Ezion’s Latest Earnings: Dour Outlook for the Next Six Months

Ezion  (SGX: 5ME) reported its fiscal first-quarter earnings report yesterday morning. The reporting period was for 1 January 2016 to 31 March 2016.

Ezion is an oil and gas support services provider. The company is an owner of 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 the results from Ezion’s previous quarter in here.

Financial highlights

The following’s a quick rundown on Ezion’s latest financial figures:

  1. For the first-quarter, Ezion’s revenue fell by 9% year-on-year to US$82.1 million.
  2. The firm recorded a profit of US$15.5 million for the quarter, a steep decline from the US$41 million seen in the same period a year ago.
  3. Ezion registered earnings per share of US$0.0084 for the first-quarter of 2016, down from the US$0.0232 seen in the first-quarter of 2015.
  4. For the reporting quarter, Ezion’s cash flow from operations came in at US$30.9 million with capital expenditures clocking in at US$21.2 million. This gave the oil and gas services firm positive free cash flow of US$9.7 million for the quarter. For perspective, Ezion had free cash flow of US$23.9 million in the same quarter a year ago (US$74.2 million in cash flow from operations and US$50.2 million in capex).
  5. As of 31 March 2015, Ezion had US$206.3 million in cash and equivalents and US$1.64 billion in debt. Ezion’s balance sheet was relatively unchanged compared to the previous sequential quarter when it had US$229.8 million in cash and equivalents and hefty borrowings of about US$1.65 billion.

Like many other companies in the oil and gas industry, Ezion did not have a good start to the year. The firm ended the first-quarter of 2016 with a decline in revenue and a sharply lower bottom-line. To be sure, Ezion did generate positive free cash flow, although that’s a big decline from the free cash flow seen a year ago. Meanwhile, there is still a sizable amount of debt for the company to deal with.

Investors may also want to note that Ezion’s trade receivables rose from US$152 million at the end of the first-quarter last year to US$200.7 million at the end of the reporting quarter. The increase in receivables comes despite the 9% fall in revenue. This could imply that Ezion has not been able to collect customer payments in a timely manner.

Operational highlights

Ezion’s top-line decline was mainly due to the absence of contribution from projects in Queensland, Australia. Cost of sales and servicing, though, rose despite the fall in revenue. This was due to the deployment of additional service rigs.

As for the outlook ahead, this is what Ezion’s management team had to share in the earnings release:

“The operating environment is expected to remain difficult in view of the depressed state of the Offshore Oil and Gas and Marine sector.

The Management expects that the Group’s performance for the next six months will continue to be affected by this. The Group will focus on and expedite putting several of its assets back to service and will also be working on deploying a few other assets for alternative use to minimise the impact.”

Ezion’s dour outlook matches those of other oil and gas industry players such as Keppel Corporation Limited (SGX: BN4) and Sembcorp Marine Ltd (SGX: S51).

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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.