ACHESON, Alberta, May 08, 2019 (GLOBE NEWSWIRE) -- (TSX:ENT) ENTREC Corporation (“ENTREC” or the “Company”), a heavy haul transportation and crane solutions provider, today announced financial results for the first quarter ended March 31, 2019. 

Three months ended $ thousands, except per share amounts and margin percent		March 31 2019	March 31 2018
Revenue		43,910	40,067
Gross profit		9,136	4,522
Gross margin		20.8%	11.3%
Adjusted EBITDA(1)		5,431	921
Adjusted EBITDA margin(1)		12.4%	2.3%
Adjusted net loss(1,2)		(4,058)	(5,217)
Per share(1)		(0.04)	(0.05)
Net loss(2)		(2,539)	(5,078)
Per share – basic		(0.02)	(0.05)
Per share – diluted		(0.02)	(0.05)
Basic weighted average shares outstanding		109,867	109,627
As at $ thousands		March 31 2019	December 31 2018
Adjusted working capital(1,4)		26,845	28,720
Total assets		304,233	224,836
Total liabilities		274,099	191,871
Shareholders’ equity		30,134	32,965
Net tangible asset value(1)		54,241	61,656

Note 1:     See “Non-IFRS Financial Measures” section of the Company’s Management Discussion & Analysis for the three months ended March 31, 2019.
Note 2:     Attributable to the shareholders of the Corporation.
Note 3:     The current period results include the impact from the adoption of IFRS 16 – Leases. As permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
Note 4:     Adjusted working capital at March 31, 2019 excludes lease liabilities of $25.8 million that arose due to the adoption of IFRS 16 – Leases.

Revenue for the quarter ended March 31, 2019 increased by 10% to $43.9 million from $40.1 million in 2018 due to growth from ENTREC’s operations in the United States as well as additional revenue generated from the acquisition of Capstan Hauling Ltd. (“Capstan”) on October 1, 2018. ENTREC’s US revenue increased by 12% to $18.3 million in 2019 from $16.3 million last year. The Company’s revenue in Canada increased to $25.6 million in the first quarter of 2019 from $23.7 million in 2018.

“Despite the revenue growth achieved year-over-year, our revenue fell below our expectations for the quarter,” said John M. Stevens, ENTREC’s President and CEO. “Lower customer demand to start the year across many of our operating regions, combined with a very cold February in western Canada and North Dakota caused the majority of this shortfall. However, we finished off Q1 with a strong March and anticipate our revenue and financial results will improve as 2019 progresses.”

Adjusted EBITDA increased to $5.4 million during the three months ended March 31, 2019 from $0.9 million in 2018. Contributing to the increase was the impact of the adoption of IFRS 16 – Leases (“IFRS 16”), which increased adjusted EBITDA by $3.7 million in the quarter. In addition, a non-recurring negative revenue adjustment of $1.9 million was incurred in the comparative quarter ended March 31, 2018.

During the quarter ended March 31, 2019, ENTREC incurred a net loss of $2.5 million, compared to a net loss of $5.1 million in 2018. Contributing to the lower net loss was an unrealized foreign exchange gain on long-term debt, which was $2.1 million in 2019 compared to a gain of $0.6 million in 2018. The remainder of the improvement was due to higher Adjusted EBITDA, partially offset by higher depreciation expense and finance costs due to the adoption of IFRS 16.

“The outlook for our US business continues to be very positive as we move through 2019. Growing demand for our services in the oil and gas sector has led to both increased activity levels as well as higher customer pricing. Assuming oil prices can be maintained at current levels or increase further in 2019, we should continue to see higher industry activity levels that should result in further improvements in profitability,” said Mr. Stevens.

“In the second quarter of 2019, we expanded our operations into the State of Wyoming. We are currently experiencing strong demand from our customers in the oil and gas sector to support their crane and transportation needs in this region. This follows our previous expansion into the State of Colorado in the fall of 2017.”

As previously reported, the profitability of ENTREC’s Texas operations was severely hampered in fiscal 2018 as well as in the first quarter of 2019 by high operating costs and labour shortages. ENTREC is executing a strategy to significantly improve its profitability in this region in 2019. In the first quarter of 2019, the Company made the strategic decision to stop providing lump sum rig moving services and instead re-focus this division on providing hourly crane and heavy haul transportation services. This focus will make the service offering of the Texas division consistent with that of all of ENTREC’s other locations in the United States.

Due to macro-economic factors and low oil and natural gas prices, the Company’s outlook for the oil and natural gas industry in western Canada continues to be very cautious. These macro-economic factors include pipeline constraints, which have contributed to significant discounts in the market price for the oil produced in western Canada compared with other jurisdictions, as well as rising carbon taxes and increasing regulatory requirements to achieve government approvals for large industrial projects. In addition, in Q4 2018, the Government of Alberta announced curtailments of oil production to help combat the significant discount in Western Canadian Select (WCS) oil prices.

While oil prices in western Canada improved significantly over the first quarter of 2019, the downward pricing momentum experienced at the end of 2018, along with activity being restricted by limited takeaway capacity and production curtailments, resulted in oil and gas companies reducing their budgeted capital expenditures and drilling programs for 2019.

Looking ahead to the remainder of 2019 and 2020, higher oil and gas prices, including lower price differentials on WCS, appear to be improving overall industry fundamentals, which could lead to higher activity levels in western Canada as the year progresses. In addition, ENTREC continues to be optimistic about the impact that LNG Canada’s $40 billion liquefied natural gas (LNG) project in Kitimat, B.C. will have on its industry as well as the natural gas sector in north-west Albert and north-east B.C., which will be required to support LNG Canada’s natural gas needs.

The Company also continues to grow its presence in MRO work in the Alberta oil sands region as well as with other industrial facilities in western Canada. This work represents a growing market and is typically less susceptible to changes in near-term commodity prices. MRO work could contribute over 35% of the Company’s Canadian revenue in fiscal 2019.

The Company will also be working to improve its balance sheet in 2019 as well as buyout or refinance equipment leases expiring over the coming year. These initiatives will include reviewing additional sources of financing and strategies to improve profitability and cash flow that could include additional debt and/or equity, and/or the sale of assets.

A complete set of ENTREC’s most recent financial statements and Management’s Discussion and Analysis will be filed on SEDAR (www.sedar.com) and posted on the Company’s website (www.entrec.com).

About ENTREC

ENTREC is a heavy haul transportation and crane solutions provider to the oil and natural gas, construction, petrochemical, mining and power generation industries. ENTREC is listed on the Toronto Stock Exchange under the symbol ENT.

Non-IFRS Financial Measures

Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, amortization, loss (gain) on disposal of property, plant and equipment, foreign exchange loss (gain) on long-term debt, share-based compensation, impairment of long-lived assets, and non-recurring business acquisition and integration costs. ENTREC believes that, in addition to net income, adjusted EBITDA is a useful measure as it provides an indication of the financial results generated by its principal business activities prior to consideration of how these activities are financed or how the results are taxed in various jurisdictions and before certain non-cash expenses such as depreciation, amortization, loss (gain) on disposal of property, plant and equipment, share-based compensation, and impairment of long-lived assets. Adjusted EBITDA also illustrates what adjusted EBITDA is, excluding the effect of non-recurring business acquisition and integration costs. Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue.

Adjusted net loss is calculated excluding the after-tax amortization of acquisition-related intangible assets, impairment of long-lived assets, notional interest accretion expense arising from convertible debentures, and foreign exchange loss (gain) on long-term debt. These exclusions represent non-cash charges that the Company does not consider indicative of ongoing business performance. The Company also believes the elimination of amortization of acquisition-related intangible assets provides management and investors an improved view of its business results by providing a degree of comparability to internally developed intangible assets for which the related costs are expensed as incurred. Adjusted loss per share is calculated as adjusted net loss divided by the basic weighted average number of shares outstanding during the applicable period.

Adjusted working capital is calculated as current assets less current liabilities, net of the current portion of lease liabilities. The Company believes adjusted working capital is a useful supplemental measure as it provides an indication of its ability to settle debts as they come due.

Net tangible asset value is derived from the consolidated statement of financial position and is calculated as shareholders’ equity, excluding intangible assets, and adjusted for the difference between the estimate of fair market value and carrying value of ENTREC’s property, plant and equipment. The Company believes net tangible asset value is a useful measure as it provides an indication of the net asset value of ENTREC. The Company’s estimate of the fair market value of its property, plant and equipment is based on recent appraisals of its equipment fleet as well as other market and industry data. In addition, non-fleet assets are estimated to have a fair market value that approximates their carrying value. Fair market value is a significant estimate, which is subject to adjustment based on market factors that can affect both the supply and demand for similar assets. The actual realizable value on a sale of property, plant and equipment could differ materially from these estimates.

Please see ENTREC's Management Discussion & Analysis for the three months ended March 31, 2019 for reconciliations of each of adjusted EBITDA and adjusted net loss to net loss, the most directly comparable financial measure calculated and presented in accordance with IFRS.

Forward-looking Statements

This press release contains forward-looking statements which reflect ENTREC’s current beliefs and are based on information currently available to ENTREC. These statements require ENTREC to make assumptions it believes are reasonable and are subject to inherent risks and uncertainties. Actual results and developments may differ materially from the results and developments discussed in the forward-looking statements as certain of these risks and uncertainties are beyond ENTREC's control. 

Examples of forward-looking statements in this MD&A and the key assumptions and risk factors involved in such statements include, but are not limited to the following: (i) ENTREC’s anticipation that its revenue and financial results will improve as 2019 progresses. This expectation is subject to the assumption that its US business will continue to grow in fiscal 2019 and that profitability of its Texas operations will improve. This expectation is also subject to the assumption that oil prices will be high enough in 2019 to encourage additional spending by oil and gas companies. The risks most likely to affect this growth include volatility of the oil and natural gas sector, economy and cyclicality, and competition. There is also no assurance that the Company will be successful in improving the profitability of its Texas operations; and (ii) ENTREC’s improving outlook on the oil and natural gas industry in western Canada. This improving outlook is based on a number of assumptions including: (a) recent improvements in oil prices and reductions in price differentials for oil produced in western Canada will continue; (b) ENTREC’s expectation that the recent positive final investment decision on the $40 billion LNG Canada project in Kitimat, B.C. will be positive for the natural gas industry in Canada and for ENTREC; and (c) ENTREC’s belief that revenue from its MRO work in the Alberta oil sands region will continue to be steady throughout the remainder of 2019. ENTREC’s belief that revenue from its MRO work in the Alberta oil sands region will be steady in fiscal 2019 is based on the assumption that oil prices will be high enough in 2019 to maintain current levels of spending by oil and gas companies in the Alberta oil sands region. ENTREC’s expectation that the $40 billion LNG Canada project will be beneficial for the natural gas industry in Canada and for ENTREC is based on the assumption that the project will encourage additional investment in the natural gas industry in western Canada and the Company can obtain additional work in the natural gas sector and in supporting construction activity related to the LNG project. This expectation is also completely subject to the construction of the LNG facility proceeding as approved. There is no certainty of this. The risks most likely to affect these assumptions include volatility of the oil and natural gas sector, Alberta oil sands exposure, economy and cyclicality, competition, and regulatory and statutory developments.

Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected effects on ENTREC. These forward-looking statements are made as of the date of this press release. Except as required by applicable securities legislation, the Company assumes no obligation to update publicly or revise any forward-looking statements to reflect subsequent information, events, or circumstances.

For further information, please contact: 

John M. Stevens - President & CEO
Telephone: (780) 960-5625

Jason Vandenberg – CFO
Telephone: (780) 960-5630

www.entrec.com