SERVICE SECTOR / Computalog Ltd. Third Quarter Operating Results
CALGARY, Nov. 2 /CNW/ -
Computalog Ltd. announced today its results from operations for the nine
month period ended September 30, 1998.
(Thousands of Canadian Dollars
except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
---- ---- ---- ----
Revenues $ 48,859 $ 63,189 $169,899 $ 161,276
Operating expenses 34,526 38,079 112,157 102,272
Selling, general and
administration 5,916 5,951 17,935 16,333
Depreciation and amortization 5,735 4,316 15,105 10,563
Research and development 2,071 1,976 6,076 5,389
Loss (gain) on foreign
exchange (216) 265 (773) 65
Interest 1,212 807 3,619 1,407
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Net income before income
taxes and minority interest $ (385) $ 11,795 $ 15,780 $ 25,247
Income tax expense (894) 5,441 6,805 10,904
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Net income before minority
interest $ 509 $ 6,354 $ 8,975 $ 14,343
Minority interest 0 9 16 9
-------- -------- -------- --------
Net income $ 509 $ 6,345 $ 8,959 $ 14,334
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Earnings per share
Basic $ 0.04 $ 0.56 $ 0.69 $ 1.28
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Fully diluted $ 0.04 $ 0.47 $ 0.68 $ 1.08
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Cash flow from operations $ 6,286 $ 10,665 $ 24,756 $ 26,501
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Computalog Ltd. reports that for the nine month period ended September
30, 1998, it generated net income of $8,959 ($0.68 per share on a fully
diluted basis) from revenues of $169,899. This compares to a net income of
$14,334 ($1.08 per share on a fully diluted basis) from revenues of $161,276
during the same period in 1997. The decrease in earnings is attributed to
declining drilling activity levels and declining demand for the Company's
services, resulting primarily from the decline in oil prices during 1998 as
compared to the same period in 1997. A shift in the geographic composition of
Computalog's revenues also occurred during the second and third quarter of
1998, with a reduction in the proportion of revenues from Canadian open hole
and directional drilling services and an increase in the proportion of
revenues from United States cased hole services and international product
sales as compared to the same period in 1997.
Computalog has attempted to maintain its ability to provide high quality
services and the position itself to take advantage of any increases in
drilling activity which are normally expected during the Canadian winter
drilling season, while reducing its costs. For the three months ended
September 30, 1998, Computalog generated a net income of $509 ($0.04 per share
on a fully diluted basis) from revenues of $48,859. This compares to a net
income of $6,345 ($0.47 per share on a fully diluted basis) from revenues of
$63,189 during the same three month period in 1997. Despite substantial
declines in activity levels in the third quarter of 1998, as compared to 1997,
Computalog generated a profit of $509 as a result of income tax recoveries
recorded during the period. Revenues increased in the United States and in
international operations during the third quarter of 1998 as compared to 1997.
Canadian revenues decreased during this quarter as a result of a 50% reduction
in western Canadian drilling rig count caused by lower commodity prices for
oil.
For the nine month period ended September 30, 1998, revenues have
increased by $8,623 or 5%, as compared to the same period of the prior year.
Revenues from Canadian operations totalled $96,992 for the first nine months
of 1998 as compared to $103,219 during the same period of 1997, a decrease of
6%. This decrease occurred in the second and third quarters as activity levels
declined from 1997 offset by higher activity during the first quarter of 1998.
Canadian revenues accounted for 57% of consolidated revenue. Revenues from
United States operations totalled $44,610 for the first nine months of 1998 as
compared to $35,280 during the same period in 1997, an increase of 26%. United
States revenues accounted for 26% of consolidated revenue. United States
wireline service revenue increased as a result of the seven acquisitions
completed by Computalog during the last sixteen months, offset by a 6%
reduction in active rig count caused by lower commodity prices and more severe
hurricane activity in 1998 as compared to 1997. International revenues
totalled $28,297 for the first nine months of 1998 as compared to $22,777
during the same period of 1997, an increase of 24%. This increase resulted
from higher drilling service revenue from India, additional wireline revenue
from operations in Argentina, new wireline operations in Mexico and higher
export product sales. International revenues accounted for 17% of consolidated
revenue.
Operating expenses for the three quarters ended September 30, 1998 were
$112,157, an increase of $9,885 or 10%, as compared to those incurred in 1997.
These expenses represent approximately 66% of operating revenue in 1998 as
compared to 64% in 1997. During 1998, Computalog has experienced cost
increases for most of its United States sourced expenditures. These cost
increases are compounded by the weakening of the Canadian dollar as compared
to the United States dollar.
Selling, general and administrative expenses increased by $1,602 to
$17,935 during the first nine months of 1998 as compared to the same period in
1997. The 10% increase in these expenses is primarily attributed to the
Company's expanding global operations. These expenses represent approximately
11% of operating revenue during both 1998 and 1997.
Depreciation and amortization expenses of $15,105 have increased by
$4,542 or 43%, as a result of the Company's acquisition strategy and its
investment in new equipment and technology. Computalog has adopted a
conservative approach to the amortization and depreciation of assets obtained
through acquisitions using an estimated useful life of three to five years.
This approach has increased the non-cash expenses in the current period.
Research and development expenses have increased by $687 or 13% to $6,076.
Interest expense for the nine months ended September 30, 1998 was $3,619,
an increase of $2,212 from the expense incurred during the same period of
1997. This increase is attributed to the August 1997 issuance of U.S. $35,000
in Senior Notes due September 1, 2005 and bearing interest at the rate of
7.78%. Foreign exchange gains have increased as a result of changes in the
value of the United States dollar as compared to the Canadian dollar.
During the first nine months of 1998, cash flow from operations before
working capital changes decreased by 7% to $24,756 compared to cash flows
generated in the same period of 1997. Increases in working capital
requirements resulting from the increased revenues for the period and
increases in inventory levels to meet anticipated future equipment sales
totalled $18,091.
As at September 30, 1998, Computalog had working capital of $68,906,
which included cash and cash equivalents of $19,777 net of any short term
borrowing on the Company's bank facilities, total assets of $206,772, long
term debt of $49,164 and shareholders' equity amounting to $129,572.
Computalog provides wellbore knowledge and solutions through its electric
wireline and directional drilling services. These services enable oil and gas
producers to manage risk and maximize production. The Company's common shares
trade on the Toronto Stock Exchange (symbol CGH) and on the Nasdaq National
Market (symbol CLTDF). |
