CALGARY, May 1, 2019 /CNW/ - Calfrac Well Services
Ltd. ("Calfrac" or "the Company") (TSX-CFW) announces its
financial and operating results for the three months ended
March 31, 2019.
HIGHLIGHTS
On January 1, 2019, Calfrac
applied IFRS 16 using the modified retrospective approach under
which comparative information has not been restated and continues
to be reported under IAS 17 and related interpretations. Please
refer to note 1 of the financial statements for additional
information on the impact to the Company's financial
information.
Three Months Ended
March 31,
|
2019
|
|
2018
|
|
Change
|
(C$000s, except
per share and unit data)
|
($)
|
|
($)
|
|
(%)
|
(unaudited)
|
|
|
|
|
|
Financial
|
|
|
|
|
|
Revenue
|
475,012
|
|
582,838
|
|
(19)
|
Operating income
(loss)(1)
|
43,623
|
|
67,974
|
|
(36)
|
Per share –
basic
|
0.30
|
|
0.47
|
|
(36)
|
Per share –
diluted
|
0.30
|
|
0.46
|
|
(35)
|
Adjusted
EBITDA(1)
|
44,086
|
|
72,953
|
|
(40)
|
Per share –
basic
|
0.31
|
|
0.51
|
|
(39)
|
Per share –
diluted
|
0.30
|
|
0.50
|
|
(40)
|
Net income (loss)
attributable to the shareholders of Calfrac before foreign
exchange gains or losses(2)
|
(35,105)
|
|
1,905
|
|
NM
|
Per share –
basic
|
(0.24)
|
|
0.01
|
|
NM
|
Per share –
diluted
|
(0.24)
|
|
0.01
|
|
NM
|
Net income (loss)
attributable to the shareholders of Calfrac
|
(36,334)
|
|
3,234
|
|
NM
|
Per share –
basic
|
(0.25)
|
|
0.02
|
|
NM
|
Per share –
diluted
|
(0.25)
|
|
0.02
|
|
NM
|
Working capital (end
of period)
|
276,785
|
|
360,654
|
|
(23)
|
Total equity (end of
period)
|
481,675
|
|
546,018
|
|
(12)
|
|
|
|
|
Weighted average
common shares outstanding (000s)
|
|
|
|
Basic
|
144,404
|
|
143,722
|
|
—
|
Diluted
|
146,239
|
|
146,624
|
|
—
|
(1) Refer to "Non-GAAP Measures" on pages 16 and 17 for
further information.
|
(2) Net income (loss) attributable to the shareholders
of Calfrac before foreign exchange (FX) gains or losses is defined
as net income (loss)
attributable to the shareholders of Calfrac before FX gains or
losses on an after-tax basis. Management believes that this
is a useful supplemental measure as it provides an indication of
the financial results generated by Calfrac without the
impact of FX fluctuations, which are not fully controllable by the
Company. This measure does not have any standardized
meaning prescribed under IFRS and, accordingly, may not be
comparable to similar measures used by other
companies.
|
CEO MESSAGE
Calfrac's President and Chief Executive
Officer, Fernando Aguilar commented
on the results: "Despite very challenging weather conditions across
a number of operating areas, Calfrac delivered results underlined
by the strength of our North American platform while showing again
the potential of our operations in Argentina. I'd like to extend my thanks to all
our employees for their ongoing dedication to executing on our
Brand Promise - Do it Better, Do it
Safely, Do it on Time."
During the quarter, Calfrac:
- generated $72.7 million in
operating cash flow, enabling a further reduction in its credit
facility borrowings by $20.0
million;
- secured incremental contracted work volumes in Argentina with a major client in that region;
and
- commenced work to extend the Company's revolving credit
facility, which was executed subsequent to
the quarter.
Update on Canadian Divisional Management
Near the end
of the first quarter, Calfrac implemented a change in the
management of its Canadian Division. Tom
Medvedic, the former President of Calfrac's Canadian
Division, left the Company in March to pursue a new career
opportunity in the pipeline infrastructure industry. Tom joined
Calfrac in 2004 and occupied a number of senior management roles at
the Company, including Chief Financial Officer, Vice President,
Corporate Development and, most recently, as President of Calfrac's
Canadian Division.
"On behalf of everyone at Calfrac, I would like to thank Tom for
his many years of outstanding service across a number of key senior
management roles and for the leadership that he provided during his
time at the Company." - Fernando
Aguilar, Calfrac President and CEO.
"I would also like to thank Tom for his partnership and efforts
over the past 15 years and for being such an integral part of the
Calfrac family. His focus on details and an unwavering commitment
to safety and service quality have helped make Calfrac the company
it is today. " - Doug Ramsay,
Calfrac Vice Chairman and Co-Founder.
On Tom's departure, Chad Leier
has assumed the role of President of Calfrac's Canadian Division.
Chad joined Calfrac in 2005 and has worked in a number of sales and
marketing roles in both Canada and
the United States, most recently
as Vice-President of Sales and Marketing for the Canadian
Division.
"Chad's long tenure at Calfrac and strong relationships with our
customer base and within our organization position him well to lead
the Canadian Division, and he will benefit greatly from the support
of the strong divisional and corporate team around him." -
Fernando Aguilar, Calfrac President
and CEO.
CONSOLIDATED HIGHLIGHTS
Three Months Ended
March 31,
|
2019
|
|
2018
|
|
Change
|
(C$000s, except
operational information)
|
($)
|
|
($)
|
|
(%)
|
(unaudited)
|
|
|
|
|
|
Revenue
|
475,012
|
|
582,838
|
|
(19)
|
Expenses
|
|
|
|
|
|
Operating
|
412,185
|
|
490,106
|
|
(16)
|
Selling, general and
administrative (SG&A)
|
19,204
|
|
24,758
|
|
(22)
|
|
431,389
|
|
514,864
|
|
(16)
|
Operating
income(1)
|
43,623
|
|
67,974
|
|
(36)
|
Operating income
(%)
|
9.2
|
|
11.7
|
|
(21)
|
Adjusted
EBITDA(1)
|
44,086
|
|
72,953
|
|
(40)
|
Adjusted EBITDA
(%)
|
9.3
|
|
12.5
|
|
(26)
|
Fracturing revenue
per job ($)
|
33,093
|
|
36,783
|
|
(10)
|
Number of fracturing
jobs
|
13,100
|
|
14,752
|
|
(11)
|
Active pumping
horsepower, end of period (000s)
|
1,344
|
|
1,259
|
|
7
|
Idle pumping
horsepower, end of period (000s)
|
36
|
|
134
|
|
(73)
|
Total pumping
horsepower, end of period (000s)
|
1,380
|
|
1,393
|
|
(1)
|
Coiled tubing revenue
per job ($)
|
30,463
|
|
33,283
|
|
(8)
|
Number of coiled
tubing jobs
|
843
|
|
729
|
|
16
|
Active coiled tubing
units, end of period (#)
|
21
|
|
22
|
|
(5)
|
Idle coiled tubing
units, end of period (#)
|
8
|
|
8
|
|
—
|
Total coiled tubing
units, end of period (#)
|
29
|
|
30
|
|
(3)
|
Cementing revenue per
job ($)
|
39,389
|
|
37,728
|
|
4
|
Number of cementing
jobs
|
118
|
|
69
|
|
71
|
Active cementing
units, end of period (#)
|
11
|
|
12
|
|
(8)
|
Idle cementing units,
end of period (#)
|
12
|
|
11
|
|
9
|
Total cementing
units, end of period (#)
|
23
|
|
23
|
|
—
|
(1) Refer to "Non-GAAP
Measures" on pages 16 and 17 for further
information.
|
Revenue in the first quarter of 2019 was $475.0 million, a decrease of 19 percent from the
same period in 2018. The Company's fracturing job count decreased
by 11 percent while consolidated revenue per fracturing job
decreased by 10 percent. The number of cementing jobs increased by
71 percent due to higher cementing activity in northern
Argentina, while coiled tubing
activity was 16 percent higher due to better utilization in
Canada and Argentina.
Pricing in Canada and
the United States decreased while
pricing in Russia was consistent
with the first quarter of 2018. In Argentina, the transition to more
unconventional activity does not allow for a meaningful pricing
comparison to the first quarter in 2018 as the type of job is
significantly different than conventional activity.
Adjusted EBITDA of $44.1 million
for the first quarter of 2019 decreased from $73.0 million in the comparable period in 2018
primarily due to lower utilization and pricing in Canada and the
United States.
Net loss attributable to shareholders of Calfrac was
$36.3 million or $0.25 per share diluted compared to income of
$3.2 million or $0.02 per share diluted in the same period last
year. The first quarter of 2019 included higher depreciation of
$23.2 million primarily due to a
change in depreciation policy and the adoption of IFRS 16.
Three Months
Ended
|
March
31,
|
|
December
31,
|
|
Change
|
|
2019
|
|
2018
|
|
|
(C$000s, except
operational information)
|
($)
|
|
($)
|
|
(%)
|
(unaudited)
|
|
|
|
|
|
Revenue
|
475,012
|
|
498,858
|
|
(5)
|
Expenses
|
|
|
|
|
|
Operating
|
412,185
|
|
416,886
|
|
(1)
|
SG&A
|
19,204
|
|
19,980
|
|
(4)
|
|
431,389
|
|
436,866
|
|
(1)
|
Operating
income(1)
|
43,623
|
|
61,992
|
|
(30)
|
Operating income
(%)
|
9.2
|
|
12.4
|
|
(26)
|
Adjusted
EBITDA(1)
|
44,086
|
|
62,914
|
|
(30)
|
Adjusted EBITDA
(%)
|
9.3
|
|
12.6
|
|
(26)
|
Fracturing revenue
per job ($)
|
33,093
|
|
38,264
|
|
(14)
|
Number of fracturing
jobs
|
13,100
|
|
12,068
|
|
9
|
Active pumping
horsepower, end of period (000s)
|
1,344
|
|
1,328
|
|
1
|
Idle pumping
horsepower, end of period (000s)
|
36
|
|
42
|
|
(14)
|
Total pumping
horsepower, end of period (000s)
|
1,380
|
|
1,370
|
|
1
|
Coiled tubing revenue
per job ($)
|
30,463
|
|
29,567
|
|
3
|
Number of coiled
tubing jobs
|
843
|
|
715
|
|
18
|
Active coiled tubing
units, end of period (#)
|
21
|
|
22
|
|
(5)
|
Idle coiled tubing
units, end of period (#)
|
8
|
|
7
|
|
14
|
Total coiled tubing
units, end of period (#)
|
29
|
|
29
|
|
—
|
Cementing revenue per
job ($)
|
39,389
|
|
46,403
|
|
(15)
|
Number of cementing
jobs
|
118
|
|
130
|
|
(9)
|
Active cementing
units, end of period (#)
|
11
|
|
11
|
|
—
|
Idle cementing units,
end of period (#)
|
12
|
|
12
|
|
—
|
Total cementing
units, end of period (#)
|
23
|
|
23
|
|
—
|
(1) Refer to "Non-GAAP
Measures" on pages 16 and 17 for further
information.
|
Revenue in the first quarter of 2019 was $475.0 million, a decrease of 5 percent from the
fourth quarter of 2018, primarily due to lower pricing in
North America offset partially by
increased fracturing and coiled tubing activity. Revenue in
Russia and Argentina was higher sequentially due to
increased activity and job sizes. Revenue per fracturing job
decreased by 14 percent primarily due to lower pricing and job mix
in Canada and the United States.
In Canada, first-quarter
revenue decreased by 9 percent from the fourth quarter to
$131.4 million despite a 14 percent
increase in the number of fracturing jobs completed, primarily due
to lower average pricing and the completion of smaller jobs.
Operating income as a percentage of revenue was 10 percent versus
11 percent in the fourth quarter.
In the United States, revenue
in the first quarter of 2019 decreased by 7 percent from the fourth
quarter to $259.1 million, mainly as
a result of lower pricing as activity was fairly consistent on a
sequential basis. The U.S. division's operating income margin
decreased to 15 percent in the first quarter from 18 percent in the
fourth quarter of 2018.
In Russia, revenue of
$29.1 million in the first quarter of
2019 was 17 percent higher than the fourth quarter due to a
seasonal increase in fracturing and coiled tubing activity. The
operating loss position in the first quarter was primarily due to
higher costs associated with extremely cold weather during parts of
the quarter while the closing of one facility also impacted
profitability.
In Argentina, revenue in the
first quarter of 2019 increased by 12 percent from the fourth
quarter to $55.4 million, while
operating income improved to $4.9
million from $4.4 million in
the fourth quarter. The improvement was due to higher activity in
Neuquén as better operational efficiencies were achieved in the
first quarter.
BUSINESS UPDATE AND OUTLOOK
Calfrac's first-quarter
results are a result of strong execution across the platform,
impacted by weather-related delays in Canada, the United
States and Russia.
CANADA
In
Canada, the first quarter unfolded
largely as planned despite periods of extreme cold weather in
February, which impacted the pace of operations during the quarter.
Although some industry players reported delays in delivering sand
to location, Calfrac's internal supply chain network delivered an
exceptional result with little to no time lost in its
operations.
Although commodity prices have strengthened during the first
quarter, Calfrac believes producers will remain cautious in their
outlook for the second half of 2019. Based on lower drilling
activity in the first quarter, Calfrac expects near-term
utilization to continue to be lower than levels experienced in
2018. In response, Calfrac has idled one incremental fleet in its
Canadian operations and has adjusted second quarter field labour
schedules to prudently manage its operating costs while maintaining
experienced field personnel.
Calfrac expects activity to increase from current levels through
the remainder of second quarter and has secured a number of large
pad fracturing operations that provide consistent activity levels.
Calfrac has not offered any seasonal discounts for second-quarter
work as current pricing remains below levels needed to deliver
acceptable returns on investment.
Calfrac remains committed to the Canadian market and its
long-standing client base, and will focus on delivering exceptional
execution and ongoing innovation, while managing its footprint and
costs in the best long-term interests of the Company.
UNITED
STATES
Activity during the first quarter was expected
to be consistent with the prior quarter but extended periods of
cold weather in North Dakota and
Pennsylvania delayed work for
significant portions of February. Temperatures in North
Dakota were approximately 20 degrees colder than normal and
resulted in utilization levels materially lower than typical.
Utilization during the first quarter in the Company's operating
districts in the southern United
States was as expected.
Due to pricing erosion in the fourth quarter, the Company
experienced limited customer turnover into the beginning of the
year and expects some further turnover in the months ahead. Calfrac
will continue to focus on clients whose long-term focus on safety,
productivity and returns aligns with the Company's strategy.
Based on steady rig activity, improved commodity prices and a
growing inventory of uncompleted wells, the Company's outlook in
the United States remains strong
as oil takeaway capacity additions in the Permian Basin are
expected to increase completion activity in that basin during the
second half of the year. Calfrac's strong presence throughout
multiple basins in the United
States and across several top-tier producers should lead to
strong utilization over the short-run, and the Company will monitor
producer plans for opportunities to further optimize its
operational and financial performance in the United States.
RUSSIA
Calfrac's
operations in Russia delivered a
sequential improvement in revenue but the higher costs of winter
operations and the costs associated with the closing of one
district facility during the first quarter impacted profitability.
Contracted work volumes are anticipated to result in improved
levels of utilization and profitability during the second quarter
and the remainder of 2019.
ARGENTINA
Calfrac's
operations in Argentina again
delivered strong year-on-year improvement in operating and
financial results due to higher activity and utilization.
Calfrac's outlook for Argentina
in 2019 remains positive due to the recent addition of a
substantial fracturing contract in the Neuquén district which is
expected to commence during the second half of 2019. This higher
level of utilization is expected to improve profitability
throughout the upcoming quarters.
CORPORATE
Despite a sequential decline in overall
activity, Calfrac generated positive free cash flow during the
first quarter and reduced its credit facility borrowings by
$20.0 million to $100.0 million. Prudent management of capital
spending as well as a release of cash from working capital enabled
the incremental debt reduction. The Company is continuing to pursue
efficiencies in its capital program and remains focused on further
debt reduction throughout 2019.
FINANCIAL OVERVIEW – THREE MONTHS ENDED MARCH 31, 2019
VERSUS 2018
CANADA
Three Months Ended
March 31,
|
2019
|
|
2018
|
|
Change
|
(C$000s, except
operational information)
|
($)
|
|
($)
|
|
(%)
|
(unaudited)
|
|
|
|
|
|
Revenue
|
131,395
|
|
189,728
|
|
(31)
|
Expenses
|
|
|
|
|
|
Operating
|
114,668
|
|
154,442
|
|
(26)
|
SG&A
|
3,001
|
|
3,576
|
|
(16)
|
|
117,669
|
|
158,018
|
|
(26)
|
Operating
income(1)
|
13,726
|
|
31,710
|
|
(57)
|
Operating income
(%)
|
10.4
|
|
16.7
|
|
(38)
|
Fracturing revenue
per job ($)
|
15,466
|
|
19,326
|
|
(20)
|
Number of fracturing
jobs
|
7,474
|
|
8,930
|
|
(16)
|
Active pumping
horsepower, end of period (000s)
|
301
|
|
322
|
|
(7)
|
Idle pumping
horsepower, end of period (000s)
|
5
|
|
51
|
|
(90)
|
Total pumping
horsepower, end of period (000s)
|
306
|
|
373
|
|
(18)
|
Coiled tubing revenue
per job ($)
|
24,585
|
|
26,255
|
|
(6)
|
Number of coiled
tubing jobs
|
602
|
|
495
|
|
22
|
Active coiled tubing
units, end of period (#)
|
11
|
|
10
|
|
10
|
Idle coiled tubing
units, end of period (#)
|
3
|
|
5
|
|
(40)
|
Total coiled tubing
units, end of period (#)
|
14
|
|
15
|
|
(7)
|
(1) Refer to "Non-GAAP
Measures" on pages 16 and 17 for further
information.
|
REVENUE
Revenue from Calfrac's Canadian operations
during the first quarter of 2019 was $131.4
million versus $189.7 million
in the same period of 2018 primarily due to lower activity and
pricing. In the first quarter of 2019, the number of fracturing
jobs was 16 percent lower than the comparable period in
2018 due to lower activity in the Viking and Cardium oil
plays, combined with delays caused by extremely cold weather in
February. Revenue per job decreased 20 percent due to a combination
of lower pricing and job mix. The number of coiled tubing jobs
increased by 22 percent from the first quarter in 2018 mainly due
to a larger operating scale combined with higher utilization
throughout the quarter.
OPERATING INCOME
Operating income in Canada during the first quarter of 2019 was
$13.7 million compared to
$31.7 million in the same period of
2018. The decrease in operating income was due to lower utilization
and pricing experienced during the quarter. The Company made the
decision to suspend operations for one fleet at the beginning of
the quarter based on weaker demand for its fracturing services and
reduced its fixed cost structure accordingly. Despite certain
reductions in costs for logistics and materials, overall pricing
was lower on a net basis quarter-over-quarter. The reported
operating income was impacted by the adoption of IFRS 16 at the
beginning of 2019 which resulted in $2.2
million of lease payments no longer being recognized as
operating costs during the first quarter of 2019. In addition, the
$0.6 million decrease in SG&A
expenses compared to the first quarter in 2018 was primarily due to
a lower bonus accrual being recorded in the first quarter of
2018.
UNITED STATES
Three Months Ended
March 31,
|
2019
|
|
2018
|
|
Change
|
(C$000s, except
operational and exchange rate information)
|
($)
|
|
($)
|
|
(%)
|
(unaudited)
|
|
|
|
|
|
Revenue
|
259,125
|
|
315,980
|
|
(18)
|
Expenses
|
|
|
|
|
|
Operating
|
216,714
|
|
257,606
|
|
(16)
|
SG&A
|
4,667
|
|
5,125
|
|
(9)
|
|
221,381
|
|
262,731
|
|
(16)
|
Operating
income(1)
|
37,744
|
|
53,249
|
|
(29)
|
Operating income
(%)
|
14.6
|
|
16.9
|
|
(14)
|
Fracturing revenue
per job ($)
|
50,806
|
|
59,348
|
|
(14)
|
Number of fracturing
jobs
|
5,095
|
|
5,309
|
|
(4)
|
Active pumping
horsepower, end of period (000s)
|
858
|
|
752
|
|
14
|
Idle pumping
horsepower, end of period (000s)
|
31
|
|
83
|
|
(63)
|
Total pumping
horsepower, end of period (000s)
|
889
|
|
835
|
|
6
|
Active coiled tubing
units, end of period (#)
|
—
|
|
—
|
|
—
|
Idle coiled tubing
units, end of period (#)
|
2
|
|
1
|
|
100
|
Total coiled tubing
units, end of period (#)
|
2
|
|
1
|
|
100
|
Active cementing
units, end of period (#)
|
—
|
|
—
|
|
—
|
Idle cementing units,
end of period (#)
|
10
|
|
9
|
|
11
|
Total cementing
units, end of period (#)
|
10
|
|
9
|
|
11
|
US$/C$ average
exchange rate(2)
|
1.3295
|
|
1.2647
|
|
5
|
(1) Refer to "Non-GAAP
Measures" on pages 16 and 17 for further
information.
|
(2) Source: Bank of
Canada.
|
REVENUE
Revenue from Calfrac's United States operations decreased to
$259.1 million during the first
quarter of 2019 from $316.0 million
in the comparable quarter of 2018 due to lower pricing and a 4
percent decrease in the number of fracturing jobs completed
period-over-period. Activity in North
Dakota and Pennsylvania was
impacted by weather-related delays during the first quarter of 2019
while activity in Colorado was
also down relative to the same period in 2018. These declines were
partially offset by an increase in activity in Pennsylvania due to a larger operating scale
while activity in Texas was flat
year-over year. The 14 percent decrease in revenue per job
year-over-year was primarily due to lower pricing and the impact of
job mix. The 5 percent appreciation in the U.S. dollar versus the
Canadian dollar partially offset the decrease in revenue.
OPERATING INCOME
The Company's United States operations generated operating
income of $37.7 million during the
first quarter of 2019 compared to $53.2
million in the same period in 2018. The year-over-year
decline in operating results was primarily due to lower realized
pricing and decreased utilization on a larger operating footprint
and fixed cost structure. Overall activity was 4 percent lower,
however, the Company operated two additional crews compared to the
same quarter in 2018. Activity in North
Dakota and Pennsylvania was
negatively impacted by extended periods of cold weather within the
quarter while Texas and
Colorado experienced more
scheduling gaps than in the same period in 2018. Operating results
in the first quarter of 2019 did not include any fleet reactivation
costs, while $5.0 million was
incurred in the comparable quarter in 2018. The reported operating
income was impacted by the adoption of IFRS 16 at the beginning of
2019, which resulted in $3.5 million
of lease payments no longer being recognized as operating costs
during the first quarter of 2019. SG&A expenses decreased by 9
percent in the first quarter of 2019 primarily due to a lower bonus
accrual recorded in the first quarter in 2019.
RUSSIA
Three Months Ended
March 31,
|
2019
|
|
2018
|
|
Change
|
(C$000s, except
operational and exchange rate information)
|
($)
|
|
($)
|
|
(%)
|
(unaudited)
|
|
|
|
|
|
Revenue
|
29,078
|
|
31,235
|
|
(7)
|
Expenses
|
|
|
|
|
|
Operating
|
30,866
|
|
31,317
|
|
(1)
|
SG&A
|
988
|
|
876
|
|
13
|
|
31,854
|
|
32,193
|
|
(1)
|
Operating
loss(1)
|
(2,776)
|
|
(958)
|
|
NM
|
Operating loss
(%)
|
(9.5)
|
|
(3.1)
|
|
NM
|
Fracturing revenue
per job ($)
|
89,290
|
|
87,710
|
|
2
|
Number of fracturing
jobs
|
290
|
|
305
|
|
(5)
|
Pumping horsepower,
end of period (000s)
|
77
|
|
77
|
|
—
|
Coiled tubing revenue
per job ($)
|
43,618
|
|
37,678
|
|
16
|
Number of coiled
tubing jobs
|
73
|
|
119
|
|
(39)
|
Active coiled tubing
units, end of period (#)
|
5
|
|
6
|
|
(17)
|
Idle coiled tubing
units, end of period (#)
|
2
|
|
1
|
|
100
|
Total coiled tubing
units, end of period (#)
|
7
|
|
7
|
|
—
|
Rouble/C$ average
exchange rate(2)
|
0.0202
|
|
0.0222
|
|
(9)
|
(1) Refer to "Non-GAAP
Measures" on pages 16 and 17 for further
information.
|
(2) Source: Bank of
Canada.
|
REVENUE
Revenue from Calfrac's Russian operations
decreased by 7 percent during the first quarter of 2019 to
$29.1 million from $31.2 million in the corresponding three-month
period of 2018. The decrease in revenue was attributable to a
decrease in fracturing activity in Noyabrsk and Usinsk, offset
partially by higher activity in Khanty-Mansiysk. Revenue per
fracturing job increased by 2 percent primarily due to job mix.
Coiled tubing activity decreased by 39 percent, primarily due to
cold weather-related delays combined with lower utilization than
expected with one of Calfrac's customers. The 9 percent
depreciation of the Russian rouble in the first quarter of 2019
versus the same period in 2018 also contributed to the decrease in
reported revenue.
OPERATING LOSS
The Company's Russian division
generated an operating loss of $2.8
million during the first quarter of 2019 versus a loss of
$1.0 million in the comparable
quarter in 2018. The increased operating loss was primarily due to
lower equipment utilization resulting from extremely cold
temperatures experienced for portions of January and February
combined with higher equipment repair expenses. In addition, the
Company closed its operations in Noyabrsk during the quarter and
incurred mobilization costs to transfer equipment to
Khanty-Mansiysk to work for an existing customer in that region.
SG&A expenses were $0.1 million
higher than the comparable quarter in 2018 due to higher personnel
costs.
ARGENTINA
Three Months Ended
March 31,
|
2019
|
|
2018
|
|
Change
|
(C$000s, except
operational and exchange rate information)
|
($)
|
|
($)
|
|
(%)
|
(unaudited)
|
|
|
|
|
|
Revenue
|
55,414
|
|
45,895
|
|
21
|
Expenses
|
|
|
|
|
|
Operating
|
48,486
|
|
45,563
|
|
6
|
SG&A
|
2,073
|
|
3,350
|
|
(38)
|
|
50,559
|
|
48,913
|
|
3
|
Operating income
(loss)(1)
|
4,855
|
|
(3,018)
|
|
NM
|
Operating income
(loss) (%)
|
8.8
|
|
(6.6)
|
|
NM
|
Active pumping
horsepower, end of period (000s)
|
108
|
|
108
|
|
—
|
Idle pumping
horsepower, end of period (000s)
|
—
|
|
—
|
|
—
|
Total pumping
horsepower, end of period (000s)
|
108
|
|
108
|
|
—
|
Active cementing
units, end of period (#)
|
11
|
|
12
|
|
(8)
|
Idle cementing units,
end of period (#)
|
2
|
|
2
|
|
—
|
Total cementing
units, end of period (#)
|
13
|
|
14
|
|
(7)
|
Active coiled tubing
units, end of period (#)
|
5
|
|
6
|
|
(17)
|
Idle coiled tubing
units, end of period (#)
|
1
|
|
1
|
|
—
|
Total coiled tubing
units, end of period (#)
|
6
|
|
7
|
|
(14)
|
US$/C$ average
exchange rate(2)
|
1.3295
|
|
1.2647
|
|
5
|
(1) Refer to "Non-GAAP
Measures" on pages 16 and 17 for further
information.
|
(2) Source: Bank of Canada
and Bloomberg.
|
REVENUE
Calfrac's Argentinean operations generated
total revenue of $55.4 million during
the first quarter of 2019 versus $45.9
million in the comparable three-month period in 2018.
Revenue in Argentina was 21
percent higher than the comparable quarter primarily due to a 16
percent increase in the number of fracturing jobs completed. The
Company's fracturing revenue per job was consistent with the same
period in 2018. Coiled tubing revenue increased from the first
quarter in 2018 due to higher activity in northern Argentina while cementing revenue also
improved as the Company did not experience similar labour-related
disruptions in 2019 as it did in 2018.
OPERATING INCOME (LOSS)
The Company's operations in
Argentina generated operating
income of $4.9 million during the
first quarter of 2019 compared to a loss of $3.0 million during the first quarter in 2018.
The Company achieved positive operating income through a
combination of improved utilization and crew efficiencies during
the quarter as it continued to transition to unconventional
operations in Argentina. SG&A
expenses were $1.3 million lower
during the first quarter in 2019 compared to the first quarter in
2018. This was mainly due to $1.6 million of one-time
costs recorded during the first quarter of 2018.
CORPORATE
Three Months Ended
March 31,
|
2019
|
|
2018
|
|
Change
|
(C$000s)
|
($)
|
|
($)
|
|
(%)
|
(unaudited)
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating
|
1,451
|
|
1,178
|
|
23
|
SG&A
|
8,475
|
|
11,831
|
|
(28)
|
|
9,926
|
|
13,009
|
|
(24)
|
Operating
loss(1)
|
(9,926)
|
|
(13,009)
|
|
(24)
|
% of
Revenue
|
2.1
|
|
2.2
|
|
(5)
|
(1) Refer to "Non-GAAP
Measures" on pages 16 and 17 for further
information.
|
OPERATING LOSS
Corporate expenses for the first
quarter of 2019 were $9.9 million
compared to $13.0 million in the
first quarter of 2018. The decrease was primarily due to lower
stock-based compensation expense of $2.8
million versus the same period in 2018. The reduction in
stock-based compensation was mainly due to a lower number of
restricted share units outstanding. The implementation of IFRS 16
also resulted in lower reported corporate expenses as lease
payments related to corporate office space are no longer recorded
in SG&A.
DEPRECIATION
For the three months ended March 31,
2019, depreciation expense increased by $23.2 million to $61.5
million from $38.3 million in
the corresponding quarter of 2018. The increase was primarily due
to the Company decreasing its useful life estimate and salvage
value, effective January 1, 2019, for
certain components of its fracturing equipment. This resulted in a
one-time depreciation charge of $9.5
million during the first quarter relating to assets in use
at the end of the prior quarter. The resulting accelerated
depreciation rate on these components combined with additions
during the quarter increased depreciation expense by a further
$7.1 million. In addition, the
adoption of IFRS 16 at the beginning of 2019 resulted in a
$5.0 million increase to depreciation
expense. The 5 percent appreciation in the U.S. dollar relative to
the Canadian dollar also contributed to the increase in reported
depreciation expense.
FOREIGN EXCHANGE GAINS AND LOSSES
The Company recorded
a foreign exchange loss of $0.5
million during the first quarter of 2019 versus a loss of
$0.7 million in the comparative
three-month period of 2018. Foreign exchange gains and losses arise
primarily from the translation of net monetary assets or
liabilities that were held in U.S. dollars in Canada, net monetary assets or liabilities
that were held in pesos in Argentina, and liabilities held in Canadian
dollars in Russia. The Company's
foreign exchange loss for the first quarter of 2019 was largely
attributable to U.S. dollar-denominated assets held in Canada as the U.S. dollar depreciated against
the Canadian dollar during the quarter.
INTEREST
The Company's net interest expense of
$21.2 million for the first quarter
of 2019 was $0.5 million higher than
the comparable period of 2018 despite a reduction in overall debt
levels. The higher interest rate on its US$650.0 million 8.50 percent senior notes during
the first quarter compared to its US$600.0
million 7.50 percent senior notes that were repaid during
the second quarter of 2018 resulted in an increase in reported
interest expense. The stronger U.S. dollar during the first quarter
in 2019 compared to the same period in 2018 also contributed to the
higher reported interest expense related to its senior notes.
Additionally, the adoption of IFRS 16 resulted in a further
$0.6 million in interest expense.
These increases were partially offset by the impact of replacing
its $200.0 million second lien term
loan that carried an interest rate of 9.0 percent with lower
interest rate credit facility borrowings.
INCOME TAXES
The Company recorded an income tax
recovery of $13.4 million during the
first quarter of 2019 compared to a recovery of $0.6 million in the comparable period of 2018.
The recovery position was the result of pre-tax losses during the
quarter in Canada and the United States. The effective recovery rate
was 27 percent during the first quarter of 2019.
LIQUIDITY AND CAPITAL RESOURCES
|
Three Months Ended
Mar 31,
|
|
2019
|
|
2018
|
(C$000s)
|
($)
|
|
($)
|
(unaudited)
|
|
|
|
Cash provided by
(used in):
|
|
|
|
Operating
activities
|
72,748
|
|
(8,233)
|
Financing
activities
|
(26,538)
|
|
29,283
|
Investing
activities
|
(35,825)
|
|
(47,307)
|
Effect of exchange
rate changes on cash and cash equivalents
|
(2,122)
|
|
3,704
|
Increase (decrease)
in cash and cash equivalents
|
8,263
|
|
(22,553)
|
OPERATING ACTIVITIES
The Company's cash provided by
operating activities for the three months ended March 31, 2019
was $72.7 million versus cash used of
$8.2 million in the first quarter of
2018. The significant improvement in cash provided by operations
was primarily due to working capital providing $31.9 million versus using $72.8 million in the same period of 2018. This
was partially offset by weaker operating results in Canada and the
United States in the first quarter of 2019. At
March 31, 2019, Calfrac's working capital was approximately
$276.8 million compared to
$329.9 million at December 31, 2018.
FINANCING ACTIVITIES
Net cash used by financing
activities for the three months ended March 31, 2019 was
$26.5 million compared to cash
provided of $29.3 million in the
comparable period in 2018. During the three months ended
March 31, 2019, the Company had net
repayments under its credit facilities of $20.0 million, lease principal payments of
$5.4 million and debt issuance costs
of $1.2 million.
On May 31, 2018, the Company
repaid in full the remaining $196.5
million principal amount of its second lien senior secured
term loan facility with Alberta Investment Management Corporation
(AIMCo). The term loan, which had a maturity date of September 20, 2020 provided Calfrac the right to
prepay the loan prior to June 10,
2018 with a nominal prepayment premium.
On May 30, 2018, Calfrac closed a
private offering of US$650.0 million
aggregate principal amount of its 8.50 percent senior notes due
2026. Fixed interest on the notes is payable on June 15 and December
15 of each year. The notes will mature on June 15, 2026. The Company used a portion of the
net proceeds from the offering of the notes to repay all of its
outstanding 7.50 percent senior notes due 2020.
Subsequent to the end of the first quarter, Calfrac amended and
extended its credit facilities while maintaining its total facility
capacity at $375.0 million. The
facilities consist of an operating facility of $40.0 million and a syndicated facility of
$335.0 million. The Company's credit
facilities were extended by a term of two years and mature on
June 1, 2022 and can be extended by
one or more years at the Company's request and lenders'
acceptance. The Company also may prepay principal without
penalty. The interest rates are based on the parameters of certain
bank covenants. For prime-based loans and U.S. base-rate loans, the
rate ranges from prime or U.S. base rate plus 0.50 percent to prime
plus 2.50 percent. For LIBOR-based loans and bankers'
acceptance-based loans, the margin thereon ranges from 1.50 percent
to 3.50 percent above the respective base rates. The accordion
feature of the syndicated facility remains at $100.0 million,
and is available to the Company during the term of the agreement.
The Company incurs interest at the high end of the ranges outlined
above if its net Total Debt to Adjusted EBITDA ratio is above
4.00:1.00. Additionally, in the event that the Company's net Total
Debt to Adjusted EBITDA ratio is above 5.00:1.00, certain
restrictions would apply including the following: (a) acquisitions
will be subject to majority lender consent; and (b) distributions
will be restricted other than those relating to the Company's share
unit plans, and no increase in the rate of dividends will be
permitted. As at March 31, 2019, the
Company's net Total Debt to Adjusted EBITDA ratio was
3.10:1.00.
Advances under the credit facilities are limited by a borrowing
base. The borrowing base is calculated based on the following:
i.
|
Eligible North
American accounts receivable, which is based on 75 percent of
accounts receivable owing by companies rated BB+ or lower by
Standard & Poor's (or a similar rating agency) and 85 percent
of accounts receivable from companies rated BBB- or
higher;
|
ii.
|
100 percent of
unencumbered cash of the parent company and its U.S. operating
subsidiary, excluding any cash held in a segregated account for the
purposes of a potential equity cure; and
|
iii.
|
25 percent of the net
book value of property, plant and equipment (PP&E) of the
parent company and its U.S. operating subsidiary. The value of
PP&E excludes assets under construction and is limited to
$150.0 million.
|
At March 31, 2019, the Company had used $0.9 million of its credit facilities for letters
of credit and had $100.0 million of
borrowings under its credit facilities, leaving $274.1 million in available capacity under its
credit facilities. As described above, the Company's credit
facilities are subject to a monthly borrowing base, as determined
using the previous month's results, which at March 31, 2019, when calculated on a proforma
basis for the amendments made subsequent to the
quarter, resulted in a liquidity amount of $246.3 million.
The Company's credit facilities contain certain financial
covenants as shown below.
|
|
Working capital ratio
not to fall below
|
1.15x
|
Funded Debt to
Adjusted EBITDA not to exceed(1)(2)
|
3.00x
|
Funded Debt to
Capitalization not to exceed(1)(3)
|
0.30x
|
(1)
Funded Debt is defined as Total Debt excluding all outstanding
senior unsecured notes and lease obligations.
Total Debt includes bank loans and long-term debt (before
unamortized debt issuance costs and debt discount)
plus outstanding letters of credit. For the purposes of the Total
Debt to Adjusted EBITDA ratio, the Funded Debt
to Capitalization Ratio and the Funded Debt to Adjusted EBITDA
ratio, the amount of Total Debt or Funded Debt,
as applicable, is reduced by the amount of cash on hand with
lenders (excluding any cash held in a segregated
account for the purposes of a potential equity
cure).
|
(2)
Adjusted EBITDA is defined as net income or loss for the period
adjusted for interest, taxes, depreciation and
amortization, non-cash stock-based compensation, non-controlling
interest, and gains and losses that are
extraordinary or non-recurring.
|
(3) Capitalization is Total
Debt plus equity attributable to the shareholders of
Calfrac.
|
Proceeds from equity offerings may be applied, as an equity
cure, in the calculation of Adjusted EBITDA towards the Funded Debt
to Adjusted EBITDA covenant for any of the quarters ending prior to
and including June 30, 2022, subject
to certain conditions including:
i.
|
the Company is only
permitted to use the proceeds of a common share issuance to
increase Adjusted EBITDA a maximum of two times;
|
ii.
|
the Company cannot
use the proceeds of a common share issuance to increase Adjusted
EBITDA in consecutive quarter ends;
|
iii.
|
the maximum proceeds
of each common share issuance permitted to be attributed to
Adjusted EBITDA cannot exceed the greater of 50 percent of Adjusted
EBITDA on a trailing four-quarter basis and $25.0 million;
and
|
iv.
|
if proceeds are not
used immediately as an equity cure they must be held in a
segregated bank account pending an election to use them for such
purpose, and if they are removed from such account but not used as
an equity cure they will no longer be eligible for such
use.
|
The Company can utilize two equity cures during the term of the
credit facilities subject to the conditions described above. To
utilize an equity cure, the Company must provide notice of any such
election to the lending syndicate at any time prior to the filing
of its quarterly financial statements for the applicable quarter on
SEDAR. Amounts used as an equity cure prior to June 30, 2022 will increase Adjusted EBITDA over
the relevant twelve-month rolling period and will also serve to
reduce Funded Debt.
As shown in the table below, at March 31,
2019, the Company was in compliance with the financial
covenants associated with its credit facilities.
|
Covenant
|
Actual
|
As at March
31,
|
2019
|
2019
|
Working capital ratio
not to fall below
|
1.15x
|
2.25x
|
Funded Debt to
Adjusted EBITDA not to exceed
|
3.00x
|
0.15x
|
Funded Debt to
Capitalization not to exceed
|
0.30x
|
0.03x
|
The Company's credit facilities also require majority lender
consent for dispositions of property or assets in Canada and the
United States if the aggregate market value exceeds
$20.0 million. There are no
restrictions pertaining to dispositions of property or assets
outside of Canada and the United States, except that to the extent
that advances under the credit facilities exceed $50.0 million at the time of any such
dispositions, Calfrac must use the resulting proceeds to reduce the
advances to less than $50.0 million
before using the balance for other purposes.
The indenture governing the senior unsecured notes, which is
available on SEDAR, contains restrictions on the Company's ability
to pay dividends, purchase and redeem shares of the Company and
make certain restricted investments, that are not defined as
Permitted Investments under the indenture, in circumstances
where:
i.
|
the Company is in
default under the indenture or the making of such payment would
result in a default;
|
ii.
|
the Company is not
meeting the Fixed Charge Coverage Ratio(1) under the
indenture of at least 2:1 for the most recent four fiscal quarters,
with the restricted payments regime commencing once internal
financial statements are available which show that the ratio is not
met on a pro forma basis for the most recently ended four fiscal
quarter period; or
|
iii.
|
there is insufficient
room for such payment within a builder basket included in the
indenture.
|
(1)
The Fixed Charge Coverage Ratio is defined as cash flow to
interest expense. Cash flow is a non-GAAP measure and does not have
a standardized meaning under IFRS and is defined under the
indenture as net income (loss) attributable to the shareholders of
Calfrac before depreciation, extraordinary gains or losses,
unrealized foreign exchange gains or losses, gains or losses on
disposal of property, plant and equipment, impairment or reversal
of impairment of assets, restructuring charges, provision for
settlement of litigation, stock-based compensation, interest, and
income taxes. Interest expense is adjusted to exclude any
non-recurring charges associated with redeeming or retiring any
indebtedness prior to its maturity.
|
These limitations on restricted payments are tempered by the
existence of a number of exceptions to the general prohibition,
including a basket allowing for restricted payments in an aggregate
amount of up to US$20.0 million. As
at March 31, 2019 this basket was not
utilized. The indenture also restricts the ability to incur
additional indebtedness if the Fixed Charge Coverage Ratio
determined on a pro forma basis for the most recently ended four
fiscal quarter period for which internal financial statements are
available is not at least 2:1. As is the case with restricted
payments, there are a number of exceptions to this prohibition on
the incurrence of additional indebtedness, including the incurrence
of additional debt under credit facilities up to the greater of
$375.0 million or 30 percent of the
Company's consolidated tangible assets.
As at March 31, 2019, the
Company's Fixed Charge Coverage Ratio of 3.51:1 was higher than the
required 2:1 ratio so the aforementioned prohibitions will not be
applicable as long as the Company remains above this ratio.
INVESTING ACTIVITIES
Calfrac's net cash used for
investing activities was $35.8
million for the three months ended March 31, 2019 versus $47.3 million in the comparable period in 2018.
Cash outflows relating to capital expenditures were $28.2 million during the first quarter in 2019
compared to $51.3 million in 2018.
Capital expenditures were primarily to support the Company's North
American fracturing operations.
As announced in December 2018,
Calfrac's Board of Directors have approved a capital budget
of $149.0 million, which includes $126.0
million of maintenance capital, $11.0 million of
refurbishment capital and $12.0 million related to
corporate initiatives. In addition, approximately $6.0
million remaining from Calfrac's 2018 capital program is
expected to be spent in 2019.
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
The effect of changes in foreign exchange rates
on the Company's cash and cash equivalents during the three months
ended March 31, 2019 was a loss of
$2.1 million versus a gain of
$3.7 million during the comparable
period in 2018. These gains and losses relate to movements of cash
and cash equivalents held by the Company in a foreign currency
during the period.
With its working capital position, available credit facilities
and anticipated funds provided by operations, the Company expects
to have adequate resources to fund its financial obligations and
planned capital expenditures for 2019 and beyond.
At March 31, 2019, the Company had cash and cash
equivalents of $60.2 million.
OUTSTANDING SHARE DATA
The Company is authorized to
issue an unlimited number of common shares. Employees have been
granted both performance share units as well as options to purchase
common shares under the Company's shareholder-approved equity
compensation plans. The number of shares reserved for issuance
under the performance share unit plan and stock option plan is
equal to 10 percent of the Company's issued and outstanding common
shares. As at April 26, 2019, the
Company had issued and outstanding 144,586,072 common shares,
732,253 equity-based performance share units and 10,690,819 options
to purchase common shares.
SUMMARY OF QUARTERLY RESULTS
Three Months
Ended
|
Jun. 30,
|
|
Sep. 30,
|
|
Dec. 31,
|
|
Mar. 31,
|
|
Jun. 30,
|
|
Sep. 30,
|
|
Dec. 31,
|
|
Mar
31,
|
|
2017
|
|
2017
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
2019
|
(C$000s, except
per share and operating data)
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
325,344
|
|
448,090
|
|
485,456
|
|
582,838
|
|
544,602
|
|
630,128
|
|
498,858
|
|
475,012
|
Operating
income(1)
|
36,740
|
|
78,196
|
|
44,789
|
|
67,974
|
|
66,528
|
|
115,331
|
|
61,992
|
|
43,623
|
Per share –
basic
|
0.27
|
|
0.57
|
|
0.32
|
|
0.47
|
|
0.46
|
|
0.80
|
|
0.43
|
|
0.30
|
Per share –
diluted
|
0.27
|
|
0.57
|
|
0.31
|
|
0.46
|
|
0.45
|
|
0.79
|
|
0.42
|
|
0.30
|
Adjusted
EBITDA(1)
|
39,913
|
|
81,113
|
|
49,213
|
|
72,953
|
|
81,910
|
|
111,631
|
|
62,914
|
|
44,086
|
Per share –
basic
|
0.29
|
|
0.59
|
|
0.35
|
|
0.51
|
|
0.57
|
|
0.77
|
|
0.44
|
|
0.31
|
Per share –
diluted
|
0.29
|
|
0.59
|
|
0.34
|
|
0.50
|
|
0.56
|
|
0.76
|
|
0.43
|
|
0.30
|
Net income (loss)
attributable to the
shareholders of Calfrac
|
(20,349)
|
|
7,822
|
|
38,013
|
|
3,234
|
|
(32,838)
|
|
14,878
|
|
(3,462)
|
|
(36,334)
|
Per share –
basic
|
(0.15)
|
|
0.06
|
|
0.27
|
|
0.02
|
|
(0.23)
|
|
0.10
|
|
(0.02)
|
|
(0.25)
|
Per share –
diluted
|
(0.15)
|
|
0.06
|
|
0.26
|
|
0.02
|
|
(0.23)
|
|
0.10
|
|
(0.02)
|
|
(0.25)
|
Capital
expenditures
|
22,358
|
|
22,093
|
|
34,518
|
|
51,334
|
|
42,404
|
|
34,542
|
|
31,484
|
|
28,218
|
Working capital (end
of period)
|
293,411
|
|
334,606
|
|
327,049
|
|
360,654
|
|
361,613
|
|
386,843
|
|
329,871
|
|
276,785
|
Total equity (end of
period)
|
463,180
|
|
477,188
|
|
543,645
|
|
546,018
|
|
507,607
|
|
516,899
|
|
513,820
|
|
481,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (end of
period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active pumping
horsepower (000s)
|
874
|
|
1,057
|
|
1,115
|
|
1,259
|
|
1,313
|
|
1,344
|
|
1,328
|
|
1,344
|
Idle pumping
horsepower (000s)
|
443
|
|
338
|
|
280
|
|
134
|
|
80
|
|
49
|
|
42
|
|
36
|
Total pumping
horsepower (000s)
|
1,317
|
|
1,395
|
|
1,395
|
|
1,393
|
|
1,393
|
|
1,393
|
|
1,370
|
|
1,380
|
Active coiled tubing
units (#)
|
21
|
|
21
|
|
21
|
|
22
|
|
22
|
|
22
|
|
22
|
|
21
|
Idle coiled tubing
units (#)
|
11
|
|
11
|
|
9
|
|
8
|
|
8
|
|
8
|
|
7
|
|
8
|
Total coiled tubing
units (#)
|
32
|
|
32
|
|
30
|
|
30
|
|
30
|
|
30
|
|
29
|
|
29
|
Active cementing
units (#)
|
12
|
|
12
|
|
12
|
|
12
|
|
11
|
|
11
|
|
11
|
|
11
|
Idle cementing units
(#)
|
13
|
|
13
|
|
11
|
|
11
|
|
12
|
|
12
|
|
12
|
|
12
|
Total cementing units
(#)
|
25
|
|
25
|
|
23
|
|
23
|
|
23
|
|
23
|
|
23
|
|
23
|
(1)
With the adoption of IFRS 16, the accounting treatment for
operating leases when Calfrac is the lessee, changed effective
January 1, 2019. Calfrac adopted IFRS 16 using the
modified retrospective approach and the comparative information was
not restated. As a result, the Company's 2019 Operating Income and
Adjusted EBITDA are not comparable
to periods prior to January 1, 2019. Refer to "Non-GAAP
Measures" on pages 16 and 17 for further
information.
|
SEASONALITY OF OPERATIONS
The Company's North American
business is seasonal. The lowest activity is typically experienced
during the second quarter of the year when road weight restrictions
are in place due to spring break-up weather conditions and access
to well sites in Canada and
North Dakota is reduced (refer to
"Business Risks - Seasonality" in the 2018 Annual Report).
FOREIGN EXCHANGE FLUCTUATIONS
The Company's
consolidated financial statements are reported in Canadian dollars.
Accordingly, the quarterly results are directly affected by
fluctuations in the exchange rates for United States, Russian and Argentinean
currency (refer to "Business Risks - Fluctuations in Foreign
Exchange Rates" in the 2018 Annual Report).
ADVISORIES
FORWARD-LOOKING STATEMENTS
In
order to provide Calfrac shareholders and potential investors with
information regarding the Company and its subsidiaries, including
management's assessment of Calfrac's plans and future operations,
certain statements contained in this press release, including
statements that contain words such as "seek", "anticipate", "plan",
"continue", "estimate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might",
"should", "believe", "forecast" or similar words suggesting future
outcomes, are forward-looking statements.
In particular, forward-looking statements in this press release
include, but are not limited to, statements with respect to
expected operating strategies and targets, capital expenditure
programs, future financial resources, anticipated equipment
utilization levels, future oil and natural gas well activity in
each of the Company's operating jurisdictions, results of
acquisitions, the impact of environmental regulations and economic
reforms and sanctions on the Company's business, future costs or
potential liabilities, projections of market prices and costs,
supply and demand for oilfield services, expectations regarding the
Company's ability to maintain its competitive position, anticipated
benefits of the Company's competitive position, expectations
regarding the Company's financing activities and restrictions,
including with regard to its credit agreement and the indenture
pursuant to which its senior notes were issued, and its ability to
raise capital, treatment under government regulatory regimes,
commodity prices, anticipated outcomes of specific events
(including exposure under existing legal proceedings), expectations
regarding trends in, and the growth prospects of, the global oil
and natural gas industry, the Company's growth strategy and
prospects, and the impact of changes in accounting policies and
standards on the Company and its financial statements. These
statements are derived from certain assumptions and analyses made
by the Company based on its experience and perception of historical
trends, current conditions, expected future developments and other
factors that it believes are appropriate in the circumstances,
including, but not limited to, the economic and political
environment in which the Company operates, the Company's
expectations for its current and prospective customers' capital
budgets and geographical areas of focus, the Company's existing
contracts and the status of current negotiations with key customers
and suppliers, the effect unconventional gas projects have
had on supply and demand fundamentals for natural gas and the
likelihood that the current tax and regulatory regime will remain
substantially unchanged.
Forward-looking statements are subject to a number of known and
unknown risks and uncertainties that could cause actual results to
differ materially from the Company's expectations. Such risk
factors include: excess oilfield equipment levels; regional
competition; the availability of capital on satisfactory terms;
restrictions resulting from compliance with debt covenants and risk
of acceleration of indebtedness; direct and indirect exposure to
volatile credit markets, including credit rating risk; currency
exchange rate risk; risks associated with foreign operations;
operating restrictions and compliance costs associated with
legislative and regulatory initiatives relating to hydraulic
fracturing and the protection of workers and the environment;
changes in legislation and the regulatory environment; dependence
on, and concentration of, major customers; liabilities and risks,
including environmental liabilities and risks, inherent in oil and
natural gas operations; uncertainties in weather and temperature
affecting the duration of the service periods and the activities
that can be completed; liabilities and risks associated with prior
operations; failure to maintain the Company's safety standards and
record; failure to realize anticipated benefits of acquisitions and
dispositions; the ability to integrate technological advances and
match advances from competitors; intellectual property risks;
sourcing, pricing and availability of raw materials, component
parts, equipment, suppliers, facilities and skilled personnel; and
the effect of accounting pronouncements issued periodically.
Further information about these and other risks and uncertainties
may be found under "Business Risks" below.
Consequently, all of the forward-looking statements made in this
press release are qualified by these cautionary statements and
there can be no assurance that actual results or developments
anticipated by the Company will be realized, or that they will have
the expected consequences or effects on the Company or its business
or operations. These statements speak only as of the respective
date of this press release or the document incorporated by
reference herein. The Company assumes no obligation to update
publicly any such forward-looking statements, whether as a result
of new information, future events or otherwise, except as required
pursuant to applicable securities laws.
BUSINESS RISKS
The business of Calfrac is subject to
certain risks and uncertainties. Prior to making any investment
decision regarding Calfrac, investors should carefully consider,
among other things, the risk factors set forth in the Company's
most recently filed Annual Information Form, which are specifically
incorporated by reference herein. The Annual Information Form is
available through the Internet on the Canadian System for
Electronic Document Analysis and Retrieval (SEDAR), which can be
accessed at www.sedar.com. Copies of the Annual Information Form
may also be obtained on request without charge from Calfrac at 411
- 8th Avenue S.W., Calgary, Alberta,
Canada, T2P 1E3, or at www.calfrac.com, or by facsimile at
403-266-7381.
NON-GAAP MEASURES
With the adoption of IFRS 16, the
accounting treatment for operating leases when Calfrac is the
lessee, changed effective January 1,
2019. Calfrac adopted IFRS 16 using the modified
retrospective approach and the comparative information was not
restated. As a result, the Company's 2019 operating income and
adjusted EBITDA are not comparable to periods prior to January 1, 2019.
Certain supplementary measures presented in this MD&A do not
have any standardized meaning under IFRS and, because IFRS have
been incorporated as Canadian generally accepted accounting
principles (GAAP), these supplementary measures are also non-GAAP
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 explained below.
Operating income (loss) is defined as net income (loss) before
depreciation, foreign exchange gains or losses, gains or losses on
disposal of property, plant and equipment, impairment of inventory,
impairment of property, plant and equipment, interest, and income
taxes. Management believes that operating income is a useful
supplemental measure as it provides an indication of the financial
results generated by Calfrac's business segments prior to
consideration of how these segments are financed or taxed. In
addition, management believes this measure allows investors to more
accurately compare the Company's performance with its peers by
providing an indication of its financial results prior to
consideration of the age or size of its asset base, or the
investment and accounting policies associated with its assets.
Operating income (loss) for the period was calculated as
follows:
Three Months Ended
March 31,
|
2019
|
|
2018
|
(C$000s)
|
($)
|
|
($)
|
(unaudited)
|
|
|
|
Net (loss)
income
|
(36,334)
|
|
1,096
|
Add back
(deduct):
|
|
|
|
Depreciation
|
61,528
|
|
38,281
|
Foreign exchange
losses
|
513
|
|
678
|
Loss on disposal of
property, plant and equipment
|
10,135
|
|
7,773
|
Interest
|
21,230
|
|
20,754
|
Income
taxes
|
(13,449)
|
|
(608)
|
Operating
income
|
43,623
|
|
67,974
|
Adjusted EBITDA is defined as net income or loss for the period
less interest, taxes, depreciation and amortization, unrealized
foreign exchange losses (gains), non-cash stock-based compensation,
non-controlling interest, and gains and losses that are
extraordinary or non-recurring. Adjusted EBITDA is presented
because it gives an indication of the results from the Company's
principal business activities prior to consideration of how its
activities are financed and the impact of foreign exchange,
taxation and depreciation and amortization charges. Adjusted EBITDA
for the period was calculated as follows:
Three Months Ended
March 31,
|
2019
|
|
2018
|
(C$000s)
|
|
|
|
(unaudited)
|
|
|
|
Net (loss)
income
|
(36,334)
|
|
1,096
|
Add back
(deduct):
|
|
|
|
Depreciation
|
61,528
|
|
38,281
|
Unrealized foreign
exchange losses
|
144
|
|
1,041
|
Loss on disposal of
property, plant and equipment
|
10,135
|
|
7,773
|
Impairment of
inventory
|
—
|
|
579
|
Restructuring
charges
|
20
|
|
768
|
Stock-based
compensation
|
812
|
|
1,131
|
Losses attributable
to non-controlling interest
|
—
|
|
2,138
|
Interest
|
21,230
|
|
20,754
|
Income
taxes
|
(13,449)
|
|
(608)
|
Adjusted
EBITDA
|
44,086
|
|
72,953
|
(1) For bank covenant
purposes, EBITDA includes an additional $5.8 million
of lease payments that would have been recorded as operating
expenses
prior to the adoption of IFRS 16.
|
ADDITIONAL INFORMATION
Further information regarding
Calfrac Well Services Ltd., including the most recently filed
Annual Information Form, can be accessed on the Company's website
at www.calfrac.com or under the Company's public filings found at
www.sedar.com.
FIRST QUARTER CONFERENCE CALL
Calfrac will be
conducting a conference call for interested analysts, brokers,
investors and news media representatives to review its 2019
first-quarter results at 10:00 a.m.
(Mountain Time) on Wednesday, May 1, 2019. The conference
call dial-in number is 1-888-231-8191 or 647-427-7450. The
seven-day replay numbers are 1-855-859-2056 or 416-849-0833 (once
connected, enter 3958399). A webcast of the conference call may be
accessed via the Company's website at www.calfrac.com.
CONSOLIDATED BALANCE SHEETS
|
March
31,
|
|
December
31,
|
|
2019
|
|
2018
|
(C$000s)
(unaudited)
|
($)
|
|
($)
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
60,164
|
|
51,901
|
Accounts
receivable
|
310,013
|
|
349,431
|
Income taxes
recoverable
|
95
|
|
582
|
Inventories
|
142,601
|
|
150,123
|
Prepaid expenses and
deposits
|
14,892
|
|
17,527
|
|
527,765
|
|
569,564
|
Non-current
assets
|
|
|
|
Property, plant and
equipment
|
1,066,932
|
|
1,116,677
|
Right-of-use assets
(note 5)
|
39,439
|
|
—
|
Deferred income tax
assets
|
105,172
|
|
96,416
|
Total
assets
|
1,739,308
|
|
1,782,657
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities
|
|
|
|
Accounts payable and
accrued liabilities
|
234,439
|
|
239,507
|
Current portion of
lease obligations (note 5)
|
16,541
|
|
186
|
|
250,980
|
|
239,693
|
Non-current
liabilities
|
|
|
|
Long-term debt (note
2)
|
952,384
|
|
989,614
|
Lease obligations
(note 5)
|
22,515
|
|
552
|
Deferred income tax
liabilities
|
31,754
|
|
38,978
|
Total
liabilities
|
1,257,633
|
|
1,268,837
|
Equity attributable
to the shareholders of Calfrac
|
|
|
|
Capital stock (note
3)
|
509,015
|
|
508,276
|
Contributed
surplus
|
40,550
|
|
40,453
|
Loan receivable for
purchase of common shares
|
(2,500)
|
|
(2,500)
|
Accumulated
deficit
|
(65,305)
|
|
(28,971)
|
Accumulated other
comprehensive loss
|
(85)
|
|
(3,438)
|
Total
equity
|
481,675
|
|
513,820
|
Total liabilities and
equity
|
1,739,308
|
|
1,782,657
|
Contingencies
(note 7)
|
See accompanying
notes to the consolidated financial statements.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
|
2019
|
|
2018
|
(C$000s, except
per share data) (unaudited)
|
($)
|
|
($)
|
Revenue
|
475,012
|
|
582,838
|
Cost of
sales
|
473,713
|
|
528,387
|
Gross
profit
|
1,299
|
|
54,451
|
Expenses
|
|
|
|
Selling, general and
administrative
|
19,204
|
|
24,758
|
Foreign exchange
losses
|
513
|
|
678
|
Loss on disposal of
property, plant and equipment
|
10,135
|
|
7,773
|
Interest
|
21,230
|
|
20,754
|
|
51,082
|
|
53,963
|
(Loss) income before
income tax
|
(49,783)
|
|
488
|
Income tax expense
(recovery)
|
|
|
|
Current
|
1,645
|
|
250
|
Deferred
|
(15,094)
|
|
(858)
|
|
(13,449)
|
|
(608)
|
Net (loss)
income
|
(36,334)
|
|
1,096
|
|
|
|
|
Net (loss) income
attributable to:
|
|
|
|
Shareholders of
Calfrac
|
(36,334)
|
|
3,234
|
Non-controlling
interest
|
—
|
|
(2,138)
|
|
(36,334)
|
|
1,096
|
|
|
|
|
(Loss) earnings per
share (note 3)
|
|
|
|
Basic
|
(0.25)
|
|
0.02
|
Diluted
|
(0.25)
|
|
0.02
|
See accompanying
notes to the consolidated financial statements.
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
INCOME
Three Months Ended
March 31,
|
2019
|
|
2018
|
(C$000s)
(unaudited)
|
($)
|
|
($)
|
Net (loss)
income
|
(36,334)
|
|
1,096
|
Other
comprehensive (loss) income
|
|
|
|
Items that may be
subsequently reclassified to profit or loss:
|
|
|
|
Change in foreign
currency translation adjustment
|
3,353
|
|
(323)
|
Comprehensive (loss)
income
|
(32,981)
|
|
773
|
Comprehensive
(loss) income attributable to:
|
|
|
|
Shareholders of
Calfrac
|
(32,981)
|
|
2,902
|
Non-controlling
interest
|
—
|
|
(2,129)
|
|
(32,981)
|
|
773
|
See accompanying
notes to the consolidated financial statements.
|
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
Equity Attributable
to the Shareholders of Calfrac
|
|
|
|
|
|
Share
Capital
|
|
Contributed
Surplus
|
|
Loan
Receivable
for Purchase
of Common
Shares
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Retained
Earnings
(Deficit)
|
|
Total
|
|
Non
Controlling
Interest
|
|
Total
Equity
|
(C$000s)
(unaudited)
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Balance – Jan. 1,
2019
|
508,276
|
|
40,453
|
|
(2,500)
|
|
(3,438)
|
|
(28,971)
|
|
513,820
|
|
—
|
|
513,820
|
Net loss
|
—
|
|
—
|
|
—
|
|
—
|
|
(36,334)
|
|
(36,334)
|
|
—
|
|
(36,334)
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
translation
adjustment
|
—
|
|
—
|
|
—
|
|
3,353
|
|
—
|
|
3,353
|
|
—
|
|
3,353
|
Comprehensive income
(loss)
|
—
|
|
—
|
|
—
|
|
3,353
|
|
(36,334)
|
|
(32,981)
|
|
—
|
|
(32,981)
|
Stock
options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
recognized (note 4)
|
—
|
|
611
|
|
—
|
|
—
|
|
—
|
|
611
|
|
—
|
|
611
|
Proceeds from
issuance of shares
(note 3)
|
32
|
|
(7)
|
|
—
|
|
—
|
|
–
|
|
25
|
|
—
|
|
25
|
Performance share
units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
recognized (note 4)
|
—
|
|
200
|
|
—
|
|
—
|
|
—
|
|
200
|
|
—
|
|
200
|
Shares issued (note
3)
|
707
|
|
(707)
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
Balance – Mar. 31,
2019
|
509,015
|
|
40,550
|
|
(2,500)
|
|
(85)
|
|
(65,305)
|
|
481,675
|
|
—
|
|
481,675
|
Balance – Jan. 1,
2018
|
501,456
|
|
35,094
|
|
(2,500)
|
|
2,728
|
|
21,268
|
|
558,046
|
|
(14,401)
|
|
543,645
|
Net income
(loss)
|
—
|
|
—
|
|
—
|
|
—
|
|
3,234
|
|
3,234
|
|
(2,138)
|
|
1,096
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation
adjustment
|
—
|
|
—
|
|
—
|
|
(332)
|
|
—
|
|
(332)
|
|
9
|
|
(323)
|
Comprehensive income
(loss)
|
—
|
|
—
|
|
—
|
|
(332)
|
|
3,234
|
|
2,902
|
|
(2,129)
|
|
773
|
Stock
options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
recognized (note 4)
|
—
|
|
1,056
|
|
—
|
|
—
|
|
—
|
|
1,056
|
|
—
|
|
1,056
|
Proceeds from
issuance of shares
|
627
|
|
(158)
|
|
—
|
|
—
|
|
—
|
|
469
|
|
—
|
|
469
|
Performance share
units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
recognized (note 4)
|
—
|
|
75
|
|
—
|
|
—
|
|
—
|
|
75
|
|
—
|
|
75
|
Balance – Mar. 31,
2018
|
502,083
|
|
36,067
|
|
(2,500)
|
|
2,396
|
|
24,502
|
|
562,548
|
|
(16,530)
|
|
546,018
|
See accompanying
notes to the consolidated financial statements.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
|
2019
|
|
2018
|
(C$000s)
(unaudited)
|
($)
|
|
($)
|
CASH FLOWS
PROVIDED BY (USED IN)
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
Net (loss)
income
|
(36,334)
|
|
1,096
|
Adjusted for the
following:
|
|
|
|
Depreciation
|
61,528
|
|
38,281
|
Stock-based
compensation
|
812
|
|
1,131
|
Unrealized foreign
exchange losses
|
144
|
|
1,041
|
Loss on disposal of
property, plant and equipment
|
10,135
|
|
7,773
|
Interest
|
21,230
|
|
20,754
|
Interest
paid
|
(1,573)
|
|
(4,614)
|
Deferred income
taxes
|
(15,094)
|
|
(858)
|
Changes in items of
working capital
|
31,900
|
|
(72,837)
|
Cash flows provided
by (used in) operating activities
|
72,748
|
|
(8,233)
|
FINANCING
ACTIVITIES
|
|
|
|
Issuance of long-term
debt, net of debt issuance costs
|
(1,192)
|
|
29,481
|
Long-term debt
repayments
|
(20,000)
|
|
(624)
|
Lease obligation
principal repayments
|
(5,371)
|
|
(43)
|
Proceeds on issuance
of common shares
|
25
|
|
469
|
Cash flows (used in)
provided by financing activities
|
(26,538)
|
|
29,283
|
INVESTING
ACTIVITIES
|
|
|
|
Purchase of property,
plant and equipment
|
(33,013)
|
|
(49,221)
|
Proceeds on disposal
of property, plant and equipment
|
(2,812)
|
|
1,921
|
Other
|
—
|
|
(7)
|
Cash flows used in
investing activities
|
(35,825)
|
|
(47,307)
|
Effect of exchange
rate changes on cash and cash equivalents
|
(2,122)
|
|
3,704
|
Increase (decrease)
in cash and cash equivalents
|
8,263
|
|
(22,553)
|
Cash and cash
equivalents, beginning of period
|
51,901
|
|
52,749
|
Cash and cash
equivalents, end of period
|
60,164
|
|
30,196
|
See accompanying
notes to the consolidated financial statements.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at
and for the three months ended March 31, 2019 and 2018
(Amounts in text and tables are in thousands of Canadian
dollars, except share data and certain other exceptions as
indicated)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Except as noted below, these condensed consolidated interim
financial statements follow the same accounting policies and
methods of application as the most recent annual financial
statements.
For purposes of calculating income taxes during interim periods,
the Company utilizes estimated annualized income tax rates. Current
income tax expense is only recognized when taxable income is such
that current income tax becomes payable.
(a) Changes in Accounting Policies and
Disclosure
The IASB issued IFRS 16 Leases, which requires that
lessees recognize lease liabilities and right-of-use (ROU) assets
related to its lease commitments on the balance sheet. IFRS 16 is
effective for annual periods beginning on or after January 1, 2019.
In accordance with the transition provisions in IFRS 16, the
Company elected to adopt the new standard using the modified
retrospective approach by recognizing the cumulative effect of
initially applying the new standard on January 1, 2019 using the simplified right-of-use
asset measurement method. Comparatives for the prior reporting
period are not restated, as permitted under the specific
transitional provisions in the standard. Lease liabilities are
measured at the present value of the remaining lease payments,
discounted using the Company's incremental borrowing rate as of
January 1, 2019. The associated ROU
asset is measured at the lease liability amount on January 1, 2019, resulting in no adjustment to
the opening balance of retained earnings.
The Company elected to use the following practical expedients
permitted under the new standard:
- Leases with a remaining lease term of twelve months or less as
at January 1, 2019 are considered
short-term leases. As such, payments for such leases will be
expensed as incurred.
- Leases of low dollar value based on the value of the asset when
it is new, regardless of the age of the asset, will be expensed as
incurred.
Several key judgments and estimates were made such as assessing
whether an arrangement contains a lease, determining the lease
term, calculating the incremental borrowing rate and whether to
account for the lease and any non-lease components as a single
lease component.
The Company is subject to financial covenants relating to
working capital, leverage and the generation of cash flow in
respect of its operating and revolving credit facilities. The
adoption of IFRS 16 has no impact on the Company's reported bank
covenants as the effects of the new standard are excluded from the
covenant calculations.
See note 5 for further information on leases.
(b) Changes in Accounting Estimates
Depreciation of the Company's property, plant and equipment
incorporates estimates of useful lives and residual values. These
estimates may change as more experience is obtained or as general
market conditions change, thereby affecting the value of the
Company's property, plant and equipment.
Effective January 1, 2019, the
Company revised its useful life depreciation estimate and salvage
value for certain of its components relating to field equipment.
This change was adopted as a change in accounting estimate on a
prospective basis, which resulted in a one-time depreciation charge
of $9,540 to the statement of
operations for the three months ended March
31, 2019.
2. LONG-TERM DEBT
|
March
31,
|
|
December
31,
|
|
2019
|
|
2018
|
(C$000s)
|
($)
|
|
($)
|
US$650,000 senior
unsecured notes due June 15, 2026, bearing interest at 8.50%
payable
|
|
|
|
semi-annually
|
868,595
|
|
886,730
|
$347,500 extendible
revolving term loan facility, secured by Canadian and U.S. assets
of
|
|
|
|
the Company
|
100,000
|
|
120,000
|
Less: unamortized
debt issuance costs
|
(16,211)
|
|
(17,116)
|
|
952,384
|
|
989,614
|
The fair value of the senior unsecured notes, as measured based
on the closing quoted market price at March 31, 2019, was
$670,321 (December 31, 2018 –
$661,492). The carrying value of the
revolving term loan facility approximates its fair value as the
interest rate is not significantly different from current interest
rates for similar loans.
On May 30, 2018, the Company
closed a private offering of US$650,000 aggregate principal amount of its 8.50
percent senior notes due 2026. Fixed interest on the notes is
payable on June 15 and December 15 of each year. The notes will mature
on June 15, 2026, and provide the
Company with the option to redeem up to 10 percent of the aggregate
principal amount of the notes at a redemption price of 108.50
percent of the principal amount with the proceeds of asset sales at
any time prior to December 15, 2019.
The Company used a portion of the net proceeds from the offering of
the notes to repay all of its outstanding 7.50 percent senior notes
due 2020. The early repayment of these notes resulted in a
make-whole interest payment of $10,403 and the write-off of the remaining
$5,023 unamortized deferred finance
costs, recorded during 2018.
On May 31, 2018, the Company
repaid in full the remaining $196,500
principal amount of its second lien senior secured term loan
facility. The term loan, which had a maturity date of September 30, 2020, provided the Company the
right to prepay the loan prior to June 10,
2018 with a nominal prepayment premium. The repayment of the
second lien senior secured term loan facility resulted in the
write-off of the remaining unamortized deferred finance costs of
$5,787, recorded during 2018.
Subsequent to March 31, 2019, the
Company amended and extended its credit facilities while
maintaining its total facility capacity at $375,000. The facilities consist of an operating
facility of $40,000 and a revolving
term loan facility of $335,000. The Company's credit facilities
were extended by a term of two years and mature on June 1, 2022 and can be extended by one or more
years at the Company's request and lenders' acceptance. The Company
also may prepay principal without penalty. The interest rates are
based on the parameters of certain bank covenants. For prime-based
loans and U.S. base-rate loans, the rate ranges from prime or U.S.
base rate plus 0.50 percent to prime plus 2.50 percent. For
LIBOR-based loans and bankers' acceptance-based loans, the margin
thereon ranges from 1.50 percent to 3.50 percent above the
respective base rates. The accordion feature of the revolving term
loan facility remains at $100,000,
and is available to the Company during the term of the agreement.
The Company incurs interest at the high end of the ranges outlined
above if its net Total Debt to Adjusted EBITDA ratio is above
4.00:1.00. Additionally, in the event that the Company's net Total
Debt to Adjusted EBITDA ratio is above 5.00:1.00, certain
restrictions would apply including the following: (a) acquisitions
will be subject to majority lender consent; and (b) distributions
will be restricted other than those relating to the Company's share
unit plans; and no increase in the rate of dividends will be
permitted. As at March 31, 2019, the Company's net Total Debt
to Adjusted EBITDA ratio was 3.10:1.00.
Debt issuance costs related to this facility are amortized over
its term.
Interest on long-term debt (including the amortization of debt
issuance costs and debt discount) for the three months ended
March 31, 2019 was $20,726 (three months ended March 31, 2018 – $20,690).
The following table sets out an analysis of long-term debt and
the movements in long-term debt for the periods presented:
|
2019
|
(C$000s)
|
($)
|
Balance, January
1
|
989,614
|
Issuance of long-term
debt, net of debt issuance costs
|
(1,192)
|
Long-term debt
repayments
|
(20,000)
|
Amortization of debt
issuance costs and debt discount
|
1,768
|
Foreign exchange
adjustments
|
(17,806)
|
Balance, March
31
|
952,384
|
At March 31, 2019, the Company had utilized $869 of its loan facility for letters of credit
and had $100,000 outstanding under
its revolving term loan facility, leaving $274,131 in available credit, subject to a
monthly borrowing base, as determined using the previous month's
results, which at March 31, 2019, when calculated on a
proforma basis for the amendments made subsequent to the first
quarter, resulted in a liquidity amount of $246,319.
See note 6 for further details on the covenants in respect of
the Company's long-term debt.
3. CAPITAL STOCK
Authorized capital stock
consists of an unlimited number of common shares.
|
Three Months
Ended
|
|
Year Ended
|
|
March 31,
2019
|
|
December 31,
2018
|
Continuity of Common
Shares
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
(#)
|
|
($000s)
|
|
(#)
|
|
($000s)
|
Balance, beginning of
period
|
144,462,532
|
|
508,276
|
|
143,755,741
|
|
501,456
|
Issued upon exercise
of stock options
|
12,425
|
|
32
|
|
483,974
|
|
1,820
|
Issued upon vesting
of performance share units
|
104,865
|
|
707
|
|
—
|
|
—
|
Issued on
acquisition
|
—
|
|
—
|
|
222,817
|
|
1,250
|
Balance, end of
period
|
144,579,822
|
|
509,015
|
|
144,462,532
|
|
504,526
|
Shares to be
issued
|
668,449
|
|
3,750
|
|
668,449
|
|
3,750
|
|
145,248,271
|
|
512,765
|
|
145,130,981
|
|
508,276
|
The weighted average number of common shares outstanding for the
three months ended March 31, 2019 was
144,404,051 basic and 146,238,510 diluted (three months ended
March 31, 2018 – 143,722,349 basic
and 146,623,676 diluted). The difference between basic and diluted
shares is attributable to the dilutive effect of stock options
issued by the Company as disclosed in note 4, and the shares to be
issued.
4. SHARE-BASED
PAYMENTS
(a) Stock Options
Three Months Ended
March 31,
|
2019
|
|
2018
|
Continuity of Stock
Options
|
Options
|
|
Average
Exercise Price
|
|
Options
|
|
Average
Exercise Price
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
Balance, January
1
|
9,392,095
|
|
4.70
|
|
9,616,173
|
|
5.30
|
Granted during the
period
|
1,542,000
|
|
2.48
|
|
1,356,150
|
|
5.78
|
Exercised for common
shares
|
(12,425)
|
|
1.99
|
|
(172,950)
|
|
2.71
|
Forfeited
|
(239,401)
|
|
3.94
|
|
(207,248)
|
|
5.06
|
Expired
|
(5,200)
|
|
18.02
|
|
(95,250)
|
|
12.56
|
Balance, March
31
|
10,677,069
|
|
4.39
|
|
10,496,875
|
|
5.34
|
Stock options vest equally over three to four years and expire
five years from the date of grant. The exercise price of
outstanding options range from $1.34
to $20.81 with a weighted average
remaining life of 2.70 years. When stock options are exercised, the
proceeds together with the compensation expense previously recorded
in contributed surplus, are added to capital stock.
The weighted average fair value of options granted during 2019,
determined using the Black-Scholes valuation method, was
$1.02 per option (three months ended
March 31, 2018 – $2.54 per option). The Company applied the
following assumptions in determining the fair value of options on
the date of grant:
Three Months Ended
March 31,
|
2019
|
|
2018
|
Expected life
(years)
|
3.00
|
|
3.00
|
Expected
volatility
|
59.83%
|
|
64.72%
|
Risk-free interest
rate
|
1.75%
|
|
1.82%
|
Expected
dividends
|
$0.00
|
|
$0.00
|
Expected volatility is estimated by considering historical
average share price volatility.
(b) Share Units
Three Months Ended
March 31,
|
2019
|
|
2018
|
Continuity of Stock
Units
|
Deferred Share
Units
|
|
Performance
Share Units
|
|
Restricted
Share Units
|
|
Deferred Share
Units
|
|
Performance
Share Units
|
|
Restricted
Share Units
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
Balance, January
1
|
145,000
|
|
1,108,300
|
|
3,139,150
|
|
145,000
|
|
683,665
|
|
4,275,183
|
Granted during the
period
|
145,000
|
|
1,098,368
|
|
—
|
|
145,000
|
|
737,200
|
|
—
|
Exercised
|
(145,000)
|
|
(244,683)
|
|
(1,998,600)
|
|
(145,000)
|
|
—
|
|
(876,683)
|
Forfeited
|
—
|
|
(44,969)
|
|
(54,700)
|
|
—
|
|
(10,000)
|
|
(76,300)
|
Balance, March
31
|
145,000
|
|
1,917,016
|
|
1,085,850
|
|
145,000
|
|
1,410,865
|
|
3,322,200
|
Three Months Ended
March 31,
|
2019
|
|
2018
|
|
($)
|
|
($)
|
Expense
from:
|
|
|
|
Stock
options
|
611
|
|
1,056
|
Deferred share
units
|
112
|
|
250
|
Performance share
units
|
765
|
|
718
|
Restricted share
units
|
783
|
|
3,067
|
Total stock-based
compensation expense
|
2,271
|
|
5,091
|
Stock-based compensation expense is included in selling, general
and administrative expenses.
The Company grants deferred share units to its outside
directors. These units vest in November of the year of grant and
are settled either in cash (equal to the market value of the
underlying shares at the time of exercise) or in Company shares
purchased on the open market. The fair value of the deferred share
units is recognized equally over the vesting period, based on the
current market price of the Company's shares. At March 31,
2019, the liability pertaining to deferred share units was
$81 (December 31, 2018 –
$354).
The Company grants performance share units to a senior officer.
These performance share units contain a cash-based component and an
equity-based component. The cash-based component vests over three
years based on corporate financial performance thresholds and are
settled either in cash (equal to the market value of the underlying
shares at the time of vesting) or in Company shares purchased on
the open market. The equity-based component vests over three years
without any further conditions and are settled in treasury shares
issued by the Company. At March 31, 2019, the liability
pertaining to performance share units was $1,107 (December 31, 2018 – $761).
In 2018, the Company expanded its performance share unit plan to
its employees. These performance share units contain a cash-based
component and an equity-based component. The cash-based component
vests over three years based on corporate financial performance
thresholds and are settled either in cash (equal to the market
value of the underlying shares at the time of vesting) or in
Company shares purchased on the open market. The equity-based
component vests over three years without any further conditions and
are settled in treasury shares issued by the Company. At
March 31, 2019, the liability pertaining to the cash-based
component of performance share units was $231 (December 31, 2018 – $200).
Prior to 2018, the Company granted restricted share units to its
employees. These units vest over three years and are settled either
in cash (equal to the market value of the underlying shares at the
time of exercise) or in Company shares purchased on the open
market. The fair value of the restricted share units is recognized
over the vesting period, based on the current market price of the
Company's shares. At March 31, 2019, the liability pertaining
to restricted share units was $909
(December 31, 2018 – $3,158).
Changes in the Company's obligations under the deferred,
performance and restricted share unit plans, which arise from
fluctuations in the market value of the Company's shares underlying
these compensation programs, are recorded as the share value
changes.
5. LEASES
The Company's leasing activities
comprise of: buildings and various field equipment including
railcars and motor vehicle leases.
From January 1, 2019, leases are
recognized as a right-of-use (ROU) asset and a corresponding
liability at the date at which the leased asset is available for
use by the Company. Each lease payment is allocated between the
liability (principal) and interest. The interest is charged to the
statement of operations over the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the
liability for each period. The ROU asset is depreciated on a
straight-line basis over the shorter of the asset's useful life and
the lease term on a straight-line basis.
The Company recognizes a ROU asset at cost consisting of the
amount of the initial measurement of the lease liability, plus any
lease payments made to the lessor at or before the commencement
date less any lease incentives received, the initial estimate of
any restoration costs and any initial direct costs incurred by the
lessee. The provision for any restoration costs is recognized as a
separate liability as set out in IAS 37 Provisions, Contingent
Liabilities and Contingent Assets.
The Company recognizes a lease liability equal to the present
value of the lease payments during the lease term that are not yet
paid. The lease payments are discounted using the interest rate
implicit in the lease, if that rate can be determined, or the
Company's incremental borrowing rate.
Payments associated with short-term leases and leases of
low-value assets are recognized as an expense in the statement of
operations. Short-term leases are leases with a lease term of
twelve months or less. Low-value assets comprise I.T. equipment and
small items of office equipment.
On initial application of IFRS 16 on January 1, 2019, the Company recorded ROU assets
and lease obligations of $44,917 on
the balance sheet. The weighted average incremental borrowing rate
applied to the lease liabilities on January
1, 2019 was 5.31 percent.
The following table summarizes the reconciliation between the
Company's operating lease commitments as at December 31, 2018 to the lease obligations
recognized on January 1, 2019 upon
the adoption of IFRS 16.
(C$000s)
|
($)
|
Operating lease
commitments disclosed as at December 31, 2018
|
34,564
|
Add: leases disclosed
as purchase obligations as at December 31, 2018
|
14,667
|
Less: leases that do
not meet the definition of a lease under IFRS 16
|
(9,259)
|
Less: low-value
leases recognized as an expense
|
(857)
|
Less: short-term
leases recognized as an expense
|
(540)
|
Add: residual value
guarantees on leases
|
8,801
|
Less: discounted
using the Company's incremental borrowing rate at January 1,
2019
|
(3,197)
|
Add: finance lease
obligations recognized as at December 31, 2018
|
738
|
Lease liability
recognized as at January 1, 2019
|
44,917
|
|
|
Current lease
liability
|
24,318
|
Non-current lease
liability
|
20,599
|
Lease liability
recognized as at January 1, 2019
|
44,917
|
The recognized right-of-use assets relate to the following types
of assets:
|
March
31,
|
|
January 1,
|
|
2019
|
|
2019
|
(C$000s)
|
($)
|
|
($)
|
Buildings
|
9,665
|
|
11,215
|
|
|
|
|
Field
equipment
|
29,774
|
|
33,702
|
|
39,439
|
|
44,917
|
For the three months ended March 31,
2019, depreciation expense on right-of-use assets was
$5,037.
6. CAPITAL STRUCTURE
The Company's capital
structure is comprised of shareholders' equity and debt. The
Company's objectives in managing capital are (i) to maintain
flexibility so as to preserve its access to capital markets and its
ability to meet its financial obligations, and (ii) to finance
growth, including potential acquisitions.
The Company manages its capital structure and makes adjustments
in light of changing market conditions and new opportunities, while
remaining cognizant of the cyclical nature of the oilfield services
sector. To maintain or adjust its capital structure, the Company
may revise its capital spending, adjust dividends, if any, paid to
shareholders, issue new shares or new debt or repay existing
debt.
The Company monitors its capital structure and financing
requirements using, amongst other parameters, the ratio of net debt
to operating income. Operating income for this purpose is
calculated on a 12-month trailing basis and is defined as
follows:
|
March
31,
|
|
December
31,
|
For the Twelve Months
Ended,
|
2019
|
|
2018
|
(C$000s)
|
($)
|
|
($)
|
Net income
|
(63,607)
|
|
(26,177)
|
Adjusted for the
following:
|
|
|
|
Depreciation
|
183,565
|
|
160,318
|
Foreign exchange
losses
|
37,882
|
|
38,047
|
Loss on disposal of
property, plant and equipment
|
32,679
|
|
30,317
|
Impairment of
property, plant and equipment
|
115
|
|
115
|
Impairment of
inventory
|
7,167
|
|
7,167
|
Interest
|
107,106
|
|
106,630
|
Income
taxes
|
(17,433)
|
|
(4,592)
|
Operating
income
|
287,474
|
|
311,825
|
Net debt for this purpose is calculated as follows:
|
March
31,
|
|
December
31,
|
As at
|
2019
|
|
2018
|
(C$000s)
|
($)
|
|
($)
|
Long-term debt, net
of debt issuance costs and debt discount (note 2)
|
952,384
|
|
989,614
|
Lease
obligations
|
39,056
|
|
738
|
Less: cash and cash
equivalents
|
(60,164)
|
|
(51,901)
|
Net debt
|
931,276
|
|
938,451
|
The ratio of net debt to operating income does not have a
standardized meaning under IFRS and may not be comparable to
similar measures used by other companies.
At March 31, 2019, the net debt to operating income ratio
was 3.24:1 (December 31, 2018 – 3.01:1) calculated on a
12-month trailing basis as follows:
|
March
31,
|
|
December
31,
|
For the Twelve Months
Ended
|
2019
|
|
2018
|
(C$000s, except
ratio)
|
($)
|
|
($)
|
Net debt
|
931,276
|
|
938,451
|
Operating
income
|
287,474
|
|
311,825
|
Net debt to operating
income ratio
|
3.24:1
|
|
3.01:1
|
The Company is subject to certain financial covenants relating
to working capital, leverage and the generation of cash flow in
respect of its operating and revolving credit facilities. These
covenants are monitored on a monthly basis. At March 31, 2019
and December 31, 2018, the Company was in compliance with its
covenants with respect to its credit facilities.
|
Covenant
|
Actual
|
As at March
31,
|
2019
|
2019
|
Working capital ratio
not to fall below
|
1.15x
|
2.25x
|
Funded Debt to
Adjusted EBITDA not to exceed(1)(2)
|
3.00x
|
0.15x
|
Funded Debt to
Capitalization not to exceed(1)(3)
|
0.30x
|
0.03x
|
(1)
Funded Debt is defined as Total Debt excluding all outstanding
senior unsecured notes and lease obligations. Total Debt includes
bank loans and long-term debt (before unamortized debt issuance
costs and debt discount) plus outstanding letters of credit. For
the purposes of the Total Debt to Adjusted EBITDA ratio, the Funded
Debt to Capitalization Ratio and the Funded Debt to Adjusted EBITDA
ratio, the amount of Total Debt or Funded Debt, as applicable, is
reduced by the amount of cash on hand with lenders (excluding any
cash held in a segregated account for the purposes of a potential
equity cure).
|
(2) Adjusted EBITDA is
defined as net income or loss for the period adjusted for interest,
taxes, depreciation and amortization, non-cash stock-based
compensation, non-controlling interest, and gains and losses that
are extraordinary or non-recurring.
|
(3) Capitalization is Total
Debt plus equity attributable to the shareholders of
Calfrac.
|
Adjusted EBITDA is defined as net income or loss for the period
less interest, taxes, depreciation and amortization, unrealized
foreign exchange losses (gains), non-cash stock-based compensation,
non-controlling interest, and gains and losses that are
extraordinary or non-recurring. Adjusted EBITDA is presented
because it gives an indication of the results from the Company's
principal business activities prior to consideration of how its
activities are financed and the impact of foreign exchange,
taxation and depreciation and amortization charges. Adjusted EBITDA
for the period was calculated as follows:
For the Three Months
Ended March 31,
|
2019
|
|
2018
|
(C$000s)
|
($)
|
|
($)
|
Net (loss)
income
|
(36,334)
|
|
1,096
|
Add back
(deduct):
|
|
|
|
Depreciation
|
61,528
|
|
38,281
|
Unrealized foreign
exchange losses
|
144
|
|
1,041
|
Loss on disposal of
property, plant and equipment
|
10,135
|
|
7,773
|
Impairment of
inventory
|
—
|
|
579
|
Restructuring
charges
|
20
|
|
768
|
Stock-based
compensation
|
812
|
|
1,131
|
Losses attributable
to non-controlling interest
|
—
|
|
2,138
|
Interest
|
21,230
|
|
20,754
|
Income
taxes
|
(13,449)
|
|
(608)
|
Adjusted
EBITDA
|
44,086
|
|
72,953
|
(1)
For bank covenant purposes, EBITDA includes an additional $5,843
of
lease payments that would have been recorded as operating expenses
prior
to the adoption of IFRS 16.
|
Advances under the credit facilities are limited by a borrowing
base. The borrowing base is calculated based on the following:
i.
|
Eligible North
American accounts receivable, which is based on 75 percent of
accounts receivable owing by companies rated BB+ or lower by
Standard & Poor's (or a similar rating agency) and 85 percent
of accounts receivable from companies rated BBB- or
higher;
|
ii.
|
100 percent of
unencumbered cash of the parent company and its U.S. operating
subsidiary, excluding any cash held in a segregated account for the
purposes of a potential equity cure; and
|
iii.
|
25 percent of the net
book value of property, plant and equipment (PP&E) of the
parent company and its U.S. operating subsidiary. The value of
PP&E excludes assets under construction and is limited to
$150,000.
|
The indenture governing the senior unsecured notes contains
restrictions on the Company's ability to pay dividends, purchase
and redeem shares of the Company, and make certain restricted
investments in circumstances where
i.
|
the Company is in
default under the indenture or the making of such payment would
result in a default;
|
ii.
|
the Company is not
meeting the Fixed Charge Coverage Ratio(1) under the
indenture of at least 2:1 for the most recent four fiscal quarters;
or
|
iii.
|
there is insufficient
room for such payment within a builder basket included in the
indenture.
|
(1) The Fixed Charge
Coverage Ratio is defined as cash flow to interest expense. Cash
flow is a non-GAAP measure and does not have a standardized meaning
under IFRS and is defined under the indenture as net income (loss)
attributable to the shareholders of Calfrac before depreciation,
extraordinary gains or losses, unrealized foreign exchange gains or
losses, gains or losses on disposal of property, plant and
equipment, impairment or reversal of impairment of assets,
restructuring charges, provision for settlement of litigation,
stock-based compensation, interest, and income taxes. Interest
expense is adjusted to exclude any non-recurring charges associated
with redeeming or retiring any indebtedness prior to its
maturity.
|
These limitations on restricted payments are tempered by the
existence of a number of exceptions to the general prohibition,
including a basket allowing for restricted payments in an aggregate
amount of up to US$20,000. As at
March 31, 2019, this basket was not utilized.
The indenture also restricts the incurrence of additional
indebtedness if the Fixed Charge Coverage Ratio determined on a pro
forma basis for the most recently ended four fiscal quarter period
for which internal financial statements are available is not at
least 2:1. As is the case with restricted payments, there are a
number of exceptions to this prohibition on the incurrence of
additional indebtedness, including the incurrence of additional
debt under credit facilities up to the greater of $375,000 or 30 percent of the Company's
consolidated tangible assets.
As at March 31, 2019, the Company's Fixed Charge Coverage
Ratio of 3.51:1 was higher than the required 2:1 ratio and the
aforementioned prohibitions will not be applicable as long as the
Company remains above this ratio.
The Company has measures in place to ensure that it has
sufficient liquidity to navigate the cyclical nature of the
oilfield services sector and safeguard the Company's ability to
continue as a going concern. The Company negotiated amendments to
its credit facilities to provide increased financial flexibility.
These amendments include an "Equity Cure" feature pursuant to which
proceeds from equity offerings may be applied as both an adjustment
in the calculation of Adjusted EBITDA and as a reduction of Funded
Debt towards the Funded Debt to Adjusted EBITDA ratio covenant for
any of the quarters ending prior to and including June 30, 2022, subject to certain conditions
including:
i.
|
the Company is only
permitted to use the proceeds of a common share issuance to
increase Adjusted EBITDA a maximum of two times;
|
ii.
|
the Company cannot
use the proceeds of a common share issuance to increase Adjusted
EBITDA in consecutive quarter ends;
|
iii.
|
the maximum proceeds
of each common share issuance permitted to be attributed to
Adjusted EBITDA cannot exceed the greater of 50 percent of Adjusted
EBITDA on a rolling four-quarter basis and $25,000; and
|
iv.
|
if proceeds are not
used immediately as an equity cure they must be held in a
segregated bank account pending an election to use them for such
purpose, and if they are removed from such account but not used as
an equity cure they will no longer be eligible for such
use.
|
In addition, to the extent that proceeds from an equity offering
are used as part of the Equity Cure, such proceeds are included in
the calculation of the Company's borrowing base.
7. CONTINGENCIES
GREEK LITIGATION
As a result of the acquisition and
amalgamation with Denison in 2004,
the Company assumed certain legal obligations relating to
Denison's Greek operations.
In 1998, North Aegean Petroleum Company E.P.E. ("NAPC"), a Greek
subsidiary of a consortium in which Denison participated (and which is now a
majority-owned subsidiary of the Company), terminated employees in
Greece as a result of the
cessation of its oil and natural gas operations in that country.
Several groups of former employees filed claims against NAPC and
the consortium alleging that their termination was invalid and that
their severance pay was improperly determined.
In 1999, the largest group of plaintiffs received a ruling from
the Athens Court of First Instance
that their termination was invalid and that salaries in arrears
amounting to approximately $10,270
(6,846 euros) plus interest were due
to the former employees. This decision was appealed to the
Athens Court of Appeal, which
allowed the appeal in 2001 and annulled the above-mentioned
decision of the Athens Court of
First Instance. The said group of former employees filed an appeal
with the Supreme Court of Greece,
which was heard on May 29, 2007. The
Supreme Court of Greece allowed
the appeal and sent the matter back to the Athens Court of Appeal for the consideration
of the quantum of awardable salaries in arrears. On June 3, 2008, the Athens Court of Appeal rejected NAPC's appeal
and reinstated the award of the Athens Court of First Instance, which decision
was further appealed to the Supreme Court of Greece. The matter was heard on April 20, 2010 and a decision rejecting such
appeal was rendered in June 2010. As
a result of Denison's
participation in the consortium that was named in the lawsuit, the
Company has been served with three separate payment orders, one on
March 24, 2015 and two others on
December 29, 2015. The Company was
also served with an enforcement order on November 23, 2015. Oppositions have been
filed on behalf of the Company in respect of each of these orders
which oppose the orders on the basis that they were improperly
issued and are barred from a statute of limitations perspective.
The salaries in arrears sought to be recovered through these orders
are part of the $10,270 (6,846 euros) cited above and the interest being
sought in respect of these orders is part of the $27,454 (18,300
euros) cited below. Provisional orders granting a temporary
suspension of any enforcement proceedings have been granted in
respect of all of the orders that have been served. The order
served on March 24, 2015 was heard on
November 24, 2015 and a decision was
issued on November 25, 2016 accepting
the Company's opposition on the basis that no lawful service of
Judgment No 4528/2008 had taken place until the filing of the
opponents' petition and/or the issuance of the payment order. The
plaintiffs have filed an appeal against the above decision which
was heard on October 16, 2018 and a
decision in respect of this appeal is currently pending. A hearing
in respect of the order served on November
23, 2015 took place on October 31,
2018 and a decision in respect of such order is currently
pending. A hearing in respect of the orders served in December of
2015 scheduled for September 20, 2016
was adjourned until November 21, 2016
and two decisions were issued on January 9,
2017 accepting the Company's oppositions on a statute of
limitations basis. The plaintiffs filed appeals against the above
decisions which were heard on October 16,
2018 and decisions in respect of such appeals are
pending.
NAPC is also the subject of a claim for approximately
$4,294 (2,862
euros) plus associated penalties and interest from the Greek
social security agency for social security obligations associated
with the salaries in arrears that are the subject of the
above-mentioned decision.
The maximum aggregate interest and penalties payable under the
claims noted above, as well as three other immaterial claims
against NAPC totaling $867
(578 euros), amounted to $27,454 (18,300
euros) as at March 31, 2019.
Management is of the view that it is improbable there will be a
material financial impact to the Company as a result of these
claims. Consequently, no provision has been recorded in these
consolidated financial statements.
8. SEGMENTED INFORMATION
The Company's
activities are conducted in four geographical segments:
Canada, the United States, Russia and Argentina. All activities are related to
hydraulic fracturing, coiled tubing, cementing and other well
completion services for the oil and natural gas industry.
The business segments presented reflect the Company's management
structure and the way its management reviews business performance.
The Company evaluates the performance of its operating segments
primarily based on operating income, as defined below.
|
Canada
|
|
United
States
|
|
Russia
|
|
Argentina
|
|
Corporate
|
|
Consolidated
|
(C$000s)
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
Three Months Ended
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
131,395
|
|
259,125
|
|
29,078
|
|
55,414
|
|
—
|
|
475,012
|
Operating income
(loss)(1)
|
13,726
|
|
37,744
|
|
(2,776)
|
|
4,855
|
|
(9,926)
|
|
43,623
|
Segmented
assets
|
566,199
|
|
916,136
|
|
107,339
|
|
149,634
|
|
—
|
|
1,739,308
|
Capital
expenditures
|
3,921
|
|
19,428
|
|
2,179
|
|
2,690
|
|
—
|
|
28,218
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
189,728
|
|
315,980
|
|
31,235
|
|
45,895
|
|
—
|
|
582,838
|
Operating income
(loss)(1)
|
31,710
|
|
53,249
|
|
(958)
|
|
(3,018)
|
|
(13,009)
|
|
67,974
|
Segmented
assets
|
649,582
|
|
970,698
|
|
117,662
|
|
168,997
|
|
—
|
|
1,906,939
|
Capital
expenditures
|
12,122
|
|
37,582
|
|
69
|
|
1,561
|
|
—
|
|
51,334
|
(1)
Operating income (loss) is defined as net income (loss) before
depreciation, foreign exchange gains or losses, gains or losses on
disposal of
property, plant and equipment, impairment of inventory, impairment
of property, plant and equipment, interest, and income
taxes.
|
Three Months Ended
March 31,
|
2019
|
|
2018
|
(C$000s)
|
($)
|
|
($)
|
Net (loss)
income
|
(36,334)
|
|
1,096
|
Add back
(deduct):
|
|
|
|
Depreciation
|
61,528
|
|
38,281
|
Foreign exchange
losses
|
513
|
|
678
|
Loss on disposal of
property, plant and equipment
|
10,135
|
|
7,773
|
Interest
|
21,230
|
|
20,754
|
Income
taxes
|
(13,449)
|
|
(608)
|
Operating
income
|
43,623
|
|
67,974
|
Operating income does not have a standardized meaning under IFRS
and may not be comparable to similar measures used by other
companies.
SOURCE Calfrac Well Services Ltd.