Divestco Reports 2018 Q2 Results
Calgary, Alberta--(Newsfile Corp. - August 28, 2018) - Divestco Inc. (TSXV: DVT) ("Divestco" or the "Company"), an exploration services company dedicated to providing a comprehensive and integrated portfolio of data, software and services to the oil and gas industry worldwide, today announced its financial and operating results for the three and six months ended June 30, 2018.
Overall Performance and Operational Results
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(1) Includes salaries & benefits, general & administrative expenses and share-based payments but excludes depreciation and amortization and other losses (income).
(2)See the "Non GAAP Measures" section of the Company's Management Discussion and Analysis filed on the Company's website and on SEDAR.
(3)Decrease from Q2 2018 from Q2 2017 is due to a new seismic survey completed in Q1 2017. No new surveys were completed in Q2 2018. The Company's policy is to amortize 40% of the cost of a new seismic survey in the period of data delivery.
Q2 2018 vs. Q2 2017
Divestco generated revenue of $2.2 million in Q2 2018 compared to $3.9 million in Q2 2017, a decrease of $1.6 million (43%) and revenue in the Seismic Data segment ($0.1 million) decreased by $2.7 million (95%) mainly due to low exploration activity levels. Revenue in the Services segment ($0.8 million) increased by $0.5 million as the Company was awarded several contracts in Q3 2017. Revenue in the Software & Data segment ($1.3 million) increased by $0.5 million (73%).
Operating expenses slightly increased by $0.1 million (1%) to $2.7 million in Q2 2018 from $2.6 million in Q2 2017.
Finance costs increased by $0.2 million (45%) to $0.6 million in Q2 2018 from $0.4 million in Q2 2017 due to unchanged debt levels.
Depreciation and amortization was $1.3 million in Q2 2018 compared to $1.6 million in Q2 2017, a decrease of $0.3 million (21%) as no seismic surveys were completed.
Financial Position (1)
As at June 30, 2018, Divestco had an adjusted working capital deficiency of $6.5 million (December 31, 2017: $3.7 million deficiency). The increase in the adjusted working capital deficit from the end of 2017 was due to the reclassification of Divestco's $3 million term loan from long-term debt to current liabilities. In April 2018, this term loan was repaid and replaced with a long-term non-resolving bond facility that matures in the fall of 2020, which decreased the adjusted working capital deficiency. In July 2018, Divestco received funds for a $1.4 million term loan and are in the process of finalizing the terms and conditions.
(1)See the "Non GAAP Measures" section of the Company's Management Discussion and Analysis filed on the Company's website and on SEDAR.
Operations Update and Outlook
Despite healthy world oil prices, Divestco remains impacted by delays of significant amounts of capital expenditure spending from the industry. The Company has been awarded several new international projects, and revenues have increased in the Services segment as a result of this. Divestco joint ventures: a cogeneration energy project and a project to leverage its substantial infrastructure into cryptocurrency mining, are well into the commercialization ramp up stage. We have begun full engineering design and regulatory permitting on the cogeneration project. We will be required to fund approximately $250,000, which represents 1/3rd of the expected capital cost. With respect to the Company's 50% interest in the cryptocurrency mining joint venture, the joint venture partner will be funding 100% of the required capital spending. Returns on this joint venture will be split 80/20 until the joint venture partner has received its capital investment returned at which time the returns will be split 50/50. The cogeneration power project is now projected to come onstream by the first quarter of 2019 (due to regulatory delays). The cryptocurrency mining joint venture continues to scale up and Divestco and its partners are now constructing a mobile mining system to be deployed in the field in advance of the power generation. We have also commenced a blockchain scoping project in the seismic industry and look forward to presenting this to our clients for full industry review and adoption. We continue to see interest in our existing products and services; however, many of our clients have delayed spending on exploration given the current environment, which is causing a significant impact on our seismic database sales. If the Western Canadian industry can secure the political stability it needs to grow, this backlog (which continues to grow) is expected to quickly convert into paying projects and substantially grow our existing business lines. We remain optimistic that the governments will start to reduce the burdens on our industry and allow for additional growth.
Mr. Stephen Popadynetz, CEO and President commented: "Divestco continues to be challenged by the continued unfavourable environment facing our oil and gas industry clients. Despite robust oil pricing and increased cash flows, our industry has not increased spending on new growth projects and specifically on seismic data. We have been made aware of several significant seismic licensing contracts, but many of our clients are now delaying their capex projects into the later part of this year or early next year. While our seismic data licensing funnel is at an all time high, we believe it could take another two to four quarters for these companies to start committing to growth projects which will positively to impact our cash flows. We are aware of several proposed major asset and corporate transactions and have even been involved in discussions with the entities, but the timing on them remains unknown.
We believe there is still reason to remain optimistic and as our software division is showing signs of new growth and our internationally focused strategy in the processing division is paying dividends. Both segments are experiencing increased revenues appreciably year over year. As well, we have successfully seen that the generation of cryptocurrencies is economic, and we remain committed to growing this opportunity. Currently, Divestco is in discussions with several entities for utilizing excess power and integrating it with our mining operations. We are also anticipating the deployment of our first mobile mining system into the field in September. If our field test is successful, we will fabricate and move several of these mobile mining systems throughout Alberta to take advantage of excess power available behind the energy grid."
About the Company
Divestco is a geoscience services company that provides a comprehensive and integrated portfolio of data, software, and services to the oil and gas industry. Through continued commitment to align and bundle products and services to generate value for customers, Divestco is creating an unparalleled set of integrated solutions and unique benefits for the marketplace. Divestco's breadth of data, software and services offers customers the ability to access and analyze the information required to make business decisions and to optimize their success in the upstream oil and gas industry. Divestco is headquartered in Calgary, Alberta, Canada and trades on the TSX Venture Exchange under the symbol "DVT".
Additional information on the Company is available on its website at Divestco.com and on SEDAR at sedar.com.
For more information please contact:
Mr. Stephen Popadynetz
CEO and President
Neither 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.
This press release contains forward-looking information and statements related to the Company's capital expenditures, projected growth, view and outlook with respect to future oil and gas prices and market conditions, and demand for its products and services. Statements that contain words such as "could', "should", "can", "anticipate", "expect", "believe", "will", "may" and similar expressions and statements relating to matters that are not historical facts constitute "forward-looking information" within the meaning applicable by Canadian securities legislation. Although management of the Company believes that the expectations reflected in such forward-looking information are reasonable, there can be no assurance that such expectations will prove to have been correct because, should one or more of the risks materialize, or should the assumptions underlying forward-looking statements or forward-looking information prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated or expected. Readers should not place undue reliance on forward-looking statements or forward-looking information. All of the forward-looking statements and forward-looking information of the Company contained in this press release are expressly qualified, in their entirety, by this cautionary statement. Except where required by law, the Company does not assume any obligation to update these forward-looking statements or forward-looking information if conditions or opinions should change.
In particular, this press release contains forward-looking statements pertaining to the following: Company's ability to keep debt and liquidity at acceptable levels, improve/maintain its working capital position and maintain profitability in the current economy; availability of external and internal funding for future operations; relative future competitive position of the Company; nature and timing of growth; oil and natural gas production levels; planned capital expenditure programs; plans and timing in respect of pursuing new revenue streams within existing operations and new lines of business, including without limitation of cryptocurrency mining, cogeneration and block chain, and any anticipated revenues; the Company's belief that paying projects will result from political stability and the Company's views on the evolution of the regulatory regime; supply and demand for oil and natural gas; future demand for products/services; commodity prices; impact of Canadian federal and provincial governmental regulation on the Company; expected levels of operating costs, finance costs and other costs and expenses; expectations regarding the Company's ability to raise capital.
These forward-looking statements are based upon assumptions including: future prices for crude oil and natural gas; future interest rates and future availability of debt and equity financing will be at levels and costs that allow the Company to manage, operate and finance its business and develop its software products and various oil and gas datasets including its seismic data library, and meet its future obligations; the regulatory framework in respect of royalties, taxes and environmental matters applicable to the Company and its customers will not become so onerous on both the Company and its customers as to preclude the Company and its customers from viably managing, operating and financing its business and the development of its software and data; and that the Company will continue to be able to identify, attract and employ qualified staff and obtain the outside expertise as well as specialized and other equipment it requires to manage, operate and finance its business and develop its properties.
These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the Company's control, including: general economic, market and business conditions; increased debt levels or changes to its debt service requirements; unfavourable or no access to debt or access to debt or equity capital markets; volatility in market prices for crude oil and natural gas; ability of Divestco's clients to explore for, develop and produce oil and gas; ability of the Company's clients to pay in a timely manner; availability of financing and capital; fluctuations in interest rates; demand for the Company's product and services; competitive actions by other companies; lack of a suitable purchaser for Divestco's non-strategic assets; availability of skilled labour; failure to obtain regulatory approvals in a timely manner; adverse conditions in the debt and equity markets; and government actions including changes in environment and other regulation.