TSX Trading Symbol: NAL
CALGARY, May 9, 2017 /CNW/ – Newalta Corporation (“Newalta”) (TSX:NAL) today reported results for the three months ended March 31, 2017.
FINANCIAL HIGHLIGHTS(1)
Three months ended |
||||
($000s except per share data) (unaudited) |
2017 |
2016 |
% change |
|
Revenue |
60,810 |
48,665 |
25 |
|
General & Administrative |
7,531 |
9,444 |
(20) |
|
Net loss |
(14,475) |
(41,242) |
(65) |
|
– per share ($) basic and diluted |
(0.16) |
(0.73) |
(78) |
|
Adjusted EBITDA(2) |
10,479 |
33 |
n/m |
|
– per share ($) |
0.12 |
– |
– |
|
Maintenance capital expenditures(2) |
1,099 |
970 |
13 |
|
Growth capital expenditures(2) |
1,069 |
1,698 |
(37) |
|
Dividends declared |
– |
– |
– |
|
Dividends paid |
– |
3,515 |
(100) |
|
Weighted average shares outstanding |
88,148 |
56,237 |
57 |
|
Shares outstanding, March 31,(3) |
88,148 |
56,237 |
57 |
(1) |
Refer to Newalta's Management's Discussion and Analysis and 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. Unless otherwise noted, commentary and the financial results will refer to Continuing Operations. |
(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) |
Newalta had 88,148,148 shares outstanding as at May 9, 2017. |
MANAGEMENT COMMENTARY
“Our solid first quarter performance reflects both improving market conditions and our focus on operational excellence and customer driven, value-added solutions,” said John Barkhouse, President and Chief Executive Officer. “Profitability continued to improve with Divisional EBITDA margins of 30%, up 11 percentage points over the prior year.”
“We are seeing recovery play out in our markets as we expected, beginning with improved drilling activity driving higher utilization in our U.S. and Canadian drilling services businesses and increased drilling waste volumes to our Canadian Oilfield Facilities. We are also starting to see an increase in our project work, particularly in Heavy Oil, as the relative stability in oil prices has begun to increase customer demand. We expect these positive year-over-year recovery trends to continue in the quarters ahead.
“Our outlook for the year remains unchanged with anticipated annual Adjusted EBITDA of between $40 million and $55 million, based on a WTI forecast of $45 to $60 per barrel. We continue to work towards our target of being within a range of cash flow neutrality for the year and driving towards the positive cash flow model we envision in future years. With the actions taken to establish a lower cost structure, we remain well positioned to realize significant operating leverage and deliver strong increases in performance as our markets recover.”
FIRST QUARTER RESULTS
Heavy Oil
Oilfield
Corporate and Other
The following section contains forward-looking information as it outlines our Outlook for 2017. Our Outlook is based on several key assumptions including growth capital contributions, commodity prices and activity levels in the oil and gas industry. Changes to these assumptions could cause our actual results to differ materially. Please refer to our Forward-Looking Information later in this document. We are subject to a number of risks and uncertainties in carrying out our activities including market conditions, ability to expand the business, competition, regulation, and the ability to attract and retain personnel. A complete list of our risk factors is disclosed in our most recently filed Annual Information Form.
OUTLOOK & OPERATING LEVERAGE
Our performance in the last two years was significantly impacted by the decline in oil prices and activity levels in the oil and gas industry. Inherent in our business model is the capacity to leverage significant upside with recovery in oil pricing and activity levels with minimal capital investment.
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 enables our customers to make capital decisions to invest in the drilling and completion of new wells and reactivation of shut-in wells. As we see activity levels recover, this will translate into increased production waste volumes being generated. Timing of recovery will vary among plays based on their cost profile.
Our operating leverage is driven by the following factors:
Crude Oil Prices
Drilling Activity
Step Change
Savings from Cost Rationalization
2017 Outlook
In 2017, we expect to see a return towards normalized quarterly seasonality. Our 2017 Outlook is based on the following assumptions:
Our Q2 and full-year 2017 guidance ranges are:
The following table outlines the factors we expect to impact Adjusted EBITDA performance in the second quarter and full year of 2017:
Factor |
Actual(1) |
Assumption(1) |
Expected impact on Adjusted EBITDA |
|
Q1 2017 |
Q2 and Full Year 2017 |
Q2 2017 |
2017 |
|
West Texas Intermediate (US$/bbl) |
Q1: $51.83 |
Q2 2017: $45 – $55 |
||
Canadian Light Sweet (CDN$/bbl)(2) |
Q1: $64.84 |
Q2 2017: $60 – $70 |
$0.5M – $1M ↑ |
$0.5M – $3.5M ↑ |
Western Canadian Select (CDN$/bbl)(2) |
Q1: $49.38 |
Q2 2017: $40 – $50 |
$0M – $0.5M ↑ |
$0.5M – $5M ↑ |
Drilling activity(2) over prior year |
Q1: 35% |
Q2 2017: 20% – 25% |
$2.5M – $3M ↑ |
$8M – $12M ↑ |
Step Change(3) |
Q1: $1.4M |
$2M – $2.5M ↑ |
$5M – $8M ↑ |
|
Savings from cost rationalization |
Q1: $3.2M |
$0.5M ↑ |
$4M – $5M ↑ |
|
Adjusted EBITDA Guidance |
$8M – $10M |
$40M – $55M |
(1) |
M refers to millions. |
(2) |
Impact derived from annual sensitivities based on forecast performance and volumes outlined in the “Sensitivities” section of our 2016 Annual Report. 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. |
Total Debt, Capital & Cash Flow Management
Throughout the downturn, we proactively structured our business model for the environment. Our Q2 2016 equity financing, rationalization initiatives, amended Credit Facility, reduced capital spend and suspension of dividends provided us the liquidity and flexibility to operate in the sustained downturn.
We will continue to manage cash flows to ensure our financing obligations are met and spending is minimized wherever possible. Over the last two years, management has focused on moving towards a positive cash flow model and have made significant progress through proactive management of operating cash flows and cost rationalization initiatives. Through 2017, we will maintain our focus on being within a range of cash flow neutrality for the year, subject to opportunities that may arise. Further, we will exercise prudent judgment in managing our capital expenditures for the year, aligned with our longer-term cash flow target.
Effective March 31, 2017, we amended and extended the terms of our Credit Facility to extend the waiver of our Total Debt to Covenant EBITDA covenant to Q2 2019 and to revise the Senior Debt to Covenant EBITDA and Interest Coverage covenant thresholds. These amendments provide us with the flexibility to continue to manage our balance sheet as we transition through recovery. Managing debt leverage and use of cash and capital are our highest priorities. We expect to remain within our debt covenants throughout the remainder of 2017.
Management's Discussion and Analysis and Financial Statements
The 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 May 10, 2017 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 Wednesday, May 17, 2017 by dialing 855-859-2056 and using the pass code 92431408.
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 & Operating Leverage”.
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
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