CALGARY, Nov. 10, 2011 /CNW/ - Western Energy Services Corp.
("Western" or the "Company") is pleased to release its third
quarter 2011 financial and operating results prepared under
International Financial Reporting Standards ("IFRS").
Effective January 1, 2011, Western began reporting its financial
results under IFRS. Prior year comparative amounts have been
changed to reflect results as if Western had always prepared its
financial results using IFRS. Additional information relating
to the Company, including the Company's financial statements and
management's discussion and analysis as at and for the three and
nine months ended September 30, 2011 will be available on SEDAR at
www.sedar.com. Highlights: -- Revenue in the third quarter of 2011
totalled $80.8 million, a $64.3 million increase (or 390%) over the
prior year; -- EBITDA totalled $30.4 million (38% of revenue) in
the third quarter of 2011, a $25.7 million increase (or 546%) over
the prior year. The increase reflects the growth in the contract
drilling segment where the rig count increased by 180% to 42 rigs
in the quarter from 15 in the prior year; -- Net income from
continuing operations, before considering gains on business
acquisitions, increased by $12.8 million (or 1,120%) to $13.9
million ($0.24 per share) in the third quarter of 2011 as compared
to $1.1 million in the same period of the prior year ($0.04 per
share); -- Utilization in the contract drilling segment averaged
72% in Canada as compared to the CAODC industry average of 57%. In
the United States, utilization in the third quarter averaged 65%;
-- For the three months ended September 30, 2011 capital
expenditures totalled $24.9 million, the majority of which related
to the contract drilling segment, which spent $23.7 million. These
expenditures mainly relate to Western's drilling rig build program,
which spent $13.2 million in the third quarter, while an additional
$0.9 million was spent on the construction of Western's five next
generation well servicing rigs, the first of which is expected to
begin operations in the fourth quarter. The remaining capital
spending related to ancillary drilling equipment; -- On September
13, 2011, Western sold its wholly owned subsidiary StimSol Canada
Inc. ("StimSol") for gross proceeds of approximately $24.0 million,
which were used to reduce Western's bank indebtedness. This
transaction resulted in a gain of approximately $10.7 million in
the third quarter, which was recorded in discontinued operations in
the condensed consolidated financial statements. Selected Financial
Information (stated in thousands of Canadian dollars, except share
and per share amounts) Three Three Nine Nine months months months
months ended ended ended ended Financial Sept 30, Sept 30, Sept 30,
Sept 30, Highlights 2011 2010 2011 2010 Revenue 80,786 16,485
161,219 29,427 EBITDA(1) 30,392 4,703 57,851 7,143 EBITDA as a 38%
29% 36% 24% percentage of revenue Cash flow 3,391 3,452 34,031
7,435 from operating activities Capital 24,927 5,120 54,533 7,456
expenditures Net income 13,889 9,858 (2) 28,959 20,572 (2) from
continuing operations - basic net 0.24 0.37 0.59 0.99 income per
share - diluted 0.23 0.36 0.56 0.91 net income per share Net income
24,893 (3) 10,035 (2) 40,432 (3) 20,851 (2) - basic net 0.43 0.38
0.82 1.00 income per share - diluted 0.41 0.36 0.79 0.92 net income
per share Weighted average number of shares - basic 58,533,287
26,377,458 49,256,925 20,872,089 - diluted 60,618,480 27,621,563
51,294,610 22,565,533 Outstanding 58,533,287 26,377,458 58,533,287
26,377,458 common shares as at period end (1) See financial
measures reconciliations. (2) Includes an $8.7 million and $19.8
million non-recurring gain on acquisitions for the three and nine
months ended September 30, 2010, respectively. (3) Includes a $10.7
million non-recurring gain on the sale of StimSol Canada Inc.
(stated in thousands of Canadian dollars, except operational
amounts) Three Three Nine months months months Nine months ended
ended ended ended Operating Sept30, Sept 30, Sept 30, Sept 30,
Highlights 2011 2010 2011 2010 Contract Drilling CanadianOperations
Contract drilling rig fleet: - Average 39 14 30 12 (1) - End of 37
15 37 15 period Drilling revenue 28,016 23,165 28,215 23,686 per
operation day Drilling rig 72% 61% 66% 54% (1) utilization rate (2)
CAODC industry 57% 40% 50% 38% (1) average utilization rate (2)
United StatesOperations Contract drilling rig fleet: - Average 4 -
4 - - End of 5 - 5 - period Drilling revenue 35,256 - 35,570 - per
operation day Drilling rig 65% - 61% (3) - utilization rate (2)
Financial Position at Sept 30, Dec 31, Sept 2011 2010 30,2010
Working capital 36,363 13,156 4,884 Property and 448,203 188,355
118,289 equipment Total assets 584,823 264,108 143,399 Long term
debt 108,057 46,054 20,636 (1) Calculated from the date of
acquisition of the Contract Drilling segment (March 18, 2010). (2)
Utilization rate calculated on a spud to rig release basis. (3)
Calculated from the date of acquisition of the United States
operations (June 10, 2011). Outlook Western has a drilling rig
fleet of 42 rigs, with an additional 3 rigs under
construction. Currently, Western is the sixth largest
drilling contractor in Canada with a fleet of 37 drilling
rigs. As a result of the acquisition of Stoneham Drilling
Trust on June 10, 2011, Western has entered the United States
market with the intention of building a strong presence, initially
in the Williston basin of North Dakota. Currently, Western
has five drilling rigs deployed in the United States. Western's
drilling rig fleet is specifically suited for the current market
which is moving towards drilling wells of increased
complexity. In total, approximately 95% of Western's fleet
are Efficient Long Reach ("ELR") rigs with depth ratings greater
than 3,000 meters and all of Western's rigs are capable of drilling
horizontal wells. Currently, approximately 60% of Western's
fleet is under long term take-or-pay contracts, which provide a
base level of revenue. These contracts typically generate 250
utilization days per year in Canada, as the annual spring breakup
restricts activity during the second quarter, while in the United
States these contracts typically generate approximately 300
utilization days per year. Capital expenditures are expected to be
approximately $95.0 million for 2011, of which $54.5 million was
incurred during the first nine months of the year. An
additional $17.0 million in capital expenditures is expected to be
carried forward into 2012 as projects, such as our rig build
program, are completed. Of the three drilling rigs currently
under construction, one is expected to be completed in the fourth
quarter of 2011, with the remaining two expected to be delivered in
the first quarter of 2012. Long term take-or-pay contracts
for all three rig builds have been signed. Western believes
that with continued strong pricing environments for oil and natural
gas liquids, additional rig build opportunities will be
available. Additionally, Western has commenced construction
of five next generation well servicing rigs, the first of which is
expected to begin operations in the fourth quarter of 2011 and the
remainder are expected to commence operations later in the fourth
quarter of 2011 or during the first quarter of 2012. This
moves Western towards its stated objective of entering the well
servicing industry in Canada. Drilling activity in Canada and the
United States has been substantially higher in 2011 as compared to
the last number of years. Furthermore, Western's utilization
rates have consistently been above industry average due to the
Company's modern rig fleet, strong customer base and solid
reputation. Western believes that customers targeting oil and
liquids-rich natural gas wells will continue to drive demand and
lead to high levels of utilization. Additionally, strong
commodity market conditions have provided some of Western's
customers with improved cash flow allowing them to increase their
drilling programs. The increased demand for drilling rig
services in the market has led to improved day rates, which are
expected to hold through the winter of 2012. Currently the industry
is experiencing a shortage of qualified people; however Western's
fleet is fully crewed with qualified personnel. The Company
believes Western's modern fleet and corporate culture will provide
a distinct advantage in attracting qualified individuals.
Western has a proven track record for delivering high quality
equipment and well trained, highly skilled crews to its customers
who rely on the Company to drill increasingly complex long reach
horizontal wells. As such, Western is well positioned for
future growth. Financial Measures Reconciliations Western uses the
terms EBITDA and Operating Earnings in this press release which do
not have any standardized meaning as prescribed by IFRS.
These measures may not be comparable to similar measures presented
by other reporting issuers. EBITDA Management believes that in
addition to net income from continuing operations, earnings from
continuing operations before interest and finance costs, taxes,
depreciation, other non-cash items and one-time gains and losses
("EBITDA") as derived from information reported in the condensed
consolidated statements of operations and comprehensive income is a
useful supplemental measure as it provides an indication of the
results generated by Western's principal business activities prior
to consideration of how those activities are financed, the impact
of foreign exchange, how the results are taxed, how funds are
invested, how non-cash charges and one-time gains or losses affect
results. Operating Earnings Management believes that in addition to
net income from continuing operations, operating earnings is a
useful supplemental measure as it provides an indication of the
results generated by the Company's principal operating segments
similar to EBITDA but also factors in the depreciation expense
charged in the period. The following table provides a
reconciliation of net income from continuing operations under IFRS
as disclosed in the condensed consolidated statements of operations
and comprehensive income to EBITDA and Operating Earnings. (stated
in Three months Three months Nine months Nine months thousands of
ended ended ended ended Canadian Sept 30, 2011 Sept 30, Sept 30,
Sept 30, dollars) 2010 2011 2010 EBITDA 30,392 4,703 57,851 7,143
Less: Depreciation - 7,792 2,132 15,529 3,921 operating
Depreciation - 144 43 281 77 administrative Operating 22,456 2,528
42,041 3,145 earnings Less: Stock based 66 24 182 50 compensation -
operating Stock based 336 121 630 250 compensation - administrative
Finance costs 1,333 219 2,404 525 Other items 779 114 2,149 223
Gain on - (8,720) - (19,814) business acquisitions Income taxes
6,053 912 7,717 1,339 Net income from 13,889 9,858 28,959 20,572
continuing operations 2011 Third Quarter Results Conference Call
and Webcast Western has scheduled a conference call and webcast to
begin promptly at 12:00 p.m. MST (2:00 p.m. EST) on November 10,
2011. The conference call dial-in number is 1-888-231-8191. A live
webcast of the conference call will be accessible on Western's
website at www.wesc.ca by selecting "Investor Relations", then
"Webcasts". Shortly after the live webcast, an archived
version will be available for approximately 30 days. An archived
recording of the conference call will also be available
approximately one hour after the completion of the call until
November 24, 2011 by dialling 1-855-859-2056 or 1-416-849-0833,
passcode 22307775. Western Energy Services
Corp. CONTACT: Dale E. Tremblay Alex MacAusland Jeffrey
K.BowersChief Executive President and COO VP Finance andOfficer
CFO403.984.5929 403.984.5932 403.984.5933dtremblay@wesc.ca
amacausland@wesc.ca jbowers@wesc.ca
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