November 15th, 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 THIRD QUARTER FINANCIAL RESULTS
Three months ended Sept 30 Nine months ended Sept 30
1999 1998 1999 1998
Revenue 8,126,127 9,577,052 22,764,480 27,702,226
Gross margin 24% 36% 24% 38%
Net income (loss) (150,034) 1,325,785 (754,194) 3,135,906
Per share ($0.01) $0.06 ($0.03) $0.15
Cash flow from operations 986,694 2,123,714 1,899,999 6,135,744
Per share $0.05 $0.06 $0.09 $0.29
Weighted average shares outstanding 22,192,526 21,278,026 22,192,526 21,278,026
Mr. Rodney Hauser, President, today announced the financial results of Alpine Oil Services Corporation for the nine-month period ending September 30, 1999.
Industry activity levels recovered over the course of the third quarter of 1999, but at a much slower rate than was anticipated. Revenues recovered gradually throughout the three-month period, resulting in a modest loss and positive cash flow. Activity levels in all sectors of Alpine's business rebounded as higher oil and gas prices fueled increased levels of drilling activity.
OPERATIONS REVIEW
Domestic activity levels during the third quarter of 1999 were up in all sectors and by more than 50% overall, compared with the second quarter of the year. However, they were still significantly below levels experienced during the third quarter of 1998. Junior oil and gas exploration and production companies operating in western Canada have traditionally been very quick to respond to a run-up in oil and gas prices with increased levels of exploration and development drilling activity. However, their activities have been somewhat curtailed by depressed and uncertain financial markets which have limited their access to capital. Revenues from wireline, production and underbalanced drilling services during the third quarter were $4.8 million, compared with $5.2 million during the same period in 1998.
Equipment product sales and service revenues during the third quarter were $1.7 million, down by 41% from $2.9 million during the same period in 1998. Since equipment and product sales and services tend to lag commodity price changes, revenues from product sales and services are slower to rebound than Alpine's oilfield services business. Revenues from product sales and services are not expected to rebound until at least the latter part of the fourth quarter. Drill stem testing and telemetry revenues during the third quarter were $1.7 million compared with $1.5 million, an increase of 16% over the same period last year. Historically, drill stem testing and telemetry services are driven by the number of gas wells drilled. Some of the increase in drill stem testing and telemetry revenues reflects a recovery in the level of drilling activity during the quarter. However, some of this activity reflects work that was scheduled for the second quarter, but could not be completed due to the prolonged break-up brought on by unseasonably wet weather.
In October of 1999, Alpine completed its acquisition of all of the shares of Techcorp Industries Inc. in exchange for shares of Alpine. Under the terms of the Offer to Purchase dated September 7, 1999, Alpine offered one third of a Common Share of Alpine for one Common Share of Techcorp. The offer was conditional upon Alpine acquiring at least 66 2/3% of the shares of Techcorp.
Techcorp specializes in the design and manufacture of proprietary specialty tools used in the drilling and completion of underbalanced oil and gas wells. The company's current products and equipment consist of 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.
Concurrent with the acquisition of Techcorp Industries Inc., Alpine has agreed to acquire all of the issued and outstanding shares of Gulf Technologies Inc. (“GTI”) in exchange for Common Shares of Alpine. GTI provides turn-key design and product development services to manufacturers, major service companies and oil and gas companies operating world wide. GTI has played a significant role in the development of a number of Alpine's proprietary oilfield products and services. In addition to its engineering services, GTI has developed its own line of completion and production products, including retrievable and permanent-set packer and production systems, together with tubing conveyed perforating accessories. Alpine will take over manufacturing and distribution of these products under a licensing arrangement with GTI.
FINANCIAL HIGHLIGHTS
Revenues during the nine-month period ending September 30, 1999 were $22.8 million, down by 18% from $27.7 million in 1998. Revenues from wireline, production testing and underbalanced drilling services during the nine months of 1999 were $14.3 million, down by 11% from $16.1 million in 1998. Equipment product sales and services were $4.5 million, down by 25% from $6.0 million in 1998. Drill stem testing and telemetry services during the first nine months of 1999 were $4.0 million, down by 27% from $5.6 million in 1998. North American revenues were $18.6 million in 1999, down by 13% from $21.3 million during the same period last year. International revenues were $4.2 million, down from $6.4 million in 1998, a decrease of 34%.
Gross profits as a percent of revenues were 24% during the first nine months 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 lower volumes during the second quarter compared with the same period last year. Third quarter sales in 1999 were only 15% behind last year compared with a 34% lag in the second quarter of the year. Amortization expense during the first nine months of 1999 was up by 33% over the same period last year. Interest expense during the first nine months of 1999 was $472,817 compared with $348,787 for the same period in 1998. Selling, general and administrative expenses as a percent of gross revenues during the first nine months of 1999 were 15%, up from 11% 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 $0.7 million ($0.03 per share) during the first nine months of the year compared with a profit of $3.1 million ($0.15 per share) in 1998. Cash flow from operations was $1.9 million ($0.09 per share), down from $6.1 million ($0.29 per share) in 1998. Working capital at September 30, 1999 was $5.2 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 September 30, 1999 was $5.5 million, up by 91% from $2.9 million in 1998. Long-term debt (including current portion) was 31% of equity at September 30, 1999 up from 18% of equity at the same time last year.
OUTLOOK
All of our production testing and underbalanced surface pressure control and separation equipment is completely booked for the first quarter of 2000; included in this equipment are ten Techcorp RPM System 3000TM rotating blowout preventers. Drill stem testing and telemetry activity has increased since the beginning of October in response to the continued increase in the rig count. We anticipate continued activity in drill stem testing and telemetry through to the end of 1999 and into the first quarter of 2000. We expect to perform drill stem testing and real time telemetry services on 150 to 200 drilling rigs during the first quarter of 2000. This could translate to as many as 600 to 750 drill stem and telemetry tests. Wireline has become increasingly active over the third and fourth quarters of this year as oil and gas producers continue to optimize existing production before committing further expenditures to drilling new wells. We have experienced this trend in optimization activity primarily in gas wells situated in southern Alberta as well as on deeper gas wells west of the fifth and sixth meridians in northern Alberta. We expect to bill out between 1,000 to 1,250 days for our wireline units over the course of the first quarter of 2000.
Alpine is pleased to announce the appointment of Mr. Rida El-Alem to the Company's Board of Directors. Mr. El-Alem has over 30 years experience in the energy industry, serving previously as Techcorp Industries' Chairman of the Board of Directors.
Alpine Oil Services Corporation is an innovative, value-added energy services entity competing in the Canadian upstream oil and gas market. Alpine is the second largest provider of Underbalanced Drilling surface pressure control equipment complete with rotating blowout preventers, and largest provider of Real-Time Drill Stem Testing services, in North America. Alpine is the only company in North America that has developed and now offers a mechanical wireline-set and retrievable production telemetry tool. Internationally the Company is involved in the sale of its proprietary equipment into select markets. Alpine is a recognized leader in the research, development and application of innovative technologies related to the services it provides. Alpine uses this technological knowledge base to design and manufacture many of the downhole tools used in its services. To date, Alpine has developed and presently uses more than 100 types of proprietary tools and equipment in its three main service lines.
On behalf of the Board of Directors
Rodney James Hauser
President & Chief Executive Officer
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