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CALGARY, ALBERTA--(Marketwired - May 3, 2017) - Trican Well Service (TSX:TCW) ("Trican" or the "Company") is pleased to announce its First Quarter 2017 results. The following press release should be read in conjunction with the Management's Discussion and Analysis, the unaudited interim consolidated financial statements and related notes of Trican for the quarter ended March 31, 2017, as well as the Annual Information Form for the year ended December 31, 2016. All of the above documents are available on Trican's website at www.tricanwellservice.com and on SEDAR at www.sedar.com.
Continuing Operations - Financial Review
|Three months ended|
|($ millions, except per share amounts; unaudited)||Mar. 31, 2017||Mar. 31, 2016||Dec. 31, 2016|
|Gross profit / (loss)||17.8||(31.3||)||(10.1||)|
|Operating income / (loss) (1)||22.7||(26.4||)||(7.4||)|
|Adjusted operating income / (loss) (1)||26.0||(16.2||)||1.1|
|Net income / (loss)||(48.9||)||(42.5||)||56.9|
|Per share - basic and diluted||$||(0.25||)||$||(0.29||)||$||0.29|
(1) Trican makes reference to operating income / (loss), adjusted operating income / (loss), and adjusted general and administrative expenses. These measures are not recognized under International Financial Reporting Standards (IFRS) and are considered non-GAAP measures. Management believes that, in addition to gross profit / (loss) and net income / (loss), operating income / (loss), adjusted operating income / (loss); and adjusted general and administrative expenses are useful supplemental measures.
Investors should be cautioned that operating income / (loss) and adjusted operating income / (loss) should not be construed as alternatives to gross profit / (loss) or profit / (loss) determined in accordance with IFRS as an indicator of Trican's performance. Trican's method of calculating operating income / (loss), adjusted operating income / (loss) and adjusted general and administrative expenses may differ from that of other companies and accordingly may not be comparable to measures used by other companies. See also "Non-GAAP Disclosure" section of this report.
Revenue increased 50% compared to Q1 2016 and the adjusted operating margin improved to 17.4% due to an increase in activity, improved pricing and larger job sizes combined with control over our costs as activity increased. Fracturing intensity increased significantly as the Company pumped approximately 64% more proppant this quarter compared to the same period last year and 28% more than Q4 2016. Q1 2017 represented the highest volume of proppant pumped during a quarter since Q3 2014.
Utilization of our active equipment was high throughout the first quarter as weather conditions remained favorable through to the end of the quarter and demand remained strong. Our headcount increased as we expanded our fracturing capacity by 30,000 horsepower and our cementing capacity by six crews since the fourth quarter. Hiring qualified personnel to activate parked equipment continues to be the most significant challenge to meeting customer demand.
Strong demand led to increased pricing during the first quarter of 2017, as average fracturing pricing for our customers increased by approximately 14% from Q4 2016 levels, and 20% from Q3 2016.
Our first quarter results represent a significant improvement from recent years. This could not have been achieved without the hard work and dedication of our staff whether in the field, the lab, or the office. It has been an extremely challenging period in the oilfield services space and we want to thank all of our employees for their commitment and perseverance during the past couple of years.
There was a pronounced undersupply of manned equipment in the industry in the first quarter, which resulted in many customers not completing their work programs in the first quarter and pushing their programs into the second quarter. This backlog of work, combined with planned Q2 programs for some of our anchor clients, will result in second quarter activity levels considerably higher on a year-over-year basis for fracturing and coiled tubing. The incremental revenue from the increased workload is expected to cover a meaningful portion of our fixed cost structure which should allow us to improve our second quarter financial results and maintain our headcount in anticipation of activity picking up coming out of spring break-up.
Management's current expectations are that activity and pricing will continue building from first quarter levels after spring break-up as many work programs have been, or are being, repriced for the third and fourth quarters of 2017. Although pricing improved in the quarter, our average pricing improvement was reduced by legacy agreements with long term clients that were below leading edge pricing in the industry. As these agreements roll over, we anticipate a continued improvement in pricing through the second half of the year. Approximately 80% of our pricing agreements are negotiated quarterly and we are currently in discussions with most of our clients regarding second half work programs and pricing. Pricing improvements will be required to cover cost increases in our business as well as return our business to sustainable profitability levels. If demand remains high, we anticipate that we will see inflationary pressures when we exit spring break-up, particularly on our proppant and chemicals. In addition, we anticipate wage inflation in the second half of the year.
With the current commodity price environment, we believe that demand is sufficient that two more fracturing crews can be added in the third quarter, with the possibility for a third crew to be activated during the fourth quarter of 2017 which would represent the activation of approximately 50% of our currently parked fracturing equipment. If activity levels remain high and sufficient personnel are recruited, we could potentially have our entire fracturing fleet activated in the next twelve months. We expect that these activations would secure work on the leading edge of pricing and would have an accretive impact on operating margins.
Hiring remains a significant challenge, and we have continued hiring and training during spring break-up to meet our equipment activation targets for the third and fourth quarters. We are early in the hiring process, but are optimistic that we will meet our hiring targets. Hiring efforts are ongoing at all bases from Estevan to Fort St. John, and for all service lines.
On March 21, 2017, Trican and Canyon Services Group Inc. announced that they had entered into an arrangement agreement pursuant to which Trican agreed to acquire all of the issued and outstanding common shares of Canyon. The transaction is subject to customary approvals, including approval from the shareholders of each of Trican and Canyon, as well as regulatory approval from the Competition Bureau. On April 10, 2017, Trican and Canyon made their respective filings to the Competition Bureau of Canada. If the Competition Bureau does not issue a supplementary information request in respect of the transaction, the Bureau will work towards clearing the transaction by the end of its non-binding service standard period on May 25, 2017. Shareholder votes will be held on May 31st.
We are excited by our acquisition of Canyon and believe that the combined company will achieve significant cost and operational synergies, provide greater service to our customers, offer numerous opportunities for Trican and Canyon employees, and generate competitive margins. Our companies share a similar culture, and we look forward to welcoming Canyon employees to the Trican family.
Please see the discussion in the non-GAAP Disclosure section of the MD&A for the reconciliation of non-GAAP items to IFRS measures.
Certain statements contained in this document constitute forward-looking information and statements (collectively "forward-looking statements"). These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "achieve", "estimate", "expect", "intend", "plan", "planned", and other similar terms and phrases. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. We believe the expectations reflected in these forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this document should not be unduly relied upon. These statements speak only as of the date of this document.
In particular, this document contains forward-looking statements pertaining to, but not limited to, the following:
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth below and in the "Risk Factors" section of our Annual Information Form dated March 29, 2017:
Readers are cautioned that the foregoing lists of factors are not exhaustive. Forward-looking statements are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although management of Trican believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Trican can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: crude oil and natural gas prices; the impact of increasing competition; the general stability of the economic and political environment; the timely receipt of any required regulatory approvals; Trican's, Canyon's and the combined company's ability to continue its operations for the foreseeable future and to realize its assets and discharge its liabilities and commitments in the normal course of business; industry activity levels; Trican's policies with respect to acquisitions; the ability of Trican to obtain qualified staff, equipment and services in a timely and cost efficient manner; the ability to operate our business in a safe, efficient and effective manner; the ability of Trican to obtain capital resources and adequate sources of liquidity; the performance and characteristics of various business segments; the regulatory framework; the timing and effect of pipeline, storage and facility construction and expansion; and future commodity, currency, exchange and interest rates.
The forward-looking statements contained in this document are expressly qualified by this cautionary statement. We do not undertake any obligation to publicly update or revise any forward-looking statements except as required by applicable law.
Additional information regarding Trican including Trican's most recent Annual Information Form is available under Trican's profile on SEDAR (www.sedar.com).
CONFERENCE CALL AND WEBCAST DETAILS
The Company will host a conference call on Thursday, May 4, 2017 at 9:00 a.m. MT (11:00 a.m. ET) to discuss the Company's results for the 2017 First Quarter.
To listen to the webcast of the conference call, please enter: http://edge.media-server.com/m/p/yf32yhja in your web browser or visit the Investors section of our website at www.tricanwellservice.com/investors and click on "Reports".
To participate in the Q&A session, please call the conference call operator at 1-844-358-9180 (North America) or 478-219-0187 (outside North America) 15 minutes prior to the call's start time and ask for the "Trican Well Service Ltd. First Quarter 2017 Earnings Results Conference Call".
The conference call will be archived on Trican's website at www.tricanwellservice.com/investors
Headquartered in Calgary, Alberta, Trican provides a comprehensive array of specialized products, equipment and services that are used during the exploration and development of oil and gas reserves.