Trican Reports Fourth Quarter Results for 2013
CALGARY, ALBERTA--(Marketwired - Feb 25, 2014) - Trican Well
Service Ltd. (TSX:TCW) -
Financial Review
|
|
Three months ended |
|
Twelve months ended |
|
|
Dec. 31, |
|
Dec. 31, |
|
Sept. 30, |
|
Dec. 31, |
|
Dec. 31, |
($ millions, except per share amounts; unaudited) |
2013 |
|
2012 |
|
2013 |
|
2013 |
|
2012 |
Revenue |
|
$ |
552.1 |
|
$ |
485.9 |
|
$ |
548.3 |
|
$ |
2,115.5 |
|
$ |
2,213.0 |
Operating income * |
|
|
35.5 |
|
|
35.1 |
|
|
72.7 |
|
|
179.6 |
|
|
240.1 |
Profit / (loss) |
|
|
(20.8 |
) |
|
(7.7 |
) |
|
5.7 |
|
|
(45.9 |
) |
|
53.3 |
Earnings / (loss) per share |
(basic) |
$ |
(0.14 |
) |
$ |
(0.05 |
) |
$ |
0.04 |
|
$ |
(0.31 |
) |
$ |
0.37 |
|
(diluted) |
$ |
(0.14 |
) |
$ |
(0.05 |
) |
$ |
0.04 |
|
$ |
(0.31 |
) |
$ |
0.37 |
Adjusted profit / (loss) * |
|
|
(9.9 |
) |
|
(5.4 |
) |
|
9.7 |
|
|
(31.5 |
) |
|
63.0 |
Adjusted profit / (loss) per share* |
(basic) |
$ |
(0.07 |
) |
$ |
(0.04 |
) |
$ |
0.07 |
|
$ |
(0.21 |
) |
$ |
0.43 |
|
(diluted) |
$ |
(0.07 |
) |
$ |
(0.04 |
) |
$ |
0.07 |
|
$ |
(0.21 |
) |
$ |
0.43 |
Funds provided by / (used in) operations* |
|
|
30.4 |
|
|
(14.5 |
) |
|
71.1 |
|
|
130.8 |
|
|
126.8 |
Notes:
* Trican makes reference to operating income,
adjusted net income (loss) and funds provided by (used in)
operations. These are measures that are not recognized under
International Financial Reporting Standards (IFRS). Management
believes that, in addition to net income (loss), operating income,
adjusted net income (loss) and funds provided by (used in)
operations are useful supplemental measures. Operating
income provides investors with an indication of earnings before
depreciation, foreign exchange, taxes and interest. Adjusted net
income (loss) provides investors with information on net income
(loss) excluding one-time non-cash charges and the non-cash effect
of stock-based compensation expense. Funds provided by (used in)
operations provide investors with an indication of cash available
for capital commitments, debt repayments and other expenditures.
Investors should be cautioned that operating income, adjusted net
income (loss), and funds provided by (used in) operations should
not be construed as an alternative to net income (loss) and cash
flow from operations determined in accordance with IFRS as an
indicator of Trican's performance. Trican's method of calculating
operating income, adjusted net income (loss) and funds provided by
(used in) operations may differ from that of other companies and
accordingly may not be comparable to measures used by other
companies.
FOURTH QUARTER HIGHLIGHTS
Consolidated revenue for the fourth quarter of 2013 was $552.1
million, an increase of 14% compared to the fourth quarter of 2012.
The adjusted consolidated loss was $9.9 million compared to $5.4
million, and adjusted loss per share was $0.07 compared to $0.04
for the same period in 2012.
Due to a rise in fracturing intensity per well in Canada,
including increased sand usage per well, we have seen increased
wear on fluid ends over the past year. As a result, the useful life
of a fluid end has decreased and led to a $14.3 million charge to
depreciation expense in the fourth quarter of 2013 ($10.7 million
net of tax) to write-off fluid ends no longer in use. Effective
January 1, 2014, we will change our accounting estimate on the
useful life of a fluid end to more accurately reflect current
operating conditions. We assessed the useful life of fluid ends in
our other operating regions and concluded that no further changes
in estimates were required in those regions.
Our Canadian operations earned quarterly revenue of $286.9
million in the fourth quarter of 2013, an increase of 17% compared
to the fourth quarter of 2012. Fourth-quarter operating income was
$53.1 million, which was up 4% on a year-over-year basis. Canadian
revenue increased sequentially by 3% due to the strong demand in
October and November; however, operating margins decreased
sequentially by 660 basis points. Fourth-quarter margins were
negatively impacted by cost increases and pricing declines. Cost
increases were driven primarily by higher third-party hauling,
fuel, and repairs and maintenance expenses. Canadian fracturing
prices decreased by approximately 3% and cementing prices decreased
by approximately 1%, on a sequential basis, which also had a
negative impact on fourth-quarter operating margins.
Revenue in the fourth quarter of 2013 for our U.S. operations
was relatively consistent with the fourth quarter of 2012, but
decreased by 4% on a sequential basis. Revenue for our U.S.
pressure pumping business was down sequentially, largely due to
reduced activity in the Marcellus play. As expected, our key
customers in the Marcellus play decreased spending levels as 2013
capital budgets were completed. In addition, winter weather led to
reduced industry activity in the Permian play during the fourth
quarter of 2013. Lower revenue from our pressure pumping business
was partially offset by a 50% increase in revenue for our U.S.
completion tools business. Our U.S. operations incurred an
operating loss of $8.3 million during the fourth quarter as
operating margins were negatively impacted by reduced pressure
pumping activity.
Revenue from International operations was $91.8 million compared
to $68.0 million in the fourth quarter of 2012. The majority of
international revenue is generated by our Russian operations and
pressure pumping demand was strong in this region throughout the
fourth quarter of 2013. Favorable weather conditions allowed our
Russian customers to remain active throughout the quarter and
catch-up on 2013 capital spending plans that were behind schedule
for most of 2013. Although Russian operating margins improved on a
year-over-year basis, continued cost inflation limited the margin
increase. Weak results for our Algerian operations and start-up
costs in both Saudi Arabia and Colombia also had a negative impact
on International operating margins during the fourth quarter of
2013.
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARATIVE QUARTERLY INCOME STATEMENTS ($ thousands,
unaudited) |
|
|
|
|
|
|
|
|
|
|
Quarter- |
|
|
|
|
|
|
|
|
|
|
|
|
Over- |
|
|
|
|
|
|
%
of |
|
|
|
%
of |
|
Quarter |
|
% |
|
Three months ended December 31, |
2013 |
|
Revenue |
|
2012 |
|
Revenue |
|
Change |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
552,144 |
|
100 |
% |
485,865 |
|
100.0 |
% |
66,279 |
|
13.6 |
% |
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials and operating |
490,713 |
|
88.9 |
% |
422,999 |
|
87.1 |
% |
67,714 |
|
16.0 |
% |
|
General and administrative |
25,931 |
|
4.7 |
% |
27,743 |
|
5.7 |
% |
(1,812 |
) |
(6.5 |
%) |
Operating income* |
35,500 |
|
6.4 |
% |
35,123 |
|
7.2 |
% |
377 |
|
1.1 |
% |
|
Finance costs |
8,592 |
|
1.6 |
% |
8,373 |
|
1.7 |
% |
219 |
|
2.6 |
% |
|
Depreciation and amortization |
70,085 |
|
12.7 |
% |
41,564 |
|
8.6 |
% |
28,521 |
|
68.6 |
% |
|
Foreign exchange gain |
(5,968 |
) |
(1.1 |
%) |
(3,467 |
) |
(0.7 |
%) |
(2,501 |
) |
72.1 |
% |
|
Other loss / (income) |
432 |
|
0.1 |
% |
(560 |
) |
(0.1 |
%) |
992 |
|
(177.1 |
%) |
Loss before income taxes and non-controlling
interest |
(37,641 |
) |
(6.8 |
%) |
(10,787 |
) |
(2.2 |
%) |
(26,854 |
) |
249.0 |
% |
Income tax recovery |
(16,431 |
) |
(3.0 |
%) |
(2,957 |
) |
(0.6 |
%) |
(13,474 |
) |
455.7 |
% |
Non-controlling interest |
(380 |
) |
(0.1 |
%) |
(88 |
) |
(0.0 |
%) |
(292 |
) |
(331.8 |
%) |
Net loss |
(20,830 |
) |
(3.8 |
%) |
(7,742 |
) |
(1.6 |
%) |
(13,088 |
) |
169.1 |
% |
* see first page of this report
CANADIAN OPERATIONS
($ thousands, except revenue per job, unaudited) |
Dec. 31, |
% of |
|
Dec. 31, |
% of |
|
Sept. 30, |
% of |
|
Three months ended, |
2013 |
Revenue |
|
2012 |
Revenue |
|
2013** |
Revenue |
|
Revenue |
286,869 |
|
|
244,237 |
|
|
279,783 |
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
Materials and operating |
228,533 |
79.7 |
% |
187,313 |
76.7 |
% |
203,005 |
72.6 |
% |
|
General and administrative |
5,244 |
1.8 |
% |
5,897 |
2.4 |
% |
6,610 |
2.4 |
% |
|
Total expenses |
233,777 |
81.5 |
% |
193,212 |
79.1 |
% |
209,615 |
74.9 |
% |
Operating income* |
53,092 |
18.5 |
% |
51,025 |
20.9 |
% |
70,168 |
25.1 |
% |
Number of jobs |
5,154 |
|
|
5,572 |
|
|
6,082 |
|
|
Revenue per job |
55,435 |
|
|
43,545 |
|
|
45,393 |
|
|
* see first page of this report
** Certain prior period comparative numbers have been
restated to be consistent with the presentation used in Q4
2013
Sales Mix
Three months ended, |
Dec. 31, |
|
Dec. 31, |
|
Sept. 30, |
|
(unaudited) |
2013 |
|
2012 |
|
2013 |
|
%
of Total Revenue |
|
|
|
|
|
|
Fracturing |
67 |
% |
61 |
% |
70 |
% |
Cementing |
18 |
% |
21 |
% |
18 |
% |
Nitrogen |
6 |
% |
6 |
% |
4 |
% |
Industrial Services |
4 |
% |
0 |
% |
2 |
% |
Coiled Tubing |
3 |
% |
5 |
% |
3 |
% |
Acidizing |
1 |
% |
3 |
% |
2 |
% |
Other |
1 |
% |
4 |
% |
1 |
% |
Total |
100 |
% |
100 |
% |
100 |
% |
Operations Review
Canadian fracturing and cementing demand was strong in October
and November and the early part of December, but decreased
substantially in the second half of December. The lower activity in
late December was due to reduced customer spending as 2013 drilling
and completions budgets came to a close, combined with reduced
activity over the holiday season. This decrease was expected and
consistent with the previous year.
Canadian revenue increased sequentially by 3% due to the strong
demand in October and November; however, operating margins
decreased sequentially by 660 basis points. Fourth quarter margins
were negatively impacted by cost increases and pricing
declines.
A substantial increase in third-party hauling expenses had a
meaningful impact on fourth quarter Canadian operating margins. The
fracturing job size and the amount of sand pumped per fracturing
stage increased sequentially and led to increased hauling
requirements for our fracturing service line. As a result,
third-party hauling costs increased sequentially by over 70%. In
addition, the cost of diesel increased by 12% and repairs and
maintenance expenses increased by 12% compared to the third quarter
of 2013. Due to the competitive nature of Canadian pressure pumping
market, we were unable to recover these cost increases through
higher pricing.
There was downward pressure on pricing despite the strong demand
that Trican experienced throughout most of the fourth quarter, as
the Canadian market remained highly competitive. On a sequential
basis, fracturing prices decreased by approximately 3% and
cementing prices decreased by approximately 1% negatively impacting
fourth-quarter operating margins.
Our Canadian completion tools division continued to grow and
achieve increased market penetration during the fourth quarter of
2013. Revenue increased by over 20% on a sequential basis as we
continued to see good customer acceptance of our tool portfolio in
Canada.
Q4 2013 versus Q4 2012
Canadian revenue in the fourth quarter of 2013 increased by 17%
compared to the fourth quarter of 2012. Revenue per job increased
by 27% as a 17% year-over-year decrease in price was more than
offset by larger job sizes for our fracturing and nitrogen service
lines. We are continuing to see an increase in fracturing stages
per well and more product usage per job, including sand and
nitrogen, which has led to the larger job sizes. An increase in
fracturing revenue relative to total revenue also contributed to
the increase in revenue per job, as fracturing jobs generally have
significantly higher revenue per job than other service lines.
The job count decreased by 8% despite the increase in overall
Canadian activity. Cementing and fracturing jobs remained
relatively stable on a year-over-year basis; however, coiled tubing
jobs decreased significantly and contributed to most of the decline
in the overall job count. Lower coiled tubing demand also had a
negative impact on our nitrogen and acidizing job count as these
service lines are closely correlated with coiled tubing. We are
continuing to see increased competition for our coiled tubing
services in Canada, which is contributing to the decline in job
count.
As a percentage of revenue, materials and operating expenses
increased to 79.7% from 76.7% in the fourth quarter of 2012. The
year-over-year decrease in price and higher third-party hauling and
fuel expenses led to lower margins and was partially offset by
lower employee costs, as a percentage of revenue, as well as lower
guar and repairs and maintenance expenses. General and
administrative costs were down $0.7 million largely due to lower
share based expenses.
Q4 2013 versus Q3 2013
Canadian revenue increased by 3% on a sequential basis.
Fourth-quarter industry activity levels in Canada were relatively
consistent with the third quarter despite the large movements in
the job count and revenue per job. The job count decreased by 15%
due to a change in job type and customer mix. Fracturing job size
was much larger sequentially, which led to fewer jobs performed in
the fourth quarter of 2013 as the larger jobs are generally more
time consuming. In addition, a decrease in coiled tubing jobs and
associated nitrogen and acidizing work, contributed to the decline
in job count. The shift to larger fracturing jobs in the fourth
quarter led to the 22% increase in revenue per job.
Materials and operating expenses increased to 79.7% of revenue
compared to 72.6% of revenue in the third quarter of 2013. The
reduction in operating margins was due largely to a decrease in
price combined with cost increases for third-party hauling, fuel,
and repairs and maintenance expenses. General and administrative
costs were down $1.4 million due largely to lower profit-sharing
and share-based expenses.
UNITED STATES OPERATIONS
($ thousands, except revenue per job, unaudited) |
Dec. 31, |
|
% of |
|
Dec. 31, |
|
% of |
|
Sept. 30, |
% of |
|
Three months ended, |
2013 |
|
Revenue |
|
2012 |
|
Revenue |
|
2013** |
Revenue |
|
Revenue |
173,470 |
|
|
|
173,589 |
|
|
|
180,401 |
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Materials and operating |
174,989 |
|
100.9 |
% |
171,140 |
|
98.6 |
% |
169,049 |
93.7 |
% |
|
General and administrative |
6,776 |
|
3.9 |
% |
4,553 |
|
2.6 |
% |
6,541 |
3.6 |
% |
|
Total expenses |
181,765 |
|
104.8 |
% |
175,693 |
|
101.2 |
% |
175,590 |
97.3 |
% |
Operating (loss) / income** |
(8,295 |
) |
(4.8 |
%) |
(2,104 |
) |
(1.2 |
%) |
4,811 |
2.7 |
% |
Number of jobs |
2,262 |
|
|
|
1,654 |
|
|
|
2,284 |
|
|
Revenue per job |
68,533 |
|
|
|
105,077 |
|
|
|
76,238 |
|
|
* see first page of this report
** Certain prior period comparative numbers have been
restated to be consistent with the presentation used in Q4
2013
Sales Mix
Three months ended, |
Dec. 31, |
|
Dec. 31, |
|
Sept. 30, |
|
(unaudited) |
2013 |
|
2012 |
|
2013 |
|
%
of Total Revenue |
|
|
|
|
|
|
Fracturing |
88 |
% |
90 |
% |
88 |
% |
Cementing |
7 |
% |
7 |
% |
8 |
% |
Coiled Tubing |
5 |
% |
3 |
% |
4 |
% |
Total |
100 |
% |
100 |
% |
100 |
% |
Operations Review
Activity levels declined on a sequential basis for our U.S.
pressure pumping operations during the fourth quarter of 2013. As
expected, revenue earned in the Marcellus play declined
substantially as our key customers in the region reduced activity
levels during the fourth quarter. Declines in the Marcellus play
were partially offset by increased revenue earned in the Bakken in
the fourth quarter relative to the third quarter of 2013. Revenue
earned in the Eagle Ford and Permian plays were relatively flat on
a sequential basis; however, fourth quarter activity levels in the
Permian region were negatively impacted by winter weather.
Fourth-quarter pricing declined in the Eagle Ford region on a
sequential basis as this area remains competitive and over-supplied
with pressure pumping equipment. Pricing remained relatively stable
in all other U.S. operating regions.
Our U.S. completion tools business continued to show excellent
growth with revenue increasing by over 50% on a sequential basis.
We continue to see customer acceptance of our completion tools in
the U.S. and will look to grow this business and increase
profitability throughout 2014.
Q4 2013 versus Q4 2012
Revenue for our U.S. operations decreased slightly as lower
pricing for our U.S. pressure pumping business was offset by an
increase in our U.S. completion tools revenue. The job count
increased by 37% due to year-over-year increases in all service
lines including substantial increases in acidizing, nitrogen and
cementing as a result of Trican's strategic focus to expand our
service offering in the US. Revenue per job decreased by 35% due to
a decrease in price combined with a change in job mix. A
substantial amount of fracturing work was performed in the
Haynesville region in the fourth quarter of 2012, and fracturing
jobs in this region are generally larger due to the high pumping
pressure and rate required to fracture the wells. No work was
performed in the Haynesville region during the fourth quarter of
2013.
As a percentage of revenue, materials and operating expenses
increased to 100.9% of revenue compared to 98.6% in the same period
of the prior year. Year-over-year operating margins were negatively
impacted by lower pricing, which was partially offset by lower
costs due to cost cutting measures implemented throughout 2013 and
higher margins associated with the U.S. completions tools business.
An increase in the cost of diesel also had a negative impact on
fourth quarter operating margins. General and administrative
expenses increased by $2.2 million due largely to increased
overhead costs associated with the growth of the U.S. completion
tools business and one-time administrative expenses.
Q4 2013 versus Q3 2013
Revenue decreased by 4% on a sequential basis for our U.S.
operations. The job count decreased by 1%, sequentially, due to
declines in fracturing and cementing activity, offset partially by
increases in acidizing and nitrogen jobs. Revenue per job fell by
10% due largely to changes in customer mix and price decreases in
the Eagle Ford region.
As a percentage of revenue, materials and operating expenses
increased to 100.9% compared to 93.7% in the third quarter of 2013.
Operating margins were negatively impacted by the reduced activity
in the Marcellus play. The Marcellus play was our most profitable
region in the third quarter of 2013; therefore, lower activity in
this region had a meaningful impact on fourth quarter operating
margins. Improved profitability for our U.S. completion tools
business partially offset the impact of lower Marcellus activity.
General and administrative expenses increased slightly by $0.2
million as increased overhead costs associated with the growth of
the U.S. completion tools business were partially offset by lower
share-based expenses.
INTERNATIONAL OPERATIONS
($ thousands, except revenue per job, unaudited) |
Dec. 31, |
% of |
|
Dec. 31, |
% of |
|
Sept. 30, |
% of |
|
Three months ended, |
2013 |
Revenue |
|
2012 |
Revenue |
|
2013 |
Revenue |
|
Revenue |
91,805 |
|
|
68,039 |
|
|
88,161 |
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
Materials and operating |
80,556 |
87.7 |
% |
57,941 |
85.2 |
% |
71,523 |
81.1 |
% |
|
General and administrative |
4,434 |
4.8 |
% |
4,216 |
6.2 |
% |
4,176 |
4.8 |
% |
|
Total expenses |
84,990 |
92.6 |
% |
62,157 |
91.4 |
% |
75,699 |
85.9 |
% |
Operating income* |
6,815 |
7.4 |
% |
5,882 |
8.6 |
% |
12,462 |
14.1 |
% |
Number of jobs |
1,074 |
|
|
951 |
|
|
1,232 |
|
|
Revenue per job |
82,872 |
|
|
68,586 |
|
|
69,180 |
|
|
* see first page of this report
Sales Mix
Three months ended, |
Dec. 31, |
|
Dec. 31, |
|
Sept. 30, |
|
(unaudited) |
2013 |
|
2012 |
|
2013 |
|
%
of Total Revenue |
|
|
|
|
|
|
Fracturing |
84 |
% |
82 |
% |
81 |
% |
Coiled Tubing |
6 |
% |
9 |
% |
10 |
% |
Cementing |
5 |
% |
6 |
% |
5 |
% |
Nitrogen |
2 |
% |
1 |
% |
2 |
% |
Other |
3 |
% |
2 |
% |
2 |
% |
Total |
100 |
% |
100 |
% |
100 |
% |
Operations Review
The majority of international revenue is generated by our
Russian operations and pressure pumping demand was strong in this
region throughout the fourth quarter of 2013. Favorable weather
conditions allowed our Russian customers to remain active
throughout the quarter and catch up on 2013 capital spending plans
that were behind schedule for most of 2013. Although Russian
operating margins improved on a year-over-year basis, continued
cost inflation limited the margin increase.
Weak results for our Algerian operations had a significant
impact on international operating margins during the fourth quarter
of 2013. Asset impairment write-downs on inventory and equipment
were recorded during the fourth quarter relating to our Algerian
cementing operations that were shut down earlier in the year. The
asset write-downs, combined with weak results for our coiled tubing
operations in Algeria, negatively impacted fourth-quarter
international operating margins by 250 basis points.
We expect to begin coiled tubing operations in Saudi Arabia and
cementing operations in Colombia during the first half of 2014. As
a result, we incurred start-up costs in both regions during the
fourth quarter compared to the third quarter of 2013 and the fourth
quarter of 2012, which had a negative impact on fourth-quarter
operating margins.
There was minimal revenue growth for our Australian operations
in the fourth quarter of 2013 on both a sequential and
year-over-year basis. We remain optimistic about the long-term
growth opportunities in the region and are committed to growing our
Australian cementing business during 2014.
We continue to see good demand for our completion tools in the
North Sea and will look to grow this business in 2014.
Q4 2013 versus Q4 2012
International revenue increased by 35% due largely to an
increase in Russian revenue. The job count rose by 13% due to
increases in Russian cementing and fracturing activity that
benefited from more favorable weather conditions compared to the
fourth quarter of 2012. Revenue per job increased by 21% due to
larger fracturing and cementing jobs for our Russian service line
and increased fracturing revenue relative to total revenue.
Completion tools activity also contributed to the year-over-year
increase in international revenue as this service line was not
offered internationally in 2012.
As a percentage of revenue, materials and operating expenses
increased to 87.7% from 85.2%. Increased operating leverage from
higher revenue was more than offset by increased product costs in
Russia, operating losses in Algeria, and increased start-up costs
in Colombia and Saudi Arabia. General and administrative expenses
increased by $0.2 million due largely to increased overhead costs
in Colombia and Saudi Arabia as we prepared to begin active
operations in the first half of 2014.
Q4 2013 versus Q3 2013
International revenue in the fourth quarter of 2013 increased
sequentially by 4%. Revenue per job increased by 20% due to an
increase in fracturing revenue relative to total revenue and an
increase in fracturing and cementing job size in Russia. The job
count decreased by 13% due largely to a sequential decrease in
Russian activity as the third quarter is typically the most active
quarter in Russia.
Materials and operating expenses increased to 87.7% from 81.1%
due partially to a change in customer and job mix in Russia that
resulted in lower operating margins. Operating losses in Algeria
and increased start-up costs in Colombia and Saudi Arabia also
contributed to the decline in operating margins. General and
administrative expenses increased by $0.3 million due largely to
increased overhead costs in Colombia and Saudi Arabia as we
prepared to begin active operations in the first half of 2014.
CORPORATE
($ thousands, except revenue per job, unaudited) |
Dec. 31, |
|
% of |
|
Dec. 31, |
|
% of |
|
Sept. 30, |
|
% of |
|
Three months ended, |
2013 |
|
Revenue |
|
2012 |
|
Revenue |
|
2013 |
|
Revenue |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials and operating |
6,635 |
|
1.2 |
% |
6,603 |
|
1.4 |
% |
5,835 |
|
1.1 |
% |
|
General and administrative |
9,477 |
|
1.7 |
% |
13,077 |
|
2.7 |
% |
8,904 |
|
1.6 |
% |
|
Total expenses |
16,112 |
|
2.9 |
% |
19,680 |
|
4.1 |
% |
14,739 |
|
2.7 |
% |
Operating loss* |
(16,112 |
) |
|
|
(19,680 |
) |
|
|
(14,739 |
) |
|
|
* see first page of this report
Q4 2013 versus Q4 2012
Corporate expenses in the fourth quarter of 2013 were down $3.6
million compared to the fourth quarter of 2012. Reductions in
profit sharing, share-based compensation expense and professional
fees contributed to the majority of the decrease. The lower
professional fees were due to i-TEC acquisition costs that were
incurred during the fourth quarter of 2012.
Q4 2013 versus Q3 2013
Corporate expenses increased sequentially by $1.4 million due
largely to an increase in donation expenses in the fourth quarter
of 2013.
OTHER EXPENSES AND
INCOME
Finance costs in the fourth quarter of 2013 increased by $0.2
million on a year-over-year basis due to slightly higher average
interest rates on the notes payable and revolving credit facility.
Other loss was $0.4 million in the quarter versus income of $0.6
million for the same period in the prior year. Other loss/income is
largely comprised of gains and losses on disposal of property and
equipment and interest income earned on cash balances.
Depreciation and amortization expense for the fourth quarter of
2013 includes a $14.3 million charge for accelerated depreciation
on fluid ends in Canada. $9.5 million of this adjustment ($7.2
million net of tax) relates to the first three quarters of 2013,
and has been excluded from adjusted net income for the fourth
quarter of 2013.
Depreciation and amortization expense for the fourth quarter of
2013 also includes $3.1 million in amortization on the intangible
assets relating to the purchase of i-TEC. The purchase date of this
transaction was January 11, 2013 and the amortization period began
on this date. The purchase price accounting was not finalized until
the fourth quarter of 2013; therefore, a catch-up entry was
required to ensure that adequate amortization had been recorded as
of December 31, 2013. $2.1 million of this adjustment ($1.6 million
net of tax) relates to periods prior to October 1, 2013 and has
been excluded from adjusted net income for the fourth quarter of
2013.
Excluding these one-time charges, depreciation and amortization
increased by $11.1 million, on a year-over-year basis, due to an
increase in the average balance of capital assets subject to
depreciation, primarily in North America.
The foreign exchange gain of $6.0 million in the quarter versus
a gain of $3.5 million in the same quarter last year was due to the
net impact of fluctuations in the U.S. dollar and Russian ruble
relative to the Canadian dollar. In particular, the value of the
U.S. dollar increased by 3.2% relative to the Canadian dollar,
which led to foreign exchange gains on net U.S. dollar assets.
COMPARATIVE ANNUAL INCOME STATEMENTS |
|
($ thousands; unaudited) |
|
|
|
|
|
|
|
|
Year- |
|
|
|
|
|
|
|
|
|
|
|
|
Over- |
|
|
|
|
|
|
%
of |
|
|
|
%
of |
|
Year |
|
% |
|
Year ended December 31, |
2013 |
|
Revenue |
|
2012 |
|
Revenue |
|
Change |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
2,115,472 |
|
100.0 |
% |
2,213,400 |
|
100.0 |
% |
(97,928 |
) |
(4 |
%) |
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials and operating |
1,826,221 |
|
86.3 |
% |
1,870,889 |
|
84.5 |
% |
(44,668 |
) |
(2 |
%) |
|
General and administrative |
109,701 |
|
5.2 |
% |
102,443 |
|
4.6 |
% |
7,258 |
|
7 |
% |
Operating income* |
179,550 |
|
8.5 |
% |
240,068 |
|
10.8 |
% |
(60,518 |
) |
(25 |
%) |
|
Finance costs |
34,497 |
|
1.6 |
% |
30,497 |
|
1.4 |
% |
4,000 |
|
13 |
% |
|
Depreciation and amortization |
222,403 |
|
10.5 |
% |
152,837 |
|
6.9 |
% |
69,566 |
|
46 |
% |
|
Foreign exchange (gain)/loss |
(4,859 |
) |
(0.2 |
%) |
408 |
|
0.0 |
% |
(5,267 |
) |
(1,291 |
%) |
|
Goodwill impairment, net |
4,123 |
|
0.2 |
% |
- |
|
- |
|
4,123 |
|
- |
|
|
Other income |
(1,612 |
) |
(0.1 |
%) |
(1,837 |
) |
(0.1 |
%) |
225 |
|
(12 |
%) |
Income before income taxes and non-controlling
interest |
(75,002 |
) |
(3.5 |
%) |
58,163 |
|
2.6 |
% |
(133,165 |
) |
(229 |
%) |
Income tax (recovery) / expense |
(28,303 |
) |
(1.3 |
%) |
4,824 |
|
0.2 |
% |
(33,127 |
) |
(687 |
%) |
Non-controlling interest |
(845 |
) |
(0.0 |
%) |
(335 |
) |
(0.0 |
%) |
(510 |
) |
(152 |
%) |
Net (loss) / income |
(45,854 |
) |
(2.2 |
%) |
53,674 |
|
2.4 |
% |
(99,528 |
) |
(185 |
%) |
* See first page of this report
CANADIAN OPERATIONS
Year ended December 31, |
|
% of |
|
|
% of |
|
Year-Over-Year |
|
($ thousands, except revenue per job, unaudited) |
2013 |
Revenue |
|
2012 |
Revenue |
|
Change |
|
Revenue |
1,021,426 |
|
|
1,139,474 |
|
|
(10 |
%) |
Expenses |
|
|
|
|
|
|
|
|
|
Materials and operating |
794,459 |
77.8 |
% |
804,429 |
70.6 |
% |
(1 |
%) |
|
General and administrative |
26,167 |
2.6 |
% |
26,352 |
2.3 |
% |
(1 |
%) |
|
Total expenses |
820,626 |
80.3 |
% |
830,781 |
72.9 |
% |
(1 |
%) |
Operating income* |
200,800 |
19.7 |
% |
308,693 |
27.1 |
% |
(35 |
%) |
Number of jobs |
21,287 |
|
|
22,427 |
|
|
(5 |
%) |
Revenue per job |
47,553 |
|
|
50,486 |
|
|
(6 |
%) |
* See first page of this report
Canadian revenue for 2013 decreased by 10% compared to 2012.
Revenue per job decreased by 6% due to a 22% decline in average
annual pricing, which was partially offset by larger fracturing job
sizes and an increase in fracturing revenue relative to total
revenue. Job count decreased by 5% due largely to a drop in coiled
tubing activity, which also negatively impacted associated service
lines, including nitrogen and acidizing.
As a percentage of revenue, materials and operating expenses
increased to 77.8% from 70.6% in the prior year. The pricing
decline had a significant negative impact on operating margins and
was partially offset by cost decreases including reductions in
operating salaries, profit sharing expenses, product costs, and
travel expenses. General and administrative expenses were
relatively consistent on a year-over-year basis as reductions in
profit sharing expense were offset by increased share based
expenses.
UNITED STATES OPERATIONS
Year ended December 31, |
|
% of |
|
|
|
% of |
|
Year-Over-Year |
|
($ thousands, except revenue per job, unaudited) |
2013 |
Revenue |
|
2012 |
|
Revenue |
|
Change |
|
Revenue |
764,962 |
|
|
797,783 |
|
|
|
(4 |
%) |
Expenses |
|
|
|
|
|
|
|
|
|
|
Materials and operating |
716,029 |
93.6 |
% |
803,677 |
|
100.7 |
% |
(11 |
%) |
|
General and administrative |
26,046 |
3.4 |
% |
19,808 |
|
2.5 |
% |
32 |
% |
|
Total expenses |
742,075 |
97.0 |
% |
823,485 |
|
103.2 |
% |
(10 |
%) |
Operating income / (loss)* |
22,887 |
3.0 |
% |
(25,702 |
) |
(3.2 |
%) |
189 |
% |
Number of jobs |
8,789 |
|
|
7,110 |
|
|
|
24 |
% |
Revenue per job |
83,220 |
|
|
112,471 |
|
|
|
(26 |
%) |
* See first page of this report
U.S. revenue for 2013 decreased by 4% as a rise in cementing and
completion tools revenue were more than offset by pricing declines
for the fracturing service line. The job count for 2013 increased
substantially for cementing as we continued to grow this service
line in the US. The job count also increased for the fracturing
service line, although revenue per fracturing job decreased as we
performed smaller jobs in 2013 compared to 2012. Revenue per job
was also negatively impacted by lower pricing realized in 2013
compared to 2012.
Materials and operating expenses decreased to 93.6% of revenue
in 2013 compared to 100.7% in 2012. Cost-cutting initiatives and a
substantial reduction in the price of guar led to higher operating
margins on a year-over-year basis. These improvements were
partially offset by lower pricing in 2013 compared to 2012. General
and administrative expenses increased by $6.2 million in 2013
versus 2012. Overhead costs associated with the new completions
tools business combined with an increase in share based employee
costs led to a significant portion of the increase.
INTERNATIONAL OPERATIONS
Year ended December 31, |
|
% of |
|
|
% of |
|
Year-Over-Year |
|
($ thousands, except revenue per job, unaudited) |
2013 |
Revenue |
|
2012 |
Revenue |
|
Change |
|
Revenue |
329,084 |
|
|
276,143 |
|
|
19 |
% |
Expenses |
|
|
|
|
|
|
|
|
|
Materials and operating |
291,186 |
88.5 |
% |
238,967 |
86.5 |
% |
22 |
% |
|
General and administrative |
17,095 |
5.2 |
% |
14,486 |
5.2 |
% |
18 |
% |
|
Total expenses |
308,281 |
93.7 |
% |
253,453 |
91.8 |
% |
22 |
% |
Operating income / (loss)* |
20,803 |
6.3 |
% |
22,690 |
8.2 |
% |
(8 |
%) |
Number of jobs |
4,182 |
|
|
4,007 |
|
|
4 |
% |
Revenue per job |
75,861 |
|
|
65,027 |
|
|
17 |
% |
* See first page of this report
International revenue increased by 19% due to increases in both
job count and revenue per job. The job count increased by 4% due to
an increase in fracturing activity in Russia, and to a lesser
extent, increased cementing activity in Australia. Revenue per job
increased by 17% due to larger fracturing job sizes in Russia
combined with an increase in fracturing revenue relative to total
revenue.
As a percentage of revenue, materials and operating expenses
increased by 200 basis points due primarily to increased product
costs in Russia. General and administrative costs increased by $2.6
million due largely to costs associated with the international
completion tools business, which did not exist in 2012, and
increased overhead costs in Saudi Arabia and Colombia.
CORPORATE
Year ended December 31, |
|
|
% of |
|
|
|
% of |
|
Year-Over-Year |
|
($ thousands, except revenue per job, unaudited) |
2013 |
|
Revenue |
|
2012 |
|
Revenue |
|
Change |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
Materials and operating |
24,547 |
|
1.2 |
% |
23,814 |
|
1.1 |
% |
3 |
% |
|
General and administrative |
40,393 |
|
1.9 |
% |
41,799 |
|
1.9 |
% |
(3 |
%) |
|
Total expenses |
64,940 |
|
3.1 |
% |
65,613 |
|
3.0 |
% |
(1 |
%) |
Operating income / (loss)* |
(64,940 |
) |
|
|
(65,613 |
) |
|
|
(1 |
%) |
* See first page of this report
Our 2013 Corporate expenses decreased slightly by $0.7 million
compared to 2012. Lower professional fees and profit sharing
expenses were partially offset by increased share-based expenses.
Professional fees were lower due largely to acquisition fees
relating to the purchase of i-TEC in 2012.
OTHER EXPENSES AND INCOME
Our 2013 finance costs increased by $4.0 million relative to
2012 due to increased average debt levels and an increase in
average interest rates. Foreign exchange gains of $4.9 million have
been recognized in 2013 compared to losses of $0.4 million in 2012.
The 2013 gain is due to the net impact of fluctuations in the U.S.
dollar and Russian ruble relative to the Canadian dollar. Other
income was $1.6 million compared to $1.8 million in the same period
in 2012. Other income is largely comprised of net gains on disposal
of property and equipment and interest income earned on cash
balances.
Excluding the one-time adjustments relating to fluid-ends in
Canada and the amortization of intangible assets acquired in the
i-TEC acquisition, depreciation and amortization expense for 2013
increased by $52.2 million compared to 2012. A large portion of the
equipment built as part of our 2011 and 2012 capital budgets became
active, and subject to deprecation, beginning in the middle of
2012. Therefore, our average depreciable asset base is
significantly larger in 2013 compared to 2012.
LIQUIDITY AND CAPITAL
RESOURCES
Operating Activities
Funds provided by operations was $30.4 million in the fourth
quarter of 2013 compared to funds used in operations of $14.5
million in the fourth quarter of 2012 largely as a result of less
taxes paid. Funds provided by operations for the year ended
December 31, 2013 was $130.8 million compared to $126.8 million in
2012. A decrease in operating income and an increase in interest
paid was offset by lower taxes paid, which resulted in only a small
increase in funds provided by operations.
Investing Activities
Capital expenditures for the year ended December 31, 2013 were
$107.8 million compared to $444.5 million in 2012. North American
expansion initiatives in 2011 and 2012 led to large capital budgets
for those years, which resulted in large capital expenditures in
2012. The North American pressure pumping market became
over-supplied with equipment in 2012 and therefore, the capital
budget for 2013 was substantially smaller than in previous years.
The 2013 capital budget was directed primarily towards maintenance
capital requirements.
There were no significant changes made to our 2013 capital
budget during the fourth quarter of 2013. Capital expenditures for
the fourth quarter were $21 million and approximately $80 million
to $90 million of remaining capital expenditures are expected to be
carried forward into 2014.
The initial 2014 capital budget is $32.7 million. Management is
confident that this budget, combined with carryover capital
expenditures from 2013, properly maintains Trican's global
equipment fleet and infrastructure at a very high standard. Trican
regularly reviews its capital equipment requirements and will
continue to follow its policy of adjusting the capital budget on a
quarterly basis to reflect changing operating conditions and
capital equipment needs.
During the first quarter of 2013, Trican closed the previously
announced acquisition of i-TEC in exchange for cash consideration
of $29.7 million and 2.4 million Trican common shares valued at
$30.3 million at January 11, 2013.
Financing Activities
Trican currently pays a semi-annual dividend of $0.15 per share.
During 2013, $44.3 million in dividend payments were made and we
expect approximately $44.0 million in dividend payments to be made
in 2014.
During the year ended December 31, 2013, Trican repaid $42.3
million on its $500 million revolving credit facility. As at
December 31, 2013, the Company had available unused committed bank
credit facilities in the amount of $307.5 million plus cash and
trade and other receivables of $63.9 million and $452.0 million
respectively, for a total of $823.4 million available to fund the
cash outflows relating to its financial obligations. The Company
believes it has sufficient funding through the use of these sources
to meet foreseeable financing requirements. On October 17, 2013,
Trican extended its revolving credit facility by an additional year
to 2017.
The Company received approval from the Toronto Stock Exchange to
purchase its own common shares, for cancellation, in accordance
with a Normal Course Issuer Bid ("NCIB") that expires on March 7,
2014. During the year ended December 31, 2013, there were no common
shares purchased through the NCIB.
OUTLOOK
Canadian Operations
We currently expect the number of wells drilled in Canada in
2014 to be relatively consistent with wells drilled in 2013. We
also believe that fracturing intensity per well will continue to
increase in 2014 and lead to an increase in year-over-year
fracturing demand in 2014. Fracturing intensity per well is
expected to increase due to a rise in fracturing stages per well as
we continue to see an increase in multi-stage horizontal wells
drilled in Canada relative to vertical wells. In addition, we
expect to see an increase in fracturing job size. Commodity prices
are currently higher than originally forecast for the Canadian
market. This, combined with a lower Canadian dollar relative to the
US dollar, is expected to result in increased cash flow for our
customers, which normally results in increased activity in the
basin. We will continue to monitor changes to our customers'
spending and budgets as the year progresses.
Drilling and completions activity is expected to increase in the
Duvernay play during 2014 based on discussions with our customers.
We also expect that there will be a marginal increase in
LNG-related drilling next year, although we expect the majority of
LNG-related drilling will occur beyond 2014. Duvernay and
LNG-related activity both present significant growth prospects for
the pressure pumping industry over the next several years; however,
we expect a significant amount of pressure pumping demand to
continue to be generated from activity in the Montney and Cardium
plays during 2014.
Canadian pressure pumping activity levels began slowly in the
first half of January 2014; however, demand has been strong since
then and we expect our fracturing and cementing equipment to be
fully utilized until spring break-up conditions occur. Assuming
that we do not experience an early spring break-up, we expect first
quarter operating margins to increase slightly relative to the
fourth quarter of 2013 due to increased utilization; however, we
expect first quarter margins to be down relative to the first
quarter of 2013 due to lower pricing, increased costs and the low
activity levels in early January.
First quarter pricing has been relatively consistent on a
sequential basis and we expect it to remain stable throughout the
quarter; however, the first quarter in Canada generally represents
peak activity levels. Canadian pricing levels for the second half
of 2014 will be dependant on the demand for pressure pumping
equipment in the region as we head into the summer drilling season.
We will continue to look for opportunities to increase pricing if
activity levels remain high during the second half of the year.
U.S. Operations
The U.S. pressure pumping market remains very competitive and
over-supplied with equipment in most operating regions; however, we
are starting to see signs of improving fundamentals in the Permian
and Marcellus plays. The horizontal rig count continues to increase
in the Permian, which is leading to an increase in fracturing
demand. In addition, improving natural gas prices have led to
increased optimism for 2014 demand increases in the Marcellus
play.
We expect our three fracturing crews in the Marcellus play to be
well utilized in the first quarter of 2014, which is expected to
contribute to sequential improvements in revenue and operating
income for our U.S. operations. While cold weather in the region
has affected Marcellus activity levels this winter, which will have
a negative effect on first quarter results, we are encouraged by
our customers' outlook on a full year basis. Given the improving
fundamentals in this region, we currently expect the utilization of
our existing Marcellus crews to remain strong throughout 2014. We
will continue to monitor activity levels in this region and will
consider deploying additional horsepower in the Marcellus region if
market conditions continue to improve.
We are seeing an increase in activity in the Permian play and
improved long-term demand as our customers move towards more
horizontal drilling in this region. That being said, the level of
competition in the Permian play remains high as there are many
fracturing companies operating in the region. We will continue to
focus on service quality and improved utilization for our three
fracturing crews in this area, and we will look to increase pricing
when utilization remains high for a period of time. We believe that
increasing utilization in the Permian region will be a key factor
in improving the financial results of our U.S. operations and will
continue to be a strategic focus for Trican.
We expect fracturing demand to remain stable in the Eagle Ford,
Bakken, and Oklahoma regions and we will continue to focus on
improving utilization and decreasing costs, where possible, for our
operations in these areas. Activity levels remain low in the dry
gas plays, including the Haynesville and Barnett shale plays, and
we do not to expect pressure pumping demand to increase in these
regions during 2014. However, given the recent increase in natural
gas prices, we will continue to monitor activity levels in these
regions and react accordingly if industry conditions improve.
Increased sequential activity in the Marcellus and the Permian
plays are expected to lead to increased revenue and operating
income in the first quarter of 2014 compared to the fourth quarter
of 2013. In addition, we expect our U.S. completion tools business
to maintain a strong level of profitability and contribute to
improvements in sequential U.S. operating results. However, we do
not expect improvements in 2014 first quarter financial results
compared to the first quarter of 2013 due largely to lower
year-over-year pricing.
International
We expect to see a year-over-year increase in Russian and
Kazakhstan oil and gas industry activity and a continued increase
in horizontal multi-stage well completions during 2014. Management
is currently estimating 2014 revenue to increase by 5% relative to
2013. The estimated revenue increase is based on consistent
pressure pumping activity levels combined with a 7% increase in
pressure pumping revenue per job, partially offset by a small
decrease in completion tool revenue. The Russian and Kazakhstan
markets remain competitive and we expect 2014 pricing improvements
to only cover inflationary cost increases. As a result, we expect
2014 Russian and Kazakhstan operating margins to improve slightly
in 2014 relative to 2013, due to the expected increase in activity.
First quarter activity in Russia and Kazakhstan is expected to be
down sequentially due to extreme cold weather that is typically
experienced through the early part of the year.
We expect revenue growth and improved profitability in 2014 for
the international completions tools business relative to 2013. We
continue to see good customer acceptance of our tools in the North
Sea market and will look to expand our international customer base
during 2014.
We expect to see improved utilization and profitability for our
Australian cement crews in 2014 relative to 2013; however, the
improvements are expected to be modest as the Australian market
continues to develop slowly. We will continue to focus on expanding
market share through sales and marketing initiatives and by
offering high service quality and technical solutions to the
Australian customer base.
Algeria continues to be a challenging market and if we do not
see improvements in utilization for our two coiled tubing crews
operating in the region during 2014, we will consider redeploying
those assets into a more profitable region.
We expect to begin active operations in both Colombia and Saudi
Arabia in the first half of 2014. We are optimistic about the
growth prospects in both these regions and will continue to focus
on establishing our market presence in these regions throughout
2014.
NON-IFRS
DISCLOSURE
Adjusted net income, operating income and funds provided by
operations do not have any standardized meaning as prescribed by
IFRS and, therefore, are considered non-IFRS measures.
Adjusted net income and funds provided by operations have been
reconciled to net income and operating income has been reconciled
to gross profit, being the most directly comparable measures
calculated in accordance with IFRS. The reconciling items have been
presented net of tax.
|
Three months ended |
|
Twelve months ended |
|
Dec. 31, |
|
Dec. 31, |
|
Sept. 30, |
|
Dec.
31, |
|
Dec.
31, |
|
2013 |
|
2012 |
|
2013 |
|
2013 |
|
2012 |
Adjusted net (loss) / income |
($9,873 |
) |
($5,375 |
) |
$9,693 |
|
($31,490 |
) |
$63,028 |
Deduct: |
|
|
|
|
|
|
|
|
|
|
Fluid end depreciation adjustment (net of $2.4 million tax
recovery)* |
7,153 |
|
- |
|
- |
|
- |
|
- |
|
Intangible amortization adjustment (net of $0.5 million tax
recovery)** |
1,595 |
|
- |
|
- |
|
- |
|
- |
|
Goodwill impairment |
- |
|
- |
|
- |
|
4,123 |
|
- |
|
Non-cash share-based compensation expense |
2,209 |
|
2,455 |
|
1,840 |
|
8,096 |
|
9,689 |
|
Loss on deposit with vendor (net of $0.7 million tax recovery) |
- |
|
- |
|
2,145 |
|
2,145 |
|
- |
|
|
|
|
|
|
|
|
|
|
(Loss) / profit for the period (IFRS financial
measure) |
($20,830 |
) |
($7,830 |
) |
$5,708 |
|
($45,854 |
) |
$53,339 |
* Depreciation and amortization expense for the fourth quarter
of 2013 includes a $14.3 million charge for accelerated
depreciation on fluid ends in Canada. $9.5 million of this
adjustment ($7.2 million net of tax) relates to periods prior to
October 1, 2013 and has been excluded from adjusted net income for
the fourth quarter.
**Depreciation and amortization expense for the fourth quarter
includes $3.1 million in amortization on the intangible assets
relating to the purchase of i-TEC. The purchase price accounting
was not finalized until the fourth quarter of 2013; therefore, a
catch-up entry was required to ensure that adequate amortization
had been recorded as of December 31, 2013. $2.1 million of this
adjustment ($1.6 million net of tax) relates to periods prior to
October 1, 2013 and has been excluded from adjusted net income for
the fourth quarter.
|
Three months ended |
|
Twelve months ended |
|
|
Dec. 31, |
|
Dec. 31, |
|
Sept. 30, |
|
Dec. 31, |
|
Dec. 31, |
|
|
2013 |
|
2012 |
|
2013 |
|
2013 |
|
2012 |
|
Funds provided by / (used in) operations |
$ |
30,380 |
|
$ |
(14,525 |
) |
$ |
71,087 |
|
$ |
130,815 |
|
$ |
126,757 |
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
(70,085 |
) |
|
(41,564 |
) |
|
(54,646 |
) |
|
(222,403 |
) |
|
(152,837 |
) |
|
Amortization of debt issuance costs |
|
(216 |
) |
|
(208 |
) |
|
(216 |
) |
|
(864 |
) |
|
(813 |
) |
|
Stock-based compensation |
|
(2,209 |
) |
|
(2,455 |
) |
|
(1,840 |
) |
|
(8,096 |
) |
|
(9,689 |
) |
|
Loss / (gain) on disposal of property and equipment |
|
15 |
|
|
(352 |
) |
|
(585 |
) |
|
(293 |
) |
|
(2,423 |
) |
|
Net finance costs |
|
(8,122 |
) |
|
(7,824 |
) |
|
(9,111 |
) |
|
(32,749 |
) |
|
(28,285 |
) |
|
Unrealized foreign exchange (gain) / loss |
|
(1 |
) |
|
4,863 |
|
|
(2,984 |
) |
|
5,593 |
|
|
50 |
|
|
Asset impairments, net |
|
|
|
|
- |
|
|
(2,870 |
) |
|
(6,993 |
) |
|
- |
|
|
Income tax recovery / (expense) |
|
16,431 |
|
|
2,957 |
|
|
2,847 |
|
|
28,303 |
|
|
(4,824 |
) |
|
Interest paid |
|
12,956 |
|
|
8,373 |
|
|
6,182 |
|
|
34,794 |
|
|
24,278 |
|
|
Income tax paid / (recovered) |
|
21 |
|
|
42,697 |
|
|
(2,156 |
) |
|
26,039 |
|
|
100,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) (IFRS financial measure) |
$ |
(20,830 |
) |
$ |
(8,038 |
) |
$ |
5,708 |
|
$ |
(45,854 |
) |
$ |
53,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Twelve months ended |
|
|
Dec. 31, |
|
Dec. 31, |
|
Sept. 30, |
|
Dec. 31, |
|
Dec. 31, |
|
|
2013 |
|
2012 |
|
2013 |
|
2013 |
|
2012 |
|
Operating income |
$ |
35,500 |
|
$ |
35,123 |
|
$ |
72,702 |
|
$ |
179,550 |
|
$ |
240,068 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative expenses |
|
26,064 |
|
|
23,083 |
|
|
28,730 |
|
|
114,836 |
|
|
108,289 |
|
Deduct: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense |
|
(70,085 |
) |
|
(41,564 |
) |
|
(54,646 |
) |
|
(222,403 |
) |
|
(152,837 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit / (loss) (IFRS financial measure) |
$ |
(8,521 |
) |
$ |
16,642 |
|
$ |
46,786 |
|
$ |
71,983 |
|
$ |
195,520 |
|
CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Stated in thousands) As at December 31, |
2013 |
|
2012 |
|
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
63,869 |
|
$ |
113,506 |
|
|
Trade and other receivables |
|
459,210 |
|
|
437,038 |
|
|
Current tax assets |
|
5,186 |
|
|
647 |
|
|
Inventory |
|
232,898 |
|
|
211,794 |
|
|
Prepaid expenses |
|
34,407 |
|
|
33,002 |
|
|
|
795,570 |
|
|
795,987 |
|
Property and equipment |
|
1,374,212 |
|
|
1,458,562 |
|
Intangible assets |
|
44,285 |
|
|
10,081 |
|
Deferred tax assets |
|
122,745 |
|
|
76,302 |
|
Other assets |
|
17,360 |
|
|
11,898 |
|
Goodwill |
|
59,475 |
|
|
43,689 |
|
|
|
2,413,647 |
|
$ |
2,396,519 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Bank loans |
$ |
- |
|
$ |
9,119 |
|
|
Trade and other payables |
|
301,920 |
|
|
228,788 |
|
|
Contingent consideration |
|
- |
|
|
2,860 |
|
|
Deferred consideration |
|
650 |
|
|
- |
|
|
Current tax liabilities |
|
14 |
|
|
7,853 |
|
|
Current portion of loans and borrowings |
|
79,770 |
|
|
- |
|
|
|
382,354 |
|
|
248,620 |
|
|
|
|
|
|
|
|
Loans and borrowings |
|
593,786 |
|
|
694,972 |
|
Deferred tax liabilities |
|
87,005 |
|
|
77,012 |
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
|
Share capital |
|
559,723 |
|
|
527,860 |
|
|
Contributed surplus |
|
63,074 |
|
|
55,352 |
|
|
Accumulated other comprehensive loss |
|
(1,020 |
) |
|
(24,100 |
) |
|
Retained earnings |
|
725,172 |
|
|
815,700 |
|
Total equity attributable to equity holders of the
Company |
|
1,346,949 |
|
|
1,374,812 |
|
Non-controlling interest |
|
3,553 |
|
|
1,103 |
|
|
$ |
2,413,647 |
|
$ |
2,396,519 |
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
|
|
|
|
|
|
|
(Stated in thousands, except per share amounts) |
Three Months |
|
Three Months |
|
Twelve Months |
|
Twelve Months |
|
|
Ended Dec 31, |
|
Ended Dec 31, |
|
Ended Dec 31, |
|
Ended Dec 31, |
|
For the year ended December 31, |
2013 |
|
2012 |
|
2013 |
|
2012 |
|
|
|
|
|
|
|
|
|
|
Revenue |
552,144 |
|
485,865 |
|
2,115,472 |
|
2,213,400 |
|
Cost of sales |
560,665 |
|
463,378 |
|
2,043,489 |
|
2,017,880 |
|
Gross profit |
(8,521 |
) |
22,487 |
|
71,983 |
|
195,520 |
|
Administrative expenses |
26,066 |
|
28,928 |
|
114,836 |
|
108,289 |
|
Other expense |
900 |
|
(10 |
) |
136 |
|
375 |
|
Results from operating activities |
(35,487 |
) |
(6,431 |
) |
(42,989 |
) |
86,856 |
|
Finance income |
(470 |
) |
(550 |
) |
(1,748 |
) |
(2,212 |
) |
Finance costs |
8,592 |
|
8,374 |
|
34,497 |
|
30,497 |
|
Foreign exchange (gain) / loss |
(5,968 |
) |
(3,468 |
) |
(4,859 |
) |
408 |
|
Goodwill impairment, net |
- |
|
- |
|
4,123 |
|
- |
|
(Loss) / profit before income tax |
(37,641 |
) |
(10,787 |
) |
(75,002 |
) |
58,163 |
|
Income tax (recovery) /expense |
(16,431 |
) |
(2,957 |
) |
(28,303 |
) |
4,824 |
|
(Loss) / profit for the year |
(21,210 |
) |
(7,830 |
) |
(46,699 |
) |
53,339 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
Unrealized loss / (gain) on hedging instruments |
616 |
|
207 |
|
717 |
|
(898 |
) |
|
Foreign currency translation gain / (loss) |
14,411 |
|
10,311 |
|
23,797 |
|
(2,193 |
) |
Total comprehensive (loss) / income for the year |
(7,415 |
) |
2,274 |
|
(23,619 |
) |
52,044 |
|
|
|
|
|
|
|
|
|
|
(Loss) / profit attributable to: |
|
|
|
|
|
|
|
|
Owners of the Company |
(20,830 |
) |
(7,741 |
) |
(45,854 |
) |
53,674 |
|
Non-controlling interest |
(380 |
) |
(89 |
) |
(845 |
) |
(335 |
) |
(Loss) / Profit for the year |
(21,210 |
) |
(7,830 |
) |
(46,699 |
) |
53,339 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss) / income attributable
to: |
|
|
|
|
|
|
|
|
Owners of the Company |
(6,570 |
) |
2,363 |
|
(22,774 |
) |
52,379 |
|
Non-controlling interest |
(845 |
) |
(89 |
) |
(845 |
) |
(335 |
) |
Total comprehensive (loss) / income for the year |
(7,415 |
) |
2,274 |
|
(23,619 |
) |
52,044 |
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
Basic |
(0.14 |
) |
(0.05 |
) |
(0.31 |
) |
0.37 |
|
|
Diluted |
(0.14 |
) |
(0.05 |
) |
(0.31 |
) |
0.37 |
|
Weighted average shares outstanding - basic |
148,916 |
|
146,450 |
|
148,815 |
|
146,620 |
|
Weighted average shares outstanding - diluted |
148,916 |
|
146,450 |
|
148,815 |
|
146,690 |
|
CONSOLIDATED STATEMENT OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
Three Months |
|
Three Months |
|
Twelve Months |
|
Twelve Months |
|
|
Ended Dec 31, |
|
Ended Dec 31, |
|
Ended Dec 31, |
|
Ended Dec 31, |
|
(Stated in thousands; unaudited) |
2013 |
|
2012 |
|
2013 |
|
2012 |
|
Cash Provided By/ (Used In): |
|
|
|
|
|
|
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the period |
$ |
(21,210 |
) |
$ |
(7,830 |
) |
$ |
(46,699 |
) |
$ |
53,339 |
|
|
Charges to income not involving cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
70,085 |
|
|
41,564 |
|
|
222,403 |
|
|
152,837 |
|
|
|
Amortization of debt issuance costs |
|
216 |
|
|
208 |
|
|
864 |
|
|
813 |
|
|
|
Stock-based compensation |
|
2,209 |
|
|
2,455 |
|
|
8,096 |
|
|
9,689 |
|
|
|
(Gain)Loss on disposal of property and equipment |
|
(15 |
) |
|
352 |
|
|
293 |
|
|
2,423 |
|
|
|
Net Finance Costs |
|
8,122 |
|
|
7,824 |
|
|
32,749 |
|
|
28,285 |
|
|
|
Unrealized foreign exchange (gain)/loss |
|
1 |
|
|
(4,863 |
) |
|
(5,593 |
) |
|
(50 |
) |
|
|
Asset impairments, net |
|
- |
|
|
- |
|
|
6,993 |
|
|
- |
|
|
|
Income tax expense/(recovery) |
|
(16,431 |
) |
|
(2,957 |
) |
|
(28,303 |
) |
|
4,824 |
|
|
|
42,977 |
|
|
36,753 |
|
|
190,803 |
|
|
252,160 |
|
|
Change in inventories |
|
4,365 |
|
|
6,704 |
|
|
(15,874 |
) |
|
(39,471 |
) |
|
Change in trade and other receivables |
|
(37,137 |
) |
|
96,141 |
|
|
(13,251 |
) |
|
167,427 |
|
|
Change in prepayments |
|
2,894 |
|
|
10,444 |
|
|
138 |
|
|
(1,463 |
) |
|
Change in trade and other payables |
|
7,037 |
|
|
(70,701 |
) |
|
70,950 |
|
|
(67,688 |
) |
Cash generated from operating activities |
|
20,136 |
|
|
79,341 |
|
|
232,766 |
|
|
310,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
(12,956 |
) |
|
(8,373 |
) |
|
(34,794 |
) |
|
(24,278 |
) |
|
Income tax paid |
|
(21 |
) |
|
(42,697 |
) |
|
(26,039 |
) |
|
(100,312 |
) |
|
|
7,159 |
|
|
28,271 |
|
|
171,933 |
|
|
186,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received |
|
387 |
|
|
250 |
|
|
1,155 |
|
|
1,163 |
|
|
Purchase of property and equipment |
|
(20,871 |
) |
|
(58,688 |
) |
|
(107,761 |
) |
|
(444,550 |
) |
|
Proceeds from the sale of property and equipment |
|
1,790 |
|
|
1,848 |
|
|
6,520 |
|
|
3,325 |
|
|
Purchase of other assets |
|
(2,400 |
) |
|
- |
|
|
(7,000 |
) |
|
- |
|
|
Payments received on loan to an unrelated third
party |
|
- |
|
|
(250 |
) |
|
- |
|
|
(24 |
) |
|
Business acquisitions |
|
- |
|
|
- |
|
|
(29,663 |
) |
|
- |
|
|
|
(21,094 |
) |
|
(56,840 |
) |
|
(136,749 |
) |
|
(440,086 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from issuance of share capital |
|
44 |
|
|
- |
|
|
1,174 |
|
|
1,289 |
|
|
Repurchase and cancellation of shares under NCIB |
|
- |
|
|
- |
|
|
- |
|
|
(10,011 |
) |
|
(Repayment)/Issuance of loans and borrowings |
|
2,582 |
|
|
85,946 |
|
|
(42,317 |
) |
|
279,331 |
|
|
Dividend paid |
|
- |
|
|
- |
|
|
(44,304 |
) |
|
(29,300 |
) |
|
|
2,626 |
|
|
86,946 |
|
|
(85,447 |
) |
|
241,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
819 |
|
|
795 |
|
|
626 |
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase / (decrease) in cash and cash equivalents |
|
(10,490 |
) |
|
58,173 |
|
|
(49,637 |
) |
|
(12,349 |
) |
Cash and cash equivalents, beginning of period |
|
74,359 |
|
|
55,333 |
|
|
113,506 |
|
|
125,855 |
|
Cash and cash equivalents, end of period |
$ |
63,869 |
|
$ |
113,506 |
|
$ |
63,869 |
|
$ |
113,506 |
|
SELECTED NOTES TO THE 2013 CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS ACQUISITIONS
Effective January 11, 2013, Trican acquired all of the issued
and outstanding shares and discharged the existing debt of Petro
Tools Holding AS, the holding company for i-TEC and its
subsidiaries (collectively "i-TEC"), for consideration of $60.6
million, which is made up of cash of $29.7 million, 2,381,381
Trican common shares, issued at $12.73 per share, and deferred
consideration of $0.7 million. In conjunction with the acquisition,
Trican has agreed to pay contingent consideration of up to U.S. $45
million subject to agreed upon financial targets for i-TEC for the
year ended December 31, 2013. Trican has determined the acquisition
date fair value of the contingent consideration to be nil. All of
i-TEC's earnings have been included in Trican's condensed
consolidated statement of comprehensive income since January 11,
2013.
The acquisition date fair values have been accounted as
follows:
|
|
|
Fair value of acquired net assets: |
|
|
|
|
Net working capital (including cash) |
$ |
7,003 |
|
|
Property and equipment |
|
908 |
|
|
Deferred tax liability |
|
(11,735 |
) |
|
Intangible assets |
|
41,894 |
|
|
Goodwill1 |
|
22,558 |
|
|
$ |
60,628 |
|
Financed as follows: |
|
|
|
|
Cash |
$ |
29,663 |
|
|
Shares issued out of treasury |
|
30,315 |
|
|
Deferred consideration |
|
650 |
|
|
$ |
60,628 |
|
TRADE AND OTHER RECEIVABLES
|
December 31, |
|
December 31, |
|
(Stated in thousands) |
2013 |
|
2012 |
|
Trade receivables |
$ |
453,729 |
|
$ |
434,568 |
|
Allowance for doubtful accounts |
|
(5,265 |
) |
|
(4,085 |
) |
Loans and other receivables |
|
20,109 |
|
|
17,222 |
|
Total |
$ |
468,573 |
|
$ |
447,705 |
|
Non-current |
$ |
9,363 |
|
$ |
10,667 |
|
Current |
$ |
459,210 |
|
$ |
437,038 |
|
|
|
INVENTORY
|
December 31, |
December 31, |
(Stated in thousands) |
2013 |
2012 |
Chemicals and consumables |
$ |
106,071 |
$ |
93,502 |
Coiled tubing |
|
21,674 |
|
19,669 |
Parts |
|
105,153 |
|
98,623 |
|
$ |
232,898 |
$ |
211,794 |
PROPERTY AND EQUIPMENT
(stated in thousands) |
Land and buildings |
|
Equipment |
|
Fixtures and fittings |
|
Total |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2012 |
$ |
99,100 |
|
$ |
1,518,796 |
|
$ |
38,023 |
|
$ |
1,655,919 |
|
Additions |
|
14,781 |
|
|
424,127 |
|
|
3,535 |
|
|
442,443 |
|
Disposals |
|
(27 |
) |
|
(18,529 |
) |
|
(92 |
) |
|
(18,648 |
) |
Effect of movements in exchange rates |
|
(457 |
) |
|
(7,710 |
) |
|
(167 |
) |
|
(8,334 |
) |
Balance at December 31, 2012 |
$ |
113,397 |
|
$ |
1,916,684 |
|
$ |
41,299 |
|
$ |
2,071,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions through business combinations |
|
- |
|
|
908 |
|
|
- |
|
|
908 |
|
Additions |
|
22,377 |
|
|
68,301 |
|
|
5,926 |
|
|
96,604 |
|
Disposals |
|
(2,492 |
) |
|
(46,136 |
) |
|
(1,959 |
) |
|
(50,587 |
) |
Effect of movements in exchange rates |
|
3,441 |
|
|
50,086 |
|
|
1,169 |
|
|
54,696 |
|
Balance at December 31, 2013 |
$ |
136,723 |
|
$ |
1,989,843 |
|
$ |
46,435 |
|
$ |
2,173,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2012 |
$ |
18,927 |
|
$ |
433,199 |
|
$ |
25,463 |
|
$ |
477,509 |
|
Depreciation |
|
4,011 |
|
|
141,031 |
|
|
3,398 |
|
|
148,440 |
|
Disposals |
|
- |
|
|
(12,587 |
) |
|
- |
|
|
(12,587 |
) |
Effect of movements in exchange rates |
|
(20 |
) |
|
(498 |
) |
|
(26 |
) |
|
(544 |
) |
Balance at December 31, 2012 |
$ |
22,918 |
|
$ |
561,065 |
|
$ |
28,835 |
|
$ |
612,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
8,142 |
|
|
199,823 |
|
|
6,252 |
|
|
214,217 |
|
Disposals |
|
(828 |
) |
|
(41,162 |
) |
|
(914 |
) |
|
(42,904 |
) |
Effect of movements in exchange rates |
|
565 |
|
|
13,454 |
|
|
639 |
|
|
14,658 |
|
Balance at December 31, 2013 |
$ |
30,798 |
|
$ |
733,180 |
|
$ |
34,812 |
|
$ |
798,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts |
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2012 |
$ |
90,479 |
|
$ |
1,355,619 |
|
$ |
12,464 |
|
$ |
1,458,562 |
|
At December 31, 2013 |
$ |
105,926 |
|
$ |
1,256,663 |
|
$ |
11,623 |
|
$ |
1,374,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included within equipment are assets held under finance lease
with a gross value of $53.2 million (2012 - $53.7 million) and
accumulated depreciation of $28.8 million (2012 - $18.4 million).
The lease obligations are secured by the leased equipment. At
December 31, 2013, Trican had $50.5 million in idle equipment and
$150.4 million in assets under construction which have not been
depreciated. At December 31, 2013, there were no impairment losses
recognized (2012 - nil).
Included in other expense in the consolidated statement of
comprehensive income is a $2.9 million loss relating to the
write-down of unsecured deposits with an insolvent vendor. In
addition, at December 31, 2013, Trican has $8.8 million in assets
under construction with this vendor included in property and
equipment in the statement of financial position. Trican believes
that it currently has legal title to these assets and is confident
in its ability to defend this position. At December 31, 2013 the
Company is the physical custodian of these assets.
INTANGIBLE ASSETS AND GOODWILL
(stated in thousands) |
Goodwill |
|
Patents and know-how |
Non-compete agreements |
|
CBM process |
|
Total intangible assets |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2012 |
$ |
43,706 |
|
$ |
- |
$ |
23,455 |
|
$ |
8,503 |
|
$ |
31,958 |
|
Effect of movements in exchange rates |
|
(17 |
) |
|
- |
|
(462 |
) |
|
(3 |
) |
|
(465 |
) |
Balance at December 31, 2012 |
$ |
43,689 |
|
|
- |
$ |
22,993 |
|
$ |
8,500 |
|
$ |
31,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2013 |
$ |
43,689 |
|
|
- |
$ |
22,993 |
|
$ |
8,500 |
|
$ |
31,493 |
|
Acquisition through business combinations |
|
22,558 |
|
|
41,894 |
|
- |
|
|
- |
|
|
41,894 |
|
Effect of movements in exchange rates |
|
- |
|
|
- |
|
1,436 |
|
|
- |
|
|
1,436 |
|
Balance at December 31, 2013 |
$ |
66,247 |
|
$ |
41,894 |
$ |
24,429 |
|
$ |
8,500 |
|
$ |
74,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization and impairment losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2012 |
$ |
- |
|
$ |
- |
$ |
13,927 |
|
$ |
4,038 |
|
$ |
17,965 |
|
Amortization |
|
- |
|
|
- |
|
2,992 |
|
|
849 |
|
|
3,841 |
|
Effect of movements in exchange rates |
|
- |
|
|
- |
|
(394 |
) |
|
- |
|
|
(394 |
) |
Balance at December 31, 2012 |
$ |
- |
|
|
- |
$ |
16,525 |
|
$ |
4,887 |
|
$ |
21,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2013 |
$ |
- |
|
$ |
- |
$ |
16,525 |
|
$ |
4,887 |
|
$ |
21,412 |
|
Impairment |
|
6,312 |
|
|
- |
|
- |
|
|
- |
|
|
- |
|
Amortization |
|
- |
|
|
4,189 |
|
3,146 |
|
|
850 |
|
|
8,185 |
|
Effect of movements in exchange rates |
|
460 |
|
|
- |
|
941 |
|
|
- |
|
|
941 |
|
Balance at December 31, 2013 |
$ |
6,772 |
|
$ |
4,189 |
$ |
20,612 |
|
$ |
5,737 |
|
$ |
30,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2012 |
$ |
43,689 |
|
|
- |
$ |
6,468 |
|
$ |
3,613 |
|
$ |
10,081 |
|
At December 31, 2013 |
$ |
59,475 |
|
$ |
37,705 |
$ |
3,817 |
|
$ |
2,763 |
|
$ |
44,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRADE AND OTHER PAYABLES
December 31, (Stated in thousands) |
December 31, |
December 31, |
2013 |
2012 |
Trade payables |
|
160,098 |
|
112,141 |
Accrued liabilities |
|
53,888 |
|
40,803 |
Liabilities for cash-settled arrangements |
|
19,443 |
|
14,800 |
Dividend payable |
|
22,338 |
|
21,968 |
Finance lease obligations |
|
11,938 |
|
13,275 |
Other payables |
|
34,215 |
|
25,801 |
Total trade and other payables |
$ |
301,920 |
$ |
228,788 |
LOANS AND BORROWINGS
Bank loans
The Company's Russian subsidiary has a US $20 million (Canadian
equivalent of $21.3 million) demand revolving facility with a large
international bank. This facility is unsecured, bears interest at
LIBOR plus a premium, as determined by the bank, plus 2.75% and has
been guaranteed by the Company. As at December 31, 2013, there was
nothing drawn on this facility (December 31, 2012 - $9.1
million).
Long term debt (Stated in thousands) |
December 31, 2013 |
|
December 31, 2012 |
|
Notes payable |
$ |
456,935 |
|
$ |
430,408 |
|
Finance lease obligations |
|
25,904 |
|
|
36,324 |
|
Revolving credit facilities |
|
212,625 |
|
|
255,693 |
|
Hedge receivable |
|
(9,970 |
) |
|
(5,059 |
) |
Total |
$ |
685,494 |
|
$ |
717,366 |
|
Current portion of finance lease obligations (1) |
|
11,938 |
|
|
13,275 |
|
Russian demand revolving credit facility |
|
- |
|
|
9,119 |
|
Current portion of long-term debt |
|
79,770 |
|
|
- |
|
Non-current |
$ |
593,786 |
|
$ |
694,972 |
|
(1) Current portion of finance lease obligations is included in
trade and other payables.
Trican has a $500.0 million four-year extendible revolving
credit facility ("Revolving Credit Facility") with a syndicate of
banks. The Revolving Credit Facility is unsecured and bears
interest at the applicable Canadian prime rate, U.S. prime rate,
Banker's Acceptance rate, or at LIBOR, plus 50 to 325 basis points,
dependent on certain financial ratios of the Company. On October
17, 2013, the Revolving Credit Facility was extended by an
additional year to 2017.
The Revolving Credit Facility requires Trican to comply with
certain financial and non-financial covenants that are typical for
this type of arrangement. Trican was in compliance with these
covenants at December 31, 2013.
SHARE CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE LOSS
Share capital
Authorized:
The Company is authorized to issue an unlimited number of common
shares, issuable in series. The shares have no par value. All
issued shares are fully paid.
Issued and Outstanding - Common Shares: |
|
|
|
|
(stated in thousands, except share amounts) |
Number of Shares |
|
Amount |
|
Balance, January 1, 2012 |
146,916,859 |
|
$ |
529,062 |
|
Exercise of stock options |
288,718 |
|
|
1,289 |
|
Reclassification from contributed surplus on exercise of
options |
- |
|
|
231 |
|
Shares repurchased and cancelled under NCIB |
(755,400 |
) |
|
(2,722 |
) |
Balance, December 31, 2012 |
146,450,177 |
|
$ |
527,860 |
|
Exercise of stock options |
86,488 |
|
|
1,174 |
|
Reclassification from contributed surplus on exercise of
options |
- |
|
|
374 |
|
Shares issued for acquisition |
2,381,381 |
|
|
30,315 |
|
Balance, December 31, 2013 |
148,918,046 |
|
$ |
559,723 |
|
EARNINGS PER SHARE
(Stated in thousands, except share and per share
amounts) |
|
|
|
|
|
|
|
Three months |
|
Three months |
|
Twelve months |
|
Twelve months |
|
Ended Dec.31 |
|
Ended Dec.31 |
|
Ended Dec.31 |
|
Ended Dec.31 |
Basic Income Per Share |
2013 |
|
2012 |
|
2013 |
|
2012 |
Net
(loss)/income available to common shareholders |
$ |
(20,830 |
) |
(7,741 |
) |
$ |
(45,854 |
) |
$ |
53,674 |
Weighted average number of common shares |
|
148,916,011 |
|
146,450,177 |
|
|
148,815,362 |
|
|
146,619,743 |
Basic (loss) / income per share |
$ |
(0.14 |
) |
(0.05 |
) |
$ |
(0.31 |
) |
$ |
0.37 |
|
|
|
|
|
|
|
|
|
|
|
Diluted Income Per Share |
|
|
|
|
|
|
2013 |
|
|
2012 |
Net
(loss)/income available to common shareholders |
$ |
(20,830 |
) |
(7,741 |
) |
$ |
(45,854 |
) |
$ |
53,674 |
Weighted average number of common shares |
|
148,916,011 |
|
146,450,177 |
|
|
148,815,362 |
|
|
146,619,743 |
Diluted effect of stock options |
|
- |
|
- |
|
|
- |
|
|
70,515 |
Diluted weighted average number of common shares |
|
148,916,011 |
|
146,450,177 |
|
|
148,815,362 |
|
|
146,690,258 |
Diluted (loss)/income per share |
$ |
(0.14 |
) |
(0.05 |
) |
$ |
(0.31 |
) |
$ |
0.37 |
At December 31, 2013, all of the outstanding options have been
excluded from the diluted weighted average number of common shares
as the Company ended the year at a net loss.
INCOME TAXES
|
Three months |
|
Three months |
|
Twelve months |
|
Twelve months |
|
(Stated in thousands) |
Ended Dec.31 |
|
Ended Dec.31 |
|
Ended Dec.31 |
|
Ended Dec.31 |
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
Current tax expense/(recovery) |
|
|
|
|
|
|
|
|
|
|
|
Current year |
7,779 |
|
21,366 |
|
$ |
16,836 |
|
$ |
104,997 |
|
|
Adjustment for prior years |
- |
|
- |
|
|
(1,401 |
) |
|
546 |
|
|
Recognition of previously unrecognized tax losses |
- |
|
- |
|
|
(1,675 |
) |
|
- |
|
|
7,779 |
|
21,366 |
|
$ |
13,760 |
|
$ |
105,543 |
|
Deferred tax expense/(recovery) |
|
|
|
|
|
|
|
|
|
|
|
Deferred tax recovery recognized in the current year |
(24,210 |
) |
(24,323 |
) |
$ |
(42,282 |
) |
$ |
(100,474 |
) |
|
Adjustment for prior years |
- |
|
- |
|
|
219 |
|
|
(245 |
) |
|
(24,210 |
) |
(24,323 |
) |
$ |
(42,063 |
) |
$ |
(100,719 |
) |
Total tax (recovery)/expense |
(16,431 |
) |
(2,957 |
) |
$ |
(28,303 |
) |
$ |
4,824 |
|
The income tax expense differs from that expected by applying
the combined federal and provincial income tax rate of 25.26% (2012
- 25.17%) to income before income taxes for the following
reasons:
(Stated in thousands) For the year ended December 31, |
2013 |
|
2012 |
|
Expected combined federal and provincial income tax |
$ |
(18,946 |
) |
$ |
14,639 |
|
Statutory and other rate differences |
|
(15,862 |
) |
|
(18,489 |
) |
Non-deductible expenses |
|
6,898 |
|
|
5,719 |
|
Stock-based compensation |
|
2,045 |
|
|
2,439 |
|
Translation of foreign subsidiaries |
|
(85 |
) |
|
59 |
|
Adjustments related to prior years |
|
(1,182 |
) |
|
301 |
|
Recognition of previously unrecognized tax losses |
|
(1,675 |
) |
|
- |
|
Changes to deferred income tax rates |
|
517 |
|
|
19 |
|
Capital and other foreign tax |
|
(18 |
) |
|
175 |
|
Other |
|
5 |
|
|
(38 |
) |
|
$ |
(28,303 |
) |
$ |
4,824 |
|
The change in the combined Federal and Provincial statutory tax
rate in Canada from 2012 to 2013 is due to an increase in the
British Columbia provincial tax rate from 10% to 11% effective
April 1, 2013.
Deferred Tax Balances
The components of the deferred tax asset and liability are as
follows:
(Stated in thousands) |
|
|
|
|
For the year ended December 31, |
2013 |
|
2012 |
|
Deferred tax assets: |
|
|
|
|
Goodwill |
$ |
35,507 |
|
$ |
36,297 |
|
Non-capital loss carry forwards |
|
156,470 |
|
|
91,504 |
|
Property, equipment and other assets |
|
(73,077 |
) |
|
(53,942 |
) |
Other |
|
3,845 |
|
|
2,443 |
|
|
$ |
122,745 |
|
$ |
76,302 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
Non-capital loss carry forwards |
$ |
- |
|
$ |
1,707 |
|
Property, equipment and other assets |
|
(38,902 |
) |
|
(38,088 |
) |
Partnership deferral |
|
(41,031 |
) |
|
(42,362 |
) |
Other |
|
(7,072 |
) |
|
1,731 |
|
|
$ |
(87,005 |
) |
$ |
(77,012 |
) |
Included in the above tax pools are $428.4 million (2012 -
$262.6 million) of gross non-capital losses that can be carried
forward to reduce taxable income in future years. These losses are
predominantly in the U.S. and expire between 2029 and 2033.
Deferred tax assets are recognized only to the extent it is
considered probable that those assets will be recoverable. This
involves an assessment of when those deferred tax assets are likely
to reverse, and a judgment as to whether or not there will be
sufficient taxable profits available to offset the tax assets when
they do reverse. This requires assumptions regarding future
profitability and is therefore inherently uncertain.
Deferred tax liabilities of $5.6 million (2012 - $5.0 million)
have not been recognized on the unremitted earnings of the
Company's foreign subsidiaries to the extent that the Company is
able to control the timing of the reversal of the temporary
differences, and it is probable that the temporary differences
would not reverse in the foreseeable future.
OPERATING SEGMENTS
The Company operates in Canada and the U.S. along with a number
of international regions, which include Russia, Kazakhstan,
Algeria, Australia, Saudi Arabia, Colombia and Norway. Each
geographic region has a General Manager that is responsible for the
operation and strategy of their region's business. Personnel
working within the particular geographic region report to the
General Manager; the General Manager reports to the Corporate
Executive.
The Company provides a comprehensive array of specialized
products, equipment, services and technology to customers through
three operating divisions:
- Canadian operations provides cementing, fracturing, coiled
tubing, nitrogen, geological, acidizing, reservoir management,
industrial cleaning and pipeline, and completion systems and
downhole tool services, which are performed on new and existing oil
and gas wells.
- U.S. operations provides cementing, fracturing, coiled tubing,
nitrogen, acidizing and completion systems and downhole tool
services, which are performed on new and existing oil and gas
wells.
- International operations provides cementing, fracturing, coiled
tubing, acidizing, nitrogen, and completion systems and downhole
tool services, which are performed on new and existing oil and gas
wells.
Information regarding the results of each geographic region is
included below. Performance is measured based on revenue and gross
profit as included in the internal management reports, which are
reviewed by the Company's executive management team. Each region's
gross profit is used to measure performance as management believes
that such information is most relevant in evaluating regional
results relative to other entities that operate within the
industry. Transactions between the segments are recorded at cost
and have been eliminated upon consolidation.
|
Canadian Operations |
United States Operations |
|
International Operations |
|
Corporate |
|
Total |
|
Revenue |
$ |
1,021,426 |
$ |
764,962 |
|
$ |
329,084 |
|
$ |
- |
|
$ |
2,115,472 |
|
Gross profit/(loss) |
|
137,768 |
|
(50,537 |
) |
|
11,605 |
|
|
(26,853 |
) |
|
71,983 |
|
Finance income |
|
- |
|
- |
|
|
- |
|
|
(1,748 |
) |
|
(1,748 |
) |
Finance costs |
|
- |
|
- |
|
|
- |
|
|
34,497 |
|
|
34,497 |
|
Impairment |
|
2,870 |
|
- |
|
|
4,123 |
|
|
- |
|
|
6,993 |
|
Tax expense/(recovery) |
|
11,961 |
|
(39,054 |
) |
|
(1,210 |
) |
|
- |
|
|
(28,303 |
) |
Depreciation and amortization |
|
89,716 |
|
103,096 |
|
|
27,284 |
|
|
2,307 |
|
|
222,403 |
|
Assets |
|
963,234 |
|
1,070,487 |
|
|
332,041 |
|
|
47,885 |
|
|
2,413,647 |
|
Goodwill |
|
45,248 |
|
- |
|
|
14,227 |
|
|
- |
|
|
59,475 |
|
Property and equipment |
|
523,594 |
|
728,609 |
|
|
104,943 |
|
|
17,066 |
|
|
1,374,212 |
|
Capital expenditures |
|
32,020 |
|
53,532 |
|
|
21,528 |
|
|
681 |
|
|
107,761 |
|
Year ended December 31, 2012 |
|
|
|
|
|
|
|
|
Revenue |
$ |
1,139,474 |
$ |
797,783 |
|
$ |
276,143 |
|
$ |
- |
|
$ |
2,213,400 |
|
Gross profit/(loss) |
|
286,271 |
|
(77,379 |
) |
|
11,363 |
|
|
(24,735 |
) |
|
195,520 |
|
Finance income |
|
- |
|
- |
|
|
- |
|
|
(2,212 |
) |
|
(2,212 |
) |
Finance costs |
|
- |
|
- |
|
|
- |
|
|
30,497 |
|
|
30,497 |
|
Tax expense/(recovery) |
|
46,884 |
|
(43,471 |
) |
|
883 |
|
|
528 |
|
|
4,824 |
|
Depreciation and amortization |
|
53,810 |
|
71,683 |
|
|
26,422 |
|
|
922 |
|
|
152,837 |
|
Assets |
|
910,888 |
|
1,109,657 |
|
|
323,134 |
|
|
52,840 |
|
|
2,396,519 |
|
Goodwill |
|
22,690 |
|
- |
|
|
20,999 |
|
|
- |
|
|
43,689 |
|
Property and equipment |
|
534,235 |
|
797,841 |
|
|
111,632 |
|
|
14,854 |
|
|
1,458,562 |
|
Capital expenditures |
|
137,477 |
|
258,363 |
|
|
41,666 |
|
|
7,044 |
|
|
444,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FORWARD-LOOKING STATEMENTS
This document contains certain forward-looking information and
financial outlook based on Trican's current expectations,
estimates, projections and assumptions that were made by the
Company in light of information available at the time the statement
was made. Forward-looking information and financial outlook that
address expectations or projections about the future, and other
statements and information about the Company's strategy for growth,
expected and future expenditures, costs, operating and financial
results, future financing and capital activities are
forward-looking statements. Some forward-looking information and
financial outlook are identified by the use of terms and phrases
such as "anticipate," "achieve", "achievable," "believe,"
"estimate," "expect," "intention", "plan", "planned", and other
similar terms and phrases. This forward-looking information and
financial outlook speak only as of the date of this document and we
do not undertake to publicly update this forward-looking
information and financial outlook except in accordance with
applicable securities laws. This forward-looking information and
financial outlook includes, among others:
- The expectation that coil tubing operations will commence in
Saudi Arabia in the first half of 2014;
- The expectation that cementing operations will commence in
Colombia in the first half of 2014;
- The intention to grow our Australian cementing business in
2014;
- The intention to grow our completion tools business in
2014;
- The expectation that Trican's 2014 capital budget will be
approximately $80 - $90 million;
- The belief that Trican has sufficient funding to meet
foreseeable borrowing requirements;
- The expectation that the number of wells drilled in Canada in
2014 will be relatively consistent with 2013 levels;
- The belief that fracturing intensity per well will continue to
increase in 2014 and will lead to an increase in year-over-year
fracturing demand in 2014 in Canada;
- The expectation that fracturing intensity per well will
increase due to a rise in fracturing stages per well and the
expectation that the number of multi-stage horizontal wells drilled
in Canada will increase relative to vertical wells;
- The expectation that fracturing jobs will increase in size in
Canada;
- The expectation that cash flow from our Canadian customers will
increase due to an expected lower Canadian dollar and higher than
forecasted commodity prices;
- The expectation that drilling and completions activity in
Duvernay will increase in 2014;
- The expectation that there will be marginal increase in LNG
related drilling in 2014 in Canada;
- The expectation that a significant amount of pressure pumping
demand will continue to be generated from activity in Montney and
Cardium in 2014;
- The expectation that our fracturing and cementing equipment in
Canada will be fully utilized until spring break-up;
- The expectation that first quarter operating margins in Canada
will increase slightly relative to the fourth quarter in 2013 due
to increased utilization;
- The expectation that Canadian margins in the first quarter of
2014 will decrease to the levels in the first quarter of 2013 due
to lower pricing and increased costs combined with a slow start in
January of 2014;
- The expectation that pricing in Canada will remain stable in
the first quarter of 2014;
- The intention to increase pricing levels in Canada if activity
and demand remain strong during the second half of 2014;
- The expectation that our three fracturing crews in the
Marcellus will be well utilized in the first quarter of 2014 and
contribute sequential improvements in U.S. revenue and operating
income;
- The expectation that the utilization of our existing crew in
Marcellus will be strong in 2014;
- The intention to monitor activity levels in the Marcellus play
and deploy additional horsepower if market conditions continue to
improve in that region;
- The intention to continue focusing on service quality and
improved utilization of our three fracturing crews in the Permian
basin;
- The belief that pricing in the Permian basin will increase when
utilization remains high over a period of time;
- The belief that increased utilization in the Permian will be a
key factor in improving the financial results of our U.S.
operations and will continue to be a strategic focus for
Trican;
- The expectation that fracturing demand will remain stable in
the Eagle Ford, Bakken and Oklahoma regions;
- The expectation that Trican will continue to improve
utilization and decrease costs in the Eagle Ford, Bakken and
Oklahoma regions;
- The expectation that pressure pumping demand in the dry gas
plays in U.S. will not increase in 2014;
- The intention to continue monitoring the activity levels in the
U.S. dry gas plays and react accordingly;
- The expectation that increased sequential activity in the
Marcellus play and the Permian play will lead to increased revenue
and operating income in the first quarter in 2014 compared to the
fourth quarter of 2013;
- The expectation that our U.S. completion tools business will
maintain strong levels of profitability and contribute to
improvements in sequential U.S. operating results;
- The expectation that there will be no improvements in the U.S.
financial results during the first quarter of 2014 compared to the
first quarter of 2013 due to lower year over year pricing;
- The expectation that there will be a year over year increase in
Russian and Kazakhstan oil and gas industry activity and a
continued increase in horizontal multi-stage well completions
during 2014;
- The expectation that 2014 revenue for Russia and Kazakhstan
will be 5% higher compared to 2013 and that the increase is based
on consistent job count combined with a 7% increase in pressure
pumping revenue per job, partially offset by a small decrease in
pressure pumping revenue;
- The expectation that 2014 pricing improvements will only cover
inflationary cost increases in Russia and Kazakhstan;
- The expectation that 2014 Russian and Kazakhstan operating
margins will improve slightly in 2014;
- The expectation that first-quarter activity in Russia and
Kazakhstan will decrease compared with the fourth quarter in 2013
due to extreme cold weather;
- The expectation of revenue growth and improved profitability in
2014 for the international completion tools business;
- The intention to expand our international customer base in
2014;
- The expectation to see improved utilization and profitability
for our Australian cement crews in 2014;
- The intention to expand market share in Australia through sales
and marketing activities as well as offering high service quality
and technical solutions;
- The belief that, if there is no improvement in the utilization
for our two coiled tubing crews in Algeria, Trican will consider
redeploying those assets into more profitable regions;
- The intention to continue establishing our market presence in
Colombia and Saudi Arabia in 2014;
- The intention to become a full service pressure pumping company
in Colombia over time;
- The expectation that the acquisition of i-TEC will provide
growth opportunities and enhance our other pressure pumping service
lines.
Forward-looking information and financial outlook is based on
current expectations, estimates, projections and assumptions, which
we believe are reasonable but which may prove to be incorrect.
Trican's actual results may differ materially from those expressed
or implied and therefore such forward-looking information and
financial outlook should not be unduly relied upon. In addition to
other factors and assumptions which may be identified in this
document, assumptions have been made regarding, among other things:
industry activity; the general stability of the economic and
political environment; effect of market conditions on demand for
the Company's products and services; the ability to obtain
qualified staff, equipment and services in a timely and cost
efficient manner; the ability to operate its business in a safe,
efficient and effective manner; the performance and characteristics
of various business segments; the effect of current plans; the
timing and costs of capital expenditures; future oil and natural
gas prices; currency, exchange and interest rates; the regulatory
framework regarding royalties, taxes and environmental matters in
the jurisdictions in which the Company operates; and the ability of
the Company to successfully market its products and services.
Forward-looking information and financial outlook is subject to
a number of risks and uncertainties, which could cause actual
results to differ materially from those anticipated. These risks
and uncertainties include: fluctuating prices for crude oil and
natural gas; changes in drilling activity; general global economic,
political and business conditions; weather conditions; regulatory
changes; the successful exploitation and integration of technology;
customer acceptance of technology; success in obtaining issued
patents; the potential development of competing technologies by
market competitors; and availability of products, qualified
personnel, manufacturing capacity and raw materials. The foregoing
important factors are not exhaustive. In addition, actual results
could differ materially from those anticipated in forward-looking
information and financial outlook provided herein as a result of
the risk factors set forth under the section entitled "Risks
Factors" in our Annual Information Form dated March 21, 2013.
Readers are also referred to the risk factors and assumptions
described in other documents filed by the Company from time to time
with securities regulatory authorities.
Additional information regarding Trican including Trican's most
recent annual information form is available under Trican's profile
on SEDAR (www.sedar.com).
Trican Well Service Ltd.Dale DusterhoftChief Executive
Officerddusterhoft@trican.caTrican Well Service Ltd.Michael
BaldwinSenior Vice President, Finance &
CFOmbaldwin@trican.caTrican Well Service Ltd.Gary SummachDirector
of Reporting and Investor Relationsgsummach@trican.caTrican Well
Service Ltd.2900, 645 - 7th Avenue S.W.Calgary, Alberta T2P
4G8(403) 266-0202(403) 237-7716www.trican.ca
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