CALGARY, Aug. 8, 2012 /CNW/ - Western Energy Services Corp.
("Western" or the "Company") is pleased to release its second
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 and six months ended June 30, 2012 and 2011 will
be available on SEDAR at www.sedar.com. All amounts are
denominated in Canadian dollars (CDN$) unless otherwise identified.
Highlights: -- Revenue totalled $44.8 million in the second quarter
of 2012, a $14.5 million increase (or 48%) over the same period in
the prior year due to an increased drilling rig fleet and improved
day rates in Canada which was partially offset by lower activity in
Canada; -- Second quarter EBITDA increased by $0.9 million (or 10%)
to $9.4 million in 2012 (21% of consolidated revenues), as compared
to $8.5 million in 2011 (28% of consolidated revenues). The
increase in EBITDA is due to Western's growth in the contract
drilling segment, however the decrease as a percentage of revenue
is mainly due to higher overhead costs required to support the
Company's growth and maintenance costs, for items such as budgeted
recertifications and discretionary rig painting, that were planned
for the second quarter to take advantage of downtime during spring
breakup to help minimize revenue downtime in the future. EBITDA as
a percentage of revenue, after normalizing for $2.3 million in
discretionary rig painting that was incurred in the period, would
have been approximately 26%; -- Net income totalled $0.8 million
($0.01 per share) in the second quarter of 2012, a decrease of $3.4
million as compared to net income of $4.2 million ($0.08 per share)
in the same period of the prior year. The decrease in net income is
mainly due to increased finance costs of $2.7 million, as a result
of Western's senior unsecured notes issuance in January 2012;
increased depreciation expense of $2.1 million, as a result of an
increase in drilling rig operating days; and increased income taxes
of $2.4 million due to a recovery in the prior year relating to tax
planning associated with the acquisition of Stoneham Drilling
Trust. These factors were partially offset by reduced acquisition
costs as $2.6 million was incurred in the prior year relating to
the acquisition of Stoneham Drilling Trust; -- In Canada,
utilization per operating day in the contract drilling segment
averaged 27% in the second quarter as compared to the CAODC
industry average of 21%; -- In the United States, utilization per
operating day in the contract drilling segment averaged 71% in the
second quarter; -- The Company's well servicing segment worked a
total of 844 service hours in the second quarter of 2012, for an
average utilization of 22%; -- During the second quarter of 2012,
the Company extended the maturity on its $125.0 million revolving
credit facility by one year to June 7, 2015. Selected Financial
Information (stated in thousands, except share and per share
amounts) Three months ended June 30 Six months ended June 30
Financial Highlights 2012 2011 Change 2012 2011 Change Revenue
44,819 30,340 48% 155,706 80,433 94% Gross Margin (1) 14,108 11,274
25% 64,321 32,662 97% Gross Margin as a percentage of revenue 31%
37% (16%) 41% 41% 0% EBITDA(1) 9,364 8,533 10% 53,606 27,459 95%
EBITDA as a percentage of revenue 21% 28% (25%) 34% 34% 0% Cash
flow from operating activities 58,930 21,026 180% 84,647 30,641
176% Capital expenditures 39,602 14,667 170% 76,005 29,606 157% Net
income 827 4,193 (80%) 23,835 15,537 53% - basic net income per
share(2) 0.01 0.08 (88%) 0.41 0.35 17% - diluted net income per
share(2) 0.01 0.08 (88%) 0.39 0.33 18% Weighted average number of
shares - basic(2) 58,533,287 51,010,095 15% 58,533,287 44,541,870
31% - diluted (2) 60,429,663 53,028,369 14% 60,612,851 46,533,545
30% Outstanding common shares as at period end 58,533,287
58,533,287 0% 58,533,287 58,533,287 0% (1) See financial measures
reconciliations. (2) Prior year amounts adjusted to reflect the
20:1 share consolidation completed on June 22, 2011. Financial June
June Change Dec 31, Change Position 30, 30, 2011 at (stated 2012
2011 in thousands) Working 65,582 23,384 180% 39,874 64% capital
Property 536,579 432,980 24% 473,930 13% and equipment Total
699,356 543,117 29% 619,645 13% assets Long term 171,764 116,186
48% 108,039 59% debt Three months ended June 30 Six months ended
June 30 Operating Highlights 2012 2011 Change 2012 2011 Change
Contract Drilling Canadian Operations: Contract drilling rig fleet:
- Average 41 28 46% 40 26 54% - End of period 41 40 3% 41 40 3%
Drilling revenue per operating day (CDN$) 33,507 29,124 15% 34,117
28,678 19% Drilling rig operating days(1) 998 1,011 (1%) 3,873
2,774 40% Drilling rig utilization per revenue day(2) 30% 44% (32%)
60% 67% (10%) Drilling rig utilization rate per operating day(1)
27% 40% (33%) 54% 60% (10%) CAODC industry average utilization
rate(1) 21% 24% (13%) 43% 46% (7%) United States Operations:
Contract drilling rig fleet: - Average 5 3 (3) 67% 5 3 (3) 67% -
End of period 5 3 67% 5 3 67% Drilling revenue per operating day
(US$) 33,560 39,970 (16%) 33,566 39,970 (16%) Drilling rig
operating days(1) 322 23 1,300% 677 23 2,843% Drilling (3) (3) rig
utilization per revenue day(2) 89% 66% 35% 94% 66% 42% Drilling (3)
(3) rig utilization per operating day(1) 71% 36% 97% 74% 36% 106%
Well Servicing Well servicing rig fleet: - Average 4 - 100% 3 -
100% - End of period 5 - 100% 5 - 100% Revenue per service hour
(CDN$) 579 - 100% 580 - 100% Total service hours 844 - 100% 1,274 -
100% Service rig utilization rate(4) 22% - 100% 23% - 100% (1)
Drilling rig utilization rate per operating day and drilling rig
operating days are calculated on a spud to rig release basis. (2)
Drilling rig utilization rate per revenue day is calculated based
on operating and move days. (3) Calculated from the date of
acquisition of the United States operations (June 10, 2011). (4)
Service rig utilization rate calculated based on full utilization
being 10 hour days, 365 days per year. Outlook Western currently
has a drilling rig fleet of 47 rigs, with an additional 3
telescopic ELR double drilling rigs under construction.
Western is the sixth largest drilling contractor in Canada with a
fleet of 42 rigs. Currently, Western has five drilling rigs
deployed in the United States. Additionally, Western
currently has five well servicing rigs operating in the
Lloydminster area, with an additional five under construction.
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 50% of Western's fleet is currently
under long term take-or-pay contracts with an average remaining
contract life of approximately 1.5 years, which provide a base
level of revenue. These contracts typically generate 250
operating 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 $140 million, which includes
approximately $80 million in expansion capital and $60 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,
four of which have already been commissioned. Of the
remaining three drilling rigs currently under construction, one is
expected to be completed in each of the next three quarters.
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 and early in the first quarter of
2013. Maintenance capital relates to various items such as
rotational equipment, drill pipe, replacement parts and
infrastructure upgrades. In 2012, the price for natural gas has
remained soft, with the AECO 30-day spot rate on average decreasing
by approximately 42%. While the year over year average WTI
crude oil price has remained constant, pricing differentials in
Canada have increased and as such the year over year average
Edmonton Par price has decreased by approximately 7%. The
lower commodity price environment for crude oil and natural gas,
coupled with the uncertain economic environment, due in part to the
European debt crisis, is expected to result in a modest decrease in
drilling activity in the second half of 2012 as compared to the
same period of the prior year. As such, the Company expects
lower utilization in 2012 as compared to the prior year, when
industry utilization reached a five-year high. However, the
Company does not expect significant pricing pressure on day rates
on the deeper rigs in the industry's fleet. Notwithstanding
the softening commodity price environment, Western continues to
believe that additional rig build opportunities in both the
contract drilling and well servicing segments will be
available. Currently, the largest challenges facing the
drilling industry are pricing differentials on Canadian crude oil,
low natural gas prices, and the challenge to attract and retain
skilled labour. The Company believes Western's modern
drilling rig fleet, which has an average life of less than six
years, and corporate culture will provide a distinct advantage in
attracting qualified individuals. Western is of the view,
that its modern ELR rig fleet, strong customer base and solid
reputation will provide a competitive advantage which will enable
the Company to maintain its growth strategy and above industry
average utilization through a period of lower commodity prices and
drilling activity. Initial Dividend Western is pleased to announce
the Board of Directors' intention to implement a dividend policy
that provides for an annual cash dividend of $0.30 per share.
As such, the Board of Directors has declared an initial quarterly
cash dividend of 7.5 cents per share, payable on October 12, 2012,
to shareholders of record at the close of business on September 28,
2012. The dividends will be eligible dividends for Canadian income
tax purposes. Based on Western's strong operating and
financial results to date, our expectations for continued demand
over the next 12-24 months and given our balance sheet strength,
the Board of Directors felt it was appropriate to implement a
quarterly dividend at this time. On a prospective basis, the
declaration of dividends will be determined on a quarter-by-quarter
basis by the Board of Directors. We believe that this sustainable
dividend balances rewarding our shareholders with a significant
dividend payment and the ability to continue to execute our
aggressive growth plans. 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 and amortization, 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 (loss) to Gross Margin, EBITDA and Operating
Earnings: Three months ended June Six months ended June 30 30
(stated in thousands) 2012 2011 2012 2011 Gross Margin 14,108
11,274 64,321 32,662 Add (subtract): Administrative expenses
(5,286) (2,992) (11,872) (5,634) Depreciation - 178 82 372 136
administrative Stock based 364 169 785 295
compensation-administrative EBITDA 9,364 8,533 53,606 27,459
Depreciation - operating (4,941) (2,954) (14,605) (7,737)
Depreciation - (178) (82) (372) (136) administrative Operating
Earnings 4,245 5,497 38,629 19,586 Stock based compensation (116)
(67) (258) (116) - operating Stock based (364) (169) (785) (295)
compensation-administrative Finance costs (3,250) (509) (6,031)
(1,071) Other items 335 (2,335) 304 (1,372) Income taxes (23) 2,333
(8,024) (1,664) (Loss) income from - (557) - 469 discontinued
operations Net income 827 4,193 23,835 15,537 2012 Second 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 August 9, 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 August 23, 2012 by dialing 1-855-859-2056 or 1-416-849-0833,
passcode 12671917. 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 in this Press Release
include, but are not limited to under the heading "Outlook" the
statements "Western's 2012 capital spending is expected to total
approximately $140 million, which includes approximately $80
million in expansion capital and $60 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, four of which
have already been commissioned. Of the remaining three
drilling rigs currently under construction, one is expected to be
completed in each of the next three years. 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 and
early in the first quarter of 2013." and the statements "The lower
commodity price environment for crude oil and natural gas, coupled
with the uncertain economic environment, due in part to the
European debt crisis, is expected to result in a modest decrease in
drilling activity in the second half of 2012 as compared to the
same period of the prior year. As such, the Company expects
lower utilization in 2012 as compared to the prior year, when
industry utilization reached a five year high. However, the
Company does not expect significant pricing pressure on day rates
on the deeper rigs in the industry's fleet. Notwithstanding
the softening commodity price environment, Western continues to
believe that additional rig build opportunities in both the
contract drilling and well servicing segments will be available."
and in addition, under the heading "Initial Dividend" Western
announced the "intention to implement a dividend policy that
provides for an annual cash dividend of $0.30 per share."
These forward-looking statements and information are based on
certain key expectations and assumptions made by Western, including
the assumption that notwithstanding an expectation of lower
utilization for its services such lowered expectations will not be
severe enough to affect Western's ability to complete its currently
planned expansion capital program and to sustain an annual dividend
of $0.30 per share. 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. Tremblay Chief Executive
Officer403.984.5929dtremblay@wesc.caAlex MacAusland President and
COO403.984.5932amacausland@wesc.caJeffrey K. BowersVP Finance and
CFO403.984.5933jbowers@wesc.ca
Copyright
Western Energy Services (TSX:WRG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Western Energy Services (TSX:WRG)
Historical Stock Chart
From Jul 2023 to Jul 2024