C.A.T. oil AG: H1 2013 record operating and financial performance – strategic investments fuel further profitable growth

C.A.T. oil AG (O2C, ISIN: AT0000A00Y78), one of the leading providers of oil and gas field services in Russia and Kazakhstan, achieved record results in H1 2013. The Company boosted its revenues by 33.2% yoy to EUR 210.1 million (H1 2012: EUR 157.8 million) and EBITDA by 55.8% yoy to EUR 52.7 million (H1 2012: EUR 33.8 million). The EBITDA margin widened to 25.1% compared to 21.4% in H1 2012. Net income more than tripled to EUR 21.2 million yoy (H1 2012: EUR 6.7 million). Despite the weakened Russian rouble, C.A.T. oil reiterates its guidance for Fiscal Year 2013 based on a strong growth in demand for oilfield services, the Company’s solid order book and the progress in execution of the 2013 investment program.

Manfred Kastner, C.A.T. oil CEO, commented: "Top operating performance, lean and efficient organizational structures and strategically tailored investments according to our customers’ needs; that is what C.A.T. oil stands for. Our performance in the first half of the year clearly demonstrates that we have set up and executed the right expansion programs at the right time. C.A.T. oil continues its profitable growth story and is fully committed to its FY 2013 objectives.”

Swift business expansion

C.A.T. oil grew its consolidated revenues by 33.2% yoy to EUR 210.1 million (H1 2012: EUR 157.8 million) primarily driven by a combination of new capacity additions and higher utilization of existing rigs and fleets, the increased job size and complexity as well as the favorable price environment. The total service job count went up by 11.3% yoy to 1,866 jobs (H1 2012: 1,677 jobs) and the average per job revenues increased by 19.7% yoy to TEUR 113 (H1 2012: TEUR 94).

C.A.T. oil has introduced new operating and reportable segments since 1 January 2013: Well Services (fracturing, cementing and completion services) and Drilling, Sidetracking and IPM (Integrated Project Management). In H1 2013 C.A.T. oil pushed its Well Services’ revenues by 29.4% yoy to EUR 113.2 million (H1 2012: EUR 87.5 million) due to a 10.6% yoy gain in the service job count to 1,754 jobs (H1 2012: 1,586 jobs) and a 17.0% yoy rise on the average per job revenue to TEUR 65 (H1 2012: TEUR 55). The increase was primarily attributable to highly dynamic fracturing operations during the reporting period. Drilling, Sidetracking and IPM segment’s revenues increased by 40.4% yoy to EUR 96.0 million (H1 2012: EUR 68.3 million), reflecting a 30% increase in the Company’s sidetracking capacity during the reporting period compared to the end of 2012 as well as the higher utilization of existing operating capacities. The total drilling and sidetracking output was up 57.7% yoy to 134 thousand meters (H1 2012: 85 thousand meters).

Profitability advanced as operating costs lagged behind the top line growth

Despite strong business expansion, cost of sales went up only 28.5% yoy to EUR 170.7 million (H1 2012: EUR 132.8 million) as the Company stayed focused on tight cost control and operating efficiency. As a result, C.A.T. oil boosted its earnings before interest, tax, depreciation and amortization (EBITDA) by 55.8% yoy to EUR 52.7 million (H1 2012: EUR 33.8 million), with the EBITDA margin expanding by 3.7 percentage points to 25.1% (H1 2012: 21.4%). The Company’s earnings before interest and tax (EBIT) came in at EUR 27.2 million, up 109.5% yoy (H1 2012: EUR 13.0 million). The EBIT margin widened to 13.0% (H1 2012: 8.2%).

Net income more than tripled

C.A.T. oil more than tripled its net income to EUR 21.2 million during the reporting period (H1 2012: EUR 6.7 million). The Company’s net financial result stood at EUR -1.3 million (H1 2012: EUR -2.6 million) due to foreign currency exchange losses of EUR 0.3 million (H1 2012: EUR 1.0 million) as well as net interest expenses of EUR 1.0 million (H1 2012: EUR 1.7 million).

Strong cash generation and solid balance sheet

The Company’s funds from operations went up by 52.8% yoy to EUR 43.8 million (H1 2012: EUR 28.7 million) on the back of higher pre-tax profit and depreciation. Concurrently, cash flow from operating activities advanced 111.6% yoy to EUR 47.6 million (H1 2012: EUR 22.5 million) primarily reflecting the increase in funds from operations and higher working capital turnover. The Company’s capital expenditures were up by 140.4% yoy to EUR 31.1 million (H1 2012: EUR 13.0 million) owing to progress in execution of the 2013 capital expenditure program of EUR 45.0 million. In H1 2013, C.A.T. oil added 5 new rigs to expand its sidetrack drilling capacities by around 30% to 22 rigs as of 30 June 2013 from 17 rigs as of 31 December 2012. Cash flow from investing activities was a net outflow of EUR 29.1 million (H1 2012: 11.7 million) and cash flow from financing activities was a net outflow of EUR 6.8 million (H1 2012: EUR 12.5 million).

As of 30 June 2013, cash and cash equivalents increased by 37.1% to EUR 53.2 million as of 30 June 2013 (31 December 2012: EUR 38.8 million) and net debt (interest-bearing liabilities less cash and cash equivalents) contracted 67.8% to EUR 3.8 million (31 December 2012: EUR 11.8 million). The Company maintained a solid balance sheet with an equity ratio of 61.8% as of 30 June 2013 (31 December 2012: 67.0%).

Management reiterates guidance for 2013

C.A.T. oil proved once again its capability to deliver on its targets during the reporting period. The Company significantly enhanced its top- and bottom-line results and progressed executing its EUR 45 million capital expenditure program intended primarily to enlarge its sidetrack drilling and fracturing capacities. In addition to the successful expansion of its sidetrack drilling capacity by 30% during the reporting period, the Company expanded its fracturing capacity by around 10% in August. All new equipment stays highly utilized and will contribute to the Company’s FY 2013 results.

The Company is encouraged by buoyant oilfield service market dynamics in Russia and Kazakhstan and remains optimistic that this trend will sustain during the second half of the year. Even though the Russian rouble, in which the prevailing majority of C.A.T. oil’s service contracts is denominated, has devalued relative to the euro by around 9% year-to-date (effective date: 30 June 2013), the Company’s order book went up to EUR 404 million (assuming a revised average rouble-to-euro exchange rate of 42) at the end of August. Therefore, the Company reiterates its FY 2013 guidance for revenues of EUR 405 to 425 million and EBITDA of EUR 95 to 105 million (based on the rouble-to-euro exchange rate of 42).

www.catoilag.com

¹ As of 30 June 2013 and 31 December 2012 respectively