Petrowest turns in yearend figures
Petrowest is a small oil service company that I have followed lately.It showed good increases in revenues and earnings in 2014 and the share price was trading around $1.25 per share.In fact,it sold 18.4 million shares at $1.25 per share for proceeds of $23 million this year.Petrowest released it's fourth quarter and yearend results on March17,2015.The results were not as buoyant as expected,especially as they acquired three new companies.Shareholders were expecting larger revenues and earnings.
Three divisions
It has three divisions -- Civil division,Transportation division and Construction division.Civil division performed the best.
It reported record revenue and adjusted EBITDA. assets .However it too suffered from the effect of the reduced price of crude oil and natural gas. There were 3 acquisitions;they were in the civil and transportation division.Petrowest acquired Enviro Mulch Land Clearing Solutions,CJM Trucking and Trans Carrier Rentals.There is a strong backlog on the civil side and things should ramp up in the second quarter. The log haul part of the Transportation division remains strong.And they are well positioned to get work for the Site C hydro-electric project.However new revenues didn't materialize as planned and there had to be layoffs and cutbacks.With three acquisitions,revenues only increased by 15% to $269 million.While adjusted EBITDA moved up only from $33 million to $35 million. These extra earnings barely covered the costs of running these three new divisions.This is because there has been margin compression in many activities,particularly in the Construction division and the newly acquired businesses.However Petrowest as a result of these acquisitions increased assets by $50 million and shareholder equity by $125 million.
The fourth quarter
The trend in the fourth quarter is down somewhat from the year as a whole.Revenues went from $63.2 million to $63.1 million for Q4 in 2014 and adjusted EBITDA went from $7.7 million to $7.3 million.However the all important funds from operations went up from $6 million to $8 million as they paid less income tax and amortization.This is what a small business must do in lean times to keep capital available;use it's capital to pay the essentials.Also Petrowest made layoffs and cutbacks to it's employees in order to reduce expenses.
The future track
Petrowest was on a good track on the first part of 2014;it was increasing revenues and earnings.They made a small equity issue at a good price and got the necessary funds to make three small acquisitions.This has proven to be an astute move.This blog earlier predicted that it was on the way to $1.75 per share.But that was before the price of oil and natural gas dropped precipitously.Like all oil service stocks it's price fell considerably so now it is trading around $.35 to $.40 per share.It has done some belt tightening and should do okay as the price of oil comes back to at least $65 per barrel.This will increase activity in the oil patch and business for Petrowest.This blog predicts that the price will move back to at least the $.75 to $.90 range by the third quarter.If this does not happen then Petrowest may have to look at selling one of it's newly acquired businesses.
Three divisions
It has three divisions -- Civil division,Transportation division and Construction division.Civil division performed the best.
It reported record revenue and adjusted EBITDA. assets .However it too suffered from the effect of the reduced price of crude oil and natural gas. There were 3 acquisitions;they were in the civil and transportation division.Petrowest acquired Enviro Mulch Land Clearing Solutions,CJM Trucking and Trans Carrier Rentals.There is a strong backlog on the civil side and things should ramp up in the second quarter. The log haul part of the Transportation division remains strong.And they are well positioned to get work for the Site C hydro-electric project.However new revenues didn't materialize as planned and there had to be layoffs and cutbacks.With three acquisitions,revenues only increased by 15% to $269 million.While adjusted EBITDA moved up only from $33 million to $35 million. These extra earnings barely covered the costs of running these three new divisions.This is because there has been margin compression in many activities,particularly in the Construction division and the newly acquired businesses.However Petrowest as a result of these acquisitions increased assets by $50 million and shareholder equity by $125 million.
The fourth quarter
The trend in the fourth quarter is down somewhat from the year as a whole.Revenues went from $63.2 million to $63.1 million for Q4 in 2014 and adjusted EBITDA went from $7.7 million to $7.3 million.However the all important funds from operations went up from $6 million to $8 million as they paid less income tax and amortization.This is what a small business must do in lean times to keep capital available;use it's capital to pay the essentials.Also Petrowest made layoffs and cutbacks to it's employees in order to reduce expenses.
The future track
Petrowest was on a good track on the first part of 2014;it was increasing revenues and earnings.They made a small equity issue at a good price and got the necessary funds to make three small acquisitions.This has proven to be an astute move.This blog earlier predicted that it was on the way to $1.75 per share.But that was before the price of oil and natural gas dropped precipitously.Like all oil service stocks it's price fell considerably so now it is trading around $.35 to $.40 per share.It has done some belt tightening and should do okay as the price of oil comes back to at least $65 per barrel.This will increase activity in the oil patch and business for Petrowest.This blog predicts that the price will move back to at least the $.75 to $.90 range by the third quarter.If this does not happen then Petrowest may have to look at selling one of it's newly acquired businesses.
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