CST: 01/07/2016 17:36:27   

Hanwei Energy Reports Third Quarter Fiscal 2016 Financial and Operational Results

140 Days ago

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Feb 11, 2016) - Hanwei Energy Services Corp. (TSX:HE) ("Hanwei" or the "Company") today reported its financial results for the nine months ending December 31, 2015. All amounts are in Canadian Dollars unless otherwise noted.

Financial and Operational Summary for the nine-month period ending December 31, 2015

The Company has two reportable segments for its continuing operations: its FRP pipe manufacturing and its oil and gas production. The pipe segment produces and sells fiberglass reinforced plastic ("FRP") pipe for the oil and gas industry and other infrastructure applications. The oil and gas segment is engaged in the exploration and production of oil and natural gas in Western Canada.

For the nine months ending December 31, 2015:

  • Total Company revenues for the nine months ended December 31, 2015 were approximately $7.2 million as compared to $13.4 million for the same period of the prior year. The decline in revenues were primarily caused by the worldwide weakness in oil prices which impacted the Company's revenues from oil production as well as reducing FRP pipe sales predominantly in its Kazakhstan market.
  • FRP pipe sales for the nine months ended December 31, 2015, FRP pipe sales were $5.7 million as compared to $10.5 million.
    • The Company's Kazakhstan market was the most significantly impacted with numerous projects placed on hold or delayed. Sales for the Kazakhstan market were $0.2 million for the three months ended December 31, 2015, as compared to $1.2 million for the same period of the prior year. Sales for the Kazakhstan market were $0.3 million for the nine months ended December 31, 2015 as compared to $4.0 million for the same period of the prior year representing a significant downturn in this market.
    • For the Canadian market, sales were $0.7 million for the three months ended December 31, 2015 as compared to $1.5 million for the prior year. Sales for the Canadian market were $0.8 million for the nine months ended December 31, 2015 as compared to $2.7 million for the same period of the prior year. As previously announced, the company is currently producing and shipping a $2.4 million order that will be completed within this current fiscal year ending March 31, 2016. For reference the Company recorded sales of $2.7 million in its Canadian market for its prior fiscal year ending March 31, 2015.
    • For the Chinese market, sales were $2.9 million for the three months ended December 31, 2015 as compared to $2.3 million for the prior year. Sales for the Chinese market were $4.6 million for the nine months ended December 31, 2015 as compared to $3.9 million for the same period of the prior year. The increase in this market was due to new injection line and flow line projects in northern and eastern China.
  • Revenues from the Company's oil and gas production net of royalties for the nine months ended December 31, 2015 were $1.6 million as compared to $2.3 million for the same period of the prior year. The decrease in oil and gas revenues was primarily driven by lower commodity prices.
    • The Company produced approximately 160 barrels of oil equivalent per day (boed)
    • Average sales price per boe was $35.33 with a netback of $15.10 per boe (or an operating netback margin of 42.7%)
  • EBITDA from continuing operations for the nine months ended December 31, 2015 was negative $1.2 million as compared to EBITDA of $0.4 million for the same period of the prior year. The decrease in EBITDA was primarily driven by the significant reduction in Kazakhstan FRP sales and timing of Canadian FRP orders against the fixed cost overhead of the FRP pipe business unit as well as reduced revenues from oil and gas productions driven by lower commodity prices.
  • The Company had a loss from continuing operations for the nine months ended December 31, 2015 of $2.6 million as compared to loss from continuing operations of $2.4 million for the same periods of the prior year. The increase in loss from continuing operations was primarily due to the aforementioned reduction in Kazakhstan FRP pipe sales.
  • As of December 31, 2015 the Company had:
    • Cash balance (inclusive of short term investments) of $6.9 million
    • Net Asset Value per share for its continuing operations of $0.21 (on total shares outstanding of approximately 194.2 million)
  • During the quarter ended December 31, 2015, the Company successfully renegotiated and renewed a bank loan in the amount of $6.4 million (RMB 30 million) with the interest rate reduced from 10.9% per annum to 6.09% per annum. A total principal amount of all bank loans of $8.4 million. This represents a 29% debt to equity ratio (total bank debt divided by total shareholders' equity) as compared to 32% as at March 31, 2015.

Update on FRP Pipe Sales in Canada

As previously disclosed the Company's Canadian market for its FRP pipe products is considered a new growth market. Despite the current oil and gas industry downturn Hanwei has approximately 75,000 meters of its FRP pipe installed and operational in Alberta and Saskatchewan.

Update on Oil and Gas Activities

The Company's Chestermere Lands are subject to a Commitment Agreement where the Company has been granted exclusive production rights on the basis that it drills and completes at least one oil and gas well to a depth of 2,100 meters within an initial two-year term ending on July 30, 2017 (the "Primary Term"). Upon completion of this drilling commitment the Primary Term would be extended for a further one-year period ending on July 30, 2018. As of the date of this MD&A the Company is undertaking the drilling and completion of a single, new vertical well within the Chestermere Lands to fulfill its Primary Term obligation and assess the exploitability of production on this property. The Company has established a limited budget of $2.1 million to complete this well and place it on production. Production results will be announced when tie in, operating approvals and production is forthcoming.

Hanwei will host a conference call to discuss its operational and financial results for the third quarter ended December 31, 2015. Graham Kwan, Executive Vice President and Rick Huang, Chief Financial Officer of Hanwei will host the call. Management invites analysts and investors to participate on the conference call:

Date: Friday, February 12, 2016

Time: 1:00 p.m., Eastern Time (10:00 am Pacific Time)

Dial in number: 1-888-510-1786 or 1-719-325-2420

A replay of the conference call will be available on the Company's website.

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp.'s principal business operations are in two complimentary key segments of the oil and gas industry as both an equipment supplier to the industry (as a leading manufacturer of high pressure, fiberglass reinforced plastic ("FRP") pipe products and associated technologies serving major energy customers in the global energy market) and as an owner and operator of its oil and gas mineral rights at its lands in Alberta.

www.hanweienergy.com

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

FORWARD-LOOKING INFORMATION AND NON-GAAP MEASURES

Certain information in this press release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions a description of which is set out in the risk factors section of the Company's Annual Information Form dated June 17, 2015 and Management Discussion and Analysis for the year ended March 31, 2015 both of which are filed with Canadian securities regulators and available on SEDAR at www.sedar.com. The forward-looking information in this press release describes the Company's expectations as of the date of this press release.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.

Hanwei Energy Services Corp.
Graham Kwan
Executive Vice President, Strategic Development and
Corporate Affairs
604-685-2239
gkwan@hanweienergy.com
Hanwei Energy Services Corp.
Yucai (Rick) Huang
Chief Financial Officer
604-685-2239
yhuang@hanweienergy.com