Tuscany International Drilling's CEO Discusses Q3 2013 Results - Earnings Call Transcript

| About: Tuscany International (TIDZQ)

Tuscany International Drilling, Inc. (TIDZF) Q3 2013 Earnings Call November 18, 2013 11:00 AM ET

Executives

Walter Dawson - CEO and President

Matt Moorman - CFO

Analysts

Brodie Woods - AltaCorp Capital

Bryan Claggett - Canaccord Genuity

Greg Colman of National Bank Financial

Andrés Baez - LW Investment Management

Mike Carter - Private Investor

Eric Carter - Kobe Partners

Aaron Armstrong - P.A. Capital

Dennis Beaudet - GGIF

Andrés Baez - LW Investment Management

Operator

Good morning, ladies and gentlemen. Welcome to the Tuscany International Drilling 2013 Third Quarter Results Conference Call and Webcast. I would now like to turn the meeting over to Mr. Walter Dawson, Chief Executive Officer and President. Please go ahead, Mr. Dawson.

Walter Dawson

Good morning ladies and gentlemen. I would like to present the Q3 financial results discussion that we released last week. And there was a bit of delay, so there was a lot of mystique in the news release. So what I am going to do is get Matt Moorman who is on the line to walk through the financial information highlights, and then we will move to questions-and-answer period.

I would like, when question-and-answer period comes along, to restrict your questions to public information. The Company continues to move forward in its plan and we are under restrictions to answer any leading question. And I thank you for your assistance. Matt?

Matt Moorman

Thank you, Walter. Good morning everyone. First I’d like to begin by a quick overview of the presentation of our Q3 financial statements. We had some unusual presentation format this time. First the obvious one which is in the Q3 financials we are presenting the African operations as a discontinued operation, so it is separate from that what we’re calling continuing operations. Continuing operations is defined by our South American operation. Africa is presented in this format as a result of the transaction itself. So it gets collapsed into one line titled discontinued operations.

The second format presentation that I like to also mention is that, as part of the transaction as is in the press release, there are two rigs additional for sale in this transaction, and the financial statements are presenting those assets as assets held for sale, pending to closing. So the presentation is somewhat different than we’ve had before.

So I wanted to highlight those before I got into it. I guess the two other major identifiers in our presentation for our Q3 financial results, first, the second one is, there is a significant number of bad debt provisions that have been taken in Q3, roughly 14.9 million of debts for various customers. Primarily in South America we have taken some provisions for that, as a result of new information that has come to us through the Q3.

And the last presentation highlight, I do want to identify is the categorization of long-term debt as current. There are several factors that have us presenting this least of which is I mean we breached an interest coverage ratio in the quarter. We did receive an amendment from the bank. So we are not in default and that will cover that particular item. But there is also other reasons for the current presentation of long-term debt.

Those are the three major presentation highlights that we have in our quarterly financial presentations, just to skim through a few others. Revenue on the quarter 43.3 million, down from 51.7 the previous Q3 in 2012. Our gross margin a positive 10.4 million, gross margin percentage was weak on the quarter. We have adjusted EBITDA 11.9 negative millions, that of course has the significant -- capturing the significant write-downs that are hitting our G&A through the Q3.

We have funds flow from operation minus 2.5 million. We had cash from operations activity a positive 16.2 million. And that’s up from the previous year. G&A looks quite unusual, but again highlighting here that our bad debt provisions are falling through our general and administrative expense category and that’s why the G&A is sitting at 22.2 million. It has all of the write-downs in it.

If you took the write-downs out of G&A we’ll be pretty much on our run-rate of expenditures of approximately $7 million. It is a higher percent of revenue than usual, but that’s because our revenue was a little bit lower in the quarter. And then finally I want to highlight revenue days, 1,620 revenue days, just about on par for the number of revenue days that we had in 2012. Just going back to revenue, I do want to remind the audience that our revenues will generally be a lower on an absolute basis as a result of the structures of a contract that we have in Columbia with three rigs with a customer we have there, where the day rates are much lower than usual as a result of the costs being a flow-through to the client. So revenues would normally, in our case be lower in that regard but the margins are the same.

I think that's the highlights, Walter, on the financials.

Walter Dawson

Thank you. Could I open the line for questions?

Question-and-Answer Session

Operator

Thank you. We will now take questions from the telephone lines. (Operator Instructions) The first question is from Dana Benner of AltaCorp Capital, please go ahead.

Brodie Woods - AltaCorp Capital

It's actually Brodie Woods, Dana's associate. Dana is just traveling today. So just a quick question on those Brazil heli-rigs. I know you had the two that you were looking at potentially selling. Obviously, that wasn't announced in the transaction and announcement last week. Do you have any update on those two rigs?

Walter Dawson

Yes. As they are special-designed rigs for heli-portable work we have numerous people looked at them, we have approximately four companies, seriously talking to us. We feel quite good about work for them or sale within the next quarter.

Brodie Woods - AltaCorp Capital

Okay. And that's within Q4, or within the first quarter?

Walter Dawson

I hope Q4. I want ‘14 to be a company of reconstruct rather than cleanup.

Brodie Woods - AltaCorp Capital

Okay, kind of a clean slate for 2014 okay. And then just with the renegotiation of debt -- I know you guys are talking to your lenders. Any updates there, timing-wise, when you think you may be able to come out with something?

Walter Dawson

We all know that we must work together. The bank has been very favorable to us to this point and we continue to keep them well informed of every move. I would say at this time we have no deadline or goal in sight, but we all know that Q4 has to have a revamp of the debt.

Operator

The following question is from Bryan Claggett of Canaccord Genuity, please go ahead.

Bryan Claggett - Canaccord Genuity

Just another question on the debt; at the end of the third quarter, there was the current portion, 208. There was a line of credit of 47. And in your release as you talk about M&P assuming 50 million and also, there's the sale of the assets held for disposal. What the hell does the number look like post all those things all those two things, I suppose?

Walter Dawson

Well, today M&P is not closed. But when it does close there is $50 million of our 255 approximately total debt, so it will be down around 205. We are using proceeds from receivables that are doubtful receivable, as they come in those will go towards reducing debt or any further sale of assets would go to reducing debt.

Bryan Claggett - Canaccord Genuity

So the number is going to be about 205 when it's all said and done, just…?

Walter Dawson

205 when it's all said and done on M&P.

Bryan Claggett - Canaccord Genuity

Run on the M&P part. Now there is also the transfer or the sale of two of the Colombia rigs -- I assume that are held in that assets for disposal, or the assets held for sale. Now, is that paid for already through the advances or what have you or is that also to sort of come off the debt, so to speak? Or is that already in the works, or in the numbers?

Walter Dawson

We received a deposit of $15.3 million.

Bryan Claggett - Canaccord Genuity

Yes.

Walter Dawson

Of which we used approximately $8 million to reduce payables.

Bryan Claggett - Canaccord Genuity

Yes.

Walter Dawson

And the remainder went to Credit Suisse for the special account.

Bryan Claggett - Canaccord Genuity

Okay. So the bottom-line is after all the M&P things that it's going to be 205 and is backed up by about out of the assets or the property and equipment after adjustments is probably going to be something net of -- you'll take a couple more rigs out of 330 million or 340 million? What's the number is it 325 million? What's the number going to be? And I assume that’s a -- that will bank, is what the bank will hold as security for their 205, is that a fair characterization?

Walter Dawson

Correct.

Bryan Claggett - Canaccord Genuity

Is that the number 325, 330 for essentially the 20 some rigs you guys have got?

Walter Dawson

Matt can you give him an extra…

Bryan Claggett - Canaccord Genuity

Can you give me an answer, Matt?

Matt Moorman

Yes, it will be around that number Brodie, Bryan.

Bryan Claggett - Canaccord Genuity

So just one to follow-up question on that point, are those rigs in today's I assume that you have been recently conservative and those rigs are worth that much in either future cash and/or value today? Is that -- you have got enough, you’ve got a margin there of 100 million?

Walter Dawson

There is no asset that we know of that has an impairment other than we’re not certain on the heli-portables.

Bryan Claggett - Canaccord Genuity

Right, but they are still in there at full value, in that 320 million or whatever the number is going to be?

Walter Dawson

We reviewed it for a write-down and we had to have a reason to right them down so until we get an offer we can’t do anything.

Bryan Claggett - Canaccord Genuity

Right, okay. Well, hopefully you will have something good to announce for us before this next quarter. But I'll let somebody else ask a question. I've got a couple more, but I'll let somebody ask, come back, I will come back with another one or two. Thank you.

Operator

Thank you. The following question is from Greg Colman of National Bank Financial. Please go ahead.

Greg Colman - National Bank Financial

Hey Walter, Matt, just a couple of quick ones here. Wondering and this might go into the purview of stuff you can't talk about but I'll give it a shot anyway. What kind of EBITDA was being generated by the Africa and two Colombia rigs being sold on the trailing 12-month basis?

Walter Dawson

Matt?

Matt Moorman

So Africa and LTM at Q3 is roughly 18 million the two rigs -- of the two rigs that are being sold as part of the deal one of our rigs hasn’t work for some time the other rig is the C16 rig which is currently on a contract which comes off in December. It’s producing roughly 3.5 million of EBITDA, so around 20-21 would be the -- would be roughly the LTM number for that.

Greg Colman - National Bank Financial

Okay. And just to be clear, if we were to do this proposed transaction with Maurel & Prom a year ago the EBITDA that would be generated over this last year attributable to Tuscany would be about 21 million less than what you actually reported?

Matt Moorman

Roughly that number.

Greg Colman - National Bank Financial

Great, and this would be a bit more forward-looking but what's your quarterly G&A look like after giving effect to the sale assuming it goes through on a dollars basis please, with none of the one-time stuff in it obviously.

Matt Moorman

Walter I’ll take a quick drop a few numbers you can add to that I think Greg we spent roughly if you take the one-times out of our G&A in Q3 we’re around 7 million. We have obviously a number of initiatives. We believe that the number will definitely be lower, but those programs are still coming to fruition and we don’t have a hard number. We’ve been spending roughly 7 million a quarter on G&A, so we certainly expect to see some opportunities there. But, Walter did you want to add to that?

Walter Dawson

Yes, Greg, we are streamlining the Company right sizing it. The effects of Houston are not in the quarter they’re probably detrimental to the quarter because we are putting it behind us. We are streamlining Colombia once the close of M&T happens. We are rightsizing Brazil so the number is floating. And we should have a good handle on it within the quarter four.

Greg Colman - National Bank Financial

I appreciate that color. So just for clarity on the 7 million earlier just start with that, that would be roughly 7 million a quarter for the ongoing entity, which is Tuscany ex Africa and the two Colombia rigs. So that would be 7 million a quarter excluding say the Paris office and anything that’s going on in Africa?

Walter Dawson

No, Greg, that 7 million is with everything in.

Greg Colman - National Bank Financial

Okay. What would it look like after giving the effect of the sale? I am saying what should we be thinking about it on a quarterly basis going forward?

Matt Moorman

There is probably 25% reduction when you clear up the obvious changes in our G&A like Houston and the Paris and in some opportunities that we have in the field. So as Walter was saying until we have a -- until we nail those down and complete the transaction and have a good look at the operations. I would say that 20% to 25% is going to be a good target.

Greg Colman - National Bank Financial

Okay.

Matt Moorman

The goal is lower than that.

Greg Colman - National Bank Financial

So for sure, but to sort of start with somewhere between 5 million and 5.5 million will be a good place to start and then targeting reductions from there?

Matt Moorman

Correct.

Greg Colman - National Bank Financial

And then just on the write-down of your bad debt provisions the 14.9 I believe was that sort of the full amount of all the questionable accounts the large chunky ones or is there anything else which is still being held as likely or coverable but could change in Q4. I am just wondering if we have a risk of another one of these sizable bad debt expenses coming through in Q4.

Walter Dawson

First of all we're trying to put any doubtful behind this Greg we're trying to clean our balance sheet. Number two we took the write-down that was feasible on CYA, we have an agreement we have a deposit on the agreement. Centurion was written down although we’re in negotiations with EcoPetrol to pay us direct, I can't guarantee that today but that is in process.

And on the HRT we took a nominal write-down of the booked amount that we felt maybe in jeopardy because of their financial capability if we won the case which we have feelings that we will. We took a small write-down on a Brazilian receivable because the company is borderline and maybe even in receivership now. So we think all of the doubtful accounts are written off, although we're still going to collect.

Greg Colman - National Bank Financial

So that 14.9 is the full write down of your doubtful accounts but you are still pursuing a few of the collections there, so there is no other additional doubtful accounts which could show up as a bad debt provision?

Walter Dawson

Not that I know of.

Operator

Thank you. The following question is from Andrés Baez of WIM. Please go ahead.

Andrés Baez - LW Investment Management

Going back to the accounts receivables, could you give a bit more detail on Centurion? Are those three rigs still working for EcoPetrol? And what happened between EcoPetrol and Centurion and you guys?

Walter Dawson

It's a mess is where I'll start, negotiations have been -- the heat is turned up on the Centurion by both EcoPetrol and ourselves. EcoPetrol being a public entity legally have to deal with this very carefully because there is a bid process to get the contract and an obligation by Centurion to fulfill that. We have landed on a very favorable vice president who over the weekend had a second approach to him verbally because once we’ve documented it goes right into legal department.

We don't want to give EcoPetrol any thought that we're putting threats on them, in that they will be doing a favor for us in paying us direct. Verbally today they are waiting for a document which should be in their hands today, saying we in writing are requesting payments payment direct. We have gone through the crop to shuffle to get EcoPetrol's mind around it.

Last week there was two employees involved with Centurion from EcoPetrol were fired, the heat is on Centurion to perform. We're getting all sorts of overtures by emails and we want to do this that and the other thing, we say time is up. There is no more stalled tactics. They did try to pull a stalled tactic in EcoPetrol on us they in the, well the bills that we were sending in were in dispute and we went to them immediately to Centurion immediately and that problem was solved within an hour.

So I am dancing a little bit on my answer but I don't have anything solid to give you and I apologize.

Andres Baez - LW Investment Management

Yes. But just to understand one part -- are those three rigs still working currently for Ecopetrol?

Walter Dawson

There is one rig going to be released at Ecopetrol’s request in the very near future. I think it’s got two more holes to deliver. In our ladder we’re seeing we will stop the rigs if we don’t get paid directly from you from September 1st, where they verbally said, we will withhold the money owed to Centurion. The last step I’d like to tell you is I was not happy with Colombian counsel. They had my instruction and then they started dealing with my people in the office. For a week, I lost communication. We now have McCarthy Tetrault over top of our legal counsel in Colombia. And the legal counsel in Colombia knows that they may lose our account if they don’t pull their socks up.

Andres Baez - LW Investment Management

Okay. And of the accounts receivable currently outstanding, is there anything else from Centurion that you have not written off?

Walter Dawson

We wrote off a large chunk of it. I don’t know, we’re not booking the revenue that I know of, go forward until we get secured information that we’re going to get paid. So there is no booking of revenue go forward and there could be a large lump of revenue hit the books in the next quarter, should we find the result.

Andres Baez - LW Investment Management

Okay. Is there any concentration in the accounts receivables that we should be aware of?

Walter Dawson

Any concentration?

Andres Baez - LW Investment Management

On clients?

Walter Dawson

Any clients that we should aware of that are borderline not paying?

Andres Baez - LW Investment Management

No. The 3% -- 25%, 30% of your accounts receivables, currently?

Walter Dawson

No our accounts receivable are very well spread and very current. We are pleased that when we change management in Colombia that we went around to probably better than 50% of our customers and there was help offered through this crisis zone.

Andres Baez - LW Investment Management

Okay. Also, I was surprised to see $1.4 million on OGX write-down. I understood that you were working with OGX Maranhao, which has required been acquired by E.ON. So I was surprised to see that write-off there. Can you explain what's going on there?

Walter Dawson

Yes, we wrote it off with the anticipation of the worst case. The auditors approved it and recommended it. We believe strongly that we’re going to collect it because the new E.ON group is very friendly with us, claim they’re going to pay. Its matter of being in the queue and them closing their transaction. I understand their transaction is now closed. They have alerted us to full payment and ordering of a rig, the new finance group as probably know it as well as I do.

Andres Baez -- LW Investment Management

Yes, yes. Okay. Staying in Brazil, you currently only have only two out of nine rigs working.

Walter Dawson

Yes.

Andres Baez - LW Investment Management

And, I think it's safe to say that Brazil has been sort of the place where most financial troubles Tuscany has encountered. How do you move forward?

Walter Dawson

We have advisory services that we’re clearing a document right now to put in place. We are moving forward to fix the problem one way another. The rigs must go to work or they must move out or they must be sold.

Andres Baez - LW Investment Management

Do you have a target date for this?

Walter Dawson

The target is immediately, we’re active on it. Again, it’s very unusual market to sell anything in right now. In a few months when all the drilling happens, if it’s going to happen, the rigs will be worth a lot. We can’t wait. We have to fix the problem one way or another, so we’re active.

Andres Baez - LW Investment Management

Okay. And finally, SK Energy. What happened there? I understand SK Energy, it's not a small company, right?

Walter Dawson

That was a disputed move I believe it was. It wasn’t anything to do with service and we are still trying to collect it but we’re going to get our new management on it. He is a little loaded with problems these days because we had a delay in rigging up one of our rigs and he was on that particular problem.

Andres Baez - LW Investment Management

Okay. Finally, last question, in terms of management, who stays in Colombia and who goes?

Walter Dawson

We have a mandate to reduce the rent firstly. We have two oil companies or I should say, two big companies looking at it, one oil company, one our customer. We are looking for smaller premises. We believe that there is somewhere between 40% and 50% of the people goal. We want to polish up our controls from the financial side. At the same time we want to polish up our operations at the superintendent side and we are not waiting to closing of M&P, these transactions are in motion.

Andres Baez - LW Investment Management

Okay. One last question Now that Maurel & Prom will be out of the company in the matter of time; are you planning to put in any sort of poison pills to prevent takeovers at lowball prices?

Walter Dawson

Would you repeat that question please?

Andres Baez - LW Investment Management

My question is now that Maurel & Prom is out, your company structure is open for takeover opportunities at lowball prices. How do you plan to go about it?

Walter Dawson

That is one question I refrain from answering. As you know we’re in an area of advisors and people helping us with our go forward plan. We are on a mission to not stay in this position long.

Operator

Thank you. The following question is from Mike Carter, Private Investor. Please go ahead.

Mike Carter - Private Investor

Walter, we spoke at the last conference call, I have number of questions for you and Matt. So, whoever wants to take, its fine? At the last conference call, you referenced that there was a potential shocker going to occur. Is M&P considered to be the shock?

Walter Dawson

Well, anything I do in my life is usually a shock, so sometimes I use word that don’t mean whole a lot. There is change at the Company, Company needs more change and I’ll just leave it there. Thanks.

Mike Carter - Private Investor

A very simple question, I believe it was Friday and it just deals with stuff that as a private investor, I may not be too aware, there was a TSX delisting review notice. What was that about?

Walter Dawson

That is an automatic transaction when a listed company goes through a major event such as ours. So it’s not going to be reviewed till March. Yes it is going to be reviewed, but by March we should have a lot better plan for the TSX. So they gave us sometime but they put flag out there which jolts everybody.

Mike Carter - Private Investor

Okay. And that was primarily driven by the M&P divestiture?

Walter Dawson

That was driven by a request that we have which we cannot talk about to the TSX and the M&P transaction.

Mike Carter - Private Investor

Okay. Some information I guess for meeting for other retail folks on M&P. Why was this done? Who initiated it? I’m assuming the fairness opinion is good to take away. Are there any other potential liabilities associated with this transaction or is it clear and done once it’s done. And I guess the question on why was it done, was M&P wanting out or with this part of something that was preventing debt restructuring or anything that you can speak on?

Walter Dawson

Sure. I’ll do the best I can. The M&P transaction was a friendly transaction. It was done to assist Tuscany in a small way of restructure. It was done to assist us in taking a couple of extra rigs to give us some cash. It was done very friendly, with no restrictions and it was done to achieve a better base for us to grow.

As you know the African older rigs were very demanding on our CapEx and with that gone the company should be a lot better. The Company's balance sheet dictates that we restructure our, what I call, get the root of the tree planted firmly again. So we need to pay attention to a smaller operation. It was a blessing that M&P came along.

Mike Carter - Private Investor

Okay, Tuscany post M&P, what does the organization look like and who are going to be the key officers going forward? I'm assuming it's you and Matt, but are there other people, because I think at point in time I remember see you all being on the call and don’t I hear that person or anymore; anything that you can speak of, and anything in country because it sounds like there may have been some deeper organizational issues in South America.

Walter Dawson

Well when somebody decides to leave you, there's always a void. After we put our hands on it for three weeks and two trips down there, we are much more comfortable today in management than we were before the Columbian manager left. We have made a serious decision to reduce the cost and the communication in a company that needs full attention, and we're probably at the edge soon, of needing to beef up our executive team a little bit. But let's see what the Company looks like when we're done reorganizing. Today we have full hands on the wheel we have. We have Rubens Botteri, Interim COO. We have a consultant here in the company here in Calgary getting ready to go to the field to assist me in reviewing all our assets and just it's time to make a full investigation and to restructure our South American company. That will be the route for the future.

Mike Carter - Private Investor

And is that because some of the changes you're talking about, because the business practices in South America are, have become somewhat suspect and I reference that because the last time we chatted I think I'd asked a question about potential new and upcoming bad debts and you had indicated I think or Matt had indicated that, no, you're pretty secure, and now you have a light off again of some significance. So will you gain more confidence, now that you're implementing these changes?

Walter Dawson

Yes, to nearly all of your questions. We were not getting full service out of our Houston office. It was costing us $2 million a year plus and that was our first big cost savings. We found with some meetings in all of the countries since, last December I think I started the process in communications, Houston was a bottleneck. So we are redesigning our executive team. We are reviewing and polishing all of our policies to ensure they're fully followed, which we found with one case they were not and we fixed the problem. So from the outside, looking in you'd say, oh, you must have problems in your Company. This is a norm for an international operation that every year, every other year you must go out and make some statements.

Mike Carter - Private Investor

Okay. A question on utilization. I think at the last conference call, you sounded pretty confident on rig utilization increasing rather substantially and I guess with the M&P transaction, I'm going to sit here and say did expected increase in utilization occur, because obviously now it’s on a different base of rates and you're now indicating 62.9 (Ph) and I think at some point in time you'd indicated 80 or the likelihood of 80. As you look forward this current quarter and into next year and it looks like Brazil is a balanced breakfast of goodness knows what; is, your expectations per utilization are good, bad, indifferent?

Walter Dawson

Well if we go to Page 2 of the news release, it states exactly the status of our operation Ex the African, and we dropped the African because we feel confident that the transaction will close. So when you look at the two heavy rigs still sitting, those are tougher to put to work. Colombia we got one rig available and there is three people looking at it reported to work. So we’re a 100% there.

If you look at Ecuador, we’re at the end of the contracts and there is new contracts coming, although we’re looking at those rigs in making sure we don’t put them to work on a contract that we don’t get a good rate of return, not just a rate of return. We’ve got to get more value out of our assets. So I am pleased to say that I don’t see any problem booking rigs of the right size in our South American operation. Brazil has lots of work promised again and we’re talking to two or three companies that could take a rig each. And if that happens, the business turns around. Meantime we’re looking at the business.

In Colombia yesterday I talked to the country manager on a Sunday and we got a low down on how many customers are after us for rigs of the 1,500 horsepower, which we don’t have any left. So there is lots of business. It gave me a good feeling that when the rigs come off of Centurion, and the sooner the better, those rigs will polish up and go right back to work shortly thereafter.

Mike Carter - Private Investor

And the margins as we see them, I’m assuming because there has been a fairly significant reduction in margins, pretty much year-over-year come up with that 30 down to 24, is that largely the impact of the larger rigs not working or is it related to other things?

Walter Dawson

It’s related in part and a big part to Centurion contract, which is drivy [ph]. So the rig which probably will never happen again in the Company. It’s related to our smaller rigs that make small return because we’re down fighting with the mamas and papas. But our big rigs, away from those two areas make good return on investment and it’s going to get better because we found some things in our business that we can put our hands on to reduce cost.

Operator

Thank you. The following question is from Eric Carter of Kobe Partners. Please go ahead.

Eric Carter - Kobe Partners

Okay. So maybe we could just spend a few minutes looking on a go-forward basis, ex the M&P transaction, looking forward to Latin America, I know that the day-rates have come down, because you have as you mentioned a higher cost flow paid by the customer. But their gross margins did come down and the previous caller addressed that. So what I guess I wanted to look at is, to the best that you can and maybe lean more on the conservative side, is in 2014 what do you think a conservative day-rate would be for any existing contracts that will flow through next year; and the new contracts as far as the day-rate; and then what a conservative gross margin could potentially be there?

Walter Dawson

Well, first of all, it’s a loaded question because every different size of rig and how many pumps these are the different day-rates. So I’m going to group it together, and say that we are trying to get all of our assets over a period of time into the bigger rig business. That is where we’re going to make money and that’s our future. It will take us a little bit of time to transact on the smaller rigs.

On the bigger rig side, we will not be doing anymore Centurions, it’s a disaster. If you looked at the rig day-rate today, I think it’s getting to be fairly secure. I don’t think you’re really going to see a downside. I do think we can do some trimming of our operating cost without restoring our service and that’s where our attention is, is to get the rigs in an area of 1,500, where we deliver 4 millionish EBITDA.

Eric Carter - Kobe Partners

And because Brazil has been very slow with new business, would it be reasonable to assume that the number of total business days -- I think it was like 1,620 drilling days. That's going to be somewhat constant for the next few quarters?

Walter Dawson

On the two contracts that we have left with Petrobras I think history kind of leads you to look forward with those. We do -- while we are doing our other business plans have some opportunity at very good day rates, the problem has been in Brazil where Petrobras's budget went offshore. Although there are new entrepreneurs coming onshore Petrobras is a partner in all of those.

Eric Carter - Kobe Partners

Got it. Okay. And then there was some previous discussion on the reduced G&A on a go-forward basis. Understanding -- I don't have the exact number, but I think it may have been $25 million in total CapEx from 2013. Matt, is there any color you can provide on a go-forward basis for just maintenance CapEx, being that the fleet now should be on average significantly younger?

Walter Dawson

The 25 million numbers that we have been spending have been -- they have been influenced of course by the large CapEx out of the African operations. We would expect that our sustainable CapEx program would fall from that, we're probably in the range of certainly 20 with the focus on the South American fleet, that fleet is for the most parts skewed towards the newer rigs the Tuscany newer rigs that are roughly about three years old.

So we would see other than specific customer requirements when we might go to a new contract a sustainable CapEx program would be sizably and materially lower than where we're at today x the African business.

Eric Carter - Kobe Partners

And so where we are today with the African business is 25, I mean could you say that 10 to 15 is realistic, or is it something in between that and 25 million?

Walter Dawson

10 to 15 would be aggressive in my view, I think a reasonable number for the analysts would be, I would say low -- sorry mid teens to 15, 17 would be a number to use and we'll see what we can do to manage that number even lower. But I wouldn't want to put out any dragging on that. But the range is certainly sub 20 and maybe between 15 and 20 is kind of where we're aiming for.

Operator

Thank you. The following question is from Aaron Armstrong of P.A. Capital. Please go ahead.

Aaron Armstrong - P.A. Capital

A couple of quick questions. You guys are talking about CapEx. How about working capital on a forward basis? What are you seeing on that side?

Matt Moorman

Well working cap, sorry Walter go ahead.

Walter Dawson

Work in process.

Aaron Armstrong - P.A. Capital

Can you give maybe a high and low figure, then?

Walter Dawson

Working capital is work in progress, we -- this is a big focus for us as we move forward for sure, I would say that out of the South American business on a high utilization model we could be plus 10, plus 15 range. As you know we have been lower than that over the last LTM we have -- we feel that what the programs we're looking at implementing that it's got to be able to deliver a plus 10 kind of number for us.

Aaron Armstrong - P.A. Capital

So, Walter, real quickly you were talking a lot about the 1,500 horsepower. I'm just curious, how many rigs do you have now that are under 1,500?

Walter Dawson

For this call I would like to revert to getting that number exact for you rather than, I don't have my daily sheet in here sorry.

Aaron Armstrong - P.A. Capital

So I guess my next question is, are you expecting to basically phase out anything lower than 15 and then focus only on 15 plus?

Walter Dawson

No 1,200 horse power are very commodity, 1,500, 2,000 and the odd 2,500 is where the market is at today and that’s where you can make the good money because the mamas and papas have too many barriers to entry.

Aaron Armstrong - PA Capital

Okay. Let's see here, real quick, do you have any kind of EBITDA projection, maybe, like, post this M&P transaction that you could --?

Walter Dawson

If that’s a question then I think we need to refrain from answering today, if it would be a misleading number at this time. It's premature, because we’re in a position cleansing, and the number is not hard at this time.

Aaron Armstrong - PA Capital

Okay. And then one last one. So, obviously, you've been working on the strategic review; and the M&P, I would imagine, is underneath that strategic review umbrella. Are there other activities that Tuscany is looking at from the strategic review process? Or is this it, and then the strategic review is now closed?

Walter Dawson

Difficult question to answer but as you know management has a desire to cleanse the company to get the assets in the right size. So we have not stopped our process.

Aaron Armstrong - PA Capital

Okay. So that answers my questions. Thanks a lot.

Walter Dawson

Thank you.

Operator

Thank you. The following question is from Bryan Claggett of Canaccord Genuity. Please go ahead.

Bryan Claggett - Canaccord Genuity

Follow-up question -- one of them was answered. I was going to dwell on the potential in EBITDA as well, but I understand you don’t want to go down that path at this stage. I assume, though, maybe you can give me a 30,000-foot view down. If you get all these rigs working, or more of them working than the 15 out of 26 at a more optimum level, then there is more than enough cash flow to service the debt and not put you guys back into this position again. Is that a fair characterization of it?

Walter Dawson

I would say that reasonably fair.

Bryan Claggett - Canaccord Genuity

Okay. In Ecuador, the two -- is this just a transition thing in Ecuador, or is that a Brazil-like issue that the business isn't there? Or is this just a transitional thing with the two rigs not working?

Walter Dawson

What happened in Ecuador was, Petroamazonas, Petroproduction consolidated their businesses. Therefore, the bid that should have gone out eight months ago is now on hold and is almost completed. They have given us notice that they’re looking for 40 workover rigs in Ecuador quickly. There is a couple of other project they’re talking about. So it is just a matter of the oil company that we do majority of the work for is going through reorganization. The bids will come. They have been giving us short terms bids on the meantime.

Bryan Claggett - Canaccord Genuity

Okay. This other question on Brazil -- I think Matt mentioned a while ago -- if you can't get good work for these -- not the big heli-rigs, but the other ones, can you move them? Can you patch them up and move them to Colombia or other places where the work is there? Or is it not profitable, or too expensive, or some combination of all of that?

Walter Dawson

No, what we try to do is get a project that we can put them on the customer will at least help us pay the move because it is quite expensive and it is hard on our cash supply. To move those rigs to Colombia, we’re just trying to get out of the small rig business in Colombia so are --

Bryan Claggett - Canaccord Genuity

Those are smaller rigs?

Walter Dawson

Other market gets their smaller rigs correct.

Bryan Claggett - Canaccord Genuity

Okay. Obviously, you would rather put it to work in Brazil if you possibly can.

Walter Dawson

Absolutely, right today we have a project for customer in Colombia that for rig 120 fits the bill, so I said bid it. And we will figure out if we get the bid, how we move it.

Bryan Claggett - Canaccord Genuity

Okay. Thanks, gentlemen.

Walter Dawson

Thank you.

Operator

Thank you. The following question is from Greg Colman of National Bank Financial. Please go head.

Greg Colman - National Bank Financial

All my questions have been answered. Thanks very much.

Operator

Thank you. The following question is from Dennis Beaudet of GGIF. Please go ahead.

Dennis Beaudet - GGIF

Boy, Walter, you'll be glad when you can put the Tylenol away. I'm sure this has been extremely stressful for you guys, I'm sure, over the last year or so. But the thing seems to be culminating with this major transaction. And trust that going forward, we will certainly see the benefits of that as shareholders. I was wondering about CYA. I read in your MD&A that you settled for $12.5 million and another $500,000 of expense, I guess, relating to that settlement of $12 million. And you indicated that -- I don't know if that was prerequisite with Credit Suisse, or was it still current post-transaction -- but you indicated you will be paid over a ten-month period, and then it would be applied to debt. Is that still in the works, that the actual settlement of $12 million over the next 10 months would be applied to debt?

Matt Moorman

Yes. We need to reduce the debt because when you look at our go forward entity the multiple through debt is still out of range, and we are working on that.

Dennis Beaudet - GGIF

So, with them, then, is that going to be a pro-rated $1.2 million a month? Or has it sort of in lumps through the next few months?

Matt Moorman

There is been a $1 million deposit of which there is small withholding tax sending money out of Ecuador. The next payment is to rate after the first year towards the end January due to the Petroamazonas's balance sheet. It will be sale of oil, and it should be in the tune of $5.5 million and then the payments are prorated from their own.

Dennis Beaudet - GGIF

So just to confirm, you said the next payment toward the end of January will be sort of a lump-sum $5.5 million?

Matt Moorman

Correct.

Dennis Beaudet - GGIF

Well, that's good. Very good. I think that's important for investors to realize, as well, because I know you want to keep pushing that $205 million down as far as you can get. Would you be looking at this, I guess, Matt -- are you able to book this into your current view of assets in terms of this repayment schedule? Was it that firmed up, in terms of a forward view of your liquidity? Or I guess on a scale of 1 to 10, how strong do you think the collection of the $12 million is? Is it a slam-dunk $12 million, or I guess 10 out of 10? Or is there still some risk?

Matt Moorman

Both Walter and I can speak to the quality of the contract, there is been a sizable negotiation and a commitment. There is a document that prescribes the payment as well to just elute it to so we feel very confident that there is some teeth behind it, and that there won’t be another misfortune around collection. This effort was sizable effort by the company to get this negotiated and papered up. So, I think we’re feeling very strong and this arrangement will succeed in collecting the 12.5 million.

Dennis Beaudet - GGIF

Okay. And is there provision -- like, I know some of these things are off-topic, but just the question would be I know you folks are looking to do some credit facility restructure and things, and so you brought everything forward for one reason or another in your current state. Would you have provision, or are you looking for provision in this new facility, for early payment? In other words, if you do happen to liquidate a rig or two of the heli-rigs -- heli-rigs, that's a good term for them -- those rigs. If you happen to be able to liquidate those, would you be able to apply that to your long-term debt?

Matt Moorman

It’s a little premature because we’re not in negotiations on the restructuring but it is the plan.

Dennis Beaudet - GGIF

Okay. So, yes, I hear you. But all things being equal, that's what you would like to have as a provision is that, look, if we can apply this -- any extra capital that we get into our debt, please help us to facilitate that, right? Rather than --.

Matt Moorman

I think the bank and us would be happy with that.

Dennis Beaudet - GGIF

Yes. I agree. I'm sure, you know? Okay. So I guess, then, you mentioned as well, Matt, that you had from the continuing operations portion $16 million of cash flow? I don't know if it's cash flow you were looking at here. And then it was minus $3 million, I think, for the discontinued operations; so it seems to me about a net of $13 million. Is that cash flow from operations?

Matt Moorman

Those cash from operations that after funds grow and after adjustments for working capital.

Dennis Beaudet - GGIF

Would that -- I mean, this might sound like a crazy question, but was that including any of the $15.3 million, or was that after the quarter?

Matt Moorman

That was from continuing -- that's from continuing operations where we really indentify the funds growth number, it’s in the financial statements and if you go to the cash flow statement it comes out of continuing operations so it's, so it's a segregated value from just the South American business and we've had to identify. We're identifying this separately that's not the number that came out of our aggregate business but it is the segregated continuing ops number, the cash from operations as you rightly pointed out from discontinued ops was minus 3.5 million, so you bring the two of them together and it was 13 million. So that the main driver of that was a fairly strong improvement in our working capital in the quarter.

Dennis Beaudet - GGIF

Okay. And basically, what would be right today? I don't know if you're at liberty to answer this, but what would be your cash on hand at this point in time, I guess, in the Company?

Matt Moorman

Well, the cash on hand is at September 30th, the best number I have, it moves fairly fluid all the time, but as you can see from our financial statements at September 30th we had roughly 3.5 in available cash and then we had another 6.8 million of restricted cash and that's the value at September 30th. They wouldn't necessarily be a whole lot different today than they were at the end of the quarter.

Dennis Beaudet - GGIF

All right. So the other $7.3 million I know is contingent upon some things. And once transaction closes, do you have any plans for that? Is that just going to go into your working capital to fund continuing operations? Or do you feel comfortable that that $7.7 million could be allocated to further reduction of debt as you do this new facility?

Walter Dawson

I think it's probably a combination of bit of both, but as we've been saying throughout the calls, being able to find cash that will go down to reduce our debt is always a primary objective of our plans at the moment.

Dennis Beaudet - GGIF

Right. Okay. And so just one last question. In terms of what you would be looking at in terms of a facility, would you be looking to roll in your revolver into that? Or would you be looking at kind of maintaining -- well, yes; would you be looking just to basically annihilate total debt? Or would you be looking at trying to create a revolver, and roll the current revolver into one long-term debt facility, and then have a separate revolver with the lending institution? Are you at liberty to talk about that at all?

Walter Dawson

Not at this time, we prefer to deal with the bank, the bank will have certain requests, so for us to talk about it would be not good for anybody.

Operator

Thank you, (Operator Instructions). The following question is from Andrés Baez of WIM. Please go ahead,

Andrés Baez - LW Investment Management

Yes. I'm not clear on the $7.7 million from Maurel & Prom. Are those earmarked to pay down debt, or will those be used for working capital?

Matt Moorman

The 7.7 remaining from M&P will come in I think as our discussions go with the bank, as I said we would like to earmark those funds to reduce debt, as we're moving through this program that is our primary objective. If there is a commanding need for working capital we'll work with the bank on that but it's kind of a joint discussion, I don't think it's as we see that show up, we'll work with them to use it in the most optimal way but as we've been saying reducing debt is the prime objective and that we, if we can find a way to do that well that's what we use the proceeds for.

Operator

There're no further questions registered at this time, I'd like to turn the meeting back over to Mr. Dawson.

Walter Dawson

Well, thank you everybody for attending today, good questions, I wish I could be more open, we are in a process that deserves our attention and look forward to some shinier news in the next quarter. Merry Christmas.

Operator

Thank you, the conference has now ended, please disconnect your lines at this time, we thank you for your participation.

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