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Terravest Looks to Well Optimization to Offset Service Demand

Share Print Bookmark    |    Wednesday,August 12,2015

TerraVest Capital Inc. has announced its results for three months ended June 30th 2015.

The third quarter is generally TerraVest's slowest quarter on a seasonal basis, which was further impacted by reduced activity levels in the oil and sector. 

Outlook

The Fabrication Segment is experiencing pricing pressure and reduced demand from certain of its customers paralleling the state of the oil & gas market. In an effort to mitigate the impacts of a negative outlook for the Western Canadian economy, management has reduced staffing levels by approximately 35% in the Fabrication Segment and continues to evaluate all cost saving opportunities. Additionally, the Fabrication segment continues to take advantage of this economic slowdown to improve manufacturing processes through investment in equipment and changes to our plant layouts and work flow. These changes should result in cost rationalization, shorter lead times and increased capacity that will persist beyond an eventual recovery in oil prices. The Fabrication Segment's backlog is approximately $20,400, up from the previous quarter, but not as strong as the comparable period last year as the continuation of the low oil prices impacts the industry in its entirety. Management expects the continued low oil price environment will be challenging for this segment.

The Service segment's results were stronger than the prior year's quarter, excluding an impairment related to the decommissioning of certain rigs. Although management continues to face pricing pressure from its major customers, management is working diligently to ensure rig utilization and cost optimization. The Service segment generally has stronger performance in the final quarter of fiscal 2015, however, poor July weather has impacted the initial fourth quarter results. Even with such impact, management is confident that the fourth quarter results will be similar to those in the current quarter pending any unforeseen circumstances. The Service segment is a resilient business and as oil companies cut their capital budgets an emphasis is placed on well optimization which helps mitigate the cyclicality for this segment. We remain confident in the long-term outlook for this business and its ability to withstand the current downturn. 

Highlights:

• Revenues of $46,305 which represents an increase of 56% over the third quarter of fiscal 2014;
• Closing of the Signature Truck Systems acquisition which further enhanced TerraVest's exposure to the U.S. market as well as non-oil and gas related operations; and
• Issuance of a 5 year, $25,000 principal, 7.0% coupon, convertible debenture.
• Repayment of $19,000 promissory note and $6,000 bridge loan for acquisition of Signature Truck Systems.

Charles Pellerin, Executive Chairman of TerraVest said: "Although our oil & gas segments continue to face the challenges of today's macroeconomic trends, TerraVest is performing well and maintains a strong balance sheet. We are continuing to benefit from our U.S. geographic exposure and the fuel containment segment's diversity away from declining world oil prices. We expect that in excess of 50% of our EBITDA will continue to be generated from non-oil and gas related businesses. Further to this, we continue to integrate our existing business and feel we are in a strong position to take advantage of the current oil and gas downturn and augment the existing portfolio of businesses."