Oil prices hit CERF in the third quarter
CERF Incorporated in Calgary, Alberta has announced its financial and operating results for the three and nine months ended September 30, 2015. “The third quarter of 2015 was again characterized by its challenging market conditions. However, we continue to believe that our diversified businesses, cost management strategies and strong balance sheet will enable CERF to mitigate the effects of a protracted economic downturn”. said Wayne Wadley, President and CEO of CERF. “Over the past nine months, we have undertaken cost reduction initiatives which included reducing personnel in our Energy Services Division by 47%. We will continue to review the cost side of our business and focus on initiatives that allow us to maintain flexibility in the current environment.” During the quarter, significant decreases in industry activity resulting from the decline in oil and natural gas prices and its impact on CERF’s oilfield rentals business resulted in a one-time impairment provision of $12.5 million on goodwill and intangibles. Net loss for the quarter was $12.6 million compared to a net profit of $1.3 million for the similar quarter in 2014. Excluding the goodwill impairment charge, the net loss for the quarter was $92,000.
Over the past twelve months, the oil and gas industry has faced substantial changes in light of the severe decline in crude oil prices. Service providers with good assets, diversified business models and conservative balance sheets are best positioned to manage through this ongoing uncertainty, and CERF is one of those companies.
As current industry conditions continue, competitors in our Energy Services Division will continue to cut into day rates as they compete to maintain utilization rates. As a result, we anticipate further pricing pressures as we move through the fourth quarter and into the first quarter of 2016. In the near term, we anticipate activity to remain significantly below the fourth quarter of 2014 levels, as customers fulfill their 2015 capital spending commitments and look to trim capital spending further heading into 2016. With our cost reductions, we can continue to be competitive in this sector.
The Industrial Rentals Segment has seen rental revenues flatten, as competition remains strong in the Edmonton market. At 4-Way Equipment Rentals, we are committed to adapting to these pressures without sacrificing our high-quality equipment and industry leading service. During the third quarter, we successfully introduced a new aerial equipment category to our product offering in response to customer demand. Although early, we are already seeing encouraging results from our new initiative. With the winter construction season upon us, our heating equipment is starting to make its way out to job sites. Our larger natural gas/propane heaters are ahead of last year’s utilization rate, which bodes well for early season activity. We remain cautiously optimistic regarding commitments made by Alberta’s new NDP government to increase infrastructure spending. Increased public works spending can be expected to benefit CERF favorably as rental products are needed by contractors.
The Waste Management Segment continues to operate as expected. Municipal household waste volumes remain constant. Special waste volumes are now trending slightly behind last year’s volumes but we are working diligently on securing large placement volumes slated for next year. We continue to peruse new contracted facilities management, contracted commercial, industrial waste and disposal opportunities.
For the past year, we have remained focused on right sizing our business to meet the new realities of the Alberta market place. We intend to continue looking at strategic acquisitions at attractive metrics in the current environment, and to further improve capital efficiencies in our core businesses. CERF intends to do this while maintaining our financial flexibility with room on our balance sheet.
