Roughneck Mag

Hyduke Announces First Quarter 2018 Financial Results

NISKU, AB, May 15, 2018 /CNW/ – Hyduke Energy Services Inc. (“Hyduke” or the “Company”) (HYD – TSX) announced operating results for the three months ended March 31, 2018. Hyduke’s Financial Statements and Management Discussion & Analysis have been filed with regulators and are available at

Unless otherwise stated, tabular amounts presented are expressed in thousands of Canadian dollars and per-share figures in dollars per weighted average common share.


  Three months ended

March 31, 2018

change (%) Three months ended

March 31, 2017

Revenue 12,206 102.3% 6,033
Cost of goods sold 9,835 84.6% 5,328
Inventory impairment  
Gross profit 2,371 236.3% 705
Gross profit % 19.4% 7.7% 11.7%
Selling, general & administrative 2,980 95.3% 1,474

Net loss





from continuing operations      
Net loss (914) (2.2%) (935)
Per share – basic    (continuing operations) (0.01)   (0.03)
Per shares – diluted (continuing operations) (0.01)   (0.03)
EBITDAS(1) – continuing operations (29) (95.0%) (582)
  March 31, 2018   December 31, 2017
Total assets 27,124   26,563
Total liabilities 19,466   17,883
(1)       See “Non-IFRS Measures”



  March 31, 2018 March 31, 2017 Change (%)
Manufacturing & Fabrication 10,648 2,840 274.9%
Supply & Service 2,221 3,264 -32.0%
Elimination Entries (663) (71)  
Total Revenue 12,206 6,033 102.3%


The three months period ended March 31, 2018 showed a 102.3% increase in total revenues to $12,206.  In the quarter the Manufacturing & Fabrication segment generated $10,648 of revenue, a 274.9% increase over the same period in the prior year. The growth reflects increased revenues related to a recovery in legacy businesses, oil sands projects, and the diversification of its products and services to include the manufacture and repair of storage tanks in company facilities and remote locations and custom steel fabrication.

Supply & Service revenue decreased 32.0% to $2,221 in the first quarter of 2018 compared to the first quarter of 2017. The sector experienced an overall decrease in activity in Q1 2018 comparing to Q1 2017. These factors resulted in a decrease in demand for oilfield supplies, pneumatics and inspection services.

On a consolidated basis, contribution margin for Q1/18 increased by $1,852 to $3,339 (27.4% of revenue) compared to $1,487 (24.6% of revenue) in 2017. Indirect costs of $968 increased 23.8% compared to $782 in 2017 as discussed above. The resulting consolidated gross profit was $2,371 (19.4% of revenue) in Q1/18 compared to a margin of $705 (11.7% of revenue) in 2017.

SG&A expenses for the three months ended March 31, 2018 was $2,980, an increase of 95.3% compared to $1,474 for the same period in 2017. SG&A costs from the Q2 2017 acquisitions account for approximately 71.9% of this increase. The remaining increase is comprised of the removal of employee wage rollbacks and additional staff for remote tank fabrication activities. The SG&A expenses to total revenue was 24.4% in 2018 compared to 25.3% in 2017.

Negative EBITDAS (Refer to page 11 of Company’s MD&A for definition of EBITDAS) for continuing operations was $29 for the first three months of 2018 compared to a negative EBITDAS of $582 in 2017.

Depreciation and amortization of $259 increased from $152 for the same period in 2017 mainly due to the Q2 2017 acquisition and amortization of intangible assets and increased property, plant and equipment.

Stock based compensation was $46 compared to $42 for the same period in 2017.

The Company recorded $157 in interest charges during the first three months of 2018, compared to $165 for the same period in 2017.

The loss on assets disposal was $410, and was mainly due to an asset disposal in Western Manufacturing.

Continuing operations net loss for the three months ended March 31 was $906 in 2018 compared to a loss of $937 in 2017.


In the quarter ended March 31, 2018 showed significantly increased financial performance in terms of revenue, gross profit and EBITDA compared to the same period in the three prior fiscal years. Revenue of $12.2 million was more than double the $6.0 in sales for the same period in 2017. Gross profit of $2.4 million based on an operating margin of 19.4% was the highest for this three-month period since the first quarter of 2014. While EBITDA was slightly negative at ($29,000), for the same period in 2017 it was negative ($0.6 million) and negative ($1.4 million) in 2016.

Although the company is still not where management would like to be in terms of generating positive EBITDA and free cash flow from operations after debt servicing expenses and capital investments, the progress is steady and the year-over-year improvement meaningful. Based on these financial metrics, this is the best operating financial performance for Hyduke in the first quarter since world oil prices collapsed in late 2014.

April 2018 was the final winding down of Western Manufacturing Ltd operations, a business in northwest Alberta the Company acquired in March of 2017. Western had a prior history of rapid growth and profitability. It saw its direction reverse post 2014 and by the end of 2016 appeared to be attractively priced. Based in the heart of the active Montney natural gas, liquids and crude oil development, Hyduke was of the view a recovery was underway and that under new management Western could resume a growth path towards profitability.

Post-closing, financial and operating issues emerged not identified during the purchase negotiations. The result was Hyduke being forced to commit considerably more working capital to Western than contemplated to complete preexisting orders and settle with trade creditors. In spite of eliminating over $1.5 of annualized overhead shortly after purchase, Western was unable to profitably complete any of the acquired backlog. Further, the historic goodwill associated with Western in this unique, regional market was difficult to reestablish given Hyduke’s unwillingness to continue to price new work at or below cost.

These were some of the factors contributing to the operating losses in the second half of 2017.

Early in 2018 negotiations began with the former owners and current landlord of Western to vacate the leased premises at Hythe, Alberta and settle certain financial arrangements. An agreement was signed April 3, 2018 and is referred to in the Q1 financial statements as a subsequent event. Western was released from the lease effective April 1, 2018 to its legal termination December 31, 2018. Including property taxes and utilities Hyduke estimates annual savings of approximately $700,000.

Hyduke is completing its remaining orders in its main facility in Nisku and its subsidiary, Avalanche Metal Industries, in Kelowna, B.C.

Another subsequent event took place on May 8, 2018 when Hyduke finished up at the AltaGas Ridley Island Propane Export Terminal (RIPET). The Company began this project in May of last year. It completed the fabrication and air raise of a 1.5 million pound roof on January 27, 2018.

The completion on the RIPET site will allow the accelerated release of a 10% construction holdback.

Business in other company segments is steady. The company has projects underway in areas of oil sands tailing pond reclamation, utilities, agrifoods and transportation. Particularly encouraging is renewed interest in Hyduke’s legacy business of building, repairing and refitting drilling and well servicing rigs. One rig was refit and modified in April to go back into service in northeast Alberta. Other drilling and well servicing contractors are making inquiries about new equipment, modifications and repairs. Some companies are looking at reworking their rigs in anticipation of putting them to work in the significantly more active market in the United States.

The conventional upstream oil and gas industry has not been strong for Hyduke in the past three years. The company’s survival has been in diversification into new products, new markets and new industries. Hyduke is here today because it began looking beyond its legacy businesses three years ago.

Higher oil prices are having a positive impact on Canada’s upstream oil and gas industry despite all the well-publicized challenges regarding pipelines, market access and competitiveness.

In its May 7 weekly upstream industry analysis, ARC Energy Research Institute once again increased its estimate for revenue and after-tax cash flow for 2018. Based on average production of 7.5 million boe/day – the highest in history – and despite low natural prices, ARC is now forecasting revenue from production this year will be $122.5 billion and after-tax cash flow $57.6 billion. Revenue is up 49% from only $82.3 billion in 2016 while after-tax cash flow will rise by 117% from $26.6 billion two years ago.

The continually improving outlook from rising oil prices helped ARC increase its most recent revenue and after-tax cash flow forecast from earlier estimates January 2, 2018 when it was only estimated at $105.8 billion and $44.2 billion respectively

ARC has not increased is capital spending or drilling estimates for 2018, nor have other organizations that regularly do this such as the Petroleum Services Association of Canada or the Canadian Association of Oilwell Drilling Contractors.

However, in the absence of public data anticipating increased spending because of increase funds available, Hyduke is noticing a rise in inquiries from new and former customers as general economic conditions for this significant industry continue to improve.

Challenges remain. Because of the issues described above working capital and liquidity is tight. To this end, Hyduke is continuously reviewing the fixed cost side of its business. Shutting down Western’s Hythe facility and exiting the RIPET project has permanently reduced fixed property and labor costs.  The objective is to continually improve operating efficiency by increasing revenue, increasing margins and reducing fixed costs.

Additional information relating to Hyduke is available under the Company’s profile on SEDAR website at and

Forward looking information

This news release contains forward-looking information relating to the expectations of management that the integration process will lead to improvements in operations and efficiency for both Western and Hyduke. Such forward-looking information is subject to important risks, uncertainties and assumptions. The results or events predicated in this forward-looking information may differ materially from actual results or events. As a result, you are cautioned not to place undue reliance on this forward-looking information.

Forward-looking information is based on certain factors and assumptions regarding, among other things, general assumptions respecting the business and operations of Hyduke and economic factors. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward looking-information is subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what is currently expected. These factors include but are not limited to risks associated with the failure of the Company to obtain the benefits of integration; volatility in market prices for oil and natural gas; and the general economic conditions in Canada.

You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, the Company is under no obligation and does not undertake to update this information at any particular time, except as required by law.

About Hyduke

Trading on the TSX under the symbol “HYD,” Hyduke Energy Services Inc. is a supplier of equipment and services to the oil and gas drilling and well servicing industry.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this News Release.

SOURCE Hyduke Energy Services Inc.

For further information:

Patrick Ross, President & Chief Executive Officer, (780) 955-0355; Jimmie Yeung, Chief Financial Officer, (780) 955-0355

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