7,144||)||(48,450||)||(7,884||)|
|(Loss) Earnings per share - basic||(0.13||)||0.10||0.03||(0.08||)||(0.27||)||(0.11||)||(0.77||)||(0.12||)|
|(Loss) Earnings per share - diluted||(0.13||)||0.09||0.03||(0.08||)||(0.27||)||(0.11||)||(0.77||)||(0.12||)|
|Working capital (2)||49,946||33,998||28,491||27,894||8,994||(1,092||)||25,740||(4,384||)|
|(1)||Defined under Non-IFRS Measures|
|(2)||Working capital is defined as current assets less current liabilities|
LIQUIDITY AND CAPITAL RESOURCES
|March 31 2013||March 31 2012|
|Cash provided by (used in)|
As at March 31, 2013, the Company had approximately $0.8 million of capital commitments as part of the 2012 capital program. The Company anticipates being able to fund these capital expenditures through cash on hand, operating cash flows and debt facilities.
Net cash generated from operating activities was $3.8 million as compared to a $21.8 million in 2012. During the quarter trade and other receivables of $12.2 million were collected that contributed substantially to the cash flow from operating activities.
The Company repaid a portion of its credit facility in the amount of $6.1 million. This compares to net cash provided by financing activities in 2012 of $16.0 million in 2012. The funds in 2012 were as a result of the issue of convertible debentures of 37.9 million and the repayment of the credit facility of $22.1 million.
In 2012, the bank syndicate approved amendments to the credit facility suspending the financial covenants relating to trailing twelve month EBITDA through to the end of Q1 2013 and limiting draws on the credit facility during this period to $60 million. As at March 31, 2013, the Company was not in compliance with the modified EBITDA covenant. The Company renegotiated its credit facility subsequent to quarter end. The renegotiated facility includes a waiver of first quarter 2013 covenants, an extension of the maturity date to April 30, 2014, and a resizing of the facility to $50 million to reflect reduced anticipated funding requirements during the period. Pursuant to IAS 1, the Company has presented the entire credit facility as current as at the balance sheet date.
The Company invested $0.8 million in property and equipment and intangible assets to support its current capabilities compared to $24.9 million in the first quarter of 2012.
The timing of cash outflows relating to the financial liabilities are outlined in the following table:
|Contractual cash flows||Less than 1 year||1 to 3 years||4 to 5 years||Greater than 5 years|
|Trade payables and accrued liabilities (excluding performance share units and accrued interest on debentures)||10,268||10,268||-||-||-|
|Performance share units||248||134||114||-||-|
|Finance lease obligation (incl. expected interest)||2,334||1,503||831||-||-|
|Credit facility (incl. expected interest)||23,858||23,858||-||-||-|
|Debentures (incl. expected interest)||51,521||2,818||48,703||-||-|
|Operating lease payments||10,069||1,346||3,091||2,609||3,023|
|Commitment to purchase raw materials||73,610||16,670||53,462||2,706||772|
|Commitment to purchase plant and equipment||1,330||1,330||-||-||-|
To meet these financial obligations, the Company had available the following resources available within 1 year:
|Mar 31, 2013||Mar 31, 2012|
|CAD$ '000||CAD$ '000|
|Cash and cash equivalents||4,644||17,944|
|Unused credit facility - subject to applicable debt ceiling||26,142||100,000|
ACCOUNTING POLICIES AND ESTIMATES
This MD&A is based on the Company's annual consolidated financial statements that have been prepared in accordance with IFRS. Management is required to make assumptions, judgments and estimates in the application of IFRS. The Company's summary of significant accounting policies are described in Note 2 of the December 31, 2012 audited consolidated financial statements. The preparation of the consolidated financial statements requires that certain estimates and judgments be made concerning the reported amount of revenue and expenses and the carrying values of assets and liabilities. These estimates are based on historical experience and management's judgment. Anticipating future events involves uncertainty and, consequently, the estimates used by management in the preparation of the consolidated financial statements may change as future events unfold, additional experience is acquired or the environment in which the Company operates changes.
Apart from the key source of estimation uncertainty disclosed below, all key assumptions concerning the future, and other key sources of estimation uncertainty made at the end of the last full reporting period were applied consistently for the twelve months ended December 31, 2012.
RELATED PARTY TRANSACTIONS
There were no related party transactions for the quarters ended March 31, 2013 and March 31, 2012.
DISCLOSURE CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in National Instrument 52-109. Based on the evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were designed to provide a reasonable level of assurance over the disclosure of material information, and are effective as of March 31, 2013.
OUTSTANDING SHARE DATA
|Common Shares||Warrants||Share Options|
|Balance as at January 1, 2012||62,399,074||825,000||2,430,000|
|Issues / Granted||55,000||-||1,645,000|
|Issued / Exercised||1,067,420||(825,000||)||(130,000||)|
|Balance as at December 31, 2012||63,515,664||-||2,810,000|
|Issues / Granted||-||-||430,000|
|Issued / Exercised||4,251||-||-|
|Balance as at March 31, 2013||63,519,915||-||3,225,000|
INTERNAL CONTROLS OVER FINANCIAL REPORTING
The Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") have assessed and evaluated the design and effectiveness of the Company's internal controls over financial reporting as defined in National Instrument 52-109 as at March 31, 2013. During the quarter, the CFO also acted in the capacity of the CEO. In making this assessment the Company used the criteria established by the Committee of Sponsoring Organizations ("COSO") in the "Internal Control-Integrated Framework". These criteria are in the areas of control environment, risk assessment, control activities, information and communication and monitoring. The Company's assessment included documentation, evaluation and testing of its internal controls over financial reporting. Based on the evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's internal controls over financial reporting are effective to provide reasonable assurance regarding the reliability of the Company's financial reporting and its preparation of financial statements are effective as of March 31, 2013.
Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements.
There have been no changes in the Company's internal controls over financial reporting during the period ending March 31, 2013, which have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
OFF-BALANCE SHEET ARRANGEMENTS
The Company is not part to any off balance sheet arrangements or transactions.
Certain supplementary measures in this MD&A do not have any standardized meaning as prescribed under IFRS and, therefore, are considered non-IFRS measures. These measures have been described and presented in order to provide shareholders and potential investors with additional information regarding the Company's financial results, liquidity and ability to generate funds to finance its operations. These measures may not be comparable to similar measures presented by other entities, and are further explained as follows:
EBITDA is defined as net income before interest income and expense, taxes, depreciation, amortization and non-controlling interest. EBITDA is presented because it is frequently used by securities analysts and others for evaluating companies and their ability to service debt.
EBITDA was calculated as follows:
|March 31 2013||March 31 2012|
|(Deduct) Add back:|
|Interest expense - net||1,759||736|
|Depreciation and amortization||6,593||7,247|
|Income tax recovery||-||(798||)|
While the fundamentals of the overall pressure pumping market are a key factor in our operations, the most significant challenge/focus remains that of accelerating the adoption of our technology and increasing the utilization of our equipment sets. We believe that the production benefits offered by GASFRAC provide our customers an advantage in this environment and that the major challenge for the Company is increasing our market share through succinct demonstration of this benefit than it is the overall market conditions. The key barriers we have encountered impacting the pace of adoption are; demonstration of the cost/benefit, safety considerations, awareness and "inertia". The key on the cost/benefit side is the collection of basin by basin production data to provide more case studies to potential customers showing the positive impact on production and net present values. In addition, we have undertaken a number of initiatives which will reduce the cost of our service to our customers. These initiatives include equipment configuration and fracturing program design. While safety will always remain a key focus for the Company, the equipment and procedures put in place during 2011 have largely removed this as a barrier for most customers - although education and safety audits will remain part of the sales cycle. Awareness of GASFRAC has increased over the past quarters in the basins we are targeting. Marketing at technical and industry forums as well as one-on-one meetings with key executives represent the key actions being taken by GASFRAC to continue to increase awareness of the Company and our technology. By "inertia" we refer to the tendency for operating companies to continue with their current processes in field developments where they are achieving acceptable returns. This tendency towards inertia drives GASFRAC to focus more on new field developments or identify opportunities which cause the return in current manufacturing processes to be interrupted - for instance reduction in commodity prices or increases in regulation or costs associated with water fracturing.
While we have experienced a positive trend in the adoption of our services in Canada, the "inertia" described above has been more prevalent in the United States market, particularly with larger operators. We believe the key to improving the adoption in the United States is to focus sales efforts on the independent operators who are able to more quickly assess new technologies and adapt to operational changes. In addition, the introduction of our Hybrid LPG and customized fluids should be attractive to targeted USA customers, particularly those with exposure to oil reserves.
During this period of adoption, our operations in both Canada and the United States remain concentrated with a few key customers and our revenues are subject to fluctuation dependent on the level of drilling operations by these customers in the areas in which we are servicing them. Their levels of drilling activity can be impacted by numerous factors including, but not limited to, operational difficulties, infrastructure limitations, weather conditions, hunting restrictions, and budgetary priorities. While these fluctuations add a degree of uncertainty to the timing of our cash flows, our current cost structure allows us to remain cash positive at approximately $10 million of revenue per month. Further, our capital commitments and requirements for 2013 are minimal. As such, our draw on our bank credit facility is expected to remain at a level driven by the amount of our accounts receivable.
Overall demand for pressure pumping services in Canada is expected to be stable in 2013 as compared to 2012 with oil and liquids-rich gas activity remaining the predominate area of the market. The increase in pressure pumping equipment made available to the Canadian market during 2012 resulted in price declines for hydraulic fracturing during 2012. It is expected that pricing pressures will remain during 2013 but significant additional price declines are not expected at this time as the equipment supply/demand balance appears to be near equilibrium for 2013. In addition, assuming commodity prices remain firm, it is expected that additional activity in the Duvernay and Montney will drive demand for additional horsepower in Canada for 2014.
We also expect that adoption by new customers will be achieved during 2013 as more data becomes available and less robust commodity prices encourage the use of more effective technologies.
In the US, the overall pressure pumping market remains with an estimated 10%-15% oversupply of equipment which we do not expect to reverse during 2013. However, on a region by region basis, particularly in oil rich areas such as South Texas, activity remains strong. Our sales efforts in the US are focused on independent operators in South Texas and Colorado. Our work with BlackBrush recommenced in early May and is planned to continue at a constant pace for the remainder of the year. However, we have experienced interruptions to fracturing activity on this project for various reasons and such interruptions may recur in the future. In addition to the Blackbrush work, we have a number of customers planning to use our services during 2013 however, the level of repeat activity with these customers cannot be determined at this time. In addition, we anticipate that our sales focus in these areas on independent operators will result in additional customer activity over the coming quarters.
We expect the second quarter of 2013 to improve on prior year's second quarter both in terms of revenue and earnings. In Canada, we were able to plan pad fracturing for two customers during April and part of May, allowing activity during the period normally unavailable due to road bans. In the USA, work with BlackBrush recommenced in early May and is planned to continue at a steady pace throughout the quarter. We have a number of customers planning work for June, dependent on the amount of rain that may impact access.
This document contains certain statements that constitute forward-looking statements under applicable securities legislation. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. These statements are only as of the date of this document and we do not undertake to publicly update these forward looking statements except in accordance with applicable securities laws. These forward looking statements include, among other things:
- expectations that the Company's innovative technology will provide the Company with opportunities to expand the Company's market share in Canada and the USA;
- estimates of additional investment required to complete ongoing capital projects;
- expectations of securing financing for additional capital expenditures for 2013 and beyond;
- expectations as to the level of funding available under the Company's credit facility;
- expectations as to the degree of activity by key customers;
- expectations as to fluctuations in revenue due to customer concentration;
- expectations of the impact of weather on activity in Canada in 2013;
- expectations as to activity levels in North America and that oil and liquids rich gas drilling will offset declines in dry gas drilling;
- expectations as to capital development programs of major customers;
- expectations as to the rate of adoption of the Company's technology by E&P companies;
- expectations as to the number of manned fracturing spreads in Canada and the USA;
- assumption that environmental protection requirements will not have a significant impact on the Company's operations or capital budget;
- expectations as to the Company's future market position in the industry;
- expectations as to the supply of raw materials;
- expectations as to the pricing of the Company's services in Canada and the USA;
- expectations as to obtaining long term contracts with customers;
- expectations of fracturing industry pricing and the pricing of the Company services in North America in 2013 and 2014;
- expectations of oil and natural gas commodity prices in 2013;
- expectations of the amount of net fracturing horsepower being added to the North American market in 2013 and its impact on the Company's service prices;
These statements are only predictions and are based on current expectations, estimates, projections and assumptions, which we believe are reasonable but which may prove to be incorrect and therefore such forward-looking statements should not be unduly relied upon. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things, industry activity; effect of market conditions on the demand for the Company's services; the ability to obtain qualified staff, equipment and services in a timely manner; the effect of current plans; the timing of capital expenditures and receipt of added equipment operating capacity; future oil and natural gas prices and the ability of the Company to successfully market its services.
By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. These risks and uncertainties include: changes in drilling activity; fluctuating oil and natural gas prices; general economic conditions; weather conditions; regulatory changes; the successful development and execution of technology; customer acceptance of new technology; the potential of competing technologies by market competitors; the availability of qualified staff, raw materials and property and equipment.
Condensed Interim Consolidated Statement of Financial Position
|As at:||Mar 31, 2013||Dec 31, 2012|
|CAD$ '000||CAD$ '000|
|Cash and cash equivalents||4,644||7,927|
|Trade and other receivables||18,410||30,529|
|Assets held for sale||-||1,352|
|TOTAL CURRENT ASSETS||32,727||47,675|
|Plant and equipment||215,694||219,056|
|TOTAL NON-CURRENT ASSETS||224,275||227,781|
|LIABILITIES AND SHAREHOLDERS' EQUITY|
|Trade payables and accrued liabilities||10,751||17,318|
|Current portion of finance lease obligation||1,372||1,349|
|Current portion of credit facility||23,858||2,500|
|TOTAL CURRENT LIABILITIES||37,111||21,935|
|Finance lease obligation||798||1,035|
|Operating lease obligations||49||38|
|Commitments and contingencies|
|TOTAL NON-CURRENT LIABILITIES||35,625||63,077|
|CAPITAL & RESERVES|
|Foreign currency translation reserve||2,557||1,055|
|(Deficit) / Retained earnings||(83,856||)||(75,972||)|
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY||257,002||275,456|
Condensed Interim Consolidated Statements of Comprehensive Loss
|For the three months ended|
|March 31, 2013||March 31, 2012|
|CAD$ '000||CAD$ '000|
|Direct operating costs||26,044||35,243|
|Selling, general and administrative||4,643||5,997|
|Share based compensation||265||1,496|
|Depreciation and amortization||6,593||5,756|
|Foreign exchange (gain) loss||38||(26||)|
|(LOSS) BEFORE INCOME TAXES||(7,884||)||(5,724||)|
|Income tax benefit||-||798|
|(LOSS) FOR THE PERIOD||(7,884||)||(4,926||)|
|OTHER COMPREHENSIVE (LOSS) INCOME|
|Exchange differences on translating foreign operations||1,502||(1,251||)|
|OTHER COMPREHENSIVE (LOSS) INCOME||1,502||(1,251||)|
|TOTAL COMPREHENSIVE (LOSS) FOR THE PERIOD||(6,382||)||(6,177||)|
|(LOSS) PER SHARE|
|Basic (per share)||(0.12||)||(0.08||)|
|Diluted (per share)||(0.12||)||(0.08||)|
Condensed Interim Consolidated Statements of Cash Flows
|For the three months ended|
|March 31,2013||March 31,2012|
|CAD$ '000||CAD$ '000|
|CASH FLOW FROM OPERATING ACTIVITIES|
|Net Income (Loss) for the period||(7,884||)||(4,926||)|
|Depreciation and amortization||6,593||5,756|
|Equity settled share based compensation||204||525|
|Finance cost per income statement||1,770||742|
|Unrealized foreign exchange loss||68||(4||)|
|Taxation per income statement||-||(798||)|
|Net change in non-cash operating working capital||4,851||19,227|
|Cash generated from operations||5,602||22,013|
|NET CASH GENERATED BY OPERATING ACTIVITIES||3,776||21,775|
|CASH FLOW FROM INVESTING ACTIVITIES|
|Purchases of plant and equipment||(468||)||(21,988||)|
|Acquisition of intangible assets||(41||)||(174||)|
|Proceeds from sale of plant and equipment and assets held for sale||-||354|
|Net change in non-cash investing working capital||(335||)||(3,063||)|
|NET CASH USED IN INVESTING ACTIVITIES||(844||)||(24,871||)|
|CASH FLOW FROM FINANCING ACTIVITIES|
|Proceeds from common shares issued (net of share issue cost)||-||457|
|Finance leases / (repayments)||(224||)||(100||)|
|Credit facility repayment||(6,142||)||(22,187||)|
|Convertible debentures issued||-||37,888|
|NET CASH (USED IN) GENERATED BY FINANCING ACTIVITIES||(6,366||)||16,058|
|Net increase (decrease) in cash and cash equivalents||(3,434||)||12,962|
|Cash and cash equivalents at beginning of period||7,927||5,026|
|Effects of exchange rate changes on the balance of cash held in foreign currencies||151||(44||)|
|CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD||4,644||17,944|
The Company will host a conference call on Thursday, March 14, 2013 at 9:00 a.m. MT (11:00 a.m. ET) to discuss the Company's results for the year and fourth quarter of 2012.
To participate in the Q&A session, please call the conference call operator at 1-866-226-1792 or 1-416-340-2216 fifteen minutes prior to the call's start time and ask for "GASFRAC Fourth Quarter Results Conference Call".
A replay of the call will be available until May 16, 2013 by dialing 1-800-408-3053 (North America) or 1-905-694-9451 (outside North America). Playback passcode: 4217644. The Company will also archive the conference on its website at www.gasfrac.com.
GASFRAC is an oil and gas technology and service company headquartered in Calgary, Alberta, Canada, and the sole provider of waterless gelled LPG fracturing technology in North America.
This press release contains certain statements that constitute forward-looking statements under applicable securities legislation. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. These statements are only as of the date of this document and we do not undertake to publicly update these forward looking statements except in accordance with applicable securities laws. Forward-looking statements are based on current expectations, estimates, projections and assumptions, which we believe are reasonable but which may prove to be incorrect and therefore such forward-looking statements should not be unduly relied upon. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: industry activity; the general stability of the economic and political environment; effect of market conditions on demand for the Company's products and services; the ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; the ability to operate its business in a safe, efficient and effective manner; the performance and characteristics of various business segments; the effect of current plans; the timing and costs of capital expenditures; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its products and services. Forward-looking statements are subject to a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks and uncertainties include: fluctuating prices for crude oil and natural gas; changes in drilling activity; general global economic, political and business conditions; weather conditions; regulatory changes; the successful exploitation and integration of technology; customer acceptance of technology; success in obtaining issued patents; the potential development of competing technologies by market competitors; and availability of products, qualified personnel, manufacturing capacity and raw materials. In addition, actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth under the section entitled "Business Risks" in the Company's MD&A.