CALGARY, ALBERTA -- (Marketwired) -- 11/28/14 -- Divestco Inc. (TSX VENTURE: DVT) ("Divestco" or the "Company"), an exploration services company dedicated to providing a comprehensive and integrated portfolio of data, software and services to the oil and gas industry worldwide, today announced its financial and operating results for the three and nine months ended September 30, 2014.
Financial Highlights
OVERALL PERFORMANCE AND OPERATIONAL RESULTS
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Financial Results (Thousands, Except Per Share Amounts)
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Three months ended September 30
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2014 2013 $ Change % Change
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Revenue $ 5,207 $ 4,883 $ 324 7%
Operating Expenses (1) 6,140 5,219 921 18%
Other Loss (Income) (31) (24) (7) N/A
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EBITDA (2) (902) (312) (590) N/A
Finance Costs 682 301 381 127%
Depreciation and Amortization 1,449 1,372 77 6%
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Loss before Income Taxes (3,033) (1,985) (1,048) N/A
Income Tax Recovery - - - N/A
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Net Loss $ (3,033) $ (1,985) $ (1,048) N/A
Per Share - Basic and
Diluted (0.05) (0.03) (0.02) N/A
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Funds from Operations (2) $ (901) $ (291) $ (610) N/A
Per Share - Basic and
Diluted (0.01) - (0.01) N/A
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Class A Shares Outstanding 67,096 66,921 N/A N/A
Weighted Average Shares
Outstanding
Diluted 67,085 66,909 N/A N/A
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OVERALL PERFORMANCE AND OPERATIONAL RESULTS
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Financial Results (Thousands, Except Per Share Amounts)
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Nine months ended September 30
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2014 2013 $ Change % Change
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Revenue $ 17,108 $ 23,584 $ (6,476) -27%
Operating Expenses (1) 17,281 17,822 (541) -3%
Other Loss (Income) (186) 1,666 (1,852) N/A
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EBITDA (2) 13 4,096 (4,083) -100%
Finance Costs 1,184 792 392 49%
Depreciation and Amortization 6,605 5,435 1,170 22%
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Loss before Income Taxes (7,776) (2,131) (5,645) N/A
Income Tax Recovery (31) - (31) N/A
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Net Loss $ (7,745) $ (2,131) $ (5,614) N/A
Per Share - Basic and
Diluted (0.12) (0.03) (0.08) N/A
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Funds from Operations (2) $ (93) $ 6,093 $ (6,186) N/A
Per Share - Basic and
Diluted - 0.09 (0.09) -100%
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Class A Shares Outstanding 67,096 66,921 N/A N/A
Weighted Average Shares
Outstanding
Diluted 67,075 66,896 N/A N/A
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(1) Includes salaries and benefits, G&A and shared-based payments but
excludes depreciation and amortization and other loss (income)
(2) See the "Non GAAP Measures and Additional GAAP Measure" sections of the
Company's Management Discussion and Analysis filed on the Company's website
and on SEDAR.
Q3 2014 vs. Q3 2013
The Company generated revenue of $5.2 million compared to $4.9 million in Q3 2013, an increase of $0.3 million (7%). Operating expenses increased by $0.9 million (18%) to $6.1 million in Q3 2014. Finance costs increased by $381,000 (127%) to $682,000 in Q3 2014 mainly due to a higher cost of debt and the recognition of the remaining deferred finance charges related to debt the Company retired in Q3 2014. Depreciation and amortization ($1.4 million) increased by $77,000 (6%) mainly due to the growth of the seismic data library (Company's policy is to amortize 40% of participation survey costs immediately upon delivery of new seismic data to participants and the balance over six years straight-line).
Nine Months Ended September 30, 2014 vs. Nine Months Ended September 30, 2013
The Company generated revenue of $17.1 million compared to $23.6 million in 2013, a decrease of $6.5 million (27%). Operating expenses decreased by $0.5 million (3%) to $17.3 million for the nine-month period of 2014 due to lower salaries and benefits ($1 million or 10% decrease) partially offset by higher G&A costs. Finance costs increased by $0.4 million (49%) to $1.2 million in 2014 mainly due to a higher cost of debt and the recognition of the remaining deferred finance charges related to debt the Company repaid in Q3 2014. Depreciation and amortization ($6.6 million) increased by $1.2 million (22%) mainly due to higher amortization of new seismic data acquired in 2014.
Business Seasonality
Although the Company's Software & Data segment has relatively constant recurring revenue throughout the year from its license and subscription sales, some of the Company's other segments experience revenue fluctuations due to seasonal influences on oil and gas industry activities.
Seismic data acquisitions are usually completed in the winter season when the ground is frozen allowing access of heavy equipment with minimal disruption of agricultural fields. This affects the timing of recognition of revenues in the Seismic data segment. Additionally, the Services segment normally exhibits a noticeable reduction in sales in the spring and summer months and a noticeable increase in sales during the fall and winter months when significant drilling and exploration activities are underway in North America. To the extent possible, Divestco minimizes these fluctuations by performing specific types of contract work appropriate for lower-activity months.
Financial Position
Divestco ended Q3 2014 with a working capital deficit of $6.4 million (December 31, 2013: $2.3 million deficit), excluding deferred revenue of $7.8 million (December 31, 2013 - $2.8 million). The increase in working capital deficit from the end of 2013 was primarily due to the reclassification of shareholder loan debt from long-term to current. Currently, the company is in negotiations with the debt holders to restructure the debt back into a long term facility. The significant increase in accounts receivable and accounts payable was due to a large seismic brokerage transaction realized in Q3 2014.
As previously announced, the Company entered into a short-term bridge loan on September 30, 2014, to fully repay all bank indebtedness and augment working capital while management continues to move forward with the sale of non-strategic assets and putting a new long-term conventional banking facility in place. Also as previously announced, the Company consolidated its shareholder loans under a single loan agreement effective September 29, 2014. Since the entire shareholder loan is due on demand and there are no scheduled principal repayments, it is classified as current debt.
The Company expects to settle its liabilities in the near term by using funds from operations, completing an asset disposition and obtaining an alternative senior credit facility. The outcome of these events cannot be predicted at this time.
Operations Update and Outlook
For the last quarter of 2014, management anticipates seismic data segment revenues to significantly increase given current and anticipated drilling, asset acquisition and corporate consolidation activities of oil and gas producers, which is being driven by recently renewed investment in the sector. There have been three new seismic participation revenue projects initiated in Q4 2014 with revenue expected to be recognized in Q4 2014 and Q1 2015. Activity levels are also expected to increase in the Services segment, both domestically and internationally. The Software & Data segment released its new seismic interpretation solution (GlassTM) on October 1, 2014, which received excellent reviews at the May 2014 CSEG Conference in Calgary and October 2014 SEG Conference in Denver.
About the Company
Divestco is an exploration services company that provides a comprehensive and integrated portfolio of data, software, and services to the oil and gas industry. Through continued commitment to align and bundle products and services to generate value for customers, Divestco is creating an unparalleled set of integrated solutions and unique benefits for the marketplace. Divestco's breadth of data, software and services offers customers the ability to access and analyze the information required to make business decisions and to optimize their success in the upstream oil and gas industry. Divestco is headquartered in Calgary, Alberta, Canada and trades on the TSX Venture Exchange under the symbol "DVT".
Additional information on the Company is available on its website at Divestco.com and on SEDAR at sedar.com.
Neither 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.
This press release contains forward-looking information related to the Company's capital expenditures, projected growth, view and outlook with respect to future oil and gas prices and market conditions, and demand for its products and services. Statements that contain words such as "could', "should", "can", "anticipate", "expect", "believe", "will", "may" and similar expressions and statements relating to matters that are not historical facts constitute "forward-looking information" within the meaning applicable by Canadian securities legislation. Although management of the Company believes that the expectations reflected in such forward-looking information are reasonable, there can be no assurance that such expectations will prove to have been correct because, should one or more of the risks materialize, or should the assumptions underlying forward-looking statements or forward-looking information prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated or expected. Readers should not place undue reliance on forward-looking statements or forward-looking information. All of the forward-looking statements and forward-looking information of the Company contained in this press release are expressly qualified, in their entirety, by this cautionary statement. Except where required by law, the Company does not assume any obligation to update these forward-looking statements or forward-looking information if conditions or opinions should change.
In particular, this press release contains forward-looking statements pertaining to the following: Company's ability to keep debt and liquidity at acceptable levels, improve/maintain its working capital position and maintain profitability in the current economy; availability of external and internal funding for future operations; relative future competitive position of the Company; nature and timing of growth; oil and natural gas production levels; planned capital expenditure programs; supply and demand for oil and natural gas; future demand for products/services; commodity prices; impact of Canadian federal and provincial governmental regulation on the Company; expected levels of operating costs, finance costs and other costs and expenses; future ability to execute acquisitions and dispositions of assets or businesses; expectations regarding the Company's ability to raise capital and to add to seismic data through new seismic shoots and acquisition of existing seismic data; treatment under tax laws; and new accounting pronouncements.
These forward-looking statements are based upon assumptions including: future prices for crude oil and natural gas; future interest rates and future availability of debt and equity financing will be at levels and costs that allow the Company to manage, operate and finance its business and develop its software products and various oil and gas datasets including its seismic data library, and meet its future obligations; the regulatory framework in respect of royalties, taxes and environmental matters applicable to the Company and its customers will not become so onerous on both the Company and its customers as to preclude the Company and its customers from viably managing, operating and financing its business and the development of its software and data; and that the Company will continue to be able to identify, attract and employ qualified staff and obtain the outside expertise as well as specialized and other equipment it requires to manage, operate and finance its business and develop its properties.
These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the Company's control, including: general economic, market and business conditions; vol atility in market prices for crude oil and natural gas; ability of Divestco's clients to explore for, develop and produce oil and gas; availability of financing and capital; fluctuations in interest rates; demand for the Company's product and services; weather and climate conditions; competitive actions by other companies; availability of skilled labour; failure to obtain regulatory approvals in a timely manner; adverse conditions in the debt and equity markets; and government actions including changes in environment and other regulation.
Contacts:
Divestco Inc.
Mr. Stephen Popadynetz
CEO and President
587-952-8152
Divestco Inc.
Mr. Danny Chiarastella
Vice President, Finance
587-952-8027
www.divestco.com
