During the first quarter of 2013, the Company's fleet consisted of six coiled tubing units plus one reel trailer capable of 2-3/8" deep coil applications, seven nitrogen pumpers and three fluid pumpers. Three of the coiled tubing units and one reel trailer are classified as "deep" coil units. The Company has the equipment capable of running up to six coiled tubing jobs concurrently.
For the first quarter ended March 31, 2013, the Company reported operating costs of $5.6 million as compared to $6.7 million in the same quarter in 2012. As a percentage of revenue, operating costs have increased 7% as compared to operating costs reported in the first quarter of the prior period. Higher costs as a percentage of revenue is mainly attributed to lower revenues earned to cover the variable and fixed cost structures required to retain qualified personnel and operate the equipment in the field. Higher variable costs include coiled tubing charges, fuel costs, costs for nitrogen and chemicals and field staff variable compensation. During the quarter, the Company performed a larger percentage of full service deep coiled tubing jobs. As a result, the Company was utilizing a higher percentage of larger diameter coiled tubing which is more expensive to operate than smaller diameter tubing leading to higher coil charges. Fuel costs as a percentage of revenue, increased due to more of Leader's equipment travelling to location (with the addition of its fluid pumpers added to the fleet and support trailers utilized on the deep coil jobs) and the increase in distance travelled to location in the quarter. During the quarter, the Company also utilized more nitrogen on a per job basis contributing to an increase in costs. Variable compensation for field staff was higher as a percentage of revenue as a result of more personnel on location with the addition of fluid pumper equipment added to the fleet and due to the configuration and timing of jobs, combined with a smaller, but more experienced operations group leading to higher average field rates after personnel were downsized in November 2012. These cost increases were partially offset by savings in repair and maintenance due to a higher level of in-house repair capabilities than in the past, significant savings in third party transportation costs as compared to 2012 and overall lower fixed operating costs due to lower personnel levels albeit at higher average compensation rates. Further cost saving initiatives including the reduction of non-key personnel, were implemented to coincide with spring break-up.
For the three months ended March 31, 2013, the Company reported a net loss of $0.8 million ($0.03 per basic and diluted share) compared to $0.9 million in income ($0.05 per basic share and $0.04 per diluted share) for the three months ended March 31, 2012. Excluding the loss on settlement of loans and borrowings of $0.2 million and the $0.7 million in credit facility refinancing costs expensed in the current period, the Company reported income of $0.1 million in the first quarter of 2013.
Credit Facility Refinancing
In March 2013, the Company finalized a credit facility with a private Canadian asset-based lender (the "Asset-Based Credit Facility"). Proceeds from this facility were used to retire its previous credit facility with a Canadian chartered bank and provide funding for working capital purposes. The Asset-Based Credit Facility includes a demand revolving facility of up to $4.0 million and a demand non-revolving term loan of $12 million that the Company had fully drawn in March 2013. The initial term of the credit facility is for a period of 12 months at an interest rate of 18% per annum payable monthly with an option to extend for an additional six month period.
Second quarter revenues are expected to meet or exceed that of the comparative period of 2012. April revenue has shown an improvement over the same period of 2012 and weather conditions have thus far been conducive for ground conditions to dry up quickly. Although general market conditions are anticipated to remain moderately challenging for the remainder of 2013, the Company expects activity levels to be busier than 2012. The Petroleum Services Association of Canada is forecasting 12,000 wells to be drilled in 2013, an increase of about 9 per cent over 2012. Should commodity prices stay at or above current levels, equipment utilization rates are expected to increase. Additionally, the Company has continued to establish formal relationships with larger producers, which in combination with stable commodity prices should lead to improved operations in 2013.
Additional information can be found on SEDAR at www.sedar.com or the Company web site at www.leaderenergy.com. The number of common shares issued and outstanding at the date hereof is 29,388,021 which does not include 2,668,000 unexercised stock options and 4,400,000 share purchase warrants.
This press release contains certain statements or disclosures relating to the Company that are based on the expectations of the Company as well as assumptions made by and information currently available to the Company which may constitute forward-looking information under applicable securities laws. All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that the Company anticipates or expects may, or will occur in the future (in whole or in part) should be considered forward-looking information.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Leader Energy Services Ltd.
President & CEO
Leader Energy Services Ltd.
Jason Krueger, CFA
Executive VP & Director
Leader Energy Services Ltd.
Graham Reid, CA
VP Finance & CFO
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