CALGARY, May 10, 2012 /CNW/ - Western Energy Services Corp.
("Western" or the "Company") is pleased to release its first
quarter 2012 financial and operating results. Additional
information relating to the Company, including the Company's
financial statements and management's discussion and analysis as at
and for the three months ended March 31, 2012 and 2011 will be
available on SEDAR at www.sedar.com. All amounts are
denominated in Canadian dollars ($CDN) unless otherwise identified.
Highlights: -- Record revenue in the first quarter of 2012 totalled
$110.9 million, a $60.8 million increase (or 121%) over the prior
year due to an increased drilling rig fleet and improved day rates;
-- Record EBITDA in the first quarter of 2012 totalled $44.2
million (40% of revenue), a $25.3 million increase (or 134%) over
the prior year. The increase reflects improved day rates and the
scale achieved through the growth in the contract drilling segment
which had an average rig count of 44 rigs in the first quarter of
2012 as compared to 23 rigs in the same period of the prior year;
-- Net income totalled $23.0 million ($0.39 per share) in the first
quarter of 2012, an increase of 103% as compared to net income of
$11.3 million ($0.30 per share) in the same period of the prior
year; -- In Canada, utilization in the contract drilling segment
averaged 81% in the first quarter as compared to the CAODC industry
average of 65%; -- In the United States, utilization in the
contract drilling segment averaged 78% in the first quarter. Taking
mobilization days into consideration, the Company's rigs operating
in the United States worked 98% of the available days in the
quarter; -- On January 30, 2012 Western completed a private
offering of $175.0 million aggregate principal amount of 7⅞% senior
unsecured notes due January 30, 2019. Selected Financial
Information (stated in thousands, except share and per share
amounts) Three months ended March 31 Financial Highlights 2012 2011
Change Revenue 110,887 50,093 121% Gross Margin (1) 50,213 21,388
135% Gross Margin as a percentage of revenue 45% 43% 5% EBITDA(1)
44,242 18,926 134% EBITDA as a percentage of revenue 40% 38% 5%
Cash flow from operating activities 25,717 9,614 167% Capital
expenditures 36,403 14,939 144% Net income 23,008 11,344 103% -
basic net income per 0.39 0.30 30% share(2) - diluted net income
0.38 0.28 36% per share(2) Weighted average number of shares -
basic(2) 58,533,287 38,001,777 54% - diluted(2) 60,764,266
39,932,812 52% Outstanding common shares as at period end (2)
58,533,287 47,305,944 24% Financial Mar 31, 2012 Mar 31, Position
at 2011 (stated in thousands) Change Dec31, 2011 Change Working
101,925 74,452 capital 37% 39,874 156% Property and 500,130 203,319
equipment 146% 473,930 6% Total assets 706,061 329,114 115% 619,645
14% Long term 171,570 28,030 debt 512% 108,039 59% (1) See
financial measures reconciliations. (2) Prior year amounts adjusted
to reflect the 20:1 share consolidation completed on June 22, 2011.
Three months ended March 31 Operating Highlights 2012 2011 Change
Contract Drilling Canadian Operations Contract drilling rig fleet:
- Average 39 23 70% - End of period 40 24 67% Drilling revenue per
operating day (CDN$) 34,329 27,988 23% Drilling rig operating
days(1) 2,875 1,790 61% Drilling rig utilization rate(1) 81% 85%
(5%) CAODC industry average utilization rate(1) 65% 67% (3%) United
States Operations Contract drilling rig fleet: - Average 5 - 100% -
End of period 5 - 100% Drilling revenue per operating day (US$)
33,571 - 100% Drilling rig operating days(1) 355 - 100% Drilling
rig utilization rate(1) 78% - 100% Well Servicing Well servicing
rig fleet: - Average 2 - 100% - End of period 2 - 100% Revenue per
service hour (CDN$) 581 - 100% Total service hours 430 - 100%
Service rig utilization rate(2) 28% - 100% (1) Utilization rate
calculated on a spud to rig release basis. (2) Utilization rate
calculated based on full utilization being 10 hour days, 365 days
per year. Outlook Western currently has a drilling rig fleet of 45
rigs, with an additional 5 telescopic ELR double drilling rigs
under construction. Western is the sixth largest drilling
contractor in Canada with a fleet of 40 rigs. Currently,
Western has five drilling rigs deployed in the United States.
As of the second quarter of 2012, Western has commenced operations
of its first five well servicing rigs in the Lloydminster, Alberta
area and has announced the construction of an additional five well
servicing rigs. Western's drilling rig fleet is specifically suited
for the current market which is focused on drilling wells of
increased complexity. In total, approximately 96% of
Western's fleet are ELR rigs with depth ratings greater than 3,000
meters and all of Western's rigs are capable of drilling resource
base horizontal wells. Approximately 56% of Western's fleet
is currently 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 range from 330 to 365 revenue
generating days per year. Western's 2012 capital spending is
expected to total approximately $125 million, which includes
approximately $75 million in expansion capital and $50 million in
maintenance capital. Expansion capital in the contract
drilling segment aggregates to approximately $65 million and mainly
relates to Western's drilling rig build program which includes the
completion of seven telescopic ELR double drilling rigs in 2012,
two of which have already been commissioned. Of the remaining
five drilling rigs currently under construction, one is expected to
be completed in each of the second and third quarters of
2012. Two are anticipated to be commissioned in the fourth
quarter of 2012, and the final drilling rig under construction is
expected to be commissioned in the first quarter of 2013.
Expansion capital in the well servicing segment relates to the
construction of five new internally guyed single service rigs,
which are anticipated to be completed in the latter part of the
fourth quarter of 2012 or early in the first quarter of 2013.
Maintenance capital relates to various items such as rotational
equipment, drill pipe, replacement parts and infrastructure
upgrades. Western believes that with continued strong pricing
environments for oil and natural gas liquids, additional rig build
opportunities in both the contract drilling and well servicing
segments will be available. Drilling activity in Canada and the
United States remained strong in the first quarter of 2012, despite
spring breakup beginning earlier than in the prior year, which
negatively affected Canadian oilfield service activity in the month
of March. Western's utilization rates have consistently
been above industry average due to the Company's deeper on average
modern rig fleet, strong customer base and solid reputation.
Following spring breakup, Western expects its drilling rig fleet to
fully restart operations. Currently, the largest challenges
facing the drilling industry are the growth of the industry's
drilling rig fleet, as contract drillers continue to expand their
fleets, depressed natural gas prices, and the challenge to attract
and retain skilled labour. Despite the weakness in natural
gas prices, Western believes that customers targeting oil and
liquids-rich natural gas wells will continue to drive demand in
2012 and lead to levels of utilization consistent with 2011.
Currently Western's fleet is fully crewed with qualified personnel
and three crews on every rig. 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 certain measures in
this press release which do not have any standardized meaning as
prescribed by International Financial Reporting Standards
("IFRS"). These measures may not be comparable to similar
measures presented by other reporting issuers. These measures
have been described and presented in this press release in order to
provide shareholders and potential investors with additional
information regarding the Company. Gross Margin Management believes
that in addition to net income, Gross Margin is a useful
supplemental measure as it provides an indication of the results
generated by Western's principal operating activities prior to
considering administrative expenses, how those activities are
financed, the impact of foreign exchange, how the results are
taxed, how funds are invested, and how non-cash charges and
one-time gains or losses affect results. EBITDA Management believes
that in addition to net income, 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
the Company's principal operating segments similar to Gross Margin
but also factors in the cash administrative expenses incurred in
the period. Operating Earnings Management believes that in addition
to net income, 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 under IFRS
as disclosed in the condensed consolidated statements of operations
and comprehensive income to Gross Margin, EBITDA and Operating
Earnings: Three months Three months ended ended (stated in
thousands) Mar 31, 2012 Mar 31, 2011 Gross Margin 50,213 21,388 Add
(subtract): Administrative expenses (6,586) (2,642) Depreciation -
administrative 194 54 Stock based compensation - 421 126
administrative EBITDA 44,242 18,926 Less: Depreciation - operating
(9,664) (4,783) Depreciation - administrative (194) (54) Operating
Earnings 34,384 14,089 Less: Stock based compensation - (142) (49)
operating Stock based compensation - (421) (126) administrative
Finance costs (2,781) (562) Other items (31) 963 Income taxes
(8,001) (3,997) Income from discontinued - 1,026 operations Net
income 23,008 11,344 2012 First 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 May 10, 2012.
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 14 days. An archived
recording of the conference call will also be available
approximately one hour after the completion of the call until May
24, 2012 by dialing 1-855-859-2056 or 1-416-849-0833, passcode
73325185. Forward-Looking Statements and Information: This press
release contains forward-looking statements and forward-looking
information within the meaning of applicable securities laws.
All statements other than statements of historical fact contained
in this press release may be forward-looking statements and
forward-looking information. In particular, forward-looking
information and statements in this press release include, but are
not limited to, under the section headed Outlook the statement that
"of the remaining five drilling rigs currently under construction
one is expected to be completed in each of the second and third
quarters of 2012. Two are anticipated to be commissioned in
the fourth quarter of 2012, and the final drilling rig under
construction is expected to be commissioned in the first quarter of
2013." and "Despite the weakness in natural gas prices, Western
believes that customers targeting oil and liquids-rich natural gas
wells will continue to drive demand in 2012 and lead to levels
consistent with 2011". The foregoing assumes that oil pricing will
continue to be strong enough to support ongoing high demand for
drilling services and to support customer entering into long term
contracts for new rigs being built. There is a risk that oil prices
or other factors could reduce the demand for drilling services and
the viability of customers of Western entering into long term
contract for any newly built drilling rigs. These forward-looking
statements and information are based on certain key expectations
and assumptions made by Western, including the assumption that the
demand for Western's drilling rigs will remain strong through 2012
and that such demand and financial performance will not affect
expansion capital. Although Western believes that the
expectations and assumptions on which such forward-looking
statements and information are based are reasonable, undue reliance
should not be placed on the forward-looking statements and
information as Western cannot give any assurance that they will
prove to be correct. Since forward-looking statements and
information address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include, but are
not limited to, general economic, market and business
conditions. Readers are cautioned that the foregoing list of
risks and uncertainties is not exhaustive. Additional information
on these and other risk factors that could affect Western's
operations and financial results are included in Western's annual
information form and the other disclosure documents filed by
Western with securities regulatory authorities which may be
accessed through the SEDAR website at www.sedar.com. The
forward-looking statements and information contained in this press
release are made as of the date hereof and Western does not
undertake any obligation to update publicly or revise and
forward-looking statements and information, whether as a result of
new information, future events or otherwise, unless so required by
applicable securities laws. Western Energy Services Corp. CONTACT:
Dale E. TremblayChief Executive
Officer403.984.5929dtremblay@wesc.caAlex MacAuslandPresident and
COO403.984.5932amacausland@wesc.caJeffrey K. BowersVP Finance and
CFO403.984.5933jbowers@wesc.ca
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