VANCOUVER, British Columbia, Nov. 04, 2020 (GLOBE NEWSWIRE) -- Hanwei Energy Services Corp. (TSX: HE) (“Hanwei” or the “Company”), today reported its financial results for the six months ended September 30, 2020. All amounts are in Canadian Dollars unless otherwise noted.

Update on COVID-19 Impact

Global commodity prices have declined significantly due to a collapse in demand attributed to COVID-19 in combination with an oversupply of oil due to disputes between major oil producing countries. The commodity price environment remains volatile due to COVID-19. The COVID-19 situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on the Company is not known at this time.

Financial and Operating Update

The Company has two reportable segments for its continuing operations: FRP pipe manufacturing and 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 three months ended September 30, 2020:

• Total revenues were $1.1 million as compared to $2.6 million for the same period of the prior year. The $1.5 million or 60% decrease in revenue was due to a $1.4 million decrease in FRP pipe sales in China and a $0.1 million decrease in the oil and gas business due to lower commodity prices.
  
• FRP pipe sales totaled $0.7 million as compared to $2.1 million for the same period of the prior year. Sales in both periods were entirely contributed by the Company’s China market with no sales contributed from international markets.
  
  • For the Chinese market, sales were $0.7 million as compared to $2.1 million for the prior year. The decrease was due to the general downturn in the oil and gas industry with several orders deferred until the economic outlook improves and planned projects of a major customer being postponed due to flooding delaying pipe installations.
  • For the Canada market, sales were nil and equal to that in the same period of the prior year. The Canadian market has experienced a significant drop in activity in the oil and gas industry due to COVID-19 and the general fall in oil pricing that has significantly restricted capital programs in this market.
• The Company produced approximately 93 barrels of oil equivalent per day (boed) with a netback of $6.47 per boe generating revenues net of royalties of $0.3 million as compared to production of approximately 93 boed with a netback of negative $7.89 per boe generating revenues net of royalties of $0.5 million for the same period of the prior year. The decrease in revenue was primarily due to lower commodity prices with the increase in netback primarily due to lower well repair and maintenance costs, each as compared to the same period of last year. Production was from the Company’s Leduc Lands. The Company’s Nevis Lands are shut in as uneconomic to produce at current low commodity prices. The Company’s Entice Lands are also shut in as the Company pursues a solution for its gas handling at this field.
• Adjusted EBITDA from continuing operations for the three months ended September 30, 2020 totalled negative $0.5 million as compared to Adjusted EBITDA of $0.2 million for the same period of the prior year. The $0.7 million reduction in Adjusted EBITDA was mainly due to decreased operating income as a result of decreased revenue in the FRP pipe business, partially offset by a decrease in operating loss in the oil and gas business.
  
• The Company had a loss from continuing operations of $1.1 million for the three months ended September 30, 2020 as compared to a loss from continuing operations of $0.6 million for the same period of the prior year. The loss was driven by a $0.8 million operating loss from the FRP pipe business and a $0.3 million operating loss from the oil and gas business.
  

For the six months ended September 30, 2020:

• Total revenues were $2.8 million as compared to $5.3 million for the same period of the prior year. The 46% decrease in revenues for the period was due to a $1.6 million or 41% decrease in FRP pipe sales in China and a $0.8 million or 64% decrease in oil and gas production revenues due to lower commodity prices and lower production volume.
  
• FRP pipe sales for the six months ended September 30, 2020 totaled some $2.4 million as compared to $4.0 million for the same period of the prior year.
  
  • For the Chinese market, sales were $2.4 million for the six months ended September 30, 2020 as compared to $3.8 million for the prior year. The $1.4 million decrease (36%) was mainly due to the decrease in sales in the three months ended September 30, 2020 as before noted.
    
  • For the Canada market, sales were nil for the six months ended September 30, 2020, as compared to $0.3 million for the same period of the prior year. The decrease was due to the significant drop in activity in the oil and gas industry in Canada due to COVID-19, and the general fall in oil pricing with significantly restricted capital programs in this market.
    
• The Company produced approximately 71 boed with a netback of negative $10.87 per boe, generating revenues net of royalties of $0.4 million as compared to 107 boed with a netback of $9.95 per boe generating revenues net of royalties of $1.1 million for the same period of the prior year. The reduction in production volume during the period was due to: certain low production Wabamun wells being shut in at the Leduc Lands since April 16, 2020; repairs and maintenance on a main Niksu well at the Leduc Lands (shut in for the majority of the three months ended June 30, 2020 being placed back on production on June 25, 2020); and as before noted the Nevis Lands being shut in since April 30, 2020 as production is uneconomic at current low crude oil prices. The decrease in netback was mainly due to the lower realized prices for crude oil at $34.46 per boe as compared to $63.12 per boe for the same period of the prior year.
  
• Adjusted EBITDA from continuing operations for the six months ended September 30, 2020 was negative $1.1 million as compared to nil for the same period of the prior year. The significant decrease in Adjusted EBITDA was due to decreased revenue and operating income in both the FRP pipe business and the oil and gas business impacted by the postponement of pipe installations due to flooding in China and the general industry slow down due to COVID-19 and as before noted.
  
• The Company had a loss from continuing operations of $1.9 million for the six months ended September 30, 2020 as compared to a loss from continuing operations of $1.2 million for the same period of the prior year.
  

Update on Acquisition of Additional Entice Assets

As previously reported, the Company completed its agreement to acquire certain oil and gas facilities, wells, and rights adjacent to its Entice Lands on June 30, 2020. The assets were purchased out of a receivership proceeding. The Company will assume certain obligations related to the acquisition, pursuant to the final transfer of the assets from the receivership being subject to regulatory approval, that as of the date of this news release are still pending. The acquisition includes two existing shut-in wells, that were previously producing 140 boed, to be placed back on production.

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp.’s principal business operations are in two complementary key segments of the oil and gas industry as both an equipment supplier to the industry (as a manufacturer of high pressure, fiberglass reinforced plastic (“FRP”) pipe products serving energy customers in the global energy market) and as an and gas producer with properties in Alberta and joint venture interests in Manitoba.

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 25, 2020 and Management Discussion and Analysis for the year ended March 31, 2020 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.

For more information, please contact:
Graham Kwan
Executive Vice President, Strategic Development and Corporate Affairs
604-685-2239
gkwan@hanweienergy.com

Irene Mai
Chief Financial Officer
604-685-2239
imai@hanweienergy.com

Legal Disclaimer:

EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.