TSX Trading Symbol: NAL
CALGARY, March 6, 2018 /PRNewswire/ – Newalta Corporation (“Newalta”) (TSX:NAL) today reported results for the three months and year ended December 31, 2017.
FINANCIAL HIGHLIGHTS(1)
Three months ended December 31, |
Year ended |
||||||
($000s except per share data) (unaudited) |
2017 |
2016 |
% change |
2017 |
2016 |
% change |
|
Revenue |
61,740 |
63,707 |
(3) |
246,412 |
205,449 |
20 |
|
General & Administrative |
6,934 |
7,690 |
(10) |
27,919 |
31,060 |
(10) |
|
Net loss |
(12,262) |
(75,346) |
(84) |
(48,170) |
(158,476) |
(70) |
|
– per share ($) basic and diluted |
(0.14) |
(0.85) |
(84) |
(0.55) |
(2.02) |
(73) |
|
Adjusted EBITDA(2) |
11,565 |
11,486 |
1 |
44,629 |
21,852 |
104 |
|
– per share ($) basic and diluted |
0.13 |
0.13 |
– |
0.51 |
0.28 |
82 |
|
Maintenance capital expenditures(2) |
3,229 |
4,097 |
(21) |
9,691 |
8,152 |
19 |
|
Growth capital expenditures(2)(3) |
1,722 |
2,969 |
(42) |
4,485 |
6,683 |
(33) |
|
Dividends declared |
– |
– |
– |
– |
– |
– |
|
Dividends paid |
– |
– |
– |
– |
3,515 |
(100) |
|
Weighted average shares outstanding |
88,148 |
88,148 |
– |
88,148 |
78,557 |
12 |
|
Shares outstanding, December 31,(4) |
88,148 |
88,148 |
– |
88,148 |
88,148 |
– |
(1) |
Refer to Newalta's Management's Discussion and Analysis (“MD&A”) and 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 MD&A. |
(3) |
Growth capital expenditures are net of 2016 contributions from a midstream joint venture partner for its interest in a modular processing facility (“MPF”). |
(4) |
Newalta had 88,148,148 shares outstanding as at March 6, 2018. |
MANAGEMENT COMMENTARY
“Fourth quarter results continued the momentum of quarterly year-over-year improvements in the business,” said John Barkhouse, President and Chief Executive Officer. “Adjusted EBITDA of $11.6 million came in at the mid-range of our guidance for the quarter, and was primarily driven by continued improvement in our U.S. Drill Site business and cost savings in G&A, offset by decreased contributions from the Heavy Oil division. For the year, our Adjusted EBITDA was $44.6 million, a 104% increase over prior year primarily driven by improvements in our U.S. Drill Site business and the realization of our cost saving efforts in G&A. Our performance is indicative of a stabilization in the market and we are seeing the impact of our actions to increase market share of our Drill Site business.”
“Looking forward to 2018, our Q1 Adjusted EBITDA guidance range is $10 million to $12 million, and our full year guidance remains unchanged at $50 million to $60 million. We anticipate steady improvements to our business in 2018 predicated on the continuation of the recent stabilization in commodity prices and associated activity levels. Our Adjusted EBITDA guidance for full year 2018 is based on a WTI forecast of $55 to $65 per barrel.
“On March 1, 2018, we announced we entered into an arrangement agreement with Tervita Corporation which provides for the combination of Newalta and Tervita, enhancing our businesses and creating a leading publicly traded energy-focused environmental solutions provider in Canada. The combined business will provide water processing, treating, recycling and disposal services to customers in the oil and gas, mining and industrial sectors. We are pleased to announce this milestone transaction, which offers our shareholders the opportunity to participate in the success of the combined businesses, improves our balance sheet and provides significant potential for value creation through realization of synergies and growth opportunities. We strongly believe that this combination is the most attractive path forward for Newalta, and we are committed to making the merger and ensuing integration a success.”
FINANCIAL RESULTS
Heavy Oil
Oilfield
Corporate and Other
Recent Developments
On February 28, 2018, we entered into an arrangement agreement (the “Arrangement Agreement”) with Tervita Corporation (“Tervita”), pursuant to which Tervita has agreed, through a series of transactions, to acquire all of our issued and outstanding common shares on the basis of: (i) 0.1467 of a Class A Common share (“Amalco Share”) of Amalco (as defined herein); and (ii) 0.0307 of one warrant to purchase one Amalco Share, for each outstanding common share of Newalta, and Newalta and Tervita will amalgamate to form “Tervita Corporation” (“Amalco”). Each Amalco Warrant will be exercisable for a period of two years from the closing of the Arrangement (as defined herein) at a price of $2.75 per equivalent common share of Newalta. The transaction is to be completed by way of a plan of arrangement (the “Arrangement”) under the Business Corporations Act (Alberta). The Arrangement is subject to customary conditions for a transaction of this nature, which include, without limitation, court and regulatory approvals including the Toronto Stock Exchange and approval under the Competition Act (Canada), the approval of 66 2/3% of the votes cast by our securityholders represented in person or by proxy at an annual and special meeting of our securityholders to be called to consider the Arrangement (the “Newalta Meeting”) and the approval of 66 2/3% of the votes cast by the shareholders of Tervita represented in person or by proxy at an annual and special meeting of the shareholders of Tervita to be called to consider the Arrangement (the “Tervita Meeting”). A joint information circular regarding the Arrangement is expected to be mailed to our securityholders and the shareholders of Tervita in early April 2018 for the Newalta Meeting and the Tervita Meeting, each scheduled to take place in late April 2018. Closing of the Arrangement is expected to occur upon receipt of all required regulatory approvals, including the approval under the Competition Act (Canada).
The following section contains forward-looking information as it outlines our Outlook for 2018. 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 & BUSINESS DRIVERS
Our business performance is tied to drilling and production related activities in western Canada and the United States. Sustained, stable oil and gas prices enable our customers to make capital decisions to invest in the drilling and completion of new wells and reactivation of shut-in wells. Activity levels, which correlate to the generation of production waste volumes, will vary among plays based on their cost profile. We provide enhanced value solutions to our customers, enabling them to extract greater value from their operations irrespective of cost profile.
The key drivers of our business performance are as follows:
Crude Oil Prices
Drilling Activity
Production Impact & Other
Outlook
Our outlook for 2018 is based on our expectation of year-over-year trends including:
Our Q1 and full-year 2018 guidance ranges are:
The following table outlines the factors we expect to impact Adjusted EBITDA performance in the first quarter and full year of 2018:
Factor |
Actual(1) |
Assumption(1) |
Expected impact on Adjusted EBITDA |
|
Q4 2017 |
Q1 and Full Year 2018 |
Q1 2018 |
2018 |
|
West Texas Intermediate (US$/bbl) |
Q4: $55.38 2017: $50.91 |
Q1 2018: $60 – $65 |
||
Canadian Light Sweet (CDN$/bbl)(2) |
Q4: $66.93 2017: $62.65 |
Q1 2018: $70 – $75 |
$0M – $0.5M ↑ |
$0.5M – $3M ↑ |
Western Canadian Select (CDN$/bbl)(2) |
Q4: $54.86 2017: $50.54 |
Q1 2018: $45 – $50 |
Flat |
$0.5M ↓ – $0.5M↑ |
Drilling activity(2) over prior year |
Q4: 30% 2017: 30% |
Q1 2018: 15% – 25% |
$1M – $2.5M ↑ |
$3M – $8M ↑ |
Production Impact & Other(3)(4) |
Q4: ($4.1M) 2017: $4.3M |
$1.5M ↓ |
$2.5M – $4M ↑ |
|
Adjusted EBITDA Guidance |
$10M – $12M |
$50M – $60M |
(1) |
M refers to millions. |
(2) |
Impact derived from annual sensitivities based on forecast performance and volumes outlined in the “Sensitivities” section of our annual 2017 MD&A. 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. |
(4) |
2017 balances include Step Change and Savings from Cost Rationalization. |
Total Debt, Capital & Cash Flow Management
Management continues to focus on moving towards a positive cash flow model and to date we have made significant progress through proactive management of operating cash flows and cost rationalization initiatives. In 2017, we made progress towards our near-term financial objective of cash flow neutral, ending the year with a $14.1 million cash draw. Moving into 2018, we will continue to maintain our focus on cash flow and exercise prudent judgment in managing our capital expenditures, in alignment with our longer-term target of positive cash flow.
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 our performance improves. Managing debt leverage and use of cash and capital are our highest priorities. We expect to remain within our debt covenants throughout 2018.
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 March 7, 2018 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, March 14, 2018, by dialing 855-859-2056 and using the pass code 9796689.
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, more than 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