Cancoil Integrated Services Inc. Releases First Quarter Report.Business Editors CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta--(BUSINESS WIRE)--May 3, 2002 Cancoil Integrated Services In computer networking, IntServ or integrated services is an architecture that specifies the elements to guarantee quality of service (QoS) on networks. IntServ can for example be used to allow video and sound to reach the receiver without interruption. Inc. (CDNX CDNX See Canadian Venture Exchange (CDNX). :CAN)
Three Months Three Months
Ended Ended
March 31 March 31
2002 2001 Change
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Average number of rigs 12 8 50%
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Revenue $8,365,878 $4,272,634 96%
Gross margin 50% 30% 67%
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Net income $1,805,153 $ 248,143 627%
Net income per share(a) $ 0.05 $ 0.01 400%
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Cash flow $2,471,555 $ 599,487 312%
Cash flow per share(a) $ 0.06 $ 0.02 200%
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EBITDA $3,497,940 $ 770,218 354%
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Long-term debt vs. Dec. 31 2001 $8,434,741 $8,927,700 (6%)
Long-term debt to equity 37% 43% (14%)
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Shares outstanding 38,743,789 27,231,667 42%
Shares outstanding diluted 43,864,550 42,429,850 3%
Weighted average shares - diluted,
treasury stock method 39,581,089 36,414,647 9%
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(a) Per share figures are on a weighted average diluted basis using
the treasury stock method
Cancoil Integrated Services Inc. continued to deliver excellent financial and operating results in the first quarter of 2002 with record revenues and our second highest quarterly net income figure in company history. Net income for the three months ended March 31, 2002 was up 627 percent to $1.8 million or $0.05 per share compared to $0.01 per share for the three months ended March 31, 2001. The large net income increase was delivered despite a revenue increase of only 96 percent illustrating much higher utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be and cost efficiencies in operations and administration. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was up 312 percent comparing the first quarter of 2002 with the three months ended March 31, 2001. Increased cash income taxes reduced the cash flow increase relative to the strong earnings improvement. These excellent results were driven by a 50 percent increase in the coil tubing rig fleet combined with high utilization and cost efficiencies. Cancoil's balance sheet continues to improve. Long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. decreased by six percent in the quarter as cash flows more than offset the capital program for the first three months of 2002. Long-term debt to equity improved from 43 percent at December December: see month. 31, 2001 to 37 percent at March 31, 2002. Operations Cancoil operated 12 rigs throughout the first quarter of 2002 conducting both fracturing and drilling operations for our customers. In Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of where eight rigs were deployed, fracturing operations were delivered to three customers with the bulk of the work being done for Halliburton For other uses, see Haliburton. Halliburton Energy Services (NYSE: HAL) is an United States based multinational corporation with operations in over 120 countries. It has been at the forefront of several media and political controversies in relation to its work for the U. under the contract that expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. on March 31, 2002. Cancoil also conducted a 42 well drilling Well drilling is the process of drilling a hole in the ground for the extraction of a natural resource such as ground water, natural gas, or petroleum. Drilling for the exploration of the nature of the material underground (for instance in search of metallic ore) is best described program in the January January: see month. and February February: see month. time frame for a single customer. In the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Technicoil had three of its four rigs dedicated to work under the Halliburton contract. The fourth rig in the U.S. which is set up mainly for drilling had a modest amount of work in the quarter. Overall, rig utilization was high in the first quarter of 2002 resulting in excellent efficiencies in operating costs operating costs npl → gastos mpl operacionales . Cancoil's two new generation rigs were nearing completion by the end of the first quarter of 2002. These rigs are much larger in size and depth capacity than the existing 12 rigs and will have greater capacity than any coil tubing rig in the market today. The new rigs, to be delivered in the second quarter, are being built as complete drilling systems and will target the Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. drilling market. The remainder of the fleet continues to focus primarily on the coil fracturing market in Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. . Cancoil was successful in diversifying its revenue stream with a variety of services and customers as well as through geographical ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. during the first quarter of 2002. The Company's historical strength in well fracturing is now being consistently supplemented by drilling projects in both Canada and the United States. While drilling margins tend to vary significantly over the business cycle in the oil and gas industry the drilling market is large and an important element to Cancoil's growth plans. Revenue Analysis by Three months ended Three months ended Type of Activity March 31, 2002 March 31, 2001 ---------------------------------------------------------------------- Canada Fracturing $4,162,506 $ 978,879 Re-entry drilling - 344,712 Conventional drilling 1,358,885 1,783,910 ---------------------------------------------------------------------- Total Canada 5,521,391 3,107,501 ---------------------------------------------------------------------- United States Fracturing 2,592,838 756,751 Re-entry drilling 217,150 408,382 Conventional drilling 34,499 - ---------------------------------------------------------------------- Total United States 2,844,487 1,165,133 ---------------------------------------------------------------------- Consolidated revenue $8,365,878 $4,272,634 ---------------------------------------------------------------------- Management Discussion and Analysis Revenue and Net Income Revenue for the three-month period ended March 31, 2002 was up 96 percent compared to the quarter ended March 31, 2001. Net income was up a much greater 627 percent comparing the three months ended March 31, 2002 to the first quarter of 2001. A 50 percent increase in the rig fleet combined with the Halliburton Energy Services contract delivered the large revenue increase. In comparison revenues in the first quarter of 2001 were hurt by contract delays resulting in low revenues for the 2001 period. The large relative increase in net income compared to the revenue increase results from improvements in operating and general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. as a percent of revenue when comparing the two periods. Margins of 30 percent in the first quarter of 2001 were hurt by the cancellations and delays as crews were hired and trained for rigs delivered late in 2000 that did not go to work until late in the first quarter of 2001. In the quarter ended March 31, 2002 margins were 50 percent which are above management's long term expectations. The high margins reflect high utilization of the fleet in the first quarter of 2002 as 75 percent of the rigs were under contract with Halliburton. Management's planning assumptions for gross margins are in the 35 to 45 percent range depending on the type of work performed. General and administrative expenses as a percent of revenue declined to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. eight percent in the three month period ended March 31, 2002 compared to 12 percent for the first quarter of 2001. Most of Cancoil's administrative infrastructure had been put in place by the first quarter of 2001 and higher 2002 revenues delivered greater economies of scale. On a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. per share basis net income was $0.05 for the first three months of 2002 compared to $0.01 for the three months ended March 31, 2001 up 400 percent as additional shares were issued in the past year offsetting part of the income increase when measured on a per share basis. Amortization expense increased 70 percent for the three months ended March 31, 2002 compared to the quarter ended March 31, 2001 due to the aggressive capital program that Cancoil has been executing since expansion began in mid- mid- pref. Middle: midbrain. 2000. Interest expense declined 22 percent comparing the three-month period ended March 31, 2002 to the quarter ended March 31, 2001. Debt levels in 2002 were actually higher than in the first quarter of 2001; however interest rates have declined significantly from the same period last year. Additionally, the $1.5 million convertible debenture Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. was converted to common shares in October October: see month. 2001. This debenture debenture (dəbĕn`chər), document acknowledging indebtedness. In Great Britain a debenture is practically the same as a bond, and debenture stock is similar to preferred stock. carried a 7.5 percent interest rate compared to rates in the 5.5 percent range for bank debt in the first quarter of 2002. Loss carry forwards for income tax purposes at the end of 2000 were absorbed Absorbed 1. In a general business sense, when a cost is treated as an expense instead of being passed on to the customer in the form of higher prices. 2. In underwriting, when an issue has been completely sold to the public. 3. during 2001 due to a highly profitable year. The lack of loss carry forwards entering 2002 results in a large increase to income tax expense in the first quarter of 2002 compared to the same quarter in 2001. Assets and Liabilities Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying were up 34 percent at March 31, 2002 compared to December 31, 2001 as receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed from a drilling program that ended in late January were outstanding at the end of the first quarter of 2002. The majority of these receivables had been collected by the end of April. Accounts payable at March 31, 2002 were not changed much from year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2001 as the rig count and activity levels were consistent throughout the fourth quarter of 2001 and the first quarter of this year. Working capital at March 31, 2002 was in a deficit position of $6.2 million, improved from a deficit of $6.7 at December 31, 2001. The large deficit is a result of the balance sheet classification of Cancoil's equipment loans as current. Most of this debt was formerly classified as long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. . The Emerging Issues Committee of the C.I.C.A. issued EIC-122 effective January 2002 that states any debt that is legally demand in nature be classified as current on the balance sheet. Cancoil's equipment loans are repayable re·pay v. re·paid , re·pay·ing, re·pays v.tr. 1. To pay back: repaid a debt. 2. in terms ranging from 24 to 48 months but are legally demand in nature. The Company is in compliance with all terms and conditions of the equipment loans and does not expect the lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. to exercise its demand privileges privileges, n the authority granted to a physician or dental professional by a hospital governing board to provide patient care in the hospital. Clinical privileges are limited to the individual's license, experience, and competence. within the next year. The demand feature in the debt facilities provides Cancoil with lower borrowing costs. Adjusting for the removal of the equipment loans at March 31, 2002, working capital is a positive $2.2 million or a ratio of 1.35:1, almost unchanged from December 31, 2001. Capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. in the first quarter of 2002 related primarily to component equipment for the new generation rigs as well as spending on the drilling systems to accompany To go along with; to go with or to attend as a companion or associate. A motor vehicle statute may require beginning drivers or drivers under a certain age to be accompanied by a licensed adult driver whenever operating an automobile. the new rigs. Deposits made prior to the end of 2001 funded the ongoing construction of the new rigs through the first quarter. Long-term debt (equipment loans) balances were six percent lower at March 30, 2002 compared to December 31, 2001 as capital spending in the first three months was more than offset by cash flows and drawdowns on deposits for capital equipment under construction. Cancoil's debt/equity ratio Debt/Equity Ratio A measure of a company's financial leverage calculated by dividing long-term debt by shareholders equity. It indicates what proportion of equity and debt the company is using to finance its assets. continues to improve, declining to 37 percent at March 31, 2002 compared to 43 percent at December 31, 2001. Capital stock increased in the first quarter of 2002 as shares were issued as partial consideration for the purchase of the 25 percent of Cancoil's United States subsidiary, Technicoil Integrated Services Inc. in January 2002. Cancoil purchased this interest for 850,000 shares valued at $0.80 and cash consideration of U.S. $685,000. This purchase consideration amounted to $1,758,600 and included minority interest of $318,015 and goodwill of $1,440,585. Outlook The second quarter of every year in the oil and gas industry in Canada is always beset be·set tr.v. be·set, be·set·ting, be·sets 1. To attack from all sides. 2. To trouble persistently; harass. See Synonyms at attack. 3. with the uncertainty of the timing and extent of spring break-up break-up noun 1. separation, split, divorce, breakdown, ending, parting, breaking, splitting, wind-up, rift, disintegration, dissolution, termination noun 2. . This year break-up uncertainties are combined with forecasts of reduced activity in the oil and gas industry in 2002 compared to 2001, mainly due to lower commodity prices. In particular natural gas, which is the main driver of Cancoil's fracturing and drilling businesses, has seen lower market prices this year. However, despite these uncertainties, Cancoil is experiencing strong equipment utilization experience for well fracturing in late April as break-up in our key Southern Alberta Southern Alberta is a region located in the Canadian province of Alberta. As of the year 2004, the region's population was approximately 272,017[1][2]. market area is ending. In the United States break-up is not generally an issue and two of the four rigs in the U.S. have been working at high utilizations throughout April. Three quarters of Cancoil's fleet was contracted to the end of March 31, 2002 under the Halliburton agreement providing a strong base of operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. for the first quarter. Three rigs were working for Halliburton in the Unites States with five to six in Canada committed to this contract. Halliburton has renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. a contract for two rigs in the United States on a retainer A contract between attorney and client specifying the nature of the services to be rendered and the cost of the services. Retainer also denotes the fee that the client pays when employing an attorney to act on her behalf. plus day rate basis for the balance of 2002 and is contracting Cancoil rigs in Canada on an as needed as needed prn. See prn order. basis in Canada at market rates. Exiting break-up at the end of April Cancoil has approximately 50% of its fleet working with Halliburton. Reduced usage by Halliburton has freed equipment, particularly in Canada, to be marketed to other customers in the coil fracturing market. Cancoil has worked for two other fracturing customers in the first quarter of 2002 and expects significant opportunities for additional work throughout the year from existing and additional customers in Canada and the United States. Delivery of the two new generation rigs will occur in May and June June: see month. of 2002. These rigs will focus on the drilling market and will initially work in Canada. Cancoil has commitments from major oil and gas companies to drill test programs to prove the effectiveness of the new rigs. The Company is grateful for the sponsorship of these customers to test this exciting new equipment. Management is confident the new rigs will deliver wells to the customer efficiently and on a cost effective basis. Large cash deposits are in place to fund the majority of the completion costs of the new equipment and Cancoil has adequate borrowing facilities in place that combined with cash flows are expected to be more than adequate to fund the 2002 capital program. The bulk of this year's capital program will be completed by the end of June and surplus cash flows are targeted to reduce debt levels for the balance of the year. Management wishes to retain maximum financial flexibility to take advantage of improving trends anticipated in the oil and gas industry over the balance of 2002 and into next year.
Cancoil Integrated Services Inc.
CONSOLIDATED BALANCE SHEETS
March 31 December 31
2002 2001
(unaudited)
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ASSETS
Current assets:
Cash $ 273,038 $ 1,439,152
Accounts receivable 8,026,040 5,967,712
Prepaid expenses and other 233,929 242,094
Due from shareholder - 60,000
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8,533,007 7,708,958
Goodwill 1,440,585 -
Capital assets under construction 4,110,106 4,935,102
Capital assets - net 25,550,764 24,269,962
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$39,634,462 $36,914,022
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank operating loan $ 1,539,100 $ 1,150,000
Accounts payable and accrued liabilities 4,785,300 4,307,608
Demand equipment loans 8,434,741 8,927,700
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14,759,141 14,385,308
Future income taxes 1,846,149 1,680,013
Non-controlling interest - 318,015
Shareholders' equity
Capital stock 15,949,005 15,255,672
Retained earnings 7,080,167 5,275,014
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23,029,172 20,530,686
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$39,634,462 $36,914,022
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Cancoil Integrated Services Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(unaudited)
Three months Three months
ended ended
March 31, 2002 March 31, 2001
----------------------------------------------------------------------
Coil tubing service and drilling revenue $8,365,878 $4,272,634
Expenses:
Operating 4,169,391 2,978,246
General and administrative 698,547 524,170
Amortization 500,266 294,304
Interest on long-term debt 114,998 149,072
Interest income (2,586) (55,520)
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5,480,616 3,890,272
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Net income before income tax 2,885,262 382,362
Income tax expense
Current 913,973 -
Future 166,136 53,526
----------------------------------------------------------------------
1,080,109 53,526
----------------------------------------------------------------------
Net income before non-controlling
interest 1,805,153 328,836
Non-controlling interest in net (income)
loss of subsidiary - (80,693)
----------------------------------------------------------------------
Net income for the period 1,805,153 248,143
Retained earnings, beginning of period 5,275,014 494,278
----------------------------------------------------------------------
Retained earnings, end of period $7,080,167 $ 742,421
----------------------------------------------------------------------
Net income per share
Basic $ 0.05 $ 0.01
Diluted $ 0.05 $ 0.01
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Cancoil Integrated Services Inc.
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
Three months Three months
ended ended
March 31, 2002 March 31, 2001
---------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net income $ 1,805,153 $ 248,143
Add (deduct) non-cash items
Amortization 500,266 294,304
Future income tax 166,136 (23,653)
Non-controlling interest - 80,693
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Cash flow from operations 2,471,555 599,487
Change in non-cash working capital (1,512,472) (485,845)
---------------------------------------------------------------------
959,083 113,642
Financing activities:
Common shares and warrants issued 13,333 191,866
Increase (decrease) in long-term debt (492,959) 86,563
---------------------------------------------------------------------
(479,626) 278,429
Investing activities:
Acquisition of capital assets (1,774,533) (1,703,133)
Capital assets under construction 824,996 (103,896)
Acquisition of Technicoil minority
interest (1,085,135) -
---------------------------------------------------------------------
(2,034,672) (1,807,029)
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Net (decrease) in cash and cash
equivalents (1,555,215) (1,414,958)
Cash and cash equivalents (bank
operating loan net of cash), beginning
of period 289,152 (160,179)
---------------------------------------------------------------------
Cash and cash equivalent (bank operating
loan net of cash), end of period $(1,266,063) $ (1,575,137)
---------------------------------------------------------------------
Funds flow from operations per share
Basic $ 0.06 $ 0.02
Diluted $ 0.06 $ 0.02
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The TSX Venture Exchange TSX Venture Exchange Originally called the Canadian Venture Exchange (CDNX), this was a result of the merger of the Vancouver and Alberta stock exchanges. The goal of TSX Venture Exchange is to provide venture companies with effective access to capital while protecting investors. has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. |
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