August 25th, 1999
“ASL” - Toronto Stock Exchange
Investor Relations: Jason Krueger
Toll Free: (877) 474-4544
Telephone: (403) 263-7800
Internet: www.alpineoil.com
Email: invest@alpineoil.com
ALPINE ANNOUNCES SECOND QUARTER FINANCIAL RESULTS
Six months ended June 30 Three months ended June 30
1999 1998 1999 1998
Revenue 14,638,353 18,125,174 4,819,301 7,334,179
Gross margin 24% 38% 3% 34%
Net income (loss) (604,160) 1,810,121 (1,611,518) 370,348
Per share ($0.03) $0.09 ($0.08) $0.02
Cash flow from operations 913,305 4,012,030 (1,153,233) 1,444,418
Per share $0.04 $0.19 ($0.05) $0.07
Weighted average shares outstanding 21,366,661 21,223,026 21,366,661 21,223,026
Mr. Rodney Hauser, President, today announced the financial results of Alpine Oil Services Corporation for the six-month period ending June 30, 1999. Unseasonably wet weather during most of the second quarter of the year resulted in a prolonged “breakup” period and substantially reduced levels of drilling activity, despite a significant recovery in oil prices during the period. Consequently, Alpine's earnings plunged during the quarter and earnings for the first half of the year were well below expectations.
As this report is being written, activity levels in all sectors of Alpine's business are rebounding and it is hoped that the losses experienced during the second quarter of 1999 can be recouped during the latter half of the year. This recovery is predicated on increased levels of activity in drilling and completions as well as oil and gas prices sustaining themselves at current levels.
Operations Review
Domestic activity levels were down in all business segments during the second quarter due to wet weather. Because oil prices did not start to rebound until mid-way through the second quarter, international equipment and product sales were well behind those for the same period last year.
Revenues from wireline, production and underbalanced drilling services during the second quarter were $3.4 million, down by 24% from the same period in 1998. The drop in revenues was a direct result of lower activity levels due to unfavorable weather conditions, which made it very difficult to mobilize equipment in the field.
Drill stem testing and telemetry revenues during the second quarter were $0.6 million, down by 54% from the same period last year. Once again, this was a direct result of lower industry activity levels overall. Drill stem testing and telemetry services are historically driven by the number of gas wells drilled. There were 1,836 oil and gas well drilled during the second quarter of 1999 compared with 2,300 wells in the same period last year, a 20% decrease. Of the 883 gas wells drilled during the second quarter, the majority were shallow wells. These wells have little impact on Alpine's DST business.
Equipment product sales and service revenues during the second quarter were $0.8 million, down by 49% from $1.5 million during the same period in 1998. Most of Alpine's equipment and product sales are made to international customers. World oil prices did not start to rebound until April of this year and they did not average above US$ 20 until June. Since equipment product sales and services tend to lag commodity price changes, revenues from product sales and services were slow to recover. Revenues from product sales and services are not expected to rebound until at least the later part of the third quarter.
Alpine completed a number of strategic acquisitions in late July. The Company acquired all of the drill stem testing assets of McAllister Petroleum Services, a subsidiary of Weatherford Canada Ltd., and 100% of the shares of Quinn Testers Ltd. Located in Edmonton and Grande Prairie, Alberta, Quinn Testers Ltd. is a privately owned drill stem testing company established in 1973.
These acquisitions are of strategic importance to Alpine as they are expected to increase the company's drill stem testing and telemetry revenues to $7.0 million in 1999. Alpine's fleet of drill stem testing and telemetry units has increased to 35 units from 23 units as a result of these acquisitions, making Alpine the largest provider of drill stem testing and telemetry services in North America. Subsequent to closing these acquisitions, Alpine will control approximately 55% of the Canadian market for drill stem testing and 75% of the market for telemetry in Canada.
On August 4, Alpine announced that it had made an offer to purchase all of the shares of Gulf Technologies Int'l. LLC, a company based in Houston, Texas. Gulf Technologies provides turn-key design and product development services to manufacturers, major service companies and oil and gas companies operating in international markets. The company has played a significant role in the development of a number of Alpine's proprietary oilfield products. This acquisition will allow Alpine to rapidly design and develop additional proprietary products for sale and use in specialized markets worldwide, as well as the opportunity to market Gulf Technologies' existing product lines.
On August 5, Alpine announced that it had entered into an Agreement with Techcorp Industries Inc. to acquire all of that company's shares in exchange for shares of Alpine. Alpine will offer one third of a Common Share for one Common Share of Techcorp. The offer is conditional upon Alpine acquiring at least 66 2/3% of the shares of Techcorp.
Techcorp is a specialized oil and gas service company that designs and manufactures proprietary specialty tools used in the drilling and completion of underbalanced oil and gas wells. The company's current products and equipment are a complete line of Rotating Blowout Preventers, an Underbalanced Drilling Downhole Deployment Valve, Electronic Data Acquisition Systems and a complete line of External Casing Packers.
Financial Highlights
Revenues during the six-month period ending June 30, 1999 were $14.6 million, down by 19% from $18.1 million in 1998. Revenues from wireline, production testing and underbalanced drilling services during the first half of 1999 were $9.5 million, down by 14% from $11.0 million in 1998. Equipment product sales and services were $2.8 million, down by 7% from $3.0 million in 1998. Drill stem testing and telemetry services during the first half of 1999 were $2.3 million, down by 44% from $4.1 million in 1998. North American revenues were $12.0 million in 1999, down by 21% from $15.1 million during the same period last year. International revenues were $2.6 million, down from $3.0 million in 1998, a decrease of 13%.
Gross profits as a percent of revenues were 24% during the first half of 1999, down from 38% in 1998. The lower average gross profit margin in 1999 was due to lower margins on domestic service revenues as well as substantially lower volumes during the second quarter compared with the same period last year.
Amortization expense during the first six months of 1999 was up by 12% over the same period last year. Interest expense during the first half of 1999 was $250,731 compared with $222,733 in 1998. The bulk of this increase in interest charges during the period was due to higher short term borrowing costs as a result of lower revenues and slower turn over of receivables and inventory.
Selling, general and administrative expenses as a percent of gross revenues during the first half of 1999 were 16 percent, up from 11 percent in 1998. This increase was due primarily to substantially lower than anticipated levels of business activity during the second quarter of the year, which spread fixed costs over reduced levels of revenue.
The company experienced a net loss of $0.6 million ($0.03 per share) during the first half of the year compared with a profit of $1.8 million ($0.09 per share) in 1998. Cash flow from operations was $0.9 million ($0.04 per share), down from $4.0 million ($0.19 per share) in 1998.
Working capital at June 30, 1999 was $4.0 million compared with $6.7 million in 1998. Lower levels of profitability during the second quarter of 1999 contributed to the drop in working capital.
Long-term debt at June 30, 1999 was $1.9 million, down by 36% from $2.9 million in 1998. Long-term debt (including current portion) decreased to 13% of equity at June 30, 1999 down from 21% of equity at the same time last year.
Outlook
Alpine's efforts for 1999 will continue to be directed at increasing revenue and earnings from operations in Canada and the United States through internal growth of each of its divisions, as well as the prudent acquisition of other service companies.
Alpine is committed to increasing the range of innovative value-added products and services it provides, while remaining mindful of controlling costs. The acquisitions of Gulf Technologies Inc. and Techcorp Industries Inc. will set Alpine apart from its competition by ensuring that the Company has continued access to proprietary tools and services now and in the future. Alpine is well positioned to see a dramatic increase in profitability as energy prices continue to recover.
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