DAL Dalmac Energy Inc

DALMAC ENERGY INC. TSX Venture: "DAL"

EDMONTON, Aug. 25, 2015 /CNW/ - John Babic, President and CEO of Dalmac Energy Inc. ("Dalmac") (TSX Venture "DAL") is pleased to announce fourth quarter and annual financial results for the fiscal year ended April 30, 2015

Fourth Quarter and Annual Financial Highlights:

• Gross margin increased by 1% or to 24% from 23% in 2014 - despite downward pressure from major customers, to cut rates by about 20%
• EBITDA was roughly $3.62M in the current year end compared to $3.58M in the prior year. Even with a $5M decrease in Revenue Dalmac was able to hold bottom line numbers fairly consistently. This is really a credit to operations and field staff in relation to cost cutting measures which were implemented.
• Cash position at year end is significantly better - $1.6m in current year compared to from $526K in previous year.
• Debt was reduced from 12.6M to $9.39M in the year

Late in November of 2014 OPEC decided not to reign in their production. The consequence of this decision, in light of the swelling shale oil boom in the US, resulted in oversupplied energy market. This caused the price of oil to drop by upwards of 50%. The exploration and production (E&P) companies reacted swiftly by scaling back on their drilling activity and by demanding rate cuts from their suppliers. Dalmac responded by cutting its rack rates in the vicinity of 15 – 20%.  Subsequent to the aforementioned, certain key customers expressed their desire to reduce the size of their vendor lists in favour of select group of service providers who represent the necessary qualifications as a desired business partner. Dalmac was selected as one of the business partners of choice and was awarded with not only existing but additional work contracts in the Duvernay basin.

With the volatility in oil pricing came pressure on pricing from key customers which hit our gross margin and bottom line. Revenue decreased by 14% to $32M from the same period last year. The down turn was most significantly felt in the fourth quarter which ended April 30. Revenue dropped by 32% to $6.7M and net income decreased by 6% to $(893)K of which, $(932)k was a result of the disposal of assets. 

As a cost saving measure, Dalmac decided to dispose of assets over the course of the year which resulted in a disposition loss of $932k. The overall combined impact of all the above reduced year end net revenue by 2.2% to $(1.16)M.

Gross Margin, as defined as revenue less direct operating costs as a percentage of revenue, was 18% for the quarter and 24% for the year end. This compares to 20% and 23% respectively for the previous year.  This reflects the drop in oilfield activity as a result of volatile oil prices and management response to this development in the form of rapid deployment of cost saving strategies.

Outlook
The surplus of oil production is continuing to put pressure on commodity prices which is in turn affecting industry capital investment. According to the Canadian Association of Petroleum Producers (CAPP), oil and gas capital investment for 2015 is forecasted to decrease about 40% to $45 billion and drilling activity decreased 47% to 5320 wells. The bright spot on the horizon is the Duvernay basin which happens to be in Dalmac's back yard. The focus of activity for the immediate future is the natural gas liquids- rich areas of the basin. Drilling in the Duvernay is also not cheap – wells can cost anywhere between $11-20 million to complete - depending on the location. Early indications from our key E&P customers is that they will be completing a fairly extensive drilling program for the balance of the year to bring targeted production areas on line.  This bodes well for Dalmac's utilization rates on a going forward basis

Statements throughout this report that are not historical facts may be considered 'forward looking statements'.  Such statements are based on current expectations that involve risks and uncertainties, which could cause actual results to differ from those anticipated.  Important factors that can cause anticipated outcomes to differ materially from actual outcomes include the impact of general economic conditions, industry conditions, competition from other industry participants, volatility of petroleum prices, the ability to attract and retain qualified personnel, changes in laws or regulation, currency fluctuations, continued ability to access capital from available facilities and environmental risks.  References to "Dalmac', the "Corporation", "Company", "us", "we", and "our" mean Dalamc Energy Inc. and its subsidiary Dalmac Oilfield Services Inc.  The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.  We seek safe harbor.

SOURCE Dalmac Energy Inc.