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Destiny News Archives
Logan International reports first quarter results and operational update; well positioned for strong 2010
2010-05-13
CALGARY, ALBERTA, May 3, 2010 (Marketwire
Logan International reports first quarter results and operational update; well positioned for strong 2010
(All reported figures are in US dollars unless otherwise noted)
Calgary, Alberta May 13, 2010 – Logan International Inc. (TSX: DSC) today announced a net loss from continuing operations of $267 thousand ($0.02 loss per diluted share) for the first quarter of 2010, compared with net income from continuing operations of $2.4 million ($0.09 earnings per diluted share) for the first quarter of 2009. Modified EBITDA (as defined below) for the first quarter of 2010 was $3.9 million as compared to $4.8 million for the first quarter of 2009.
Gerald Hage, CEO of Logan International stated, “We are very pleased with our results in the first quarter of 2010. Logan International experienced a significant rebound in both the Logan Oil Tools and Dennis Tool platforms. In the first quarter, Logan International achieved very positive results in terms of profitability, maintaining low leverage and executing its aggressive growth strategy, while simultaneously managing the demands associated with completing the Destiny merger. 2010 will be a transitional year for Logan International as we expand, integrate and grow our product and services offering through our Logan Oil Tools, Dennis Tool, Source Energy Tool Services and Destiny Resources Services platforms. Not included in our financial results are the strong results of operations from Destiny in the first two months of the year.”
First quarter highlights include:
Established and renewed preferred supplier contracts with blue-chip service providers
Continued the integration of Dennis Tool acquired in September 2009. As a result of customer demand, Dennis Tool exceeded expectations and has initiated a capacity expansion that will be finished in Q1 2011, that will increase its capacity by approximately 70%
Completed the Destiny merger, through a reverse takeover transaction, which added a quality front-end seismic services business, free cash flow and financial capacity
Obtained a public listing on the TSX and established Canadian headquarters through the Destiny merger
Entered into a letter of intent to acquire Source Energy Tool Services Inc. (“Source”) for $26.1 million CAD ($25 million CAD of cash plus the assumption of $1.1 million CAD of loans to shareholders), a technology-focused downhole tool company which has a proprietary horizontal completion system in addition to a full line of associated completion tools and services. Source has six service and distribution locations in Alberta and Saskatchewan. The purchase of Source was completed on April 30, 2010
Executed on our plan, approved in November 2009, to dispose of Diamant Drilling Services by completing the sale in late March 2010 resulting in a small gain
Commenting on recent activity and first quarter results, Mr. Hage stated, "We are very excited about the growth platform we have created and look forward to growing in both North America and internationally. We will be aggressively growing our Dennis Tool and Source platforms while maintaining our focus on expanding our Logan Oil Tool and Destiny divisions. In addition, we are seeing tremendous opportunity to continue our downhole tool and technology consolidation strategy both in Canada and the U.S."
Shareholders of Destiny Resource Services Corp. approved the name change to “Logan International Inc.” at today’s annual general and special meeting. It is expected Logan International’s shares will commence trading on the TSX under the trading symbol “LII” within the next 10 days.
Selected Consolidated Financial Information
On March 1, 2010, the merger between Logan and Destiny (“Destiny Merger”) was completed as a reverse takeover. Accounting treatment requires the presentation of the financial statements of Logan on a historic basis and as if Logan acquired Destiny, resulting in the inclusion of the results of operations for Destiny for only the month of March (Destiny had aggregate revenue and gross margin of $19.1 million and $4.9 million, respectively, during January and February). As such, the results for the three months ended March 31, 2010 reflect the results of the Logan operations for January through March and Destiny operations for March only and the comparative figures for the three months ended March 31, 2009 reflect solely the results of Logan operations prior to the Destiny Merger.
Outlook
We are encouraged by what we see today for the growth of each of our businesses for the balance of 2010 and beyond. Overall demand for our products and services is strengthening and we believe we are well positioned in domestic and international markets to grow with the demand and to grow market share. We further believe our strong working capital position and availability under existing bank facilities, together with our access to debt and equity capital and our appetite for growth, positions us well to execute on our self-described “aggressive growth strategy”.
One of our most important philosophies has been to grow our downhole tool business, either organically or through acquisition, by focusing on technology and growth oriented markets. We began our expansion into the technology driven market with our acquisition of Dennis Tool in September 2009. Dennis Tool has developed a microwave technology for sintering carbide which provides more uniformity and consistency for the manufacture of rock bit and diamond bit inserts which increases performance by reducing insert breakage. Dennis Tool also has developed proprietary technology for the manufacture of diamond bearings that dramatically improves the bearing life of downhole mud motors, which reduces motor downtime and allows tools to remain in the wellbore for longer periods of time, and other abrasive applications. This new market will fuel future growth and will foster other applications for this product.
Increased sales driven by the combination of the Dennis Tool products and the Logan Oil Tools sales abilities created the need to expand Dennis Tool’s manufacturing capacity by approximately 70%. The Dennis Tool plant has operated 24 hours a day, 7 days a week, throughout the first quarter to meet existing demand. In February, we began the expansion of our manufacturing capacity by purchasing 4 new presses and associated equipment. The new equipment will begin to go into production in October 2010 with expected completion of the expansion project in the first quarter of 2011. We expect the expansion project will cost approximately $4 million.
The acquisition of Source provides an entry into the rapidly expanding downhole horizontal completions market and the multi-zonal fracturing market. The proprietary technology, developed and used by Source, is a fully retrievable isolation liner completion system for horizontal multi stage completions and selective opening and closing of multiple sections of the liner system with specific application in the horizontal shale resource plays including Bakken, Viking, Cardium and Marcellus. Since the system is fully retrievable, it allows for the full opening of the wellbore. We are excited about the potential for the combination of the Source technology and our engineering expertise, manufacturing capability and market presence. We plan to expand the Source presence into international markets by partnering with
multinational service companies while we concentrate our direct sales efforts on the North American market.
The challenge for the Source business line on a go forward basis will be to reduce product costs by implementing manufacturing disciplines and metrics while improving deliverability of products to grow the business. We believe that enhancing an already proven proprietary system by improving field service and availability of equipment will provide a platform that will allow Source to grow rapidly.
During the remainder of 2010, we will continue to reevaluate our strategies to meet existing and anticipated demands. A key focus will be to acquire businesses that are accretive to the growth strategy we follow and that are synergistic to our existing operations. We intend to build a strong downhole tool company that positions itself with technology focused products and in growing markets.
Forward-Looking Statements
This press release contains forward-looking statements. These statements relate to future events or future performance of Logan International. When used in this press release, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "propose", "expect", "potential", "continue", and similar expressions, are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Such statements reflect Logan International’s current views with respect to certain events, and are subject to certain risks, uncertainties and assumptions. Although Logan International believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because we can give no assurance that they will prove to be correct. Many factors could cause Logan International’s actual results, performance, or achievements to materially differ from those described in this press release. Readers are referred to Logan International’s Annual Information Form filed on www.sedar.com which identifies significant risk factors which could cause actual results to differ from those contained in the forward-looking statements. Should one or more risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this press release. The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement. These statements speak only as of the date of this press release. Logan International does not intend and does not assume any obligation, to update these forward-looking statements to reflect new information, subsequent events or otherwise, except as required by law.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities described herein in any jurisdiction.
For more information about Logan International Inc. please visit our website at www.loganinternationalinc.com
A full copy of Logan International’s first quarter 2010 Interim Report, including the financial statement and notes and management’s discussion and analysis can be obtained at www.sedar.com or by calling Kelly Lyons at 403-237-6437.
Contact:
Gerald Hage
Chief Executive Officer
Logan International Inc.
403-237-6437 Calgary
281-617-5322 Houston
via COMTEX) -- Destiny Resource Services Corp. (DSC), which, subject to shareholder approval, will be renamed Logan International Inc. (and for purposes of this press release will be referred to as "Logan International"), is pleased to announce it has acquired Source Energy Tool Services Inc. ("Source"). Source is a privately held technology-focused oilfield services company providing downhole equipment and multi-fracturing tools and services, headquartered in Lloydminster, Alberta (the "Acquisition"). The Acquisition is consistent with Logan International's previously stated strategy of growth in the downhole tool market. Logan International used its strong balance sheet to execute the Acquisition, which is expected to be accretive to 2010 EBITDA and earnings.
Under the terms of the agreement, Logan International paid $25 million Cdn. cash (less a 10% hold-back until certain terms and conditions are met) for all of the issued and outstanding common shares of Source and assumed approximately $1.1 million Cdn. of indebtedness to the selling shareholders. The Acquisition has been funded by cash on hand and by drawing on existing credit facilities, which were slightly modified to provide the acquisition financing.
The 4 key principals of Source have entered into employment and non-competition agreements. The existing principals of Source will be entitled to earn up to an additional $4.0 million Cdn., payable over two years, if certain sales growth targets are achieved for Source's proprietary horizontal multi-fracturing tool and services division.
"The acquisition of Source fits perfectly with our growth and acquisition strategy" said Gerald Hage, Chief Executive Officer of Logan International. "We expect the results from this acquisition will be immediately accretive, creating value for our shareholders. Source's MultiStim Fracture Isolation (TM) system is a proprietary multi-fracturing completion technology that is being adopted by oil and gas producers for the fracturing of horizontal wells. We intend to aggressively grow this business in Canada and introduce the technology in the U.S. and internationally through our existing network and relationships. Additionally, we expect to achieve significant synergies by leveraging Logan International's engineering expertise and manufacturing excellence and by increasing sales through utilizing the expanded combined distribution systems of Logan Oil Tools and Source."
Peters & Co. Limited acted as financial advisor to Logan International.
About Source
Source, founded in 2001, is a leading provider of equipment and services for completion, workover fishing activities and drilling motor systems in the Western Canadian Sedimentary Basin ("WCSB"). Source is headquartered in Lloydminster and has service locations in Lloydminster, Edmonton, Grande Prairie, Kindersley, Bonnyville and Brooks and a sales office in Calgary. Source has a proprietary multi-fracturing completion technology ("MultiStim Fracture Isolation (TM)") which is fully retrievable post-fracturing. The benefit of this technology is that it leaves a fully open well bore which allows for increased production flow and easier downhole intervention, if required. Other Source downhole products include packers, bridge plugs, fishing tools and services, liner hangers, casing patches and mud motors. Source's customers include many of the most active senior, intermediate and junior oil and natural gas producers in the WCSB who use horizontal drilling and completion techniques.
Source services producers that are focused on both heavy and light oil play development. Source has an established base of operations in Kindersley, Saskatchewan servicing the Viking light oil play.
Using Source's existing locations, Logan Oil Tools will have the ability to immediately increase revenue through enhanced distribution of its downhole tool products in Canada.
Logan International will utilize the majority of the Source product line in key unconventional oil and natural gas resource plays in the WCSB and will be introducing the proprietary MultiStim Fracture Isolation (TM) technology into the U.S., initially focusing on the Bakken light oil play in North Dakota.
Strategic Rationale and Benefits of the Acquisition
Some of the benefits of the Source Acquisition include:
- Provides for the direct distribution of Logan Oil Tool products in
Canada through Source's existing network of six service locations;
- Source has a proprietary technology-driven product focused on a large
and growing market for horizontal well completion that utilizes multi-
frac technology (Bakken, Viking, Cardium, Montney, Marcellus, etc.);
- The Acquisition complements Logan International's existing downhole tool
focus and strategy;
- Potential to enhance offerings to Source's customers by combining
products of Logan Oil Tools with the Source service and distribution
capabilities; and
- Engineering and manufacturing synergies will result from utilizing Logan
Oil Tools' plant, systems, quality control and expertise. This will
support the growth of Source's MultiStim Fracture Isolation(TM)
technology and provide low cost manufacturing for Source's traditional
downhole tool products.
Financial Highlights
With the completion of the Acquisition, Logan International has net debt of $29.2 million USD., of which $12.7 million USD is term debt and the balance is short-term/revolver based or due to the Source shareholders. Logan anticipates releasing its results for Q1'10 on May 13, 2010.
Disposition of Non-Core Assets
On March 25, 2010, Logan International completed its previously disclosed sale of all of the outstanding stock of Diamant Drilling Services S.A. Logan International expects to record a small gain on the sale.
Name Change
At the May 13, 2010, Annual General and Special Meeting of Shareholders, shareholders will vote on changing the name of the company to "Logan International Inc." If approved, the shares will trade on the Toronto Stock Exchange under the symbol "LII".
About Logan International
Logan International manufactures and sells a complete line of downhole products - retrieving tools, stroking tools, surface tools, remedial tools (Logan Oil Tools) and high performance polycrystalline diamond compact cutters and bearings (Dennis Tool Company) for a variety of well work-over, intervention, drilling and completion activities. Based in Houston, Texas, Logan Oil Tools is recognized as a leading source of superior products for many of the largest fishing and rental tool companies around the world. Logan International provides seismic front-end services to energy explorers and producers and to seismic acquisition companies in North America (Destiny Resource Services).
Forward-looking Statements
This press release contains forward-looking statements. These statements relate to future events or future performance of Logan International. When used in this press release, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "predict", "seek", "propose", "expect", "potential", "continue", and similar expressions, are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Such statements reflect Logan International's current views with respect to certain events, and are subject to certain risks, uncertainties and assumptions. Although Logan International believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because we can give no assurance that they will prove to be correct. Many factors could cause Logan International's future results, performance, or achievements to materially differ from those described in this press release. Should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated, or expected. The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement. These statements speak only as of the date of this press release. Logan International does not intend and does not assume any obligation, to update these forward-looking statements to reflect new information, subsequent events or otherwise, expect as required by law.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities described herein in any jurisdiction.
SOURCE: Destiny Resource Services Corp.
Logan International Inc.
Gerald Hage
Chief Executive Officer
Calgary Tel: (403) 692-1375 or Houston Tel: (281) 617-5300
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