TSX Venture: "DAL"
EDMONTON, Jan. 29, 2015 /CNW/ - John Babic, President and CEO of Dalmac Energy
Inc. ("Dalmac") (TSX Venture "DAL") is pleased to provide a
shareholder update.
The oil and gas industry in Canada is facing significant challenges due to
falling oil prices. Production companies are beginning to
take steps to limit capital expenditures by reducing or suspending
drilling programs and by eliminating all unnecessary
expenses. This is having a profound impact on cash flow
throughout the industry for both producers and service
companies. Dalmac is pleased to report that it has been
proactively successful to-date in maintaining its revenue base,
profit margins, and activity levels.
Current activity levels within the Western Canadian Sedimentary
basin vary dramatically based largely upon location, the spectrum
of hydrocarbons, decline rates, and cost of drilling. The
majority of Dalmac's operations are concentrated around the
Duvernay shale basin in west
central Alberta, which has not
been affected to the same degree by falling oil prices as many of
the marginal US shale plays. The Duvernay's advantage of having a broad
spectrum of hydrocarbon production makes it more profitable than
other conventional oil plays.
The Duvernay basin has been
credited as the source rock for many of the large Devonian oil and
gas pools in Alberta, including
the most famous Leduc Field which
was discovered in 1947. The Duvernay is touted as the second largest oil
reserve in Canada covering an area
of about 100,000 square kilometers in size. That's larger than the
infamous North Dakota Bakken and Texas Eagle Ford combined with
room to spare. According to the Energy Resource Conservation Board,
the Duvernay holds an estimated
61.7 billion barrels of oil, 11.3 billion barrels of natural gas
liquids, and 443 trillion cubic feet of natural gas. This makes it
one of the most profitable oil and gas plays in Canada. In addition to the oil production, the
Duvernay is also known for being
rich in liquid gases such as propane, ethane and butane all of
which can be processed and sold separately- which makes for a very
profitable mix. Another important aspect of the Duvernay is condensate – which is a diluent
for enabling heavier oil and oilsands production to flow through
pipelines. Typical deep Duvernay
wells, which cost about $11-$15
million to complete, produce upwards of 1,300 barrels of
condensate per day. In Alberta,
condensate commands an ultra-low royalty rate of 5% as compared to
upwards of 25% for Eagle Ford or Marcellus condensate. In
Alberta, condensate has recently
been selling at upwards of a 10% premium to crude.
Another important factor is that while drilling activity has
seen a major reduction in many areas, the majority of Dalmac's
revenues come from recurring fluid transfers from existing
production wells along with well maintenance and servicing which is
an ongoing requirement. Management has predominantly seen a
slowdown in supply growth oriented activities such as drilling and
completions as opposed to day-to-day production activity which is a
mainstay of Dalmac's services.
Dalmac is currently achieving utilization rates for production
equipment in the 70% range. This represents the upper
percentile of activity for the Company due to factors such as
seasonality uses for various types of equipment, servicing
schedules, and maintaining an adequate staffing of personnel and
inventory of equipment for key customers.
Dalmac is pleased to report that revenues in Q3 ending
January 31st are expected
to be in line with revenues from the prior year while margins will
continue to show improvement. The Company boosted its gross
profit margin to 30% in the last quarter compared to 22% in the
prior year. Dalmac expects to maintain its gross margin near
30% due to improving internal controls along with the
implementation of the new computerized dispatching and invoicing
system.
To spur revenue growth, Dalmac is working with many of its
existing customers to expand its scope of service activity to
reflect the full range of services provided. Management
strongly feels that the benefits of offering quality service along
with the correct product mix is more cost effective than having our
customers single source their service and production needs.
The Company has been successful in utilizing much of the equipment
received in 2014 and has been able to cross sell this equipment to
provide a one-stop shop for current customers. This growth
initiative is expected to continue into 2015.
While the Canadian oil and gas industry continues to deal with
the impact of lower energy pricing, management is confident that
Dalmac will continue to deliver solid shareholder value. Q3
results are expected to be reported in March
2015.
Statements throughout this report that are not historical
facts may be considered 'forward looking statements'. Such
statements are based on current expectations that involve risks and
uncertainties, which could cause actual results to differ from
those anticipated. Important factors that can cause
anticipated outcomes to differ materially from actual outcomes
include the impact of general economic conditions, industry
conditions, competition from other industry participants,
volatility of petroleum prices, the ability to attract and retain
qualified personnel, changes in laws or regulation, currency
fluctuations, continued ability to access capital from available
facilities and environmental risks. References to "Dalmac',
the "Corporation", "Company", "us", "we", and "our" mean Dalmac
Energy Inc. and its subsidiary Dalmac Oilfield Services Inc.
The TSX Venture Exchange does not accept responsibility for the
adequacy or accuracy of this release. We seek safe
harbor.
SOURCE Dalmac Energy Inc.