CALGARY,
AB, July 28, 2022 /CNW/ - Calfrac Well
Services Ltd. ("Calfrac" or "the Company") (TSX:
CFW) announces its financial and operating results for the
three and six months ended June 30,
2022.
HIGHLIGHTS – CONTINUING OPERATIONS
|
Three months ended Jun.
30,
|
Six months ended Jun.
30,
|
|
2022
|
2021
|
Change
|
2022
|
2021
|
Change
|
(C$000s, except per share
amounts)
|
($)
|
($)
|
( %)
|
($)
|
($)
|
( %)
|
(unaudited)
|
|
Revised
|
|
|
Revised
|
|
Revenue
|
318,511
|
173,769
|
83
|
613,035
|
387,723
|
58
|
Operating
income(1)
|
36,550
|
756
|
NM
|
57,579
|
12,220
|
NM
|
Per share
– basic
|
0.95
|
0.02
|
NM
|
1.50
|
0.33
|
NM
|
Per share
– diluted
|
0.43
|
0.01
|
NM
|
0.68
|
0.15
|
NM
|
Adjusted
EBITDA(1)
|
39,252
|
(1,080)
|
NM
|
60,083
|
9,741
|
NM
|
Per share
– basic
|
1.02
|
(0.03)
|
NM
|
1.57
|
0.26
|
NM
|
Per share
– diluted
|
0.46
|
(0.03)
|
NM
|
0.71
|
0.12
|
NM
|
Net loss
|
(6,776)
|
(35,516)
|
(81)
|
(24,806)
|
(58,545)
|
(58)
|
Per share
– basic
|
(0.18)
|
(0.95)
|
(81)
|
(0.65)
|
(1.56)
|
(58)
|
Per share
– diluted
|
(0.18)
|
(0.95)
|
(81)
|
(0.65)
|
(1.56)
|
(58)
|
As at
|
June 30,
|
December
31,
|
Change
|
|
2022
|
2021
|
|
(C$000s)
|
($)
|
($)
|
( %)
|
(unaudited)
|
|
Revised
|
|
Working capital, end of
period
|
144,456
|
121,934
|
18
|
Total assets, end of
period
|
863,599
|
822,368
|
5
|
Long-term debt, end of
period
|
402,683
|
388,479
|
4
|
Total consolidated
equity, end of period
|
292,515
|
328,840
|
(11)
|
(1) Refer to
"Non-GAAP Measures" on pages 14 and 15 for further
information.
|
(2) During the first
quarter of 2022, management committed to a plan to sell its Russian
division, resulting in the associated assets and liabilities being
classified as held for sale and presented as discontinued
operations. Results from discontinued operations have not been
included in the table above, unless otherwise
noted.
|
CEO'S MESSAGE
Calfrac's Chief Executive Officer, Pat
Powell commented: "Since I joined the Company, I have had
the opportunity to meet with a number of our employees, both in the
field and the divisional offices, and I am very impressed with
their drive and commitment towards delivering on our revised brand
promise of "Do It Safely, Do It Right, Do It Profitably". This
quarter, Calfrac was able to demonstrate solid progress on its
financial performance while continuing to deliver top tier service
to our clients."
During the quarter, Calfrac:
- nearly doubled adjusted EBITDA to $39.3
million or 12 percent of revenue on a sequential basis on
revenue growth of eight percent from the first quarter;
- grew its operating scale to nine fracturing fleets in
the United States to compliment
the Company's four active fleets in Canada; and
- re-constituted its Board of Directors’ committees, including
appointing the Audit Committee comprised of Charles Pellerin, Anuroop Duggal and Chetan Mehta. Charles
Pellerin, who is the Principal Partner and President of one
of the largest independent accounting firms in Quebec, will act as chairman of the Audit
Committee.
SECOND QUARTER OVERVIEW
In the second quarter of 2022, the Company:
- generated revenue of $318.5
million, an increase of 83 percent from the second quarter
in 2021, resulting primarily from improved activity in all of the
Company's operating divisions and improved pricing in North America;
- reported adjusted EBITDA of $39.3
million versus negative $1.1
million in the comparable period in 2021, mainly as a result
of improved performance in North
America;
- repaid and cancelled its $25.0
million secured bridge loan from G2S2 Capital Inc., of which
the Company had drawn $15.0 million
prior to repayment;
- reduced its Funded Debt and Total Debt leverage to levels that
will terminate the covenant relief period under its revolving
credit facility agreement upon filing its second quarter compliance
certificate, which is anticipated to occur before the end of
July 2022;
- filed a short-form base shelf prospectus that allows Calfrac to
issue up to $500.0 million of equity
or debt securities over a 25-month period commencing May 19, 2022;
- reported a net loss of $6.8
million or $0.18 per share
diluted compared to a net loss of $35.5
million or $0.95 per share
diluted in the second quarter in 2021;
- reported period-end working capital of $144.5 million; and
- incurred capital expenditures of $15.2
million, focused on maintenance and sustaining activities to
primarily support the Company's United
States fracturing operations.
In the six months ended June 30,
2022, the Company:
- generated revenue of $613.0
million, an increase of 58 percent from the first six months
in 2021, resulting from higher activity in all operating divisions,
most notably in the United
States;
- reported adjusted EBITDA of $60.1
million versus $9.7 million in
the comparable period in 2021, mainly as a result of higher
utilization of equipment in all operating divisions;
- reported a net loss of $24.8
million or $0.65 per share
diluted, compared to a net loss of $58.5
million or $1.56 per share
diluted in the first six months in 2021; and
- incurred capital expenditures of $27.4
million focused on maintenance and sustaining activities to
primarily support the Company's United
States fracturing operations.
CONSOLIDATED HIGHLIGHTS - CONTINUING OPERATIONS
Three Months
Ended
|
June
30,
|
March 31,
|
Change
|
|
2022
|
2022
|
|
(C$000s, except
operational information)
|
($)
|
($)
|
( %)
|
(unaudited)
|
|
Revised
|
|
Revenue
|
318,511
|
294,524
|
8
|
Expenses
|
|
|
|
Operating
|
269,781
|
260,871
|
3
|
SG&A
|
12,180
|
12,624
|
(4)
|
|
281,961
|
273,495
|
3
|
Operating
income(1)
|
36,550
|
21,029
|
74
|
Operating income
(%)
|
11.5
|
7.1
|
62
|
Adjusted
EBITDA(1)
|
39,252
|
20,831
|
88
|
Adjusted EBITDA
(%)
|
13.9
|
7.1
|
96
|
Fracturing revenue per
job ($)
|
42,582
|
31,460
|
35
|
Number of fracturing
jobs
|
6,655
|
8,222
|
(19)
|
Active pumping
horsepower, end of period (000s)
|
934
|
936
|
—
|
Idle pumping
horsepower, end of period (000s)
|
344
|
346
|
(1)
|
Total pumping
horsepower, end of period (000s)
|
1,278
|
1,282
|
—
|
Coiled tubing revenue
per job ($)
|
30,573
|
25,755
|
19
|
Number of coiled tubing
jobs
|
680
|
750
|
(9)
|
Active coiled tubing
units, end of period (#)
|
13
|
13
|
—
|
Idle coiled tubing
units, end of period (#)
|
6
|
6
|
—
|
Total coiled tubing
units, end of period (#)
|
19
|
19
|
—
|
Cementing revenue per
job ($)
|
76,363
|
81,047
|
(6)
|
Number of cementing
jobs
|
135
|
122
|
11
|
Active cementing units,
end of period (#)
|
10
|
10
|
—
|
Idle cementing units,
end of period (#)
|
2
|
4
|
(50)
|
Total cementing units,
end of period (#)
|
12
|
14
|
(14)
|
(1) Refer to "Non-GAAP Measures" on pages 14 and 15
for further information.
|
Second-quarter revenue in 2022 of $318.5
million represented an increase of 8 percent from the first
quarter of 2022, primarily due to improved pricing in North America and significantly higher
fracturing activity in the United
States, offset partially by lower activity in Canada due to the onset of spring break-up.
Revenue per fracturing job was 35 percent higher than the first
quarter of 2022 due to pricing increases in North America combined with job mix in
Argentina and Canada.
In Canada, revenue decreased by
34 percent from the first quarter of 2022 to $71.1 million in the second quarter of 2022 due
to the normal seasonal slowdown in activity stemming from spring
break-up conditions. Operating income as a percentage of revenue
was 5 percent compared to 13 percent in the first quarter of 2022,
and included a $3.0 million
litigation accrual related to product purchase commitments made in
a prior year.
In the United States, revenue
in the second quarter of 2022 was $193.8
million, a 46 percent increase from the first quarter of
2022 due to improved utilization and a larger average number of
fleets operating during the quarter. The second quarter included
some weather-related disruptions in North
Dakota and Wyoming in April
resulting in 24 lost operating days. However, the Company achieved
strong utilization for its eight operating fleets during the
quarter outside of these disruptions and added a ninth fleet in
May. Comparatively, the first quarter in 2022 started with four
fleets operating and exited with eight operating fleets. The
Company continued to implement pricing increases during the second
quarter in order to improve its profitability for all of its
operating fleets. Operating income was $35.8
million in the second quarter compared to $7.9 million in the first quarter of 2022.
In Argentina, revenue decreased
by 2 percent from the first quarter in 2022 to $53.6 million in the second quarter of 2022. The
Company experienced a slight decrease in sequential activity
particularly for the Company's fracturing and coiled tubing
operations. Operating income decreased from $5.5 million in the first quarter of 2022 to
$1.6 million in the second quarter of
2022 due to inflationary salary increases that are paid in pesos
that were not immediately offset by the devaluation in the official
peso exchange rate.
Adjusted EBITDA from continuing operations of $39.3 million for the second quarter of 2022
increased from $20.8 million in the
first quarter of 2022 primarily due to improved crew utilization
and pricing in the United
States.
BUSINESS UPDATE AND OUTLOOK
During the second quarter
of 2022, the Company continued to grow its North American
fracturing operating scale as it exited the period with nine
fracturing fleets operating in the United
States and four large fleets in Canada. Throughout the past few months,
Calfrac was able to achieve pricing gains with its clients that
have compensated for significant increases in its operating
expenses and are now beginning to contribute to an overall
improvement in the Company's consolidated financial performance.
The Company expects strong utilization of its North American and
Argentinean fleets for the remainder of 2022 and 2023 and remains
focused on the provision of top tier pressure pumping services,
while generating enhanced returns for its shareholders in a market
that is more supportive of a profitable services sector on a full
cycle basis.
CANADA
The Company's
operations in Canada began the
second quarter at a slower rate due to spring break-up but exceeded
expectations with a strong exit and Calfrac anticipates full
utilization in the third quarter for its four large fracturing
fleets. Calfrac's Canadian Division expects robust demand for its
services throughout the remainder of 2022 and into 2023 as
customers have already begun to inquire about equipment
availability in the new year. While Calfrac has the ability to
increase its operating scale in Canada, the Company is committed to its
current fleet capacity for the foreseeable future and will only
consider additional fleet reactivations if they are supported by a
committed customer agreement.
UNITED STATES
The
Company's United States division
overcame weather disruptions early in the second quarter in its
largest operating district to exit the quarter with fleet
profitability not seen since the same period in 2017. Calfrac
expects to benefit from consistent utilization for its nine sold
out fracturing fleets for the remainder of the year and anticipates
that the pressure pumping market will remain tight through 2023 as
demand exceeds supply. While the Company has the option to
reactivate additional idle equipment, Calfrac remains focused on
improving cash flows and returns for its existing fleets rather
than market share.
ARGENTINA
Calfrac has
a significant presence in Argentina's pressure pumping market. The
Company recently signed a multi-year contract with a major client
operating in the Vaca Muerta shale play and expects utilization as
well as profitability to improve significantly from the first six
months of the year. With the strength in commodity prices, Calfrac
anticipates that this market will remain tight and support further
growth opportunities in the Neuquén region and southern
Argentina over the next several
years.
RUSSIA
The Company
has made progress related to the sale of its Russian subsidiary and
is seeking to close this transaction as soon as possible in
compliance with applicable laws and sanctions.
CORPORATE
Calfrac's priority is to leverage its
geographical scale and superior execution focus in both
North America and Argentina to drive profitable growth, margin
expansion and strong free cash flow generation, which will be
dedicated to strengthening the Company's balance sheet. Calfrac
believes that the services industry is entering a multi-year up
cycle and the Company is well-positioned to advance its strategy
and maximize shareholder returns.
FINANCIAL OVERVIEW – CONTINUING OPERATIONS – THREE MONTHS
ENDED JUNE 30, 2022 VERSUS 2021
CANADA
Three Months Ended June
30,
|
2022
|
2021
|
Change
|
(C$000s, except
operational information)
|
($)
|
($)
|
( %)
|
(unaudited)
|
|
|
|
Revenue
|
71,089
|
50,766
|
40
|
Expenses
|
|
|
|
Operating
|
65,068
|
47,422
|
37
|
SG&A
|
2,159
|
(951)
|
NM
|
|
67,227
|
46,471
|
45
|
Operating
income(1)
|
3,862
|
4,295
|
(10)
|
Operating income
(%)
|
5.4
|
8.5
|
(36)
|
Fracturing revenue per
job ($)
|
28,595
|
28,191
|
1
|
Number of fracturing
jobs
|
2,118
|
1,621
|
31
|
Active pumping
horsepower, end of period (000s)
|
227
|
202
|
12
|
Idle pumping
horsepower, end of period (000s)
|
43
|
70
|
(39)
|
Total pumping
horsepower, end of period (000s)
|
270
|
272
|
(1)
|
Coiled tubing revenue
per job ($)
|
31,765
|
18,231
|
74
|
Number of coiled tubing
jobs
|
326
|
278
|
17
|
Active coiled tubing
units, end of period (#)
|
8
|
7
|
14
|
Idle coiled tubing
units, end of period (#)
|
4
|
6
|
(33)
|
Total coiled tubing
units, end of period (#)
|
12
|
13
|
(8)
|
(1) Refer to "Non-GAAP
Measures" on pages 14 and 15 for further
information.
|
REVENUE
Revenue from Calfrac's Canadian operations
during the second quarter of 2022 was $71.1
million compared to $50.8
million in the same period of 2021 primarily due to higher
pricing. The number of fracturing jobs increased by 31 percent from
the comparable period in 2021 due to changes in job mix as the
Company completed a larger number of smaller jobs during the second
quarter in 2022. As expected, activity in April was slow due to
spring break-up conditions but increased significantly as the
quarter progressed. Revenue per fracturing job was one percent
higher than the comparable quarter as pricing increases more than
offset the impact of job mix during the quarter. The number of
coiled tubing jobs increased by 17 percent versus the second
quarter in 2021. The 74 percent increase in the coiled tubing
revenue per job as compared to the same quarter in 2021 was due to
a combination of higher pricing and the type of work completed
during the quarter.
OPERATING INCOME
Operating income in Canada during the second quarter of 2022 was
$3.9 million compared to $4.3 million in the same period of 2021. The
Canadian division's operating income as a percentage of revenue was
five percent compared to eight percent in the second quarter of
2021. The Company recorded a $3.0
million expense accrual during the quarter to reflect the
potential outcome of ongoing litigation associated with product
purchase commitments made in a prior year. In addition, the Company
did not receive any benefit from the Canadian Emergency Wage
Subsidy ("CEWS") in the second quarter of 2022 while the comparable
quarter included a benefit of $2.5
million. The Company introduced price increases during the
first quarter that were in effect for the entire second quarter in
2022. SG&A expenses increased as the comparable quarter
included a recovery of a litigation settlement while the second
quarter in 2022 included the reinstatement of salary and benefit
rollbacks and the elimination of the CEWS benefit in 2022.
UNITED STATES
Three Months Ended June
30,
|
2022
|
2021
|
Change
|
(C$000s, except
operational and exchange rate information)
|
($)
|
($)
|
( %)
|
(unaudited)
|
|
|
|
Revenue
|
193,830
|
86,688
|
124
|
Expenses
|
|
|
|
Operating
|
154,971
|
86,366
|
79
|
SG&A
|
3,033
|
2,876
|
5
|
|
158,004
|
89,242
|
77
|
Operating income
(loss)(1)
|
35,826
|
(2,554)
|
NM
|
Operating income (loss)
(%)
|
18.5
|
(2.9)
|
NM
|
Fracturing revenue per
job ($)
|
46,986
|
27,737
|
69
|
Number of fracturing
jobs
|
4,125
|
3,123
|
32
|
Active pumping
horsepower, end of period (000s)
|
568
|
550
|
3
|
Idle pumping
horsepower, end of period (000s)
|
301
|
323
|
(7)
|
Total pumping
horsepower, end of period (000s)
|
869
|
873
|
—
|
Active coiled tubing
units, end of period (#)
|
—
|
—
|
—
|
Idle coiled tubing
units, end of period (#)
|
1
|
1
|
—
|
Total coiled tubing
units, end of period (#)
|
1
|
1
|
—
|
Active cementing units,
end of period (#)
|
—
|
—
|
—
|
Idle cementing units,
end of period (#)
|
1
|
3
|
(67)
|
Total cementing units,
end of period (#)
|
1
|
3
|
(67)
|
US$/C$ average exchange
rate(2)
|
1.2768
|
1.2282
|
4
|
(1) Refer to "Non-GAAP
Measures" on pages 14 and 15 for further
information.
|
(2) Source: Bank of
Canada.
|
REVENUE
Revenue from Calfrac's United States operations increased
significantly to $193.8 million
during the second quarter of 2022 from $86.7
million in the comparable quarter of 2021. The 124 percent
increase in revenue can be attributed to a combination of a 69
percent increase in revenue per job period-over-period combined
with a 32 percent increase in the number of completed fracturing
jobs. The higher revenue per job was due to improved pricing for
its services as the Company passed through higher input costs to
its customers while also achieving net pricing gains, combined with
the impact of job mix. The overall increase in job count was mainly
due to the Company operating eight of its nine marketed fleets for
the entire quarter while the ninth fleet began work during May.
Activity in the Rockies region and North
Dakota increased relative to the comparable quarter in 2021,
although activity in North Dakota
during April was impacted by snow storms that resulted in the loss
of 24 operating days. Activity in Pennsylvania was relatively consistent with
the comparable quarter in 2021.
OPERATING INCOME (LOSS)
The Company's operations in
the United States generated
operating income of $35.8 million
during the second quarter of 2022 compared to an operating loss of
$2.6 million in the same period
in 2021. This significant increase in operating income was
largely driven by improved fracturing crew utilization and strong
net pricing gains, which supported significant margin expansion
relative to the comparable quarter in 2021. SG&A expenses
increased by five percent primarily due to the reinstatement of
previously reduced salaries and benefits near the end of 2021.
ARGENTINA
Three Months Ended June
30,
|
2022
|
2021
|
Change
|
(C$000s, except
operational and exchange rate information)
|
($)
|
($)
|
( %)
|
(unaudited)
|
|
|
|
Revenue
|
53,592
|
36,314
|
48
|
Expenses
|
|
|
|
Operating
|
49,417
|
29,612
|
67
|
SG&A
|
2,572
|
1,774
|
45
|
|
51,989
|
31,386
|
66
|
Operating income
(1)
|
1,603
|
4,928
|
(67)
|
Operating income
(%)
|
3.0
|
13.6
|
(78)
|
Fracturing revenue per
job ($)
|
70,395
|
57,105
|
23
|
Number of fracturing
jobs
|
412
|
395
|
4
|
Active pumping
horsepower, end of period (000s)
|
140
|
121
|
16
|
Idle pumping
horsepower, end of period (000s)
|
—
|
—
|
—
|
Total pumping
horsepower, end of period (000s)
|
140
|
121
|
16
|
Coiled tubing revenue
per job ($)
|
29,475
|
23,483
|
26
|
Number of coiled tubing
jobs
|
354
|
206
|
72
|
Active coiled tubing
units, end of period (#)
|
5
|
5
|
—
|
Idle coiled tubing
units, end of period (#)
|
1
|
1
|
—
|
Total coiled tubing
units, end of period (#)
|
6
|
6
|
—
|
Cementing revenue per
job ($)
|
76,363
|
48,095
|
59
|
Number of cementing
jobs
|
135
|
116
|
16
|
Active cementing units,
end of period (#)
|
10
|
10
|
—
|
Idle cementing units,
end of period (#)
|
1
|
3
|
(67)
|
Total cementing units,
end of period (#)
|
11
|
13
|
(15)
|
US$/C$ average exchange
rate(2)
|
1.2768
|
1.2282
|
4
|
(1) Refer to "Non-GAAP
Measures" on pages 14 and 15 for further
information.
|
(2) Source: Bank of
Canada.
|
REVENUE
Calfrac's Argentinean operations generated
revenue of $53.6 million during the
second quarter of 2022 compared to $36.3
million in the comparable quarter in 2021 as activity in the
Neuquén region improved across all service lines but was offset
partially by lower activity in southern Argentina. Overall fracturing activity
increased by 4 percent compared to the second quarter in 2021 as
the Company did not experience similar disruptions in the current
quarter as it did during 2021. Average fracturing revenue per job
increased by 23 percent primarily due to higher pricing generated
by inflation. The number of coiled tubing jobs increased by 72
percent due to higher customer activity in Neuquén and southern
Argentina while revenue per job
also improved by 26 percent primarily due to job mix. Activity in
the Company's cementing operations increased by 16 percent and
revenue per job increased by 59 percent due to changes in job mix
as a greater number of pre-fracturing projects, which are typically
larger job sizes, were completed in the second quarter of 2022.
OPERATING INCOME
The Company's operations in
Argentina generated operating
income of $1.6 million during the
second quarter of 2022 compared to operating income of $4.9 million in the comparable quarter of 2021.
Utilization of the Company's equipment improved across all service
lines versus the same period in 2021. However, the Company's
operating margins as a percentage of revenue decreased from 13.6
percent to 3.0 percent due to inflationary salary increases that
are paid in pesos but were not offset by the devaluation in the
official peso exchange rate. The Company also incurred $0.3 million of severance costs during the second
quarter in 2022.
CORPORATE
Three Months Ended June
30,
|
2022
|
2021
|
Change
|
(C$000s)
|
($)
|
($)
|
( %)
|
(unaudited)
|
|
|
|
Expenses
|
|
|
|
Operating
|
324
|
353
|
(8)
|
SG&A
|
4,417
|
5,560
|
(21)
|
|
4,741
|
5,913
|
(20)
|
Operating
loss(1)
|
(4,741)
|
(5,913)
|
(20)
|
% of Revenue from
Continuing Operations
|
1.5
|
3.4
|
(56)
|
(1) Refer to "Non-GAAP
Measures" on pages 14 and 15 for further
information.
|
OPERATING LOSS
Corporate expenses for the second
quarter of 2022 were $4.7 million
compared to $5.9 million in the
second quarter of 2021. The lower SG&A expense was due to a
$1.3 million reduction in legal fees
incurred during the second quarter in 2022 offset partially by
higher stock-based compensation expense.
DEPRECIATION
For the three months ended June 30,
2022, depreciation expense of $30.4
million was relatively consistent with the corresponding
quarter in 2021. The slight decrease in second-quarter depreciation
expense was primarily due to the mix and timing of capital
expenditures related to major components.
FOREIGN EXCHANGE GAINS AND LOSSES
The Company
recorded a foreign exchange gain from continuing operations of
$3.4 million during the second
quarter of 2022 versus a loss of $2.8
million in the comparative three-month period of 2021.
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 and net
monetary assets or liabilities that were held in pesos in
Argentina. The foreign exchange
gain during the second quarter was mainly due to the revaluation of
net monetary assets that were held in U.S. dollars as the Canadian
dollar weakened relative to the U.S. dollar, offset partially by
net monetary assets that were held in pesos in Argentina as the peso devalued against the
U.S. dollar during this period.
INTEREST
The Company's net interest expense of
$10.9 million for the second quarter
of 2022 was $1.6 million higher than
the comparable period in 2021. The increase in interest expense was
primarily due to higher borrowings and interest rates under the
Company's revolving credit facilities combined with interest on
outstanding draws made under the secured bridge loan from G2S2
Capital Inc. during the second quarter in 2022.
INCOME TAXES
The Company recorded an income tax
expense of $1.7 million during the
second quarter of 2022 compared to a tax recovery of $7.9 million in the comparable period of 2021.
The Company had a current tax expense of $0.9 million and a deferred tax expense of
$0.8 million both of which were
related to its United States
operations. All other divisions are in a net deferred tax asset
position and the deferred tax assets continue to not be recognized
for accounting purposes.
ASSETS HELD FOR SALE AND DISCONTINUED
OPERATIONS
During the first quarter, management committed to
a plan to sell its Russian division, resulting in the associated
assets and liabilities being classified as held for sale and
presented as discontinued operations. In conjunction with the
ongoing sale process and in light of the additional Canadian
sanctions and restrictions that were issued in relation to the
Russian oil and gas industry during the second quarter, the Company
has recorded an impairment of $42.8
million to write down the Russian division's current and
long-term assets to their expected recoverable amount. Results from
operations held for sale have not been included in the preceding
tables.
Revenue from Calfrac's discontinued Russian operations decreased
by 2 percent during the second quarter of 2022 to $33.0 million from $33.5
million in the corresponding period of 2021. Fracturing
revenue was consistent with the comparable quarter while coiled
tubing revenue decreased slightly due to lower activity.
The Company's Russian division had an operating income of
$4.9 million during the second
quarter of 2022 compared to operating income of $5.3 million in the comparable quarter in 2021.
The slightly lower operating performance was primarily due to
higher overhead costs as the rouble appreciated during the second
quarter in 2022 compared to the same period in 2021.
FINANCIAL OVERVIEW – CONTINUING OPERATIONS – SIX MONTHS ENDED
JUNE 30, 2022 VERSUS 2021
CANADA
Six Months Ended June
30,
|
2022
|
2021
|
Change
|
(C$000s, except
operational information)
|
($)
|
($)
|
( %)
|
(unaudited)
|
|
|
|
Revenue
|
178,723
|
136,349
|
31
|
Expenses
|
|
|
|
Operating
|
157,021
|
116,165
|
35
|
SG&A
|
4,320
|
710
|
NM
|
|
161,341
|
116,875
|
38
|
Operating
income(1)
|
17,382
|
19,474
|
(11)
|
Operating income
(%)
|
9.7
|
14.3
|
(32)
|
Fracturing revenue per
job ($)
|
22,968
|
19,886
|
15
|
Number of fracturing
jobs
|
6,821
|
6,190
|
10
|
Active pumping
horsepower, end of period (000s)
|
227
|
202
|
12
|
Idle pumping
horsepower, end of period (000s)
|
43
|
70
|
(39)
|
Total pumping
horsepower, end of period (000s)
|
270
|
272
|
(1)
|
Coiled tubing revenue
per job ($)
|
30,535
|
20,940
|
46
|
Number of coiled tubing
jobs
|
683
|
633
|
8
|
Active coiled tubing
units, end of period (#)
|
8
|
7
|
14
|
Idle coiled tubing
units, end of period (#)
|
4
|
6
|
(33)
|
Total coiled tubing
units, end of period (#)
|
12
|
13
|
(8)
|
(1) Refer to "Non-GAAP
Measures" on pages 14 and 15 for further
information.
|
REVENUE
Revenue from Calfrac's Canadian operations
during the first six months in 2022 was $178.7 million, an increase from $136.3 million in the comparable period in 2021,
primarily due to improved pricing and increased activity. Revenue
per fracturing job was 15 percent higher than the comparable
period in 2021 as price increases were implemented during the
period to recover significant inflation in operating costs. The
number of fracturing jobs increased by 10 percent as the Company's
four fracturing fleets were highly utilized in the first quarter
prior to the onset of spring break-up conditions and improved
significantly in the month of June. The number of coiled tubing
jobs increased by 8 percent from the comparable period in 2021 due
to higher activity while revenue per job increased by 46 percent
due to improved pricing and changes in job mix.
OPERATING INCOME
The Company's Canadian division
generated operating income of $17.4
million compared to $19.5
million in the comparable period in 2021. The Company
recorded a $3.0 million expense
accrual during the quarter to reflect the potential outcome of
ongoing litigation associated with product purchase commitments
made in a prior year. In addition, the Company did not receive any
CEWS benefits in the first six months of 2022 while the comparable
period included a benefit of $3.9
million. Excluding these items, operating income improved
relative to the comparable period in 2021 primarily due to improved
pricing. The Company introduced price increases during the first
quarter that were in effect for the entire second quarter. SG&A
expenses increased as the comparable six month period included a
recovery of a litigation settlement while the first six months in
2022 included the reinstatement of salary and benefit rollbacks and
the elimination of the CEWS benefit in 2022.
UNITED STATES
Six Months Ended June
30,
|
2022
|
2021
|
Change
|
(C$000s, except
operational and exchange rate information)
|
($)
|
($)
|
( %)
|
(unaudited)
|
|
|
|
Revenue
|
326,141
|
179,601
|
82
|
Expenses
|
|
|
|
Operating
|
276,479
|
179,520
|
54
|
SG&A
|
5,941
|
5,647
|
5
|
|
282,420
|
185,167
|
53
|
Operating income
(loss)(1)
|
43,721
|
(5,566)
|
NM
|
Operating income (loss)
(%)
|
13.4
|
(3.1)
|
NM
|
Fracturing revenue per
job ($)
|
45,852
|
26,941
|
70
|
Number of fracturing
jobs
|
7,112
|
6,664
|
7
|
Active pumping
horsepower, end of period (000s)
|
568
|
550
|
3
|
Idle pumping
horsepower, end of period (000s)
|
301
|
323
|
(7)
|
Total pumping
horsepower, end of period (000s)
|
869
|
873
|
—
|
Active coiled tubing
units, end of period (#)
|
—
|
—
|
—
|
Idle coiled tubing
units, end of period (#)
|
1
|
1
|
—
|
Total coiled tubing
units, end of period (#)
|
1
|
1
|
—
|
Active cementing units,
end of period (#)
|
—
|
—
|
—
|
Idle cementing units,
end of period (#)
|
1
|
3
|
(67)
|
Total cementing units,
end of period (#)
|
1
|
3
|
(67)
|
US$/C$ average exchange
rate(2)
|
1.2714
|
1.2471
|
2
|
(1) Refer to "Non-GAAP
Measures" on pages 14 and 15 for further
information.
|
(2) Source: Bank of
Canada.
|
REVENUE
Revenue from Calfrac's United States operations increased to
$326.1 million in the first six
months in 2022 from $179.6 million in
the same period in 2021 primarily due to higher pricing and a 7
percent increase in the number of completed fracturing jobs. A
total of four active fleets were operating in the United States at the beginning of the year
but increased to eight fleets exiting the first quarter with a
ninth fracturing crew commencing operations in May. The higher
fracturing revenue per job was reflective of improved pricing as
the Company passed on higher input costs to its clients and was
able to attain net pricing increases during the second quarter.
OPERATING INCOME (LOSS)
The Company's United States division generated operating
income of $43.7 million in the first
half of 2022 compared to an operating loss of $5.6 million in the same period of 2021 primarily
due to a larger number of operating fleets, a higher number of
operating days per fleet and improved pricing, offset partially by
a slow start to the year and adverse weather in April 2022. SG&A expenses increased by 5
percent primarily due to the reinstatement of previously reduced
salaries and benefits during the fourth quarter in
2021.
ARGENTINA
Six Months Ended June
30,
|
2022
|
2021
|
Change
|
(C$000s, except
operational and exchange rate information)
|
($)
|
($)
|
( %)
|
(unaudited)
|
|
|
|
Revenue
|
108,171
|
71,772
|
51
|
Expenses
|
|
|
|
Operating
|
96,483
|
59,342
|
63
|
SG&A
|
4,616
|
3,588
|
29
|
|
101,099
|
62,930
|
61
|
Operating
income(1)
|
7,072
|
8,842
|
(20)
|
Operating income
(%)
|
6.5
|
12.3
|
(47)
|
Fracturing revenue per
job ($)
|
62,794
|
55,682
|
13
|
Number of fracturing
jobs
|
944
|
798
|
18
|
Active pumping
horsepower, end of period (000s)
|
139
|
121
|
15
|
Idle pumping
horsepower, end of period (000s)
|
—
|
—
|
—
|
Total pumping
horsepower, end of period (000s)
|
139
|
121
|
15
|
Coiled tubing revenue
per job ($)
|
25,770
|
20,973
|
23
|
Number of coiled tubing
jobs
|
747
|
442
|
69
|
Active coiled tubing
units, end of period (#)
|
5
|
5
|
—
|
Idle coiled tubing
units, end of period (#)
|
1
|
1
|
—
|
Total coiled tubing
units, end of period (#)
|
6
|
6
|
—
|
Cementing revenue per
job ($)
|
78,587
|
49,239
|
60
|
Number of cementing
jobs
|
257
|
209
|
23
|
Active cementing units,
end of period (#)
|
10
|
10
|
—
|
Idle cementing units,
end of period (#)
|
1
|
3
|
(67)
|
Total cementing units,
end of period (#)
|
11
|
13
|
(15)
|
US$/C$ average exchange
rate(2)
|
1.2714
|
1.2471
|
2
|
(1) Refer to "Non-GAAP
Measures" on pages 14 and 15 for further
information.
|
(2) Source: Bank of
Canada.
|
REVENUE
Calfrac's Argentinean operations generated
revenue of $108.2 million during the
first six months of 2022 compared to $71.8
million in the comparable period in 2021. Activity in the
first half of 2022 improved from the comparable period in 2021
across all service lines with the vast majority of the improvement
occurring in the Neuquén region. Activity in the Vaca Muerta shale
play continued to increase while activity in southern Argentina remained relatively consistent with
the comparable period in 2021. Overall fracturing activity
increased by 18 percent compared to the first six months in 2021
along with 13 percent higher revenue per job. Revenue from the
Company's coiled tubing and cementing service lines continued to
improve relative to the comparable period in 2021. The number of
coiled tubing jobs increased by 69 percent as activity increased in
Neuquén and southern Argentina
while revenue per job improved by 23 percent primarily due to job
mix. Activity in the Company's cementing operations increased by 23
percent and revenue per job increased by 60 percent due to changes
in job mix as a greater number of pre-fracturing projects, which
are typically larger job sizes, were completed in the first half of
2022.
OPERATING INCOME
The Company's operations in
Argentina generated operating
income of $7.1 million during the
first six months of 2022 compared to operating income of
$8.8 million in the comparable period
of 2021. Utilization of the Company's equipment improved across all
service lines compared to the same period in 2021. However, the
Company's operating margins as a percentage of revenue decreased
from 12 percent to 7 percent due to inflationary salary increases
that are paid in pesos that were not offset by the devaluation in
the official peso exchange rate. The Company also incurred
$0.6 million of severance costs
during the first half of 2022.
CORPORATE
Six Months Ended June
30,
|
2022
|
2021
|
Change
|
(C$000s)
|
($)
|
($)
|
( %)
|
(unaudited)
|
|
|
|
Expenses
|
|
|
|
Operating
|
668
|
708
|
(6)
|
SG&A
|
9,928
|
9,822
|
1
|
|
10,596
|
10,530
|
1
|
Operating
loss(1)
|
(10,596)
|
(10,530)
|
1
|
% of Revenue from
Continuing Operations
|
1.7
|
2.7
|
(37)
|
(1) Refer to "Non-GAAP
Measures" on pages 14 and 15 for further
information.
|
OPERATING LOSS
Corporate expenses during the first six
months of 2022 were $10.6 million
versus $10.5 million in the
comparable period in 2021 due to higher stock-based compensation
expenses combined with no benefit from Canadian COVID-19 government
subsidy programs which were $0.8
million in the same period of 2021. These items were mainly
offset by lower professional fees in 2022.
DEPRECIATION
Depreciation expense decreased by
$2.6 million from $62.9 million in the first six months in 2021 to
$60.3 million in the first half of
2022 primarily due to the mix and timing of major component
capital expenditures.
FOREIGN EXCHANGE LOSSES
The Company recorded a foreign
exchange loss of $0.4 million in
the first six months in 2022 versus a loss of $5.4 million in the comparable period in 2021.
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. The Company's foreign
exchange loss in the first six months in 2022 was largely
attributable to net monetary assets that were held in pesos in
Argentina as the peso devalued
against the U.S. dollar during this period, offset partially by the
revaluation of net monetary assets that were held in U.S. dollars
as the Canadian dollar weakened relative to the U.S. dollar.
INTEREST
The Company's interest expense of
$20.7 million in the first six months
in 2022 was $2.3 million higher
than the comparable period in 2021. The increase in interest
expense was primarily due to higher borrowings and interest rates
under the Company's revolving credit facilities combined with
interest related to draws made under the secured bridge loan that
was entered into with G2S2 Capital Inc. during the first quarter of
2022 and repaid in the second quarter.
INCOME TAXES
The Company recorded an income tax
recovery of $3.9 million in the first
six months in 2022 compared to a $16.3
million tax recovery in the comparable period in 2021. The
Company had current tax expense of $0.9
million in the United
States while the deferred tax recovery of $4.9 million was recorded due to the liability
position in the United States. All
other divisions are in a net deferred tax asset position which are
not recognized for accounting purposes.
DISCONTINUED OPERATIONS
Revenue from Calfrac's
discontinued Russian operations decreased by 10 percent during the
first six months of 2022 to $55.1
million from $61.2 million in
the corresponding six-month period of 2021. Fracturing revenue
decreased due to changes in job mix while coiled tubing revenue
decreased slightly due to lower activity.
The Company's Russian division had an operating income of
$4.3 million during the first six
months of 2022 versus operating income of $6.8 million in the comparable period in 2021.
The lower operating performance was primarily due to lower
fracturing equipment utilization as operations were impacted by the
start of the conflict in Ukraine.
In addition, the Company halted plans to reactivate an additional
fracturing and coiled tubing fleet in the first quarter. Coiled
tubing activity was comprised of lower margin work during the first
six months in 2022, which had a negative impact on overall margins
as a percentage of revenue. The Company incurred $0.2 million of severance costs during the first
six months in 2022.
LIQUIDITY AND CAPITAL RESOURCES – CONSOLIDATED
|
Three Months Ended
Jun. 30,
|
Six Months Ended
Jun. 30,
|
|
2022
|
2021
|
2022
|
2021
|
(C$000s)
|
($)
|
($)
|
($)
|
($)
|
(unaudited)
|
|
|
|
|
Cash provided by (used
in):
|
|
|
|
|
Operating
activities
|
9,188
|
18,828
|
24,941
|
(1,034)
|
Financing
activities
|
(18,091)
|
1,704
|
3,961
|
17,685
|
Investing
activities
|
(9,926)
|
(13,545)
|
(25,423)
|
(24,051)
|
Effect of exchange
rate changes on cash and cash equivalents
|
27,443
|
(287)
|
20,423
|
(1,765)
|
Increase (decrease) in
cash and cash equivalents
|
8,614
|
6,700
|
23,902
|
(9,165)
|
OPERATING ACTIVITIES
The Company's cash provided by
operating activities for the three months ended June 30, 2022
was $9.2 million versus $18.8 million during the same period in 2021. The
decrease in cash provided by operations was primarily due to
improved operating results in all divisions, offset by $28.9 million used to fund the Company's working
capital requirements during the second quarter as compared to
working capital providing $15.8
million of cash during the same period in 2021. At
June 30, 2022, Calfrac's working capital was $144.5 million, compared to $121.9 million at December
31, 2021.
FINANCING ACTIVITIES
Net cash used in financing
activities for the three months ended June
30, 2022 was $18.1 million
compared to net cash provided of $1.7
million in the second quarter in 2021. During the quarter,
the Company repaid $15.0 million of
bridge loan financing, paid lease principal payments of
$2.2 million, and received proceeds
of $0.6 million from the exercise of
a portion of the Company's outstanding warrants and stock
options.
During the second quarter of 2022, the Company repaid and
cancelled the $25.0 million secured
bridge loan from G2S2 Capital Inc., of which the Company had drawn
$15.0 million prior to its repayment.
The loan was executed during the first quarter of 2022 to fund the
Company's short-term working capital requirements during a period
of improved activity in North
America.
At June 30, 2022, the Company had used $0.9 million of its credit facilities for letters
of credit and had $200.0 million of
borrowings under its credit facilities, leaving $49.1 million in available liquidity. As
described above, the Company's credit facilities are subject to a
monthly borrowing base, which at June 30,
2022 was above the maximum availability of $250.0 million under its credit facilities. At
June 30, 2022, the Company was
required to have minimum available liquidity of $15.0 million.
The Company's credit facilities contain certain financial
covenants. As per the amended credit facility agreement, the
Company's Funded Debt to Adjusted EBITDA covenant is 3.00x for the
quarter ended June 30, 2022 and each
quarter end thereafter. As shown in the table below, the Company
was in compliance with its financial covenants associated with its
credit facilities as at June 30,
2022. Upon filing its second quarter compliance certificate,
the Company will no longer be subject to the covenant relief terms
within its revolving credit facility agreement, as described in
further detail in the Company's first quarter MD&A.
|
Covenant
|
Actual
|
As at June
30,
|
2022
|
2022
|
Working capital ratio
not to fall below
|
1.15x
|
1.98x
|
Funded Debt to Adjusted
EBITDA not to exceed(1)(2)
|
3.00x
|
1.83x
|
Funded Debt to
Capitalization not to exceed(1)(3)
|
0.30x
|
0.27x
|
(1) Funded Debt is defined as Total Debt excluding all
outstanding 10.875% second lien secured notes ("Second Lien
Notes"), 1.5 Lien 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 a specified purpose,
including 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, and gains and
losses that are extraordinary or non-recurring.
|
(3) Capitalization is Total Debt plus
equity.
|
INVESTING ACTIVITIES
Calfrac's consolidated net cash
used in investing activities was $9.9
million for the three months ended June 30, 2022 versus
$13.5 million in the comparable
period in 2021. Cash outflows relating to capital expenditures were
$11.0 million for the quarter ended
June 30, 2022 compared to $14.6
million in the second quarter in 2021. Calfrac's Board of
Directors have approved a 2022 capital budget of approximately
$97.0 million, which is comprised
primarily of maintenance capital, and is subject to fluctuations
based on operating activity.
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 June 30, 2022 was a gain of
$27.4 million versus a loss of
$0.3 million in the second quarter in
2021. The significant gain was primarily related to the
nearly 70 percent appreciation in the Russian rouble since the end
of the first quarter and the impact this movement had on cash,
working capital and monetary liabilities held by the Company’s
foreign subsidiary during the period.
With its working capital position, available credit facilities,
access to capital markets and anticipated funds provided by
operations, the Company expects to have adequate resources to fund
its financial obligations and planned capital expenditures for 2022
and beyond.
At June 30, 2022, the Company had a cash position of
$17.4 million, which excludes cash
held in Russia.
NON-GAAP MEASURES
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, gains or losses on
exchange or settlement of debt, impairment of property, plant and
equipment, impairment of other assets, 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. Operating income for the
period was calculated as follows:
Three Months Ended
Jun. 30,
|
Six Months Ended
Jun. 30,
|
|
2022
|
2021
|
2022
|
2021
|
(C$000s)
|
($)
|
($)
|
($)
|
($)
|
(unaudited)
|
|
Revised
|
|
Revised
|
Net loss
|
(6,776)
|
(35,516)
|
(24,806)
|
(58,545)
|
Add back
(deduct):
|
|
|
|
|
Depreciation
|
30,385
|
31,324
|
60,339
|
62,893
|
Foreign exchange
losses (gains)
|
(3,435)
|
2,780
|
402
|
5,370
|
Loss on disposal of
property, plant and equipment
|
3,750
|
741
|
4,788
|
354
|
Interest
|
10,917
|
9,297
|
20,733
|
18,400
|
Income
taxes
|
1,709
|
(7,870)
|
(3,877)
|
(16,252)
|
Operating income from
continuing operations
|
36,550
|
756
|
57,579
|
12,220
|
Adjusted EBITDA is defined in the Company's credit facilities
for covenant purposes as net income or loss for the period adjusted
for interest, income taxes, depreciation and amortization,
unrealized foreign exchange losses (gains), non-cash stock-based
compensation, and gains and losses that are extraordinary or
non-recurring. Adjusted EBITDA is presented because it is used in
the calculation of the Company's bank covenants. Adjusted EBITDA
for the period was calculated as follows:
Three Months Ended
Jun. 30,
|
Six Months Ended
Jun. 30,
|
|
2022
|
2021
|
2022
|
2021
|
(C$000s)
|
|
|
($)
|
($)
|
(unaudited)
|
|
Revised
|
|
Revised
|
Net loss
|
(6,776)
|
(35,516)
|
(24,806)
|
(58,545)
|
Add back
(deduct):
|
|
|
|
|
Depreciation
|
30,385
|
31,324
|
60,339
|
62,893
|
Unrealized foreign
exchange (gains) losses
|
(4,917)
|
1,149
|
(3,013)
|
2,841
|
Loss on disposal of
property, plant and equipment
|
3,750
|
741
|
4,788
|
354
|
Litigation expense
(income)
|
3,000
|
(700)
|
3,000
|
(700)
|
Restructuring
charges
|
265
|
218
|
966
|
473
|
Stock-based
compensation
|
919
|
277
|
1,953
|
277
|
Interest
|
10,917
|
9,297
|
20,733
|
18,400
|
Income
taxes
|
1,709
|
(7,870)
|
(3,877)
|
(16,252)
|
Adjusted
EBITDA(1)
|
39,252
|
(1,080)
|
60,083
|
9,741
|
(1)
For bank covenant purposes, EBITDA includes $5.5 million income
from discontinued operations for the six months ended June 30, 2022
(six months ended June 30, 2021 – $6.6 million) and the deduction
of an additional $4.9 million of lease payments for the six months
ended June 30, 2022 (six months ended June 30, 2021 – $4.1 million)
that would have been recorded as operating expenses prior to the
adoption of IFRS 16.
|
CONSOLIDATED BALANCE SHEETS
|
June
30,
|
December 31,
|
|
2022
|
2021
|
(C$000s)
(unaudited)
|
($)
|
($)
|
ASSETS
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
17,436
|
—
|
Accounts
receivable
|
203,918
|
189,835
|
Income taxes
recoverable
|
1,278
|
2,859
|
Inventories
|
79,575
|
101,840
|
Prepaid expenses and
deposits
|
10,667
|
12,999
|
|
312,874
|
307,533
|
Assets classified as
held for sale
|
59,704
|
—
|
|
372,578
|
307,533
|
Non-current
assets
|
|
|
Property, plant and
equipment
|
530,262
|
563,423
|
Right-of-use
assets
|
20,463
|
22,005
|
|
550,725
|
585,428
|
Total assets
|
923,303
|
892,961
|
LIABILITIES AND
EQUITY
|
|
|
Current
liabilities
|
|
|
Bank
overdraft
|
—
|
1,351
|
Accounts payable and
accrued liabilities
|
160,451
|
127,441
|
Current portion of
lease obligations
|
7,967
|
8,004
|
|
168,418
|
136,796
|
Liabilities directly
associated with assets classified as held for sale
|
27,489
|
—
|
|
195,907
|
136,796
|
Non-current
liabilities
|
|
|
Long-term
debt
|
402,683
|
388,479
|
Lease
obligations
|
10,474
|
12,560
|
Deferred income tax
liabilities
|
21,724
|
26,286
|
|
434,881
|
427,325
|
Total
liabilities
|
630,788
|
564,121
|
Capital
stock
|
806,023
|
801,178
|
Conversion rights on
convertible notes
|
4,665
|
4,764
|
Contributed
surplus
|
69,893
|
68,258
|
Warrants
|
38,281
|
40,282
|
Loan receivable for
purchase of common shares
|
(2,500)
|
(2,500)
|
Accumulated
deficit
|
(649,951)
|
(592,221)
|
Accumulated other
comprehensive income
|
26,104
|
9,079
|
Total equity
|
292,515
|
328,840
|
Total liabilities and
equity
|
923,303
|
892,961
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2022
|
2021
|
2022
|
2021
|
(C$000s, except per
share data) (unaudited)
|
($)
|
($)
|
($)
|
($)
|
|
|
Revised
|
|
Revised
|
Revenue
|
318,511
|
173,769
|
613,035
|
387,723
|
Cost of
sales
|
300,166
|
195,078
|
590,990
|
418,629
|
Gross profit
(loss)
|
18,345
|
(21,309)
|
22,045
|
(30,906)
|
Expenses
|
|
|
|
|
Selling, general and
administrative
|
12,180
|
9,259
|
24,805
|
19,767
|
Foreign exchange
(gains) losses
|
(3,435)
|
2,780
|
402
|
5,370
|
Loss on disposal of
property, plant and equipment
|
3,750
|
741
|
4,788
|
354
|
Interest
|
10,917
|
9,297
|
20,733
|
18,400
|
|
23,412
|
22,077
|
50,728
|
43,891
|
Loss before income
tax
|
(5,067)
|
(43,386)
|
(28,683)
|
(74,797)
|
Income tax expense
(recovery)
|
|
|
|
|
Current
|
942
|
142
|
986
|
170
|
Deferred
|
767
|
(8,012)
|
(4,863)
|
(16,422)
|
|
1,709
|
(7,870)
|
(3,877)
|
(16,252)
|
Net loss from
continuing operations
|
(6,776)
|
(35,516)
|
(24,806)
|
(58,545)
|
Net (loss) income from
discontinued operations
|
(29,416)
|
4,981
|
(32,924)
|
5,592
|
Net loss for the
period
|
(36,192)
|
(30,535)
|
(57,730)
|
(52,953)
|
|
|
|
|
|
(Loss) earnings per
share – basic
|
|
|
|
|
Continuing
operations
|
(0.18)
|
(0.95)
|
(0.65)
|
(1.56)
|
Discontinued
operations
|
(0.76)
|
0.13
|
(0.86)
|
0.15
|
|
(0.94)
|
(0.82)
|
(1.51)
|
(1.41)
|
|
|
|
|
|
(Loss) earnings per
share – diluted
|
|
|
|
|
Continuing
operations
|
(0.18)
|
(0.95)
|
(0.65)
|
(1.56)
|
Discontinued
operations
|
(0.76)
|
0.06
|
(0.86)
|
0.07
|
|
(0.94)
|
(0.82)
|
(1.51)
|
(1.41)
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2022
|
2021
|
2022
|
2021
|
(C$000s)
(unaudited)
|
($)
|
($)
|
($)
|
($)
|
Net loss for the
period
|
(36,192)
|
(30,535)
|
(57,730)
|
(52,953)
|
Other comprehensive
income (loss)
|
|
|
|
|
Items that may be
subsequently reclassified to profit or loss:
|
|
|
|
|
Change in foreign
currency translation adjustment
|
24,416
|
(3,693)
|
17,025
|
(6,931)
|
Comprehensive income
(loss)
|
(11,776)
|
(34,228)
|
(40,705)
|
(59,884)
|
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
Share
Capital
|
Conversion
Rights on
Convertible
Notes
|
Contributed
Surplus
|
Warrants
|
Loan
Receivable
for Purchase of
Common Shares
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Accumulated
Deficit
|
Total
Equity
|
(C$000s)
(unaudited)
|
($)
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
Balance – January 1,
2022
|
801,178
|
4,764
|
68,258
|
40,282
|
(2,500)
|
9,079
|
(592,221)
|
328,840
|
Net loss
|
—
|
|
—
|
—
|
—
|
—
|
(57,730)
|
(57,730)
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
Cumulative translation
adjustment
|
—
|
—
|
—
|
—
|
—
|
17,025
|
—
|
17,025
|
Comprehensive income
(loss)
|
—
|
—
|
—
|
—
|
—
|
17,025
|
(57,730)
|
(40,705)
|
Stock
options:
|
|
|
|
|
|
|
|
|
Stock-based
compensation recognized
|
—
|
—
|
1,953
|
—
|
—
|
—
|
—
|
1,953
|
Proceeds from issuance
of shares
|
867
|
—
|
(318)
|
—
|
—
|
—
|
—
|
549
|
Conversion of 1.5 Lien
Notes into shares
|
1,263
|
(99)
|
—
|
—
|
—
|
—
|
—
|
1,164
|
Warrants:
|
|
|
|
|
|
|
|
|
Proceeds from issuance
of shares
|
2,715
|
—
|
—
|
(2,001)
|
—
|
—
|
—
|
714
|
Balance –
June 30, 2022
|
806,023
|
4,665
|
69,893
|
38,281
|
(2,500)
|
26,104
|
(649,951)
|
292,515
|
Balance – January 1,
2021
|
800,184
|
4,873
|
65,986
|
40,797
|
(2,500)
|
10,303
|
(509,409)
|
410,234
|
Net loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(52,953)
|
(52,953)
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
Cumulative translation
adjustment
|
—
|
—
|
—
|
—
|
—
|
(6,931)
|
—
|
(6,931)
|
Comprehensive
loss
|
—
|
—
|
—
|
—
|
—
|
(6,931)
|
(52,953)
|
(59,884)
|
Stock
options:
|
|
|
|
|
|
|
|
|
Stock-based
compensation recognized
|
—
|
—
|
277
|
—
|
—
|
—
|
—
|
277
|
Rescission of equity
portion of 1.5 Lien Notes
|
—
|
(85)
|
—
|
—
|
—
|
—
|
—
|
(85)
|
Warrants:
|
|
|
|
|
|
|
|
|
Proceeds from issuance
of shares
|
338
|
—
|
—
|
(249)
|
—
|
—
|
—
|
89
|
Balance –
June 30, 2021
|
800,522
|
4,788
|
66,263
|
40,548
|
(2,500)
|
3,372
|
(562,362)
|
350,631
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2022
|
2021
|
2022
|
2021
|
(C$000s)
(unaudited)
|
($)
|
($)
|
($)
|
($)
|
CASH FLOWS PROVIDED
BY (USED IN)
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net loss for the
period
|
(36,192)
|
(30,535)
|
(57,730)
|
(52,953)
|
Adjusted for the
following:
|
|
|
|
|
Depreciation
|
30,385
|
31,415
|
60,538
|
63,039
|
Stock-based
compensation
|
919
|
277
|
1,953
|
277
|
Unrealized foreign
exchange (gains) losses
|
(13,241)
|
901
|
(9,068)
|
2,987
|
Loss on disposal of
property, plant and equipment
|
3,750
|
741
|
4,787
|
354
|
Impairment of
property, plant and equipment
|
5,634
|
—
|
5,634
|
—
|
Impairment of
inventory
|
27,548
|
—
|
27,548
|
—
|
Impairment of other
assets
|
9,648
|
—
|
9,648
|
—
|
Interest
|
10,917
|
9,297
|
20,733
|
18,398
|
Interest
paid
|
(2,001)
|
(1,038)
|
(14,464)
|
(11,674)
|
Deferred income
taxes
|
767
|
(8,012)
|
(4,863)
|
(16,422)
|
Changes in items of
working capital
|
(28,946)
|
15,782
|
(19,775)
|
(5,040)
|
Cash flows provided by
(used in) operating activities
|
9,188
|
18,828
|
24,941
|
(1,034)
|
FINANCING
ACTIVITIES
|
|
|
|
|
Bridge loan
proceeds
|
—
|
—
|
15,000
|
—
|
Issuance of long-term
debt, net of debt issuance costs
|
(1,474)
|
3,421
|
6,957
|
22,191
|
Bridge loan
repayments
|
(15,000)
|
—
|
(15,000)
|
—
|
Long-term debt
repayments
|
—
|
—
|
—
|
(1,050)
|
Lease obligation
principal repayments
|
(2,176)
|
(1,738)
|
(4,259)
|
(3,545)
|
Proceeds on issuance
of common shares from the exercise of warrants and stock
options
|
559
|
21
|
1,263
|
89
|
Cash flows (used in)
provided by financing activities
|
(18,091)
|
1,704
|
3,961
|
17,685
|
INVESTING
ACTIVITIES
|
|
|
|
|
Purchase of property,
plant and equipment
|
(11,005)
|
(14,584)
|
(27,109)
|
(25,458)
|
Proceeds on disposal
of property, plant and equipment
|
472
|
461
|
775
|
648
|
Proceeds on disposal
of right-of-use assets
|
607
|
578
|
911
|
759
|
Cash flows used in
investing activities
|
(9,926)
|
(13,545)
|
(25,423)
|
(24,051)
|
Effect of exchange rate
changes on cash and cash equivalents
|
27,443
|
(287)
|
20,423
|
(1,765)
|
Increase (decrease) in
cash and cash equivalents
|
8,614
|
6,700
|
23,902
|
(9,165)
|
Cash and cash
equivalents (bank overdraft), beginning of period
|
13,937
|
13,965
|
(1,351)
|
29,830
|
Cash and cash
equivalents, end of period
|
22,551
|
20,665
|
22,551
|
20,665
|
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 the
outlook for the Company’s operating divisions in 2022 and beyond,
the supply and demand fundamentals of the pressure pumping
industry, expected operating strategies and targets, anticipated
pricing for the Company’s services, projections of market prices
and costs, anticipated equipment demand and utilization levels,
commodity prices, the planned sale of the Company’s Russia division and its accounting treatment,
capital expenditure programs, the Company’s debt, liquidity and
financial position, future financial resources and performance,
future oil and natural gas well activity in the Company’s operating
jurisdictions, future costs or potential liabilities, the Company’s
competitive position, expectations regarding the Company’s
financing activities and restrictions, including with regard to its
revolving credit facility agreement and the Indentures, treatment
under government regulatory regimes, anticipated outcomes of
specific events (including exposure and positioning under existing
legal proceedings), expectations regarding trends in, and the
growth prospects of, the global oil and natural gas industry, and
accounting policies, practices and standards of the Company and the
impact of any changes 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 effect of
the military conflict in the Ukraine and related Canadian, U.S. and
international sanctions involving Russia and counter-sanctions by Russia on the Company’s ownership and planned
sale of the Russian division and the broader markets for the
Company’s services, the Company’s expectations for its current and
prospective customers’ capital budgets and geographical areas of
focus, the effect of environmental, social and governance factors
on customer and investor preferences and capital deployment, the
Company’s existing contracts and the status of current negotiations
with key customers and suppliers, the continued effectiveness of
cost reduction measures instituted by the Company 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: volatility of industry conditions including the
level of exploration, development and production for oil and
natural gas in Canada, the US and
Argentina and market prices for
oil and natural gas impacting the demand for oilfield services;
sourcing, pricing and availability of raw materials, component
parts, equipment, suppliers, facilities and skilled personnel;
oilfield equipment utilization levels; risks associated with
foreign operations including but not limited to the sanctions and
restrictive measures against Russia by Canada, US and other governments in response
to Russia's invasion of
Ukraine and counter-actions taken
by Russia in response thereto; the
impacts of the Russia-Ukraine conflict on the supply and demand for
oil and gas produced in Russia and
globally; failure to manage growth related risks; the Company's
ability to continue to manage the effects of the COVID-19 pandemic
on its operations; the availability of capital on satisfactory
terms and managing restrictions resulting from compliance with or
breach of debt covenants and risk of acceleration of indebtedness,
including under the Company's credit facilities and the Indentures;
failure to reach any additional agreements with the Company's
lenders; the impact of events of defaults in respect of other
material contracts of the Company, including but not limited to,
cross-defaults resulting in acceleration of amounts payable
thereunder or the termination of such agreements; direct and
indirect exposure to volatile credit markets, including credit
rating risk; ability to employ and retain skilled and unskilled
labour to meet the Company's needs; the Company's ability to
address the energy transition and adapting equipment and technology
based on government and customer requirements and preferences;
dilution risks associated with the conversion of outstanding
convertible securities and additional equity or debt financings;
regional competition; operating restrictions and compliance costs
associated with legislative and regulatory initiatives relating to
hydraulic fracturing and the protection of workers and the
environment; greenhouse gas regulation risks; fluctuations in
foreign exchange rates; 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; the
Company's ability to expand operations; liabilities relating to
legal and/or administrative proceedings including the decisions by
securities regulators and/or the courts; changes in legislation and
the regulatory environment; failure to maintain the Company's
safety standards and record; activist shareholder risks;
liabilities and risks associated with prior operations; ability to
maintain continuous improvements in operating equipment and
proprietary fluid chemistries; intellectual property risk;
unauthorized access or breach of confidential information; third
party credit risk; cybersecurity risks; loss of reputation in the
marketplace; merger and acquisition activity amongst oil and
natural gas exploration and production companies; retaining key
employees; failure to realize anticipated benefits of acquisitions
and dispositions; and unfavorable tax assessments or changes in
administrative tax practices. 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 is 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
Suite 500, 407 - 8th Avenue S.W., Calgary, Alberta, Canada, T2P 1E5, or at
www.calfrac.com, or by facsimile at 403-266-7381.
The ongoing conflict between Russia and Ukraine has added a level of risk and
uncertainty around the Company's operations in Russia. As a result of these changes in
circumstances, the risk and uncertainty surrounding banking
restrictions and the ability to repatriate funds to Canada from Russia, the Company's ownership and control
over its Russian subsidiary, the physical security of property,
plant and equipment, collectability of accounts receivable, and
overall business and operational risks are being monitored.
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.
SECOND QUARTER CONFERENCE CALL
Calfrac will be
conducting a conference call for interested analysts, brokers,
investors and news media representatives to review its 2022
second-quarter results at 10:00 a.m.
(Mountain Time) on Thursday, July 28, 2022. The conference
call dial-in number is 1-800-458-4148 or 647-484-0477. The
seven-day replay numbers are 1-888-203-1112 or 647-436-0148 (once
connected, enter (2366060). A webcast of the conference call may be
accessed via the Company's website at www.calfrac.com.
SOURCE Calfrac Well Services Ltd.