Oil and gas dip hits CERF hard
By Helen Wright02 June 2016
Canadian equipment rental and waste management company CERF has reported a 52% year-on-year drop in first quarter revenues to CA$8.5 million (€5.8 million), and a net loss of CA$4.1 million (€2.8 million), compared to income of CA$1.2 million (€818300) for the same three months last year.
CERF said the impact of lower drilling activity took its toll on results in its energy services division, which accounted for 39% of its 2015 revenues, while its waste management division, which generated 34% of revenues last year, also experienced weaker market conditions resulting in lower volumes.
The general rentals division, which accounted for 27% of CERF’s 2015 revenues, also felt the effects of the economic downturn from continued
low commodity prices, with a 54% drop in first quarter revenues. It added that excess idle equipment from existing competitors and the entry of new competitors into the Alberta market also increased the rental equipment supply and placed downward pressure on pricing.
Looking ahead, CERF said the uncertain and challenging economic environment experienced in 2015 due to the decline and instability of commodity prices showed no sign of reversing. It said this environment had caused its customers to reduce their 2016 capital expenditure programs and delay investment decisions which have directly impacted the utilisation and day rates of its rental equipment.
CERF said it expected activity levels for its energy services division to remain low until commodity prices stabilise at levels that result in increased producer spending. It added that the recent wildfires in Fort McMurray, Alberta, and the subsequent rebuilding efforts that will take place may provide opportunities for the company to deploy assets – it said it was exploring areas where it could supply lodging, power and lighting equipment.
“With a largely new management team in place, the Company is expanding its market reach and customer base from beyond its traditional energy services and general commercial customers to new industry segments including industrial facilities and pipeline construction. This will lead to more diversity in its revenue streams and increase the utilisation of existing rental equipment by penetrating new market segments that are less affected by the current economic downturn,” the company added.