VANCOUVER, British Columbia, Feb. 05, 2020 (GLOBE NEWSWIRE) -- Hanwei Energy Services Corp. (TSX: HE) (“Hanwei” or the “Company”) today reported its financial results for the three and nine months ended December 31, 2019. All amounts are in Canadian Dollars unless otherwise noted.

The Company has two reportable segments for its continuing operations: its FRP pipe manufacturing and its oil and gas production. The pipe segment produces and sells fiberglass reinforced plastic (“FRP”) pipe for the oil and gas industry and other infrastructure applications. The oil and gas segment is engaged in the exploration and production of oil and natural gas in Western Canada.

For the three months ended December 31, 2019:

• Total Company revenues were approximately $4.0 million as compared to $4.2 million for the same period of the prior year.
   
  • FRP pipe sales totalled $3.6 million, as compared to $3.8 million for the same period of the prior year.  Sales in this period were entirely contributed by the Company’s China market with no sales contributed from international markets.  The $0.2 million, or 6%, decrease resulted from an approximate $1.2 million decrease in sales in the Company’s international market offset by an increase in sales in the Company’s Chinese market of approximately $1.0 million. Orders in the Company’s Canada market have been negatively affected by the general slow-down of the oil and gas industry in Canada with many projects deferred or restricted until the economic outlook improves.
     
  • The Company produced approximately 81 barrels of oil equivalent per day (boed) with a netback of  negative $0.05 per boe, generating revenues net of royalties of $0.4 million as compared to 153 boed with a netback of negative $15.59 per boe generating revenues net of royalties of $0.4 million for the same period of the prior year. The decrease in production was due to the shut-in of one horizontal well requiring repair and maintenance that reduced production at the Company’s Leduc Lands, together with the natural decline of the Company’s wells. The increase in netback was due to the Company’s oil and gas revenues increasing as a result of  improved oil prices during the period as well as reduced operating expenses compared to the three months ended December 31, 2018 that included certain expenses of system commissioning and improvements at the Leduc Lands.
     
• Total Company Adjusted EBITDA from continuing operations totalled $0.1 million as compared to $54,000 for the same period of the prior year. The increase was mainly due to higher oil prices and lower operating costs as compared to the same period of the prior year (such prior year period included certain expenses of system commissioning and improvements at the Leduc Lands).
   
• The Company had a loss from continuing operations of $0.4 million as compared to a loss from continuing operations of $0.8 million for the same period of the prior year.  The $0.4 million reduction in loss was driven by decreased operating costs in the oil and gas business and decreased net finance costs. 

For the nine months ended December 31, 2019:

• Total Company revenues were approximately $9.3 million as compared to $9.2 million for the same period of the prior year.
   
  • FRP pipe sales were $7.6 million as compared to $6.9 million for the same period of the prior year. The $0.7 million or 10% increase was due to orders obtained from new customers in the China market.   
     
  • The Company produced approximately 99 barrels of oil equivalent per day (boed) with a netback of $7.19 per boe, generating revenues net of royalties of $1.4 million as compared to 150 boed with a netback of $5.42 per boe generating revenues net of royalties of $2.0 million for the same period of the prior year. The reduction in production was mainly due to one horizontal well shut-in over the last two quarterly periods due to maintenance and workover requirements. Production was primarily from the Company’s Leduc Lands and Nevis Lands.
     
• Adjusted EBITDA from continuing operations was $0.1 million as compared to negative $0.2 million for the same period of the prior year. The $0.3 million increase in adjusted EBITDA for the period was mainly due to operating cost reductions in the oil and gas business (as before noted such prior year included certain expenses of system commissioning and improvements at the Leduc Lands). 
   
• The Company had a loss from continuing operations of $1.6 million as compared to a loss from continuing operations of $1.9 million for the same period of the prior year. The reduction in loss was mainly due to the reduced operating costs in the oil and gas business.

Oil and Gas Business Subsequent Event

The Company’s Entice Lands wells remain shut in as an adjacent gas handling plant accommodating gas production from these wells remains closed. The Company is exploring alternative options for its gas handling requirements. On February 4, 2020, the Company secured an agreement to acquire certain oil and gas facilities, interests and rights adjacent to its Entice Lands for a purchase price and associated fees of $490,000. The Company will also assume certain obligations at closing, with the transaction subject to regulatory approval anticipated to close within the next 90 days. This acquisition was undertaken to allow the Company to place its current wells within its Entice Lands back on production by way of additional improvements for gas disposal. The acquisition also includes three existing shut-in wells to also be placed back on production. Any additional improvements will include certain jurisdictional approvals yet to be granted.

Impact of Corona Virus

The Company’s FRP pipe manufacturing is undertaken in China under its wholly owned subsidiary Harvest. As before noted the Company also derives a significant portion of its annual sales from its China market. The developing situation with the “Corona Virus” may possibly affect the Company’s access to its raw materials supply chain and potentially delay end user projects and impact the Company’s sales in China. Notwithstanding the aforementioned the impact to the Company’s operations due to the corona virus outbreak is unknown at this time.

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp.’s principal business operations are in two complementary key segments of the oil and gas industry as both an equipment supplier to the industry (as a leading manufacturer of high pressure, fiberglass reinforced plastic (“FRP”) pipe products and associated technologies serving major energy customers in the global energy market) and as oil and gas producer with properties in Alberta and joint venture interests in Manitoba.

www.hanweienergy.com

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

FORWARD-LOOKING INFORMATION AND NON-GAAP MEASURES

Certain information in this press release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions a description of which is set out in the risk factors section of the Company’s Annual Information Form dated June 18, 2019 and Management Discussion and Analysis for the year ended March 31, 2019 both of which are filed with Canadian securities regulators and available on SEDAR at www.sedar.com.  The forward-looking information in this press release describes the Company’s expectations as of the date of this press release.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.

For more information, please contact:
Graham Kwan
Executive Vice President, Strategic Development and Corporate Affairs
604-685-2239
gkwan@hanweienergy.com

Irene Mai
Chief Financial Officer
604-685-2239
imai@hanweienergy.com