Trican Reports Second Quarter Results for 2015
Consolidated revenue for the second quarter of 2015 was $230.6 million, a decrease of 57% compared to the second quarter of 2014. The adjusted loss was $85.3 million and adjusted diluted loss per share was $0.57 compared to an adjusted loss of $36.2 million and adjusted diluted loss per share of $0.24 in the same period of 2014. Funds used in operations were $50.3 million compared to funds used in operations of $11.5 million in the second quarter of 2014.
Subsequent to the end of the second quarter, Trican entered into a definitive agreement with RN Assets LLC, an indirect subsidiary of Rosneft Oil Company, for the sale of Trican’s Russian pressure pumping business for a purchase price of USD$140 million or approximately CAD$182 million, with customary working capital and net debt adjustments to be determined. Trican intends to apply the net proceeds from this sale to reduce its outstanding debt. Trican and the Purchaser have now entered into definitive agreements for the sale of the Russian business, and the purchaser has obtained approval of the Russia Federal Antimonopoly Service for the transaction. Closing of the transaction is scheduled for August 20, 2015, and is subject to certain conditions precedent and the preparation and delivery of customary closing documentation.
Trican and Rosneft are also continuing to negotiate for the sale of Trican’s Kazakhstan pressure pumping business. If the parties reach agreement on the terms of the sale of the Kazakhstan business, Trican expects that such sale would close in Q4 2015. There is no guarantee that the parties will be able to agree on terms regarding the sale of the Kazakhstan business or complete the transaction on the terms agreed. Further, such transaction would be subject to approval by the Kazakhstan Antimonopoly Body, and final corporate approvals by Trican and the Purchaser.
Trican continues to negotiate covenant relief with its lenders and meaningful progress in the negotiations has been made to date. No agreements have been reached with the lenders as of the date of this report and there can be no assurance that such agreements will be reached. The closing of the sale of the Russian business is a positive step for the Company and we remain optimistic an agreement with covenant relief will be reached with the lenders.
Canadian operations generated $81.8 million of revenue and an operating loss of $12.7 million during the 2015 second quarter compared to Q2 2014 revenue of $171.9 million and an operating loss of $8.0 million. The adjusted operating loss was $11.8 million or 14.4% of revenue and excludes severance costs recorded during the 2015 second quarter. Canadian results were negatively impacted by reduced drilling and completions activity caused by low commodity prices and the impact of spring break-up. Activity levels were very low during April and May, but meaningfully rebounded in June. Reduced customer demand resulted in a sequential decline in pricing of approximately 10%. Management has been focused on adjusting the Canadian operations’ cost structure to current operating conditions and experienced price reductions during the quarter for proppant, cement, chemicals, third party hauling, fuel and parts in the 10-15% range. In addition, management has reduced the Canadian operations’ fixed cost structure on a sequential basis by 44%. Approximately 35% of the Canadian operations’ equipment remains parked and we will continue to monitor activity and pricing levels and adjust our active equipment fleet and cost structure accordingly.
U.S. operations generated $79.4 million of revenue and an operating loss of $24.6 million during the 2015 second quarter compared to Q2 2014 revenue of $267.6 million and operating income of $12.0 million. The adjusted operating loss was $22.7 million or 28.6% of revenue and excludes severance costs of $1.9 recorded during the 2015 second quarter. Reduced drilling and completions activity caused by low oil and gas prices resulted in a significant sequential decline in utilization and pricing in our U.S. operations. We parked eight of our sixteen crews in the U.S. in the second quarter and utilization on the remaining eight (8) crews bottomed in April and May with approximately 20% of our active equipment being utilized and rebounded in June with approximately 60% utilization of our active fleet. All of our parked equipment could be put back into service at any time with minimal cost. Pricing declined an additional 15% and job count declined 32% on a sequential basis. Management has meaningfully reduced the U.S. operations’ cost structure and continues to adjust it to current industry activity and operating conditions. U.S. operational results benefitted from price reductions in the 10-15% range for proppant, cement, chemicals, third party hauling, fuel and parts. Management has also reduced the U.S. operations’ fixed cost structure by 34% during the second quarter on a sequential basis. Management will continue to monitor activity and pricing levels and adjust our active equipment fleet and cost structure accordingly.
International operations generated $69.4 million in revenue and operating income of $10.0 million during the 2015 second quarter compared to Q2 2014 revenue of $95.1 million and operating income of $15.6 million. The devaluation of the Russian ruble had the most significant impact on second quarter financial results as the ruble/Canadian dollar exchange rate declined 34% compared to the 2014 second quarter. Russian activity was relatively strong during the quarter; however, this strength was partially offset by weak activity in Kazakhstan and Australia. Subsequent to the end of the second quarter, Trican decided to cease operations in Australia and suspend operations in Saudi Arabia due to weak operating activity and cash flow.
Corporate expenses excluding the impact of share-unit expenses decreased $4.2 million or 26% relative to the 2015 first quarter. Headcount and salary reductions as well as a tight cost control over discretionary expenses largely account for the significant cost decrease.
