CALGARY, ALBERTA — (Marketwired) — 11/14/13 — Leader Energy Services Ltd. (TSX VENTURE: LEA) (“Leader” or the “Company”) has released its financial and operating results for the three and nine month periods ended September 30, 2013.
Revenue in the third quarter was $5.3 million as compared to $7.4 million in the third quarter of the prior year. Activity levels in the third quarter were slower to recover from spring break-up as industry activity was hampered by the June flood in Alberta and wet weather at various times throughout the summer months. In the current quarter, the Company was involved in a significant increase in stand-alone nitrogen work as compared to the third quarter of 2012. The increase is due to customers utilizing nitrogen for gas lift activities. As a result, the Company used over 15% more nitrogen in the current quarter. This increase in stand-alone nitrogen work was offset by a reduction in full service coiled tubing activity in the third quarter of 2013 versus the same quarter in 2012. The reduction in full service coiled tubing activity is due to the wet weather experienced in the quarter creating a bottle-neck in services as customers could not access locations with equipment to complete drilling and fracturing activities prior to the Company–s services being needed on location. Overall, lower activity in the third quarter continued to put pressure on pricing for the Company–s services.
Operating costs in the third quarter of 2013 totaled $4.0 million as compared to $5.1 million for the third quarter of 2012. During the third quarter, the Company experienced a 4.4% increase in variable costs as a percentage of revenue mainly the result of an increase in nitrogen used on stand-alone nitrogen work and higher costs as a percentage of revenue for routine repair and maintenance, partially offset by savings realized in lower coiled tubing charges, lower third party charges, and lower field related subsistence charges. To help ensure reliability of the Company–s equipment, routine repair and maintenance continued in the third quarter particularly on the nitrogen pumpers where maintenance was performed between jobs. In addition, the difficulty of moving equipment on and off location resulting from the wet weather increased the wear and tear on equipment. These increases were partially offset by savings in personnel charges. As part of the cost cutting initiatives undertaken in November 2012 and again in April 2013 to coincide with spring break-up, the Company started the third quarter of 2013 with a smaller, but more experienced operations group as compared to the third quarter of 2012. Due to the expected increase in activity in the winter drilling season; the Company is in the process of adding personnel. Over the past few years, the biggest challenge facing the Company has been the ability to hire enough qualified personnel to operate the equipment in the field. As in the past, the Company is adding personnel from both within and outside western Canada.
For the three months ended September 30, 2013, the Company reported a net loss of $1.7 million ($0.06 per basic and diluted share) compared to income of $0.1 million ($0.00 per basic share and diluted share) for the three months ended September 30, 2012.
For the nine month period ended September 30, 2013, the Company reported revenues of $16.2 million as compared to $20.8 million reported in the nine month period of 2012. Leader continues to provide larger diameter deep coil services in north-central Alberta and northeast British Columbia focusing on oil and liquids-rich resource plays. The reduction in year-to-date 2013 revenue as compared to 2012 is attributed to lower revenue in the first and third quarters, partially offset by an increase in activity in the second quarter.
For the nine month period ended September 30, 2013, the Company reported operating costs of $12.8 million as compared to $16.0 million for the nine month period ended September 30, 2012. In the current period, the Company experienced a slight decrease in variable costs as a percentage of revenue as compared to the same period in 2012. Savings in repair and maintenance and third party equipment rentals and transportation charges, were partially offset by higher coiled tubing charges resulting from the Company utilizing a higher percentage of larger diameter coiled tubing which is more expensive than smaller diameter coiled tubing (particularly in the first half of 2013), higher fuel costs due to an increase in equipment on location (with the addition of fluid pumpers added to the fleet and support trailers utilized on the deep coil jobs) and higher nitrogen charges particularly in the third quarter accounted for the decrease in variable costs. As a result of cost reduction initiatives implemented in late 2012 and to coincide with spring break-up, the Company also saved almost $1.0 million in operational wages in the first nine months of 2013.
For the nine months ended September 30, 2013, the Company reported a net loss of $5.9 million ($0.20 per basic and diluted share) compared to a net loss of $4.1 million ($0.15 per basic share and diluted share) for the nine months ended September 30, 2012.
Outlook
Leader expects demand for all its services to remain strong through the winter season and to strengthen over the long term. Although the market remains very competitive, fourth quarter revenue has to date shown a substantial increase relative to the same period last year. The Company has been adding to the number of field personnel over the past few weeks, complementing the highly-experienced team already in place. With strong oil prices, the development of liquids rich gas plays, and the prospect of LNG export capabilities to the west coast, optimism has improved. Effective management of corporate and operating costs remains a focus.
Other
Additional information can be found on SEDAR at or the Company web site at . The number of common shares issued and outstanding at the date hereof is 29,388,021 which does not include 2,568,000 unexercised stock options and 4,400,000 share purchase warrants.
Forward-looking information
This press release contains certain statements or disclosures relating to the Company that are based on the expectations of the Company as well as assumptions made by and information currently available to the Company which may constitute forward-looking information under applicable securities laws. All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that the Company anticipates or expects may, or will occur in the future (in whole or in part) should be considered forward-looking information.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Contacts:
Leader Energy Services Ltd.
Rod Hauser
President & CEO
(403) 265-5400
Leader Energy Services Ltd.
Jason Krueger, CFA
Executive VP & Director
(403) 265-5400
Leader Energy Services Ltd.
Graham Reid, CA
VP Finance & CFO
(403) 265-5400