Dalmac Energy Inc. Reports Q3’19 Financial Results

EDMONTON, Alberta, March 29, 2019 (GLOBE NEWSWIRE) -- John Babic, President and CEO of Dalmac Energy Inc. (“Dalmac”) (TSX Venture “DAL”) announces the second quarter financial results for the period ended January 31, 2019

Highlights for Q3’19

• US east coast refineries – maintenance shut down creates extra pressure on pipeline network which contributes to system overload on pipelines and impairs oil and gas egress from Alberta.  WCS oil price drops to $10/bbl in November.
• Alberta’s oil production storage inventory hits 35 million bbls which prompted the Alberta government to announce a production curtailment of approximately 325,000 bbs/day effective January 1^st 2019.  The curtailment will be reviewed monthly for trimming following inception and is expected to expire fully by end of 2019. Recently announced reductions in curtailment cuts will amount to 150,000 by the end of May 2019.  To supplement lack of pipeline access, the Alberta Government announced the procurement of 7000 additional rail cars by the end of 2019.
• By end January 2019 curtailment measures showed results and the WCS spot price rebounded to over $40/bbl and storage inventories are reduced to 30 million bbls.
• E & P producers respond to egress constraints and drop in WCS pricing by cancelling or rescheduling drilling and completion programs.  2019 cap ex budgets were also trimmed.  In some cases producing wells got shut in which affected Dalmac’s service work.
• Q3’19 revenues down 4% from Q3’18.
• Gross margin remained relatively constant at 25%.  Higher fuel costs, decreased rentals and an overall lower industry utilization levels weighed in on the GM.
• EBITDAS was $522K - 10% lower than in Q3’18
• Due to the accumulated loss position – Company did not claim any tax credits for income taxes.
• Dalmac initiated new cost cutting measures by reducing staffing positions and streaming inter branch operations – about $1.4 million of costs will be trimmed over the course of next 12 months
• The Company is still engaged in revising the credit facility with its senior lender to modify the covenant terms going forward.  Until the completion of the review and covenant amendment, all senior lender long term debt will be classified as current.

Outlook

The sharp drop in oil prices in the fourth quarter of 2018 has led to increased uncertainty surrounding our customers 2019 capital budgets. Many have taken a conservative approach to rolling out their scheduled capital expenditures at the start of the new year.  The lack of export capacity and low oil prices caused many of our customers to postpone scheduled drilling and completion projects and rein in their capital expenditure forecasts. The steep discounts on WCS pricing eased of significantly by January which was aided in a good part by the Alberta government announced production curtailment of about 325,000 bbls/day. To make up for the lack of pipeline capacity the Alberta government announced that an additional 7000 additional rail cars will come on line by the end of 2019. The government also announced that the production curtailment will be lowered by 150,000 bbls/ day by the end of May and the expectation is that the entire curtailment will be eliminated by the end of 2019.

The drilling and competition activity levels in the Duvernay basin is still expected to be fairly robust in 2019.  Many of our customers such as Encana, Shell, Chevron and Peyto are still pursuing fairly significant drilling and completion programs. Dalmac is positioned very well in the Duvernay and has an excellent working relationship our customers operating in this basin.

Dalmac strategy going forward it to focus on being first call on drilling and completions work in our operating areas while also locking in more production related projects which entail more regular and routine fluid transfers.

In our efforts optimise on efficiency and control our costs we have streamlined much of our branch operations and reduced overhead significantly. Our forecasted savings are expected to be in the neighbourhood of approximately $1.4 million per year

Our customers drilling, maintenance and plant certification projects which are scheduled to run over the course the year will help to bolster and sustain our activity and utilization levels.  With the recent developments, described above, and the expectation that more take away capacity is soon coming on stream, we expect that further development and activity in our industry will also follow suit.

For more information contact:

John Babic - CEO - Dalmac Energy
Tel: 780-988-8510
Email: jbabic@dalmac.ca

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.