Divestco Inc. (TSX-V: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,
2017.
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 |
Nine months ended September 30 |
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2017 |
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2016 |
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$ Change |
% Change |
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2017 |
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2016 |
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$ Change |
% Change |
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Revenue |
$ |
1,599 |
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$ |
2,015 |
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$ |
(416 |
) |
-21 |
% |
$ |
9,432 |
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$ |
8,287 |
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$ |
1,145 |
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14 |
% |
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Operating Expenses (1) |
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2,813 |
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2,448 |
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365 |
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15 |
% |
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8,380 |
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7,640 |
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740 |
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10 |
% |
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Other Loss (Gain) |
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(844 |
) |
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(9 |
) |
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(835 |
) |
N/A |
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(806 |
) |
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62 |
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(868 |
) |
N/A |
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EBITDA (2) |
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(370 |
) |
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(424 |
) |
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54 |
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N/A |
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1,858 |
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585 |
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1,273 |
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218 |
% |
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Finance Costs |
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457 |
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359 |
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98 |
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27 |
% |
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1,231 |
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1,069 |
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162 |
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15 |
% |
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Depreciation and Amortization (3) |
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1,647 |
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1,643 |
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4 |
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0 |
% |
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6,385 |
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4,750 |
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1,635 |
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34 |
% |
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Net Loss |
$ |
(2,474 |
) |
$ |
(2,426 |
) |
$ |
(48 |
) |
N/A |
$ |
(5,758 |
) |
$ |
(5,234 |
) |
$ |
(524 |
) |
N/A |
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Per Share - Basic and Diluted |
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(0.04 |
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(0.04 |
) |
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- |
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N/A |
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(0.09 |
) |
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(0.08 |
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(0.01 |
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N/A |
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Funds from (used in) Operations |
$ |
(978 |
) |
$ |
(453 |
) |
$ |
(525 |
) |
N/A |
$ |
845 |
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$ |
567 |
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$ |
278 |
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49 |
% |
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Per Share - Basic and Diluted |
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(0.01 |
) |
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(0.01 |
) |
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- |
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N/A |
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0.01 |
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0.01 |
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- |
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0 |
% |
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Class A Shares Outstanding |
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66,343 |
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67,252 |
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N/A |
N/A |
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66,343 |
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67,252 |
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N/A |
N/A |
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Weighted Average Shares Outstanding |
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Basic |
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66,416 |
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67,254 |
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N/A |
N/A |
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66,692 |
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67,240 |
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N/A |
N/A |
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Basic and Diluted |
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66,416 |
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67,254 |
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N/A |
N/A |
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66,692 |
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67,240 |
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N/A |
N/A |
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(1) Includes salaries & benefits, general &
administrative expenses and share-based payments but excludes
depreciation and amortization and other losses (income)(2) See the
“Non GAAP Measures” section of the Company’s Management Discussion
and Analysis filed on the Company’s website and on SEDAR(3)
Increase in 2017 from 2016 is due to a new seismic survey completed
in Q1 2017. The Company’s policy is to amortize 40% of the cost of
a new seismic survey in the period of data delivery.
Q3 2017 vs. Q3
2016
Divestco generated revenue of $1.6 million in Q3
2017 compared to $2.0 million in Q3 2016, a decrease of $0.4
million (21%). This was due to lower seismic data library
revenue and to a delay in a contract that was subsequently signed
in Q4. Revenue in the Seismic Data segment ($0.3 million)
decreased by $0.4 million (53%). Revenue in the Services segment
($0.6 million) increased slightly as the Company was awarded
several contracts in Q3 2017. Revenue in the Software & Data
segment ($0.7 million) decreased by $0.2 million (23%) as a log
sale expected to close in Q3 2017, closed in Q4 2017. Operating
expenses increased by $0.4 million (15%) to $2.8 million in Q3 2017
from $2.4 million in Q3 2016 due to higher salaries as certain
austerity measures in place in 2016 were reversed in 2017. Finance
costs increased by $98,000 (27%) to $457,000 in Q3 2017 from
$359,000 in Q3 2016 due to higher debt levels. Depreciation and
amortization was $1.6 in Q3 2017 and Q3 2016.
Nine Months Ended September 30, 2017 vs.
Nine Months Ended September 30, 2016
Divestco generated revenue of $9.4 million in
the first nine months of 2017 compared to $8.3 million for the same
period in 2016, an increase of $1.1 million (14%) mainly due to
higher Seismic Data segment revenue related to the completion of a
new seismic survey and significantly higher data library sales.
Revenue in the Seismic Data segment ($5.7 million) increased by
$2.7 million (89%). Revenue in the Software & Data segment
($2.2 million) decreased by $1.1 million (34%) mainly due to a log
sale expected to close in Q3 2017, closed in Q4 2017. Revenue in
the Services segment ($1.5 million) decreased by $0.4 million (22%)
primarily due to delays in the awarding of new contracts on
successful bids. Several projects were awarded commencing in the
later portion of Q3 2017; these will be completed from Q4 2017 to
Q2 2018. Operating expenses increased by $0.8 million (10%) to $8.4
million in the first nine months of 2017 from $7.6 million for the
same period in 2016 due to higher salaries as certain of the
austerity measures in place in 2016 were reversed in 2017. In
addition, business taxes were higher due to a refund received in Q1
2016 and royalties related to international projects increased.
This was partially offset by lower property taxes. Finance costs
increased by $0.1 million (15%) to $1.2 million for the first nine
months of 2017 from $1.1 million for the same period in 2016 due to
higher debt levels. Depreciation and amortization was $6.4 million
for the first nine months of 2017 compared to $4.8 million in 2016,
an increase of $1.6 million (34%) due to the completion of a new
seismic survey.
Financial
Position
(1)
As at September 30, 2017, Divestco had a working
capital deficiency of $3.3 million (December 31, 2016: $3.9 million
deficiency), excluding deferred revenue of $1.3 million (December
31, 2016: $1.7 million). The decrease in the working capital
deficit from the end of 2016 was due to the repayment of a bridge
loan in March 2017 which was replaced by a long-term debt facility
and positive funds from operations.
(1) See the “Non GAAP Measures” section of the
Company’s Management Discussion and Analysis filed on the Company’s
website and on SEDAR
Term Loan
In March 2017, the Company entered into a
secured loan with a new lender for $6.0 million with an initial
draw of $5.0 million. The loan bears interest at 17% per annum
compounded monthly and matures in September 2020. Effective
September 30, 2017, the loan agreement was amended to reduce the
amount of cash restricted by the lender to $750,000 from $3.1
million. As a result of the amendment, the Company is required to
make a $2 million loan repayment by December 6, 2017. This amount
has been reclassified to current as at September 30, 2017.
Operations Update and
Outlook
The improvement in West Texas Intermediate oil
prices in the later part of 2017 is expected to have a positive
impact on capital spending by the industry going into 2018. With
the increase in M&A activity and recent announcements of equity
and debt financings, access to capital also seems to be improving
for our clients leading us to view Q4 2017 and next year in a more
favourable light. Divestco diligently monitors its operating
expenses which has resulted us in reducing our costs by over 50%
since 2014. We will continue to adjust our expenses based on
activity levels.
Mr. Stephen Popadynetz, CEO and President
commented: “While Q3 had lower activity then we previously
expected, much of this activity was just delayed and commenced in
our fourth quarter. In fact, our services division is now
operating at full capacity and we now have more contracted projects
in hand then we have billed in the previous four quarters. Our
continued strategy of developing international markets is paying
increased dividends and with a better outlook for our domestic
markets, we are beginning to realize a significant turnaround in
our services division. We remain well positioned throughout the
company to take advantage of the uptick in activity levels and
capital spending plans. With an efficient cost structure and
additional financial flexibility, Divestco is poised for a vastly
improved 2018.”
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.
For more information please contact:
Divestco
Inc.(www.divestco.com)
Mr. Stephen Popadynetz
CEO
and President
Tel 587-952-8152
Mr. Danny ChiarastellaCFOTel 587-952-8027
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; volatility 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.
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