Calfrac: Q1 Results – Russian Focus
In Russia, Calfrac‘s operating income margins decreased to 2 percent from 5 percent year-over-year as a result of abnormal weather conditions.
During the first quarter of 2014, the Company’s revenue from Russian operations increased by 5 percent to$38.9 million from $37.2 million in the corresponding three-month period of 2013. The increase in revenue was mainly due to higher fracturing activity as a result of the Company expanding its operations into Usinsk for a new customer in the fourth quarter of 2013 combined with increased demand for horizontal multi-stage fracturing operations in Western Siberia. During the first quarter of 2014, approximately 50 percent of the Company’s total fracturing jobs were multi-stage completions within horizontal wellbores versus 33 percent in the comparable quarter of 2013. The increase in revenue was partially offset by severely cold winter weather in Western Siberia during January and February and warmer than expected weather in Usinsk which reduced equipment utilization, as well as the completion of smaller coiled tubing jobs.
Operating income in Russia was $0.8 million during the first quarter of 2014 compared to $2.0 million in the corresponding period of 2013. The decrease in operating income was due to the unusual weather conditions during the first quarter, which included both colder and warmer-than-normal conditions affecting equipment utilization and access to well sites, respectively. In addition, the start-up of a fourth district in Usinsk increased operating costs over the first quarter of 2013.
Calfrac’s 2014 capital budget is projected to be approximately $130.0 million, of which $33.0 million is being directed towards growing its international operations, including an investment in coiled tubing and fracturing equipment in Russia and Argentina. In addition, approximately $20.0 million remaining from Calfrac’s 2013 capital program is expected to be expended in 2014. As such, projected capital spending in 2014 is $150.0 million.
