Newalta Reports Third Quarter 2015 Results
/EINPresswire.com/ -- CALGARY, ALBERTA -- (Marketwired) -- 11/04/15 -- Newalta Corporation ("Newalta") (TSX: NAL) today reported results for the three and nine months ended September 30, 2015, and, in response to fundamental changes in the oil and gas industry, also reported the recent completion of a third phase of cost rationalization and a reduction in Newalta's common share dividend effective with the payment in January, 2016.
FINANCIAL HIGHLIGHTS(1)
Three months
ended Nine months ended
September 30, September 30,
($000s except per
share data) % %
(unaudited) 2015 2014 Change(2) 2015 2014 Change(2)
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Continuing
Operations(3)
Revenue 83,502 135,398 (38) 262,919 362,203 (27)
Divisional EBITDA(4) 30,017 59,779 (50) 83,244 146,752 (43)
% of Revenue 36% 44% (18) 32% 41% (22)
Net (loss) earnings
from Continuing
Operations(5) (12,690) 10,596 n/m (49,330) 5,505 n/m
- per share ($)
basic (0.23) 0.19 n/m (0.88) 0.10 n/m
- per share ($)
diluted (0.23) 0.19 n/m (0.88) 0.10 n/m
Adjusted net (loss)
earnings(5) (189) 16,760 (101) (9,364) 28,212 (133)
- per share ($)
basic adjusted(5) - 0.30 (100) (0.17) 0.51 (133)
Adjusted EBITDA(5) 20,067 43,284 (54) 48,439 98,738 (51)
- per share(5) 0.36 0.77 (53) 0.86 1.77 (51)
Cash from Continuing
Operations 36,810 10,843 n/m 29,979 52,960 (43)
- per share ($) 0.65 0.19 n/m 0.53 0.95 (44)
Funds from
operations(5) 16,556 41,115 (60) 22,616 75,822 (70)
- per share ($)(5) 0.29 0.74 (61) 0.40 1.36 (71)
Maintenance capital
expenditures(5) 3,879 6,381 (39) 10,343 15,824 (35)
Growth capital
expenditures(5) 9,818 35,378 (72) 57,770 76,728 (25)
Dividends declared 7,030 6,990 1 21,084 20,097 5
- per share ($)(5) 0.125 0.125 - 0.375 0.360 4
Dividends paid 7,030 5,567 26 19,780 15,006 32
Weighted average
Shares outstanding 56,237 55,901 1 56,216 55,734 1
Shares outstanding,
September 30,(6) 56,237 55,923 1 56,237 55,923 1
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Combined
Operations(3)
Revenue 83,502 228,431 (63) 305,027 629,325 (52)
Net (loss) earnings (15,662) 16,570 (195) (56,692) 14,890 n/m
- per share ($)
basic (0.28) 0.30 (193) (1.01) 0.27 n/m
- per share ($)
diluted (0.28) 0.29 (197) (1.01) 0.26 n/m
Cash from Operating
Activities 32,758 27,649 18 4,486 64,507 (93)
- per share ($)
basic 0.58 0.49 18 0.08 1.16 (93)
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(1) Newalta's unaudited Condensed Consolidated Financial Statements are
attached. References to Generally Accepted Accounting Principles (GAAP) are
synonymous with IFRS and references to unaudited Condensed Consolidated
Financial Statements and notes are synonymous with Financial Statements.
All financial figures are unaudited.
(2) n/m Indicates the percentage change is not meaningful.
(3) In Q1 2015, we completed the sale of our Industrial Division to
Revolution. As a result, we have defined our Industrial Division as
"Discontinued Operations", the remaining operations as "Continuing
Operations" and the total Discontinued Operations and Continuing Operations
as "Combined Operations". In accordance with the requirements of IFRS 5
Non-current Assets Held for Sale and Discontinued Operations, income and
expenses and cash flow provided and used associated with the business to be
sold have been classified as Discontinued Operations in our Financial
Statements for the periods presented.
(4) As a result of the change in our financial statement presentation from
functional to nature based, we have reclassified the sales expense directly
attributable to the divisions from Corporate and Other to the respective
division. Prior period comparative figures have been amended to conform to
current period's presentation. Please refer to "Reporting Structure" for
the restated the historical segmented information and key metrics.
(5)These financial measures do not have any standardized meaning prescribed
by GAAP and are therefore unlikely to be comparable to similar measures
presented by other issuers. Non-GAAP financial measures are identified and
defined.
(6) Newalta has 56,236,548 Shares outstanding as at November 4, 2015.
MANAGEMENT COMMENTARY
"Third quarter revenue and Adjusted EBITDA were 38% and 54% lower than a year ago, in line with previous guidance, adjusted for the sub US$40 WTI oil prices in the quarter," said John Barkhouse, President and CEO. "While we offset some of this impact with significant cost reductions and the ongoing cash flows provided by our contract model, it's clear that new industry realities have set in. Accordingly, we triggered a third phase of our cost rationalization program which will drive an incremental $5 million in annualized savings. Lower overhead combined with growth initiatives will help to sustain our business but in this environment, additional action is warranted. Accordingly, the Board approved a 50% reduction to our quarterly dividend effective for the dividend payable to shareholders of record as of December 31, 2015. This reduction will preserve cash flow and align payouts with our previously stated strategic target of 15% to 20% of forward looking cash flows. These steps protect our balance sheet and ensure Newalta retains the strength to build on its environmental energy services industry leadership."
On the strength of our balance sheet, Senior Debt to EBITDA ratio and effective working capital management, we also increased financial flexibility for the next two years by securing a waiver of the Total Debt to EBITDA covenant under our credit facility.
"This spring, oil traded at a level of approximately US$50-60 WTI, which would have allowed us to show marked improvement in the second half of 2015. Instead, oil prices dropped approximately 30% to around US$40 and dipped even lower for several days. At these levels, some producers have shut-in wells, minimized maintenance activities, deferred capital spending and taken to managing their own waste to the extent possible.
"Newalta has proactively structured its business model to meet these challenges and our initiatives to strengthen our business provide the agility and balance sheet strength to weather this sustained downturn," said Mr. Barkhouse. "While we expect to continue to benefit from these actions, our revised guidance for the final quarter of 2015 is that Adjusted EBITDA will be lower than in the third quarter of this year. Despite the low oil price environment, we will target to be Free Cash Flow neutral commencing in 2016 and positive thereafter."
Newalta continues to focus on value creation for customers and shareholders using the strategies and approach of our Vision 2020 plan. This includes targeted investments and growth initiatives such as the extension of our contract at Syncrude's full-scale facility at Mildred Lake to March 2017. Vision 2020, launched in May 2015, directs Newalta to enhance the recovery of value from oil and gas waste streams for our customers at each stage of drilling, completions, production and reclamation using a business approach called Sustainability Simplified™ and to enhance performance for our shareholders with emphasis on improving corporate scale and operating footprint geographically, growing our onsite business and contracts and leveraging our core capabilities to add differentiated services.
THIRD QUARTER RESULTS
Continuing Operations reflect the ongoing pure play environmental energy services business of Newalta and exclude the Industrial Division which was sold in the first quarter. Newalta's Continuing Operations include two divisions - Heavy Oil and Oilfield - a structure adopted in Q1 2015 to more closely align operations with customer activities, facilitate a seamless service package to customers, optimize our resource allocations, and aid in the execution of our growth strategies.
Continuing Operations
Q3 revenue and Adjusted EBITDA decreased 38% and 54%, respectively, to $83.5 million and $20.1 million compared to prior year. Performance in the third quarter of 2015 was significantly impacted by fundamental industry changes. Crude oil prices (WTI) hovered around $40 per bbl throughout August and September dipping below $40 for several days. This low price environment had significant impacts on the industry. Certain producers shut-in wells and minimized maintenance activities such as well work-overs and turn-arounds. To the extent possible, producers reduced volumes and the quality of waste available in the market. In addition, producers continued to review and defer projects and capital spending. These actions reduced production-driven volumes available for processing in the market, driving increased competition and competitive pricing actions. At our Canadian Oilfield Facilities, production-driven volumes decreased by over 40% while volumes at our Heavy Oil Facilities decreased 30%. In combination, these factors drove $17.4 million of the $23.2 million decline in Q3 Adjusted EBITDA compared to prior year. The balance was driven by both lower drilling activity and crude oil prices ($9.6 million and $5.3 million, respectively). These factors were partially offset by cost savings of approximately $9.1 million realized in the third quarter. Net loss from Continuing Operations for the quarter was $12.7 million compared to income of $10.6 million in the prior year. Lower EBITDA was partially offset by lower finance charges and stock-based compensation.
In response to the severe decline in activity levels and crude oil prices, we actioned the following steps to protect our profitability and balance sheet:
-- We initiated the third phase of our cost rationalization program, which
will drive an incremental $5 million in annualized savings. Actions over
the three phases included the elimination of positions, office space
consolidation and the suspension of the company-matching payments in our
employee savings plans. In combination, we have realized $9.1 million
and $19.4 million in savings in the quarter and year-to-date,
respectively. We expect to realize approximately $30 million in cost
savings in 2015 and in excess of $35 million on an annualized basis.
-- We secured a waiver of our Total Debt to EBITDA covenant under our
Credit Facility, in effect to June 2017. The waiver was granted based on
the strength of our balance sheet, our effective working capital
management and our strong Senior Debt to EBITDA ratio. The waiver
provides us with increased financial flexibility in this low oil price
and activity environment.
-- We recommended and the Board approved a 50% reduction to our quarterly
dividend effective for the dividend payable to shareholders of record as
of December 31, 2015. This reduction will preserve cash flow and align
our payouts with our previously stated strategic target of 15% to 20% of
forward looking cash flows.
Our contract model has performed well during this downturn, continuing to provide steady, predictable cash flow. These contracts generally are not tied directly to commodity price changes or drilling activity and provide a solid foundation for our business, particularly in depressed markets. On a trailing-twelve month basis, contracts represented 29% of our revenue.
Year-to-date Adjusted EBITDA was $48.4 million, down 51% over prior year, reflecting the same factors as the quarter, with the decline in drilling activity having a greater impact. Year-to-date, Net loss from Continuing Operations was $49.3 million compared to $5.5 million net income in the prior year, reflecting the same factors as the quarter and higher restructuring and other related costs and impairment.
Q3 2015 and year-to-date G&A decreased 40% and 28% to $10.0 million and $34.8 million, respectively. The improvement reflects the cost rationalization initiatives commenced in Q1 2015. During the quarter, we incurred $2.7 million in restructuring and other related costs, comprised primarily of severance and related costs. Year-to-date restructuring and other related costs were $28.1 million, comprised almost equally of severance and related costs and non-cash onerous lease costs. Of the year-to-date employee termination and other costs, 70% were in corporate overhead with the balance in operations ($1.6 million, in Heavy Oil and $3.0 million in Oilfield).
Divisional Results
Heavy Oil revenue and Divisional EBITDA in the quarter decreased by 28% and 34%, respectively, to $40.3 million and $18.4 million compared to prior year. Contributions from both Heavy Oil Facilities and Onsite were weighed down by reduced activity in the heavy oil sector and lower crude oil prices. Year-to-date, revenue and Divisional EBITDA decreased by 21% and 34%, respectively, to $115.4 million and $44.5 million compared to prior year. The decrease was driven by lower contributions from Heavy Oil Facilities. Onsite contributions were relatively flat, supported by our mature fine tailings (MFT) contracts.
Year-to-date, Heavy Oil made progress with several growth initiatives:
-- Completed construction of the second MFT plant at Shell Canada Limited's
(Shell) Jackpine Mine and began MFT processing in the first quarter.
-- Signed an extension on the original Syncrude MFT contract to operate in
the second half of 2015.
-- Signed an extension on the contract at Syncrude's full-scale facility at
Mildred Lake in the third quarter.
-- Completed construction and commissioning of the Fort McMurray full-
service facility to serve the oil sands in Q2.
-- Completed commissioning and began operations late in the third quarter
at our new modular processing facility (MPF) near Silver Lake,
Saskatchewan.
Oilfield revenue and Divisional EBITDA in the quarter decreased 45% and 64%, respectively, to $43.2 million and $11.6 million. Performance was driven by lower contributions from both Oilfield Facilities and Drilling Services due primarily to reduced production and drilling activity and lower crude oil prices. Year-to-date Oilfield revenue and Divisional EBITDA decreased 32% and 51%, respectively, to $147.5 million and $38.8 million compared to prior year. Results were impacted by the same factors as the quarter with drilling activity and crude oil prices having a more significant impact on year-to-date results.
Year-to-date, Oilfield made progress with several growth initiatives:
-- Entered into a joint venture agreement with a midstream provider in Q2
for one commissioned MPF, which is anticipated to be expanded to include
a full-service offering to customers.
-- Completed commissioning of the Alexander, North Dakota MPF in the Bakken
early in Q1.
-- Completed construction and commissioning at two new MPFs at Fox Creek
and Gold Creek, Alberta in Q1.
-- Completed construction of our Gold Creek Landfill and commenced
operations mid October 2015. The landfill is strategically located near
our Gold Creek MPF to improve operational efficiencies and provide a
seamless service for our customers.
Capital expenditures for the three and nine months ended September 30, 2015 were $13.7 million and $68.1 million. Throughout 2015, we have focused our capital deployment on strategic markets. In Heavy Oil, growth capital was allocated to our new Fort McMurray facility to serve the oil sands and the Silver Lake MPF to serve the conventional heavy oil market. In Oilfield, our resources have been focused on expanding our footprint in the Montenay/Duvernay and Deep Basin plays in Canada through our new locations at Fox Creek and Gold Creek, AB and in the U.S. at our MPF in Bakken.
At September 30, 2015, Total Debt was $333.4 million, reduced by $138.8 million from December 31, 2014. Senior Secured Debt to EBITDA at September 30, 2015 was 0.76.
Discontinued Operations
Q3 2015 Discontinued Operations net loss before loss on sale was $0.4 million compared to net earnings of $6.0 million in prior year. Q3 2015 results reflect customary purchase price adjustments. Year-to-date, net loss before loss on sale was $7.7 million compared to net earnings of $9.4 million in prior year. The decrease in performance was driven by the timing of the sale in February.
Credit Facility Waiver
During Q3, we amended the Credit Facility to include a waiver of the Total Debt to EBITDA financial covenant and a reduction in the Interest Coverage Ratio covenant from 2.25x to 2.00x minimum, with each of these covenant amendments to take effect at the end of Q3 through to June 30, 2017. These amendments were granted based on the strength of our balance sheet and strong Senior Secured Debt to EBITDA ratio and provide us with increased financial flexibility in this period of uncertain market conditions.
Dividends
In determining the dividend to be paid to our shareholders, the Board of Directors considers a number of factors, including: the forecasts for operating and financial results, maintenance and growth capital requirements, as well as market activity and conditions. After review of all factors, the Board declared $7.0 million in dividends or $0.125 per share, paid October 15, 2015, to shareholders on record as at September 30, 2015.
The Board reviews dividends on a quarterly basis. In light of the current market environment and outlook, the Board approved a 50% reduction in the quarterly cash dividend to $0.0625 ($0.25 per share annualized) from the current rate of $0.50 annualized, effective for the dividend payable to shareholders of record as of December 31, 2015.
The following section contains forward-looking information as it outlines our Outlook for 2015. Our Outlook is based on several key assumptions including growth capital contributions, commodity prices and activity levels of the industries we serve. Changes to these assumptions could cause our actual results to differ materially.
OUTLOOK
Our performance in 2015 has been significantly impacted by the sharp drop in oil prices and activity levels in the oil and gas industry. The magnitude of this downturn is expected to continue to impact our results for the balance of 2015. During the third quarter, oil prices dropped below $40/bbl, outside of our previous guidance, and drove corresponding behavioral and market shifts. As a result, we have reduced our guidance for the final quarter of 2015, with the incremental decline reflecting reduced production volumes and pricing pressure partially offset by additional savings from our rationalization initiatives.
Adjusted EBITDA in the fourth quarter of 2015 is expected to be lower than the third quarter. Low crude oil prices and activity declines exacerbated by an anticipated early shut down for the holiday season are expected to continue to impact our results. Operations at our full-service facility in Fort McMurray and the Silver Lake modular processing facility (MPF) in Heavy Oil and at our Fox Creek and Gold Creek MPF and landfill in Oilfield will continue to ramp up. Contributions will be lower than previously expected as a result of the decreased activity experienced in the third quarter. In Heavy Oil, Onsite contributions will be seasonally lower and further impacted by the hibernation of our original Syncrude MFT contract. We expect to realize approximately $10 million of savings in the fourth quarter from our cost rationalization actions taken in the year.
The following table outlines the factors we expect to impact performance in the fourth quarter and full year.
Expected impact on Adjusted
EBITDA compared to prior year
Factor Assumption period(1)
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Q4 and Full
Q3 2015(1) year Q4 2015 2015
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West Texas Q4 2015: $40 -
Intermediate $46.41 $50
(US$/bbl) 2015: $48 - $52
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Canadian Light Q4 2015: $50 -
Sweet $54.71 $60 $1M - $2M $10M - $11M
(CDN$/bbl)(2) 2015: $55 - $60 decrease decrease
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Western Canadian Q4 2015: $40 -
Select $43.29 $50 $1M - $2M $8M - $9M
(CDN$/bbl)(2) 2015: $45 - $48 decrease decrease
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Drilling
activity(2) approx. $8M - $9M $33M - $34M
decline year- 50% 50% - 55% decrease decrease
over-year
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$15M - $20M $44M - $49M
Step Change(3) ($17.4M) decrease decrease
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In excess of
Savings from cost $9.1 M $35 million $10M increase $29M increase
rationalization annualized
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(1) M refers to millions.
(2) Impact derived from annual sensitivities based on 2015 forecast
performance and volumes outlined in the "Sensitivities" section. The actual
impact from crude oil prices may vary with fluctuations in volumes.
(3) This factor is expected to have an impact on our performance through the
year, and cannot be quantified on any linear sensitivity.
The expected impact of crude oil prices on Adjusted EBITDA is derived from the change in crude oil price and annual recovered crude oil volumes. At current activity levels, we expect to recover fewer barrels of crude oil in 2015 compared to 2014. This decrease reduces our sensitivity on an annual basis. For every $10 change in our Canadian benchmarks we expect a $6 million change in Adjusted EBITDA in 2015, compared to an $8 million change in 2014. The impact of the reduced volumes has increased the expected impact on performance from Step Change in 2015.
Crude oil prices
-- Lower crude oil prices directly impact the value of the products we
recover from waste. Year-to-date, crude oil prices have dropped more
than 40% compared to 2014. We anticipate oil prices to remain low for
the balance of 2015 and into 2016.
Drilling Activity
-- Since December 2014, drilling activity in areas where we operate has
declined approximately 50%. We anticipate drilling activity to remain
depressed for the balance of 2015, with a staged recovery commencing in
the second half of 2016.
Step Change (Production waste volumes, shifts in waste mix, customer pricing reductions, offset by returns from growth capital and operational efficiencies)
-- In response to the significant market declines experienced in the third
quarter, we have increased the expected impact of step change on our
fourth quarter and 2015 results.
-- In the fourth quarter, we expect heightened pricing pressure and lower
production volumes, as experienced in Q3 2015, to continue.
-- We are working with our customers to bundle opportunities, partner
through contractual relationships, collaborating with our suppliers and
reducing our operating cost structure to mitigate the impact of pricing
pressure.
-- In 2014, growth capital of $130 million was directed to our Heavy Oil
and Oilfield Divisions. Year-to-date, the severe decline in crude oil
prices and activity has reduced contributions from these investments. We
expect this trend to continue for the balance of 2015 and into 2016.
Savings from Cost Rationalization
-- We anticipate cost reduction and rationalization initiatives will drive
in excess of $35 million in annualized ongoing savings and approximately
$30 million in 2015.
Net Debt and Leverage
The waiver of our Total Debt to EBITDA covenant ratio under our Credit Facility provides us with additional flexibility to manage our balance sheet successfully during this downturn. Management of our debt leverage and optimal use of our cash and capital are of the highest priority. We will remain well within our remaining debt covenants throughout the balance of the year.
Restructuring and Other Related Costs
We expect to incur approximately $4 million in additional restructuring and other related costs in the fourth quarter of 2015.
Free Cash Flow Generation
We have proactively structured our business model for a "lower for longer" environment. Our rationalization initiatives, waiver on our Total Debt to EBITDA ratio, reduced dividend payout and continued focus on effective and timely capital execution give us agility and balance sheet strength to weather this sustained downturn. Our 2015 growth capital investments, including the Fort McMurray facility, the four new MPFs in Canada and the Bakken, are strategically located and provide torque to our business model as prices and activity recover. Going forward, we will continue to focus on value creation for our customers. Further, in 2016, despite the low oil price environment, we will target to be Free Cash Flow neutral, after all cash financing, tax, dividend and capital expenditures. Beyond 2016, we will target positive Free Cash Flow generation.
With crude oil prices below US$50 WTI and current activity levels, our previous guidance for 2016 based on oil between US$50 - $60 WTI for Adjusted EBITDA ranging from $120 to $140 million, is no longer valid. Given the current environment, we will provide guidance on 2016 results as we move through the next year and are better positioned to assess developments in commodity prices, drilling activity and customer spending.
Quarterly Conference Call
Management will hold a conference call on November 5, 2015 at 11:00 a.m. (ET) to discuss Newalta's performance for the quarter ended September 30, 2015. To participate in the teleconference, please call 416-340-8010 or toll free 866-226-1798. To access the simultaneous webcast, please visit www.newalta.com. For those unable to listen to the live call, a taped broadcast will be available at www.newalta.com and, until midnight on Friday, November 13, 2015, by dialing 800-408-3053 and using pass code 4737155.
About Newalta
Newalta is a leading provider of innovative engineered environmental solutions that enable customers to reduce disposal, enhance recycling and recover valuable resources from oil and gas exploration and production waste streams. We simplify the critical challenges of sustainable environmental practices through the use of advanced processing capabilities deployed through a differentiated business model. We serve customers onsite directly at their operations and through a network of locations throughout North America. Our proven processes and excellent record of safety make us the first-choice provider of sustainability-enhancing services for oil and gas customers. With a highly skilled team of people, a two-decade track record of innovation and a commitment to commercializing new solutions, Newalta is positioned for sustained future growth and improvement. We are Sustainability Simplified™. Newalta trades on the TSX as NAL. For more information, visit www.newalta.com.
The press release contains certain statements that constitute forward-looking information. Please refer to the section below "Forward-Looking Information", for further discussion of assumptions and risks relating to this forward looking information.
The unaudited interim Condensed Consolidated Financial Statements and MD&A, which contain additional notes and disclosures, are available on SEDAR at www.sedar.com or our website at www.newalta.com under Investor Relations/Financial Reports.
SELECTED FINANCIAL INFORMATION
Three months
ended Nine months ended
September 30, September 30,
($000s except per
share data)
(unaudited) 2015 2014 % Change 2015 2014 % Change
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Heavy Oil
Revenue 40,328 56,256 (28) 115,427 146,598 (21)
Divisional EBITDA(1) 18,434 27,836 (34) 44,479 67,329 (34)
- % of revenue 46% 49% (6) 39% 44% (15)
Revenue by Business
Unit
Facilities 26% 35% (26) 25% 37% (32)
Onsite 74% 65% 14 75% 63% 19
Assets Employed(2) 278,465 237,148 17
Oilfield
Revenue 43,174 79,142 (45) 147,492 215,605 (32)
Divisional EBITDA(1) 11,583 31,943 (64) 38,765 79,423 (51)
- % of revenue 27% 40% (33) 26% 37% (30)
Revenue by Business
Unit
Facilities 73% 69% 6 72% 73% (1)
Drilling Services 27% 31% (13) 28% 27% 4
Assets Employed(2) 538,422 490,838 10
Capital Expenditures
Maintenance capital
expenditures 3,879 6,381 (39) 10,343 15,824 (35)
Heavy Oil 2,165 1,594 36 6,315 5,598 13
Oilfield 1,268 3,685 (66) 1,875 7,069 (73)
Growth capital
expenditures 9,818 35,378 (72) 57,770 76,728 (25)
Heavy Oil 4,377 18,560 (76) 22,854 32,732 (30)
Oilfield 4,092 14,168 (71) 29,452 35,720 (18)
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(1) Divisional EBITDA does not have any standardized meaning prescribed by
GAAP.
(2) Assets employed is provided to assist management and investors in
determining the effectiveness of the use of the assets at a divisional
level. Assets employed is the sum of capital assets, intangible assets and
goodwill allocated to each division. Assets employed as defined does not
include capital assets held by corporate. Corporate assets include
information technology, leasehold improvements, and technical development.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - Expressed in thousands of Canadian Dollars)
September 30, December 31,
2015 2014
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Assets
Current assets
Cash 2,998 4,129
Accounts and other receivables 71,073 104,945
Inventories 5,225 7,681
Prepaid expenses and other assets 5,628 9,150
Assets held for sale - 365,262
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84,924 491,167
Non-current assets
Property, plant and equipment 835,387 804,522
Other long-term assets 4,775 8,953
Goodwill 60,443 60,443
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TOTAL ASSETS 985,529 1,365,085
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Liabilities
Current liabilities
Accounts payable and accrued liabilities 94,414 170,541
Dividends payable 7,030 7,003
Liabilities held for sale - 97,131
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101,444 274,675
Non-current liabilities
Senior secured debt 40,091 183,104
Senior unsecured debentures 271,390 270,837
Other liabilities 672 1,973
Deferred tax liability 23,254 43,180
Provisions 84,186 68,410
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TOTAL LIABILITIES 521,037 842,179
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Shareholders' Equity
Shareholders' capital 426,061 422,991
Contributed surplus 11,760 10,916
Retained (deficit) earnings (1,715) 76,061
Accumulated other comprehensive income 28,386 12,938
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TOTAL SHAREHOLDERS' EQUITY 464,492 522,906
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 985,529 1,365,085
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - Expressed in thousands of Canadian Dollars)
(Except per share data)
For the three
months ended For the nine months
September 30, ended September 30,
2015 2014 2015 2014
----------------------------------------------------------------------------
Revenue 83,502 135,398 262,919 362,203
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Operating expenses 53,485 75,619 179,675 215,451
General and administrative 9,950 16,495 34,805 48,014
Depreciation and amortization 16,020 14,901 45,803 37,157
Stock-based compensation
(recovery) expense (2,406) 2,850 (3,376) 10,540
Restructuring and other related
costs 2,683 - 28,146 526
Impairment 9,049 - 14,794 -
Finance charges 6,498 6,943 20,891 26,651
Embedded derivative loss 3,175 3,314 402 11,641
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Total expenses 98,454 120,122 321,140 349,980
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(Loss) earnings before income taxes (14,952) 15,276 (58,221) 12,223
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Deferred income tax (recovery)
expense (2,262) 4,680 (8,891) 6,718
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Net (loss) earnings from continuing
operations (12,690) 10,596 (49,330) 5,505
Net (loss) earnings from
discontinued operations (2,972) 5,974 (7,362) 9,385
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Net (loss) earnings (15,662) 16,570 (56,692) 14,890
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Other comprehensive income:
Items that may be reclassified
subsequently to consolidated
statement of operations
Exchange difference on translating
foreign operations 8,194 5,532 15,448 5,552
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Other comprehensive income 8,194 5,532 15,448 5,552
----------------------------------------------------------------------------
Total comprehensive (loss) income (7,468) 22,102 (41,244) 20,442
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(Loss) earnings per share:
Basic from continuing operations (0.23) 0.19 (0.88) 0.10
Basic from discontinued operations (0.05) 0.11 (0.13) 0.17
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Basic (loss) earnings per share (0.28) 0.30 (1.01) 0.27
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Diluted from continuing operations (0.23) 0.19 (0.88) 0.10
Diluted from discontinued
operations (0.05) 0.10 (0.13) 0.16
----------------------------------------------------------------------------
Diluted (loss) earnings per share (0.28) 0.29 (1.01) 0.26
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited - Expressed in thousands of Canadian Dollars)
Accumulated
Retained other
Shareholders' Contributed (deficit) comprehensive
capital surplus earnings income Total
----------------------------------------------------------------------------
Balance,
December 31,
2013 409,894 15,251 245,834 4,183 675,162
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Changes in
equity for the
nine months
ended September
30, 2014
Expense related
to vesting of
options - 1,968 - - 1,968
Exercise of
options 6,880 (6,409) - - 471
Issuance of
shares 4,187 - - - 4,187
Dividends
declared - - (20,097) - (20,097)
Other
comprehensive
income - - - 5,552 5,552
Net earnings for
the period - - 14,890 - 14,890
----------------------------------------------------------------------------
Balance,
September 30,
2014 420,961 10,810 240,627 9,735 682,133
----------------------------------------------------------------------------
Changes in
equity for the
three months
ended December
31, 2014
Expense related
to vesting of
options - 675 - - 675
Exercise of
options 569 (569) - - -
Issuance of
shares 1,461 - - - 1,461
Dividends
declared - - (7,003) - (7,003)
Other
comprehensive
income - - - 3,203 3,203
Net loss for the
period - - (157,563) - (157,563)
----------------------------------------------------------------------------
Balance,
December 31,
2014 422,991 10,916 76,061 12,938 522,906
----------------------------------------------------------------------------
Changes in
equity for the
nine months
ended September
30, 2015
Expense related
to vesting of
options - 2,277 - - 2,277
Exercise of
options 1,791 (1,433) - - 358
Issuance of
shares 1,279 - - - 1,279
Dividends
declared - - (21,084) - (21,084)
Other
comprehensive
income - - - 15,448 15,448
Net loss for the
period - - (56,692) - (56,692)
----------------------------------------------------------------------------
Balance,
September 30,
2015 426,061 11,760 (1,715) 28,386 464,492
----------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - Expressed in thousands of Canadian Dollars)
For the three months For the nine months
ended September 30, ended September 30,
2015 2014 2015 2014
----------------------------------------------------------------------------
Cash provided by (used for):
Operating Activities
Net (loss) income from
continuing operations (12,690) 10,596 (49,330) 5,505
Adjustments for:
Depreciation and amortization 16,020 14,901 45,803 37,157
Impairment 9,049 - 14,794 -
Onerous lease (150) - 12,731 -
Onerous lease paid (1,029) - (2,108) -
Income tax provision (2,262) 4,680 (8,891) 6,718
Income tax paid (11) (5) (161) (12)
Non-cash stock-based
compensation (recovery)
expense (2,407) 2,193 (4,446) 6,230
Finance charges 6,498 6,943 20,891 26,651
Embedded derivative loss 3,175 3,314 402 11,641
Finance charges paid (471) (1,893) (10,001) (18,740)
Other 834 386 2,932 672
----------------------------------------------------------------------------
Funds from Operations 16,556 41,115 22,616 75,822
Change in non-cash working
capital 20,505 (29,341) 8,414 (20,649)
Decommissioning costs incurred (251) (931) (1,051) (2,213)
----------------------------------------------------------------------------
Cash from continuing operations 36,810 10,843 29,979 52,960
Cash (used in) from discontinued
operations (4,052) 16,806 (25,493) 11,547
----------------------------------------------------------------------------
Cash from Operating Activities 32,758 27,649 4,486 64,507
----------------------------------------------------------------------------
Investing Activities
Additions to property, plant
and equipment (20,144) (30,371) (123,097) (117,520)
(Adjustment) proceeds on sale
of discontinued operations (15,701) - 279,646 -
Proceeds on sale of property,
plant and equipment 293 1 718 562
Other 907 (95) 7,148 (1,135)
----------------------------------------------------------------------------
Cash (used in) from continuing
operations (34,645) (30,465) 164,415 (118,093)
Cash used in discontinued
operations - (4,979) (4,041) (14,242)
----------------------------------------------------------------------------
Cash (used in) from Investing
Activities (34,645) (35,444) 160,374 (132,335)
----------------------------------------------------------------------------
Financing Activities
Issuance of shares - 237 358 469
Issuance of series 3 senior
unsecured debentures - - - 147,069
Redemption of series 1 senior
unsecured debentures - - - (125,000)
Increase (decrease) in senior
secured debt 15,143 13,613 (143,013) 66,626
Decrease in bank indebtedness (1,711) - - (1,321)
Dividends paid (7,030) (5,567) (19,780) (15,006)
----------------------------------------------------------------------------
Cash from (used in) continuing
operations 6,402 8,283 (162,435) 72,837
----------------------------------------------------------------------------
Cash from (used in) Financing
Activities 6,402 8,283 (162,435) 72,837
----------------------------------------------------------------------------
Effect of foreign exchange on
cash (1,517) (650) (3,556) (495)
----------------------------------------------------------------------------
Change in cash 2,998 (162) (1,131) 4,514
Cash, beginning of period - 4,676 4,129 -
----------------------------------------------------------------------------
Cash, end of period 2,998 4,514 2,998 4,514
----------------------------------------------------------------------------
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document constitute "forward-looking information" as defined under applicable securities laws. When used in this document, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "potential", "strategy", "target", and similar expressions, as they relate to Newalta Corporation and the subsidiaries of Newalta Corporation, or their management, are intended to identify forward-looking information. In particular, forward-looking information included or incorporated by reference in this document includes statements with respect to:
-- future operating and financial results;
-- business prospects and strategy including related timelines;
-- capital expenditure programs and other expenditures;
-- realization of anticipated benefits from the sale of the Industrial
Division, including the ability to reinvest net proceeds of disposition
in a timely and efficient manner;
-- realization of anticipated benefits of growth capital investments,
acquisitions, divestitures and our innovation and process development
initiatives;
-- realization of anticipated benefits from the implementation of cost
rationalization initiatives including the anticipated value and
sustainability of the cash savings from such initiatives;
-- anticipated industry activity levels;
-- anticipated commodity prices;
-- expected demand for our services;
-- expected expansion opportunities for our business;
-- the amount of dividends declared or payable in the future;
-- our projected cost structure; and
-- expectations and implications of changes in legislation.
Expected future financial and operating performance and related assumptions are set out under "Outlook".
Such information reflects our current views with respect to future events and is subject to certain risks, uncertainties and assumptions, including, without limitation:
-- strength of the oil and gas industry, including drilling activity;
-- general market conditions;
-- fluctuations in commodity prices for oil and the price we receive for
our recovered oil;
-- fluctuations in interest rates and exchange rates;
-- our ability to secure future capital to support and develop our
business, including the issuance of additional common shares;
-- the highly regulated nature of the environmental services and waste
management business in which we operate;
-- dependence on our senior management team and other operations management
personnel with waste industry experience;
-- the competitive environment of our industry in Canada and the U.S.;
-- success of our growth, acquisition and innovation and process
development strategies, including integration of businesses and
processes into our operations, and potential liabilities from
acquisitions;
-- potential operational and safety risks and hazards, obtaining insurance
for such risks and hazards on reasonable financial terms, and potential
failure of meeting customer safety standards;
-- the seasonal nature of our operations;
-- risk of pending and future legal proceedings;
-- risk to our reputation;
-- our ability to attract, retain, and integrate skilled employees;
-- open access for new industry entrants and the general unprotected nature
of technology used in the waste industry;
-- possible volatility of the price of, and the market for, our shares, and
potential dilution for shareholders in the event of a sale of additional
shares;
-- financial covenants in our debt agreements that may restrict our ability
to engage in transactions or to obtain additional financing;
-- costs associated with operating our landfills; and
-- such other risks or factors described from time to time in reports we
file with securities regulatory authorities.
By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking information will not occur. Many other factors could also cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking information and readers are cautioned that the foregoing list of factors is not exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Furthermore, the forward-looking information contained in this document is made as of the date of this document and, in each case, is expressly qualified by this cautionary statement. Unless otherwise required by law, we do not intend, or assume any obligation, to update any such forward-looking information.
RECONCILIATION OF NON-GAAP MEASURES
This Press Release contains references to certain financial measures, including some that do not have any standardized meaning prescribed by International Financial Reporting Standards (IFRS or GAAP) and may not be comparable to similar measures presented by other corporations or entities. These financial measures are identified and defined below.
"EBITDA", "EBITDA per share", "Adjusted EBITDA", and "Adjusted EBITDA per share" are measures of our operating profitability. EBITDA provides an indication of the results generated by our principal business activities prior to how these activities are financed, assets are amortized or impaired, or how the results are taxed in various jurisdictions. In addition, Adjusted EBITDA provides an indication of the results generated by our principal business activities prior to recognizing stock-based compensation and restructuring and other related costs. Adjusted EBITDA provides improved continuity with respect to the comparison of our operating results over a period of time. Stock-based compensation, a component of employee remuneration, can vary significantly with changes in the price of our common shares (Shares), while restructuring and other related costs are outside of our normal course of business. Restructuring and other related costs are charges primarily attributable to cost rationalization initiatives. EBITDA and Adjusted EBITDA are derived from the condensed consolidated statements of operations and comprehensive income. EBITDA per share and Adjusted EBITDA per share are derived by dividing EBITDA and Adjusted EBITDA by the basic weighted average number of Shares.
EBITDA and Adjusted EBITDA from Continuing Operations are calculated as follows:
Three months ended Nine months ended
September 30, September 30,
($000s except per share data) 2015 2014 2015 2014
----------------------------------------------------------------------------
Net (loss) earnings from Continuing
Operations (12,690) 10,596 (49,330) 5,505
Add back:
Deferred income tax (recovery)
expense (2,262) 4,680 (8,891) 6,718
Embedded derivative loss 3,175 3,314 402 11,641
Finance charges 6,498 6,943 20,891 26,651
Impairment 9,049 - 14,794 -
Depreciation and amortization(1) 16,020 14,901 45,803 37,157
----------------------------------------------------------------------------
EBITDA 19,790 40,434 23,669 87,672
----------------------------------------------------------------------------
Add back:
Stock-based compensation
(recovery) expense(2) (2,406) 2,850 (3,376) 10,540
Restructuring and other related
costs 2,683 - 28,146 526
----------------------------------------------------------------------------
Adjusted EBITDA 20,067 43,284 48,439 98,738
----------------------------------------------------------------------------
Weighted average number of Shares 56,237 55,901 56,216 55,734
----------------------------------------------------------------------------
EBITDA per share 0.35 0.72 0.42 1.57
----------------------------------------------------------------------------
Adjusted EBITDA per share 0.36 0.77 0.86 1.77
----------------------------------------------------------------------------
(1) Includes non-cash gains or losses on asset disposal and other non-cash
charges.
(2) Stock-based compensation includes ($2,407) and ($4,446) for Q3 2015 and
2015 year-to-date, respectively, and $2,193 and $6,230 for Q3 2014 and 2014
year-to-date, respectively of non-cash stock-based compensation (recovery)
expense.
"Divisional EBITDA" provides an indication of the results generated by the division's principal business activities prior to how activities are financed, the assets are amortized or impaired and before allocation of General and Administrative costs (G&A), restructuring and other related costs or stock-based compensation. Divisional EBITDA is derived from Net (loss) earnings before income tax from Continuing Operations as follows:
Three months ended Nine months ended
September 30, September 30,
($000s except per share data) 2015 2014 2015 2014
----------------------------------------------------------------------------
Net (loss) earnings before Income
tax from Continuing Operations (14,952) 15,276 (58,221) 12,223
Add back:
Embedded derivative loss 3,175 3,314 402 11,641
Finance charges 6,498 6,943 20,891 26,651
Restructuring and other related
costs 2,683 - 28,146 526
Impairment 9,049 - 14,794 -
Stock-based compensation
(recovery) expense (2,406) 2,850 (3,376) 10,540
Depreciation and amortization 16,020 14,901 45,803 37,157
G&A(1) 9,950 16,495 34,805 48,014
----------------------------------------------------------------------------
Divisional EBITDA 30,017 59,779 83,244 146,752
----------------------------------------------------------------------------
Heavy Oil 18,434 27,836 44,479 67,329
Oilfield 11,583 31,943 38,765 79,423
Deduct:
G&A(1) 9,950 16,495 34,805 48,014
----------------------------------------------------------------------------
Adjusted EBITDA 20,067 43,284 48,439 98,738
----------------------------------------------------------------------------
Stock-based compensation
(recovery) expense (2,406) 2,850 (3,376) 10,540
Restructuring and other related
costs 2,683 - 28,146 526
----------------------------------------------------------------------------
EBITDA 19,790 40,434 23,669 87,672
----------------------------------------------------------------------------
(1) As a result of the change in our financial statement presentation from
functional to nature based, we have reclassified the sales expense directly
attributable to the divisions from Corporate and Other to the respective
division. Prior period comparative figures have been amended to conform to
current period's presentation. Please refer to "Reporting Structure" for
the restated historical segmented information and key metrics.
"Adjusted net earnings" and "Adjusted net earnings per share" are measures of our profitability from Continuing Operations. Adjusted net earnings from Continuing Operations (Adjusted net earnings) provides an indication of the results generated by our principal business activities prior to recognizing stock-based compensation recovery or expense, the gain or loss on embedded derivatives, impairment and restructuring and other related charges. Stock-based compensation, a component of employee remuneration, can vary significantly with changes in the price of our Shares. The loss on the embedded derivative is a result of the change in the trading price of the debentures and the volatility of the applicable bond market. Impairment and restructuring and other related costs are related to initiatives outside of our normal course of business. As such, Adjusted net earnings provides improved continuity with respect to the comparison of our results over a period of time. Adjusted net earnings per share is derived by dividing Adjusted net earnings by the basic weighted average number of Shares.
Three months ended Nine months ended
September 30, September 30,
($000s except per share data) 2015 2014 2015 2014
----------------------------------------------------------------------------
Net (loss) earnings from Continuing
Operations (12,690) 10,596 (49,330) 5,505
Add back:
Embedded derivative loss 3,175 3,314 402 11,641
Restructuring and other related
costs 2,683 - 28,146 526
Impairment 9,049 - 14,794 -
Stock-based compensation
(recovery) expense (2,406) 2,850 (3,376) 10,540
----------------------------------------------------------------------------
Adjusted net (loss) earnings (189) 16,760 (9,364) 28,212
----------------------------------------------------------------------------
Weighted average number of Shares 56,237 55,901 56,216 55,734
----------------------------------------------------------------------------
Adjusted net (loss) earnings per
share - 0.30 (0.17) 0.51
----------------------------------------------------------------------------
"Tangible book value per share" is used to assist management and investors in evaluating the book value compared to the market value.
September 30, December 31,
($000s except per share data) 2015 2014
----------------------------------------------------------------------------
Total Assets 985,529 1,365,085
Less:
Goodwill 60,443 60,443
Other long-term assets 4,775 8,953
Assets held for sale - 365,262
----------------------------------------------------------------------------
Total Tangible Assets 920,311 930,427
----------------------------------------------------------------------------
Weighted average number of Shares 56,237 55,802
----------------------------------------------------------------------------
Tangible book value per share 16.36 16.67
----------------------------------------------------------------------------
"Return on Capital Employed" (ROCE) is used to assist management and investors in measuring the returns realized at the consolidated level from capital employed. ROCE is derived from Net earnings plus tax-adjusted interest divided by the average of the beginning and ending balances of our total assets less current liabilities for the period (Net Assets).
"Cash Basis Return on Capital" (ROC - Cash) is also used to assist management and investors in measuring the returns realized at the consolidated level from capital employed. ROC - Cash is derived from Adjusted EBITDA less cash stock-based compensation, cash taxes and maintenance capital divided by Net Assets.
"Net Debt" is defined as sum of amount drawn on the Credit Facility, Letters of Credit and Senior Unsecured Debentures less Cash on hand.
"Funds from operations" is used to assist management and investors in analyzing cash flow and leverage from Continuing Operations. Funds from operations as presented is not intended to represent operating funds from operations or operating profits for the period, nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS. Funds from operations is derived from the condensed consolidated statements of cash flows and is calculated as follows:
Three months ended Nine months ended
September 30, September 30,
($000s except per share data) 2015 2014 2015 2014
----------------------------------------------------------------------------
Cash from Continuing Operations 36,810 10,843 29,979 52,960
Add back (deduct):
Change in non-cash working capital (20,505) 29,341 (8,414) 20,649
Decommissioning costs incurred 251 931 1,051 2,213
----------------------------------------------------------------------------
Funds from Operations 16,556 41,115 22,616 75,822
----------------------------------------------------------------------------
Weighted average number of Shares 56,237 55,901 56,216 55,734
----------------------------------------------------------------------------
Funds from operations per share 0.29 0.74 0.40 1.36
----------------------------------------------------------------------------
"Free Cash Flow" is defined as Funds from Operations less dividends paid, capital expenditures and decommissioning costs incurred.
References to EBITDA, EBITDA per share, Adjusted EBITDA, Adjusted EBITDA per share, Divisional EBITDA, Adjusted net earnings, Adjusted net earnings per share, ROC - Cash, Net Debt, Funds from operations, Funds from operations per share and Free Cash Flow throughout this document have the meanings set out above.
REPORTING STRUCTURE
In Q1 2015, we reorganized our reporting structure into two divisions - Heavy Oil and Oilfield. The new structure more closely aligns operations with customer activities, facilitates a seamless service package to customers, optimizes our resource allocations, and aids in the execution of our refreshed growth strategy.
The revised structure consists of:
Heavy Oil
-- Facilities business unit -- Onsite business unit
Oilfield
-- Facilities business unit (includes facilities in both Canada and the
U.S.)
-- Drilling Services business unit (includes drill site services in both
Canada and the U.S.)
HEAVY OIL RESTATED INFORMATION BY QUARTER
2014 2013 2012
($ millions) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
----------------------------------------------------------------------------
Revenue 56.7 56.2 50.4 40.0 48.3 53.5 41.7 24.4 36.5 45.6 25.4 22.9
Operating
expenses 33.3 28.4 27.2 23.7 26.4 25.2 21.4 13.8 19.0 24.9 12.8 11.5
----------------------------------------------------------------------------
Divisional
EBITDA 23.4 27.8 23.2 16.3 21.9 28.3 20.3 10.6 17.5 20.7 12.6 11.4
----------------------------------------------------------------------------
Divisional
EBITDA % of
revenue 41% 49% 46% 41% 45% 53% 49% 43% 48% 45% 50% 50%
----------------------------------------------------------------------------
Depreciation and
amortization 5.6 5.5 4.2 2.7 4.5 5.1 3.2 1.4 3.4 2.3 1.4 1.2
----------------------------------------------------------------------------
Operating profit 17.8 22.3 19.0 13.6 17.4 23.2 17.1 9.2 14.1 18.4 11.2 10.2
----------------------------------------------------------------------------
Operating profit
% of revenue 31% 40% 38% 34% 36% 43% 41% 38% 39% 40% 44% 45%
----------------------------------------------------------------------------
Maintenance
capital 2.6 1.6 3.0 1.0 7.4 1.5 0.6 0.2 2.0 2.1 2.1 0.3
Growth capital 29.8 18.6 8.4 5.8 18.0 12.4 13.4 3.8 12.3 2.9 26.7 17.0
----------------------------------------------------------------------------
Assets employed 261 237 223 217 210 189 178 168 165 158 155 129
----------------------------------------------------------------------------
Business Unit Revenue Contribution %
Facilities 28% 35% 35% 43% 32% 31% 33% 51% 35% 30% 51% 57%
Onsite 72% 65% 65% 57% 68% 69% 67% 49% 65% 70% 49% 43%
----------------------------------------------------------------------------
Metrics
Contracts % of
Onsite revenue 80% 77% 74% 77% 75% 86% 71% 67% 74% 71% 61% 65%
----------------------------------------------------------------------------
HEAVY OIL RESTATED INFORMATION BY YEAR
2014 2013 2012
Q4 Q3 Q2 Q4 Q3 Q2 Q4 Q3 Q2
($ millions) YTD YTD YTD Q1 YTD YTD YTD Q1 YTD YTD YTD Q1
----------------------------------------------------------------------------
Revenue 203.3 146.6 90.4 40.0 167.9 119.6 66.1 24.4 130.4 93.9 48.3 22.9
Operating
expenses 112.6 79.3 50.9 23.7 86.8 60.4 35.2 13.8 68.2 49.2 24.3 11.5
----------------------------------------------------------------------------
Divisional
EBITDA 90.7 67.3 39.5 16.3 81.1 59.2 30.9 10.6 62.2 44.7 24.0 11.4
----------------------------------------------------------------------------
Divisional
EBITDA % of
revenue 45% 46% 44% 41% 48% 49% 47% 43% 48% 48% 50% 50%
----------------------------------------------------------------------------
Depreciation
and
amortization 18.0 12.4 6.9 2.7 14.2 9.7 4.6 1.4 8.3 4.9 2.6 1.2
----------------------------------------------------------------------------
Operating
profit 72.7 54.9 32.6 13.6 66.9 49.5 26.3 9.2 53.9 39.8 21.4 10.2
----------------------------------------------------------------------------
Operating
profit % of
revenue 36% 37% 36% 34% 40% 41% 40% 38% 41% 42% 44% 45%
----------------------------------------------------------------------------
Maintenance
capital 8.2 5.6 4.0 1.0 9.6 2.3 0.7 0.2 6.5 4.5 2.5 0.3
Growth
capital 62.6 32.8 14.2 5.8 47.6 29.6 17.2 3.8 58.9 46.6 43.7 17.0
----------------------------------------------------------------------------
Business Unit Revenue
Contribution %
Facilities 35% 37% 38% 43% 35% 36% 40% 51% 40% 42% 54% 57%
Onsite 65% 63% 62% 57% 65% 64% 60% 49% 60% 58% 46% 43%
----------------------------------------------------------------------------
Metrics
Contracts %
of Onsite
revenue 77% 76% 75% 77% 77% 77% 69% 67% 69% 68% 63% 65%
----------------------------------------------------------------------------
OILFIELD RESTATED INFORMATION BY QUARTER
2014 2013 2012
($ millions) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
----------------------------------------------------------------------------
Revenue 76.4 79.1 66.0 70.5 61.7 63.6 53.9 65.1 60.5 63.2 52.2 63.7
Operating
expenses 51.0 47.1 43.0 46.0 41.7 39.4 35.4 39.2 39.8 39.3 36.6 37.1
----------------------------------------------------------------------------
Divisional
EBITDA 25.4 32.0 23.0 24.5 20.0 24.2 18.5 25.9 20.7 23.9 15.6 26.6
----------------------------------------------------------------------------
Divisional
EBITDA % of
revenue 33% 40% 35% 35% 32% 38% 34% 40% 34% 38% 30% 42%
----------------------------------------------------------------------------
Depreciation
and
amortization 8.0 5.7 4.6 4.4 4.4 3.9 4.0 4.1 4.0 4.1 3.6 4.1
----------------------------------------------------------------------------
Operating
profit 17.4 26.3 18.4 20.1 15.6 20.3 14.5 21.8 16.7 19.8 12.0 22.5
----------------------------------------------------------------------------
Operating
profit % of
revenue 23% 33% 28% 29% 25% 32% 27% 33% 28% 31% 23% 35%
----------------------------------------------------------------------------
Maintenance
capital 6.0 3.7 2.1 1.3 2.8 2.8 1.9 1.5 1.8 3.2 2.3 1.4
Growth
capital(1) 31.5 14.2 8.8 12.7 30.5 12.6 8.9 7.2 15.6 8.8 4.5 5.7
----------------------------------------------------------------------------
Assets employed 513 491 475 472 451 427 421 413 407 391 385 380
----------------------------------------------------------------------------
Business Unit Revenue Contribution %
Facilities 67% 69% 73% 76% 73% 75% 74% 71% 70% 68% 67% 67%
Canada % of
Facilities
revenue 86% 89% 85% 88% 92% 93% 90% 91% 89% 91% 93% 95%
U.S. % of
Facilities
revenue 14% 11% 15% 12% 8% 7% 10% 9% 11% 9% 7% 5%
----------------------------------------------------------------------------
Drilling
Services 33% 31% 27% 24% 27% 25% 26% 29% 30% 32% 33% 33%
Canada % of
revenue(2) 29% 30% 24% 43% 35% 30% 26% 35% 38% 41% 36% 47%
U.S. % of
revenue(2) 71% 70% 76% 57% 65% 70% 74% 65% 62% 59% 64% 53%
----------------------------------------------------------------------------
Metrics
U.S. Recovered
Crude Oil
('000 bbl) 8.1 4.4 8.6 7.5 - - - - - - - -
U.S. Netback 58.3 78.8 83.8
(CDN$/bbl) 8 8 0 81.32 - - - - - - - -
U.S. Recovered
Crude Oil
sales 0.5 0.3 0.7 0.6 - - - - - - - -
----------------------------------------------------------------------------
OILFIELD RESTATED INFORMATION BY YEAR
2014
($ millions) Q4 YTD Q3 YTD Q2 YTD Q1 Q4 YTD Q3 YTD Q2 YTD
----------------------------------------------------------------------------
Revenue 292.0 215.6 136.5 70.5 244.3 182.6 119.0
Operating expenses 187.1 136.1 89.0 46.0 155.7 114.0 74.6
----------------------------------------------------------------------------
Divisional EBITDA 104.9 79.5 47.5 24.5 88.6 68.6 44.4
----------------------------------------------------------------------------
Divisional EBITDA %
of revenue 36% 37% 35% 35% 36% 38% 37%
----------------------------------------------------------------------------
Depreciation and
amortization 22.7 14.7 9.0 4.4 16.4 12.0 8.1
----------------------------------------------------------------------------
Operating profit 82.2 64.8 38.5 20.1 72.2 56.6 36.3
----------------------------------------------------------------------------
Operating profit %
of revenue 28% 30% 28% 29% 30% 31% 31%
----------------------------------------------------------------------------
Maintenance capital 13.1 7.1 3.4 1.3 9.0 6.2 3.4
Growth capital(1) 67.2 35.7 21.5 12.7 59.2 28.7 16.1
----------------------------------------------------------------------------
Business Unit Revenue Contribution %
Facilities 71% 73% 75% 76% 73% 73% 72%
Canada % of
Facilities revenue 87% 87% 87% 88% 91% 91% 91%
U.S. % of Facilities
revenue 13% 13% 13% 12% 9% 9% 9%
----------------------------------------------------------------------------
Drilling Services 29% 27% 25% 24% 27% 27% 28%
Canada % of
revenue(2) 31% 32% 33% 43% 32% 31% 31%
U.S. % of revenue(2) 69% 68% 67% 57% 68% 69% 69%
----------------------------------------------------------------------------
Metrics
U.S. Recovered Crude
Oil ('000 bbl) 28.6 20.5 16.1 7.5 - - -
U.S. Netback
(CDN$/bbl) 75.60 81.33 82.56 81.32 - - -
U.S. Recovered Crude
Oil sales 2.1 1.6 1.3 0.6 - - -
----------------------------------------------------------------------------
(1) Growth capital has been restated from the information reported in our Q1
2015 MD&A.
(2) Drilling Services revenue split by country has been restated from the
information reported in our Q1 2015 MD&A to include Environmental Services.
2013 2012
($ millions) Q1 Q4 YTD Q3 YTD Q2 YTD Q1
----------------------------------------------------------------------------
Revenue 65.1 239.6 179.1 115.9 63.7
Operating expenses 39.2 152.8 113.0 73.7 37.1
----------------------------------------------------------------------------
Divisional EBITDA 25.9 86.8 66.1 42.2 26.6
----------------------------------------------------------------------------
Divisional EBITDA %
of revenue 40% 36% 37% 36% 42%
----------------------------------------------------------------------------
Depreciation and
amortization 4.1 15.8 11.8 7.7 4.1
----------------------------------------------------------------------------
Operating profit 21.8 71.0 54.3 34.5 22.5
----------------------------------------------------------------------------
Operating profit %
of revenue 33% 30% 30% 30% 35%
----------------------------------------------------------------------------
Maintenance capital 1.5 8.7 6.8 3.7 1.4
Growth capital(1) 7.2 34.5 19.0 10.2 5.7
----------------------------------------------------------------------------
Business Unit
Revenue
Contribution %
Facilities 71% 68% 67% 67% 67%
Canada % of
Facilities revenue 91% 92% 93% 94% 95%
U.S. % of Facilities
revenue 9% 8% 7% 6% 5%
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Drilling Services 29% 32% 33% 33% 33%
Canada % of
revenue(2) 35% 39% 41% 42% 47%
U.S. % of revenue(2) 65% 61% 59% 58% 53%
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Metrics
U.S. Recovered Crude
Oil ('000 bbl) - - - - -
U.S. Netback
(CDN$/bbl) - - - - -
U.S. Recovered Crude
Oil sales - - - - -
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(1) Growth capital has been restated from the information reported in our Q1
2015 MD&A.
(2) Drilling Services revenue split by country has been restated from the
information reported in our Q1 2015 MD&A to include Environmental Services.
G&A RESTATED INFORMATION
2014 2013 2012
($ millions) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
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G&A - by quarter 18.6 16.6 15.8 15.7 20.8 17.0 15.7 16.1 15.1 13.8 14.5 13.1
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G&A - YTD 66.7 48.1 31.5 15.7 69.6 48.8 31.8 16.1 56.4 41.4 27.6 13.1
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SENSITIVITIES
Results from Continuing Operations are sensitive to changes in commodity prices for crude oil. The direct impact of these commodity prices is reflected in the revenue received from the sale of products such as crude oil. Approximately 20% of our revenue is sensitive to the direct impact of commodity prices. Our results are also impacted by drilling activity. Drilling sensitivities are impacted by the area in which drilling occurs, compared to areas where we operate and the drilling techniques employed. Where possible, we actively manage these impacts by strategically geographically balancing mobile assets to meet demand and shifts in activity levels where necessary.
In Q2, we revised our sensitivities for crude oil prices to better reflect the lower recovered crude oil volumes recovered at our facilities. Year-to-date, volumes have declined approximately 40%. As a result, the assumptions and relationships used to derive the previously disclosed sensitivities have been revised. The following table provides our estimates of fluctuations in key inputs and prices, and the direct impact on revenue and Adjusted EBITDA from product sales:
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Impact on Impact on Annual
Change in Annual Revenue Adjusted
2014 benchmark ($)((1)) EBITDA($)((1))
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Canadian Light
Sweet ($/bbl) 94 10 3 to 3.5 million 3 to 3.5 million
WCS ($/bbl) 81 10 2 to 2.5 million 2 to 2.5 million
Drilling
activity((2)(3)) 5% change 5 to 8 million 2 to 3 million
Metres drilled
(million
metres) 25 1 1.5 million 0.8 million
Active rigs in
WCSB 370 100 rigs 4 million 1 million
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(1) Based on 2015 forecast performance and volumes. The actual impact from
crude oil prices may vary with fluctuations in recovered crude oil volumes.
(2) Impact from changes in drilling activity assumes a change in the key
drilling metrics including metres drilled, and active rigs in the WCSB and
in the U.S.
(3) U.S. results are impacted by changes in drilling activity in the
respective plays we serve, as indicated by active rigs, and to a greater
extent changes in our market share and operations. A sensitivity for active
rigs in the U.S. has not been provided because of the overriding impact of
shifts in market share on our results.
Stock-based compensation expense is sensitive to changes in our share price. At September 30, 2015, a $1 change in our share price between $9 per share and $15 per share has approximately a $0.5 to 1.0 million direct impact on annual stock-based compensation reflected in G&A from Continuing Operations. Stock-based compensation is also impacted by dividend rate changes and the effects of vesting.
Contacts:
Newalta Corporation
Anne M. Plasterer
Executive Director, Investor Relations
(403) 806-7019
www.newalta.com
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