Ezion’s Latest Earnings: Slow Start to the Year

Ezion  (SGX: 5ME) reported its fiscal first-quarter earnings yesterday. The reporting period was for 1 January 2015 to 31 March 2015.

Ezion is an oil and gas support services provider. The company owns a fleet of offshore assets that include multi-purpose self-propelled jack-up rigs and heavy-haul vessels. It also provides services such as well-servicing and maintenance, amongst others.

You can catch up with the previous quarter’s earnings here.

Financial highlights

Here’s a rundown on Ezion’s latest financial figures:

  1. Overall revenue for the first quarter fell by 4.6% year on year to US$90.1 million.
  2. Profit for the period was US$41 million, down 9.4% compared to last year’s first-quarter.
  3. Consequently, diluted earnings per share (EPS) fell 16.9% from 3.07 US cents per share in the first-quarter last year to 2.55 US cents per share.
  4. For the reporting quarter, cash flow from operations came in at US$74.1 million with capital expenditures clocking in at US$50.2 million. This gave the oil and gas services outfit US$23.9 million in positive free cash flow. The cash flow figures are also a big improvement from a year ago, when Ezion had US$26.7 million in cash flow from operations, US$48.5 million in capital expenditures, and thus –US$21.8 million in free cash flow.
  5. Ezion ended 31 March 2015 with US$345 million in cash and equivalents and hefty borrowings of US$1.52 billion on its balance sheet, representing a net debt (total borrowings minus total cash) position of US$1.126 billion. The firm’s balance sheet has weakened as it had a net debt position of US$1.09 billion a year ago.

In all, it was a slow start to 2015 for Ezion. Both revenue and profits for the quarter were down amidst a tough operating environment in nearly the entire oil and gas industry. The debt-laden state of the firm’s balance sheet did not change too.

It wasn’t all doom and gloom though as Ezion managed to nearly triple its operating cash flow during the qauarter and also churn out positive free cash flow.

Operational highlights and a future outlook

According to management, the decrease in revenue was mainly due to the absence of contribution from the marine and offshore logistics support services division.

Elsewhere, share of results from associates and jointly controlled entities rose by 31.1% from $6.2 million in the first quarter of 2014 to $8.1 million in the reporting quarter. The increase came from higher contribution from Ezion’s associate, Charisma Energy Services Limited.

Beyond that, Foolish investors might want to keep a keen eye on new share issues as well. Ezion had issued 230,400 ordinary shares during the quarter under its Employee Share Option scheme.

Ezion’s management team added the following commentary in the earnings release for the year ahead:

“Operating environment has been made challenging following the drastic drop in the prices of fossil fuel over the last seven months. Several of the Group’s Service Rigs have been made to work at their limits resulting in more wear and tear and higher maintenance. In addition, the Group also needed to incur additional cost to further upgrade a few of the Group’s newer units to meet clients’ additional requirements. The management has been putting in maximum effort to address these new challenges.

Based on the current schedule, a few units of the Service Rigs which are under maintenance and dry docking inspection are expected to be redeployed before the end of June. Similarly, several other new units that are undergoing modification are also expected to be progressively deployed starting from the same period.

The management is cautiously optimistic that the Group expects to have stronger performance for the remaining of the year when some of the units are redeployed and new units are delivered.”

Foolish take away

At its closing price yesterday of $1.21, Ezion traded at around 7.7 times its trailing earnings. That seems like a low valuation, but Foolish investors should note that the company’s profit in the fourth-quarter of 2014 included a one-off gain from the sale of a subsidiary.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.