CST: 25/05/2016 09:55:14   

Wilmington Announces Year-End 2015 Results

70 Days ago

TORONTO, ONTARIO--(Marketwired - Mar 15, 2016) - Wilmington Capital Management Inc. ("Wilmington" or the "Corporation") (TSX:WCM.A)(TSX:WCM.B) reported a net loss attributable to shareholders for the three months ended December 31, 2015 of $2.1 million or ($0.21) per share compared to a net loss of $5.8 million or ($0.68) per share for the same period in 2014.

For the year ended December 31, 2015, the Corporation realized a net loss attributable to shareholders of $1.5 million or ($0.17) per share compared to a net loss of $5.5 million or ($0.65) per share for the same period in 2014.

To view a full copy of the Corporation's audited annual financial results for the year ended December 31, 2015 including the Corporation's audited annual Consolidated Financial Statements and accompanying Management Discussion and Analysis ("MD&A"), please refer to SEDAR's website at www.sedar.com.

2015 FINANCIAL HIGHLIGHTS

The financial highlights of the Corporation and those of its controlled and associated entities are set out below. Investments in controlled and associated entities account for the majority of the Corporation's financial results and are accounted for on a consolidated basis or using the equity method of accounting.

Corporation

  • During the fourth quarter of 2015, the Corporation completed a non-brokered private placement of 1.5 million Class A shares issued at a price of $3.50 per Class A share for gross proceeds of $5.4 million. Proceeds of the issue were used to subscribe for additional units in Real Storage Private Trust and to increase the Corporation's working capital.

Self-storage facilities

  • Real Storage Private Trust (43% owned - the "Trust") spent $56.7 million to acquire nine self-storage facilities in 2015, increasing net rentable area by approximately 500,000 square feet.
  • Total net rentable area is now approximately 1.36 million square feet. The Trust owns and operates 30 facilities located in British Columbia, Alberta, Manitoba and Ontario including a 33.3% ownership interest in a facility in Toronto, Ontario. This makes the Trust the fourth largest self-storage operator in Canada.
  • The Trust completed an equity raise of $13.0 million during the year to fund the self-storage acquisitions. The Corporation subscribed for $5.5 million, thereby maintaining its 42.5% ownership interest.
  • The Trust completed the construction of a self-storage facility located in Toronto, Ontario with rentable area of approximately 83,000 square feet. The Trust has a 33.3% ownership interest and operates the facility.
  • The Trust generated funds from operations of $4.2 million in 2015 (2014 - $3.1 million) representing a 37% increase over 2014. The increase was primarily driven by organic growth and earnings contributions from the facilities acquired and successfully integrated in the year.
  • The Trust increased quarterly distributions to 4% of invested capital, totaling approximately $1.0 million for the year. This represents an increase from the 3% of invested capital paid in 2014.

Private equity

  • Network Capital Management Inc.'s (50% owned - "NCMI") assets under management amounted to approximately $29.5 million as at December 31, 2015. This represents a decrease of approximately $26.2 million of assets under management as at December 31, 2014. The decrease was in part due to $10.8 million in distributions resulting from the divesture of the underlying investments in certain funds and lower valuations attributed to the underlying investments remaining in the funds given the 50% decline in oil prices.
  • During the year ended December 31, 2015, the Corporation acquired 40% of the issued and outstanding shares of NCMI held by its other shareholder, who is a director of the Corporation. The shares are held in escrow and voting rights revert to the Corporation only upon release from escrow which is no later than December 31, 2016.

Natural gas assets

  • Shackleton 2011 Limited Partnership (59% owned - "Shackleton Partnership") production decreased approximately 9% compared to 2014 average annual production.
  • The Shackleton Partnership generated $0.6 million in funds flow from operations for the year, compared to $1.8 million in 2014. The decrease was a result of a 40% decline in natural gas prices and the natural decline of production volumes;
  • Northpoint's production decreased by 21% year over year primarily due to natural production declines and the shut-in of select production during periods of third party pipeline capacity constraints. For the year ended December 31, 2015, Northpoint's average selling price for natural gas decreased 31% from 2014, which when combined with lower production, resulted in a 54% year over year decrease in revenues.
  • Subsequent to year-end 2015, Northpoint restructured the terms of its debentures, whereby the maturity date was extended to December 31, 2017 and interest payments owing as of December 31, 2015 through to December 31, 2016, could be deferred at the option of Northpoint. Pursuant to the restructuring, debenture holders received one Series A preferred share for each $250.00 of debenture outstanding as compensation for the concessions.

As at December 31, 2015, Wilmington had assets under management in its operating platforms of approximately $177 million ($69 million representing Wilmington's share).

OPERATIONS REVIEW

Self-Storage Facilities

Real Storage Private Trust

The Trust owns and operates 30 self-storage facilities comprising approximately 1.36 million square feet of net rentable area and a 33.3% interest in a self-storage facility in Toronto. During 2015, same store occupancy levels averaged 80% compared to 84% in 2014; same store operating margins averaged 56% in 2015 compared to 59% in 2014. The Trust saw a decline in the occupancy levels and operating margins in the Alberta facilities as a result of the severe downturn in the energy sector, however, the impact was mitigated by higher rents and continued strong performance in the Ontario portfolio.

Private Equity

Network Capital Management Inc. and Network 2012 Fund

As at December 31, 2015, NCMI had assets under management ("AUM") of $29.5 million compared to $55.7 million as at December 31, 2014. During the year, NCMI paid distributions of $10.8 million to participants in the various funds. The Corporation invested $8.0 million of capital in the Network 2012 Fund and has received cumulative distributions of $3.6 million to date. NCMI is focused on deploying capital raised in its most recent fund, Fund 16, which closed in the fall of 2014 and has $7.5 million of undeployed capital.

Natural Gas Assets

Shackleton 2011 Limited Partnership

The Shackleton Partnership owns and operates a 100% interest in natural gas assets in Southwestern Saskatchewan. The Shackleton Partnership's production decreased by 9% year over year to 528 boe/d in 2015 from 578 boe/d during 2014, primarily due to natural production decline. The average netback of $0.94 per mcf in 2015 decreased significantly when compared with $1.92 per mcf realized in 2014 due to lower realized natural gas prices.

The Shackleton Partnership recognized a $2.6 million impairment charge (2014 - $6.5 million) due to lower projected natural gas prices and reserve estimates.

The Shackleton Partnership's proved natural gas reserves decreased 7% to approximately 10.0 billion cubic feet and proved plus probable natural gas reserves decreased 13% to 12.7 billion cubic feet. Approximately half of the decrease is due to 2015 production and the remainder as a result of the lower pricing outlook for natural gas.

Northpoint Resources Ltd.

Northpoint is a privately held natural gas producer with assets in the Altares region of Northeastern British Columbia. Northpoint's production decreased by 21% year over year to 982 boe/d in 2015 from 1,246 boe/d in 2014, primarily due to the natural production decline of wells and the shut-in of production during select periods of third party pipeline capacity constraints. For the year ended December 31, 2015, Northpoint's average selling price for natural gas decreased 31% from 2014.

In December 2015, Northpoint drilled a 100% owned vertical well targeting the Gething zone. The well is shut-in and is expected to be tied-in in 2016. Northpoint is currently evaluating options to finance the completion and tie-in of the well, estimated to cost $1.6 million. Estimated proved developed sales gas attributable to the well is approximately 8.8 Bcf.

Outlook

The Corporation continues to execute its long-term strategy of building shareholder value by increasing the Trust's ownership of self-storage facilities through development and acquisition as well as increasing its ownership interest in its private equity platform. 2016 growth strategies for the Trust have been developed and the private equity platform is being positioned for what we believe is an inevitable recovery in oil prices in the near term. The Corporation's goal of scaling its interest in natural gas assets held through the Shackleton Partnership and Northpoint is seen as being no longer viable in light of the 40% drop in AECO prices this year. Accordingly, the Shackleton Partnership and Northpoint are focused on preserving capital and optimizing production.

FINANCIAL RESULTS

CONSOLIDATED STATEMENTS OF LOSS
(unaudited) (audited)
For the three months ended
December 31,
For the years ended
December 31,
(CDN $ Thousands, except per share amounts) 2015 2014 2015 2014
Revenue
Natural gas sales 719 1,071 3,100 4,904
Royalties (113 ) (181 ) (490 ) (985 )
Natural gas revenue 606 890 2,610 3,919
Investment and other income 31 50 184 196
637 940 2,794 4,115
Expenses
Petroleum operations 404 431 1,532 1,504
General and administrative 411 365 1,296 1,229
Depletion, depreciation and amortization 233 364 916 1,391
Impairment of natural gas property, plant and equipment 2,633 6,530 2,633 6,530
Stock-based compensation 11 13 35 96
Finance costs 55 59 226 249
(3,747 ) (6,822 ) 6,638 10,999
Loss before share of equity accounted investments and income tax (3,110 ) (6,822 ) (3,844 ) (6,884 )
Share of net income (loss) from Real Storage Private Trust (48 ) 187 604 735
Loss on ownership change in Real Storage Private Trust --- (12 ) (83 ) (12 )
Share of net income (loss) from Network Capital Management Inc. (40 ) 26 89 131
Share of net income (loss) from Network 2012 Limited Partnership (18 ) (60 ) 1,196 (242 )
Share of net loss from Northpoint Resources Ltd. --- (2,505 ) (583 ) (2,513 )
Loss before income tax (3,216 ) (9,186 ) (2,621 ) (8,785 )
Income tax expense (recovery) 8 (705 ) 135 (734 )
Net loss (3,224 ) (8,481 ) (2,756 ) (8,051 )
Net loss attributable to:
Owners of the Corporation (2,078 ) (5,786 ) (1,512 ) (5,541 )
Non-controlling interest (1,146 ) (2,695 ) (1,244 ) (2,510 )
(3,224 ) (8,481 ) (2,756 ) (8,051 )
Net loss per share
Basic (0.21 ) (0.68 ) (0.17 ) (0.65 )
Diluted (0.21 ) (0.68 ) (0.17 ) (0.65 )
CONSOLIDATED BALANCE SHEETS
(audited) (audited)
As at December 31, December 31,
(CDN $ Thousands) 2015 2014
Assets
Non-current assets
Investment in Real Storage Private Trust 16,107 10,501
Investment in Network Capital Management Inc. 257 128
Investment in Network 2012 Limited Partnership 3,315 7,793
Northpoint Debenture --- 583
Natural gas property, plant and equipment 5,752 9,046
Deferred income tax assets 622 317
26,053 28,368
Current assets
Income tax receivable --- 350
Accounts receivables and other 1,057 821
Cash 3,993 2,174
5,050 3,345
Total assets 31,103 31,713
Liabilities
Non-current liabilities
Decommissioning liabilities 1,074 843
1,074 843
Current liabilities
Accounts payable and accrued liabilities 861 1,182
Revolving Loan facility 4,350 4,400
5,211 5,582
Total liabilities 6,285 6,425
Equity
Shareholders' equity 24,467 23,693
Non-controlling interest 351 1,595
Total equity 24,818 25,288
Total liabilities and equity 31,103 31,713
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)
(unaudited) (audited)
For the three months ended
December 31,
For the years ended
December 31,
(CDN $ Thousands) 2015 2014 2015 2014
Net loss (3,224 ) (8,481 ) (2,756 ) (8,051 )
Items that may be reclassified to net loss
Share of other comprehensive income (loss) from Network 2012 Fund (536 ) (2,138 ) (3,638 ) 506
Deferred income tax expense (recovery) on above item (88 ) (278 ) (491 ) 66
Other comprehensive income (loss) (448 ) (1,860 ) (3,147 ) 440
Comprehensive loss (3,672 ) (10,341 ) (5,903 ) (7,611 )
Comprehensive loss attributable to:
Owners of the Corporation (2,526 ) (7,646 ) (4,659 ) (5,101 )
Non-controlling interest (1,146 ) (2,695 ) (1,244 ) (2,510 )
(3,672 ) (10,341 ) (5,903 ) (7,611 )

Executive Officers of the Corporation will be available at 403-705-8038 to answer any questions on the Corporation's financial results.

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this news release may constitute forward-looking statements or information under applicable securities legislation. Forward-looking statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding the operations, business, financial conditions, expected financial results, performance, opportunities, priorities, ongoing objectives, strategies and outlook of the Corporation and its investee entities and contain words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar expressions and statements relating to matters that are not historical facts constitute "forward-looking information" within the meaning of applicable Canadian securities legislation.

While the Corporation believes the anticipated future results, performance or achievements reflected or implied in those forward-looking statements are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond the Corporation's control, which may cause the actual results, performance and achievements of the Corporation to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

These risks and uncertainties include but are not limited to: the ability of management of Wilmington and its investee entities to execute its and their business plans; health, safety and environmental risks; uncertainties as to the availability and cost of financing; general economic and business conditions; the possibility that government policies or laws may change or governmental or regulatory approvals may be delayed or withheld; risks associated with existing and potential future law suits and regulatory actions against Wilmington; and other risks and uncertainties described in Wilmington's filings with Canadian securities regulatory authorities.

The foregoing list of important factors that may affect future results is not exhaustive. When relying on the forward-looking statements, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, the Corporation undertakes no obligation to publicly update or revise any forward-looking statements or information, that may be as a result of new information, future events or otherwise. These forward-looking statements are effective only as of the date of this document.

This new release contains natural gas volumes which have been converted on the basis of six thousand cubic feet of natural gas to one barrel of oil equivalent. Barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Wilmington Capital Management Inc.
Executive Officers of the Corporation
403-705-8038