TSX Trading Symbol: NAL
CALGARY, Nov. 9, 2016 /CNW/ – Newalta Corporation (“Newalta”) (TSX:NAL) today reported results for the three and nine months ended September 30, 2016.
FINANCIAL HIGHLIGHTS(1)
($000s except per share data) (unaudited) |
Three months ended September 30, |
Nine months ended September 30, |
|||||
2016 |
2015 |
% change |
2016 |
2015 |
% change |
||
Continuing Operations |
|||||||
Revenue |
51,311 |
83,502 |
(39) |
141,742 |
262,919 |
(46) |
|
General & Administrative |
6,791 |
9,950 |
(32) |
23,370 |
34,805 |
(33) |
|
Net loss |
(20,328) |
(12,690) |
60 |
(83,130) |
(49,330) |
69 |
|
– per share ($) basic and diluted |
(0.23) |
(0.23) |
– |
(1.10) |
(0.88) |
25 |
|
Adjusted EBITDA(2) |
8,065 |
20,067 |
(60) |
10,366 |
48,439 |
(79) |
|
– per share ($) |
0.09 |
0.36 |
(75) |
0.14 |
0.86 |
(84) |
|
Maintenance capital expenditures(2) |
2,065 |
3,879 |
(47) |
4,055 |
10,343 |
(61) |
|
Growth capital expenditures(2)(3) |
1,697 |
9,818 |
(83) |
3,714 |
57,770 |
(94) |
|
Dividends declared |
– |
7,030 |
(100) |
– |
21,084 |
(100) |
|
– per share ($)(2) |
– |
0.125 |
(100) |
– |
0.375 |
(100) |
|
Dividends paid |
– |
7,030 |
(100) |
3,515 |
19,780 |
(82) |
|
Weighted average shares outstanding |
88,148 |
56,237 |
57 |
75,337 |
56,216 |
34 |
|
Shares outstanding, September 30,(4) |
88,148 |
56,237 |
57 |
88,148 |
56,237 |
57 |
|
Combined Operations |
|||||||
Revenue |
51,311 |
83,502 |
(39) |
141,742 |
305,027 |
(54) |
|
Net loss |
(20,328) |
(15,662) |
30 |
(83,119) |
(56,692) |
47 |
|
– per share ($) basic and diluted |
(0.23) |
(0.28) |
(18) |
(1.10) |
(1.01) |
9 |
|
(1) |
Refer to Newalta's Management's Discussion and Analysis and unaudited Condensed Consolidated Financial Statements for further information. References to GAAP are synonymous with IFRS and references to Consolidated Financial Statements and notes are synonymous with Financial Statements. |
(2) |
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 in our Management's Discussion and Analysis (“MD&A”). |
(3) |
Growth capital expenditures are net of 2015 and 2016 contributions from a midstream joint venture partner for its interest in a modular processing facility. |
(4) |
Newalta had 88,148,148 shares outstanding as at November 9, 2016. |
MANAGEMENT COMMENTARY
“Third quarter results continued the 2016 trend of sequential quarter over quarter improvement in Adjusted EBITDA, reflecting the alignment of our cost basis to the activity levels in the areas we serve,” said John Barkhouse, President and Chief Executive Officer. “We are seeing our efforts to reduce costs flow through to the bottom line. Further, improving stability in oil pricing is translating into gradual improvements in activity.”
“Heavier than normal rainfall in the quarter, and a lagging recovery that continued to impact drilling and production volumes contributed to results coming in at the lower end of our previous guidance. As such, we have applied our Interest Coverage covenant waiver for the third quarter, as allowed for in our credit facility. In addition, through discussions with and support from our syndicate of lenders, we determined it was best to be proactive and obtain a Q4 2016 Interest Coverage covenant waiver as a precautionary measure. The waiver removes uncertainty from the fourth quarter for our various stakeholders, including our customers, employees, bondholders and shareholders, and sets the stage for execution of our business plan in 2017.
“As previously indicated, we continue to see the second half of 2016 demonstrating substantially stronger performance than in the first half, supported by a number of factors. Stabilizing commodity prices and a slow but steady increase in production waste volumes flowing into our facilities, combined with targeted improvements in our drill site business and the impact of our ongoing focus on cost management, continue to underpin our outlook for Q4 2016 as well as for 2017.
“Looking forward to 2017, we anticipate annual Adjusted EBITDA of between $40 million and $55 million, based on a WTI forecast of $45 to $60 per barrel. Our guidance is underpinned by the assumption that relative oil price stability will result in improved activity levels. In 2017, given the actions we have taken to manage our operating cash flows, we expect to be within a range of cash flow neutrality for the year.
“We remain well positioned to unlock operating leverage as the markets we serve gradually recover.”
THIRD QUARTER AND YEAR-TO-DATE RESULTS HIGHLIGHTS
The following section contains forward-looking information as it outlines our Outlook for 2016 and 2017. Our Outlook is based on several key assumptions including growth capital contributions, commodity prices and activity levels of the industries we serve. Changes to these assumptions could cause our actual results to differ materially. Please refer to our Forward-Looking Information later in this document.
OUTLOOK
Our performance in 2016 has been significantly impacted by the drop in oil prices and activity levels in the oil and gas industry. Our view is that recovery, in the form of increased activity (whether drilling, completions or production), will be driven by stability in oil and gas prices, which will enable our customers to make capital decisions to invest in the drilling and completions of new wells and bring back shut-in wells.
Given results in Q3 coming in on the lower end of our previous guidance range, and with limited visibility to this lagging recovery, we've tightened our outlook for the year.
We expect performance in the fourth quarter to be stronger than Q3 2016 predicated on:
Our 2016 guidance ranges are:
The following table outlines the factors we expect to impact Adjusted EBITDA performance in the fourth quarter.
Factor |
Actual(1) |
Assumption(1) |
Expected impact on Adjusted EBITDA |
|
Q3 2016 |
Q4 2016 |
Q4 2016 |
2016 |
|
West Texas Intermediate (US$/bbl) |
$44.88 |
Q4 2016: $40 – $50 |
||
Canadian Light Sweet (CDN$/bbl)(2) |
$54.32 |
Q4 2016: $51 – $59 |
$0.1M ↓ – $0.5M ↑ |
$1.3M – $1.8M ↓ |
Western Canadian Select (CDN$/bbl)(2) |
$41.03 |
Q4 2016: $31 – $41 |
$0.4M ↓ – $0.3M ↑ |
$1.9M – $2.5M ↓ |
Drilling activity(2) decline over prior year |
~45% |
Q4 2016(3): 10% – 20% |
$1M – $2M ↓ |
$12M – $13M ↓ |
Step Change(4) |
($14.9M) |
$0.5M – $1M ↓ |
$38.5M – $39M ↓ |
|
Fort McMurray wildfire |
$4.5M↓ |
|||
Savings from cost rationalization |
$5.8M |
Full year assumption: $10M 2015 carry forward 2016: $14.5 – $15.5M |
$5.5M – $6M↑ |
$24.8M – $25.3M↑ |
Adjusted EBITDA Guidance |
$8.5M – $11.5M |
$19M – $22M |
(1) |
M refers to millions. |
(2) |
Impact derived from annual sensitivities based on 2016 forecast performance and volumes outlined in the “Sensitivities” section on page 45 of our 2015 Annual Report. The actual impact from crude oil prices may vary with fluctuations in volumes. |
(3) |
Estimates for drilling activity decline as disclosed in our 2015 Annual Report have been amended to reflect expectations for the remainder of 2016. The revision does not have an impact on expected Adjusted EBITDA range. |
(4) |
This factor is expected to have an impact on our performance through the year, and cannot be quantified on any linear sensitivity. |
We will continue to manage cash flows to ensure our financing obligations are met and spending is minimized wherever possible. Tied to our Adjusted EBITDA guidance and its underlying assumptions, we anticipate being cash flow negative for the fourth quarter of 2016 after the impact of working capital changes and cash costs for severance, onerous lease payments, financing costs, tax and capital expenditures.
2017 Outlook
Looking forward to 2017, we anticipate our annual revenue to range between $200 million to $275 million and annual Adjusted EBITDA between $40 million to $55 million, based on a WTI forecast of $45 to $60 US$/bbl. Further, we expect our G&A to approximate an average of $7.5 million per quarter. Our guidance is underpinned by the assumption that relative oil price stability will result in improved activity levels.
Over the last two years, management has focused on moving towards a positive cash flow model. We have made significant progress in moving towards this target through proactive management of operating cash flows and cost rationalization initiatives. In 2017, we will maintain our focus on this target and expect to be within a range of cash flow neutrality for the year, subject to opportunities that may arise. Management will exercise prudent judgment in managing our capital expenditures for the year, aligned with our longer-term cash flow target.
Management's Discussion and Analysis and Financial Statements
The unaudited 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.
Quarterly Conference Call
Management will hold a conference call on November 10, 2016 at 11:00 a.m. (ET) to discuss Newalta's performance for the quarter. To participate in the teleconference, please call 647-427-7450 or toll free 1-888-231-8191. 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 Thursday, November 17, 2016 by dialing 855-859-2056 and using the pass code 2019876.
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 SimplifiedTM. 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.
This press release contains references to certain financial measures, including some that 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 in our MD&A.
FORWARD-LOOKING INFORMATION
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 information with respect to:
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 are subject to certain risks, uncertainties and assumptions, including, without limitation:
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.
SOURCE Newalta Corporation