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Press release from CNW Group

Dalmac Energy Reports Third Quarter 2013 Financial Results

Wednesday, March 13, 2013

Dalmac Energy Reports Third Quarter 2013 Financial Results09:05 EDT Wednesday, March 13, 2013TSX Venture: "DAL"EDMONTON, March 13, 2013 /CNW/ - John Babic, President and CEO of Dalmac Energy Inc. ("Dalmac") (TSX Venture "DAL") is pleased to announce third quarter financial results for the three and nine month periods ended January 31, 2013.The company posted its highest quarterly sales in history for the third quarter with revenues reaching $11.5 million compared to $10.9 million during the same period in the prior year.  For the 9 months, revenues were $29.8 million compared to $24.7 million YTD'12.The gross margin in the third quarter was softer at just 24% due to a number of mitigating factors and one-time costs.  This compares to gross margins of 34% during the third quarter of fiscal 2012. The YTD'13 gross margin was 27% compared to 31% reported in YTD'12. Management has put the necessary plans in place to ensure a prompt return to historical margins.Net income for the third quarter was $0.6M ($0.03 per share) compared to $1.3M ($0.07 per share) in the prior year.  For the 9 month period, net income was $1.5M ($0.07 per share) YTD'13 compared to $1.9M ($0.10 per share) YTD'12.  Net income was impacted particularly by increasing wage pressures, professional fees associated with the line of credit put in place in September 2012, and excessive repair and maintenance costs necessary to transition equipment for 24/7 use due to upcoming demand.(in thousands of dollars,except per share data)                  Q3 2013Q3 2012YTD 2013YTD 2012     Revenues                                $11,529$10,931$ 29,828$24,708Gross margin                              2,7423,7167,9697,688Gross margin %                              24%34%27%31%EBITDAS(1)                                1,3922,5024,0914,569EBIDTAS per share -- basic                 0.060.120.180.23Net income                                  5851,3051,5431,943Net income per share -- basic             0.030.070.070.10Net income per share -- diluted            0.030.060.070.10     (1) EBITDAS stands for earnings before interest, taxes, depreciation,amortization, and stock based compensation.Dalmac increased its revenues during a quarter when  overall industry activity levels were slightly lower than in the previous year. Key customers depleted their 2012 capital expenditure budgets earlier than expected which put a hold on further expenditures until January 2013.  In addition, many customers took advantage of an industry lull to have an extended Christmas break commencing the middle of December effectively creating a two week work month.Notwithstanding the foregoing, in Q3'13 Dalmac managed to secure more work contracts with its major customers to service existing and new wells. Much of these work contracts are scheduled to start early in 2013 and will require equipment on a 24/7 basis. In order to ensure our equipment is fully compliant to meet the challenges of a 24/7 work schedule, Dalmac completed a major retrofit of nearly a quarter of its fleet in Q3'13 which pushed up the repair and maintenance expenditures by over $540K as compared to the same quarter in the previous year. The positive side of these additional expenditures is that Dalmac will be taking on new work contracts which will contribute to increased revenues.Dalmac also experienced an increase in operating costs, largely stemming from the tightening up of the labour markets. This has resulted in a labour shortage, which increased the cost of labour by over $240K or 20% over Q3'12.  The tight labour market also placed more strain on Company training costs which increased to about $300K in Q3'13.  Collectively the Q3'13 retrofit, labour and training contributed to increased costs of about $1.1M.  While Dalmac is not immune to the vagaries of the labour markets, it is confident that the Company will offset most of these costs by increasing its charge out rates in the fourth quarter.Overall, Q3'13 expenses increased by 9% or $174K to $2.2M, from Q3'12. The year to date expenses increased 18% or $941K to $6.2M from the same period in the previous year.  Of particular note are professional fees which increased by $221K or 475% to $267K for Q3'13 ($222K or 170% to $352K for the YTD). Consistent with the refinancing which was completed September 10, 2012, non-recurring refinancing costs of $210K were included in Q3'13. The remaining balance of the non-recurring refinancing costs which is estimated to be about $142K, will be expensed in Q4'13.The Q3'13 amortization expense increased by 16% to $627K (YTD'13 increased 13% to $1.8M) from the same period last year as is consistent with new asset purchases. As a result of improved borrowing costs, the overall interest expenses decreased by 28% to $132K on the quarter and decreased 19% to $431K for the year to date.OutlookDalmac reported record revenues in all three quarters of this fiscal year. Despite the slight industry wide drop in activity in Q3'13, the continued outlook for the future is quite robust.  The Petroleum Service Association of Canada ("PSAC"), forecasts 11,775 well completions for 2013, which is down marginally from the 2012 levels of 12,500, however the number of metres drilled per well is on the rise. According to Oilweek magazine, the average metres drilled per well has risen dramatically in the last few years, from 1,202 metres in 2007 to 1,976 in 2012. The number of metres drilled per well is probably a more significant metric of health in the patch as opposed to looking at straight well completions. Additionally, 70% of the wells drilled in 2013 will be of the horizontal variety, which take longer to drill than the traditional vertical wells. Despite the overall decrease in well completions, Alberta will see an increase of drilling to the tune of 3% or 7,045 new wells. The 2013 overall oilfield activity for Alberta is expected to be more active than it was in 2012.Responding to the current surge of oilfield activity and production requirements, Dalmac remains on course for purchasing approximately $6.5 million dollars of additional oilfield equipment in this fiscal year. While much of this equipment is just now starting to trickle in, we are confident that the steps we are taking now will translate into higher revenues and earnings for Dalmac on a going forward basis.  The Company's equipment has been booked near full capacity over the remainder of fiscal 2013 and with the continued robust activity in the sector, we expect to continue on record pace and with a stronger focus on the bottom line now that much of our repair, maintenance, and financing costs are behind us.Conference callA conference call to discuss the results will be held today, March 13, 2013, at 1:30 pm EST/11:30 am MST.To participate in the conference call, please dial 416-644-3414 local in Toronto or toll-free 1-800-814-4859 and request the Dalmac Energy conference.Statements throughout this report that are not historical facts may be considered 'forward looking statements'.  Such statements are based on current expectations that involve risks and uncertainties, which could cause actual results to differ from those anticipated.  Important factors that can cause anticipated outcomes to differ materially from actual outcomes include the impact of general economic conditions, industry conditions, competition from other industry participants, volatility of petroleum prices, the ability to attract and retain qualified personnel, changes in laws or regulation, currency fluctuations, continued ability to access capital from available facilities and environmental risks.  References to "Dalmac', the "Corporation", "Company", "us", "we", and "our" mean Dalamc Energy Inc. and its subsidiary Dalmac Oilfield Services Inc.  The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.  We seek safe harbor.  SOURCE: Dalmac Energy Inc.For further information: Doren Quinton, President QIS Capital Corp. Ph:  (250) 377-1182 Email:  info@smallcaps.ca www.smallcaps.ca