Enerchem International Notes Financial Results for 1Q
Enerchem International reported financial results for the three months ended March 31, 2010.
Oilfield activity levels in the WCSB and overall industry conditions improved substantially coming into the 2009/2010 drilling season with drilling rig utilization rates up in the first quarter of 2010 at 54% compared to 35% for the first quarter of the prior year. Natural gas prices remained low, slowing drilling for that commodity while higher average crude oil prices and the application of horizontal drilling technology to developed fields in the WCSB drove the increase in oilwell drilling activity. Though well completions for the first quarter of 2010 were lower, at 3,133 compared to 4,434 during the first quarter of 2009, the nature of the wells being drilling increased demand for the Company's fluids.
Consolidated revenue for the three months ended March 31, 2010 increased by $32,939 when compared to the same period of 2009. The Company's pricing in two of its business segments is directly linked to the price of crude oil, which is used as a feedstock in the Oilfield services segment and as a marketed product in the Energy marketing segment. Higher average crude oil prices and higher sales volumes in the first quarter of 2010 combined to drive revenues up in the Oilfield services and Energy marketing segments and higher industry activity levels contributed to higher revenues in the Transportation services segment.
A more direct indicator of Enerchem's financial performance is overall margin achieved measured against the relatively fixed cost structure of the business, as evidenced in the EBITDA results. EBITDA for the first three months of 2010 has increased to $6,495 from $271 for the same period of the previous year. The combined impact of high plant utilization and more effective inventory management provided significantly higher margin contribution in the current period than the Company experienced throughout 2009.
Strategy and Outlook
Although the prospects for the world's economic recovery remain the subject matter of cautious commentary by analysts, Enerchem management believes that the cost containment work, inventory management effort and plant utilization rate improvement put in place over the last year along with a capital investment strategy targeting plant reliability and safety will continue to provide positive financial results in the favorable economic environment currently in existence in the areas of the WCSB that the Company serves.
On May 3, 2010, Trinity Capital Partners, mailed a Take-Over Bid Circular and Offer to shareholders of Enerchem to acquire all of the issued and outstanding common shares of Enerchem (the "Offer") at a price of $2.75 in cash per share by way of a take-over bid, in connection with the Offer. Concurrently with the mailing of the Take-Over Bid Circular and Offer, the Board of Directors of Enerchem mailed a Directors' Circular with respect to the Offer recommending that shareholders tender their common shares. The Board has unanimously approved the Offer and has concluded, based on the Fairness Opinion received from the its financial advisor and upon consultation with its outside legal advisers, that the transaction is in the best interests of Enerchem. Both the Take-over Bid Circular and Offer and the Directors' Circular have been filed with Canadian securities regulatory authorities.