Calmena Makes Good on Debt Payment through Divestitures

Calmena Makes Good on Debt Payment through Divestitures

By: Dylan Sikes - AllPennyStocks.com News

Friday, May 9, 2014

By large, energy services plays have had a strong 2014 already, which has led to plenty of analysts offering price target and opinion changes this year. The shale revolution in the United States has been a key driver for many stocks, although some companies are now viewed as being a little heavy in their valuations upon a more discerning look at overall fundamentals. For instance, Jefferies late in February cited high capex requirements and the age of fleet in downgrading Basic Energy Services (NYSE:BAS) from hold to underperform, although the firm did raise its price target from $13.50 to $16.00. Shares are currently at $25.55. Imperial Capital this week lowered its price target on Key Energy Services (NYSE:KEG) from $11.00 to $10.50, following Barclays lowering its target for Key from $12.00 to $11.00 last week. Zacks actually upgraded its rating on Key from underperform to neutral with a $10.10 price target. In the last 12 days, shares of KEG have sunk from a high of $10.52 to trade at $8.33 in Friday action. C&J Energy Services (Nasdaq:CJES) is one that has been getting love from analysts, with Global Hunter Securities issuing a buy rating on Monday on the stock. Barclays has an overweight rating on CJES and a $35 price target for the stock that is up 37 percent this year to $31.07 in trading today. Calgary’s Calmena Energy Services (TSX:CEZ) is one energy services company that certainly hasn’t enjoyed a rising valuation as part of the North American oil and gas boom. The company, which provides well construction services to its customers operating in Canada, the United States, Latin America and the Middle East and North Africa, is struggling to keep its head above water as it explores strategic opportunities to either get its rigs employed or divest assets to pay its debt.


Revenue during 2013 slipped to $98.63 million from $163.92 million in 2012. Net loss expanded to $67.93 million, or 23 cents per share, from a net loss of $11.13 million, or 4 cents per share. Total assets were $132.58 million at the end of the year and borrowings and debt (net of cash) totaled $40.11 million, down from $59.29 million a year earlier.

Since recovering from the Great Recession and hitting $1.52 per share in August 2009 (when the company was called BlackWatch Energy Services Corp.), shares have sunk to as low as a penny in January. On the bright side, shares have risen in each of the past three months, including hitting 7 cents in April and are up so far in May, trading at 4.5 cents currently.

The company’s senior credit lender has been providing forbearance, as long as Calmena keeps hocking assets and making payments. As part of its efforts to reduce corporate indebtedness, Calmena sold its Canadian Contract Drilling assets to CanElson last summer for $15.0 million. In April 2013, the company had sold its wireline technologies service business for proceeds for $12.1 million. In Q1 2014, Calmena’s Colombia operations were shuttered to preserve capital.

On Tuesday, the company announced the senior lender will continue to forbear demanding payments that are due, providing an extension until June 30 with a stipulation for Calmena to either pay $9.0 million or have contracts in hand showing they’re selling something to come up with $9.0 million by May 9 (today).

Calmena is going to make that payment by the hair on its chinny-chin-chin. The company said late on Thursday that it has agreed to sell its equipment rentals and frac fluids management service lines to Great Prairie Energy Inc. (TSX-Venture:GPE) for $10.0 million in cash. $9.0 million is slated for the senior lender and $1.0 is allocated for working capital.

On Friday, Calmena lightened its asset portfolio some more, announcing that it has sold its Canadian-based drilling technologies research and manufacturing business and some related assets to Boston-based FastCAP Systems Corp. for $1.0 million in cash and a $1.2 million in services and products over the next four years. Calmena says it intends to use the cash to further pay lenders.

"Calmena views this transaction as strategically beneficial to both parties, allowing Calmena access to advanced measurement-while-drilling technologies through a long term strategic arrangement with FastCAP. While we continue to deliver onshore directional field services, through our core business operations in the United States, we are excited about collaborating closely with FastCAP to develop and commercialize new and exciting directional drilling technologies," noted John King, President and Chief Executive Officer of Calmena, in a statement today.

Calmena looks like they may be able to dig (or drill, rather) their way out of the debt crevasse they are in, but they are still facing a lot of headwinds. Management says it is still exploring strategic options and they apparently have another payment to a senior lender due at the end of June. At the end of March, the company was sanguine with their outlook, as a contract for one of its rigs in Mexico was being terminated early in Q2 and two rigs in Libya were being shut down because of the political environment. Calmena rigs in Brazil were idle and looking to be sold. Now it’s just a matter of seeing what’s in the cards for Calmena as they try to regroup and return their focus to North America. Proper due diligence is, as always, encouraged.

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