CALGARY, AB, May 5, 2022 /CNW/ - Western Energy Services Corp.
("Western" or the "Company") (TSX: WRG) announces the release of
its first quarter 2022 financial and operating results. Additional
information relating to the Company, including the Company's
financial statements and management's discussion and analysis as at
March 31, 2022 and for the three
months ended March 31, 2022 and 2021
will be available on SEDAR at www.sedar.com. Non-International
Financial Reporting Standards ("Non-IFRS") measures and ratios,
such as Adjusted EBITDA and Adjusted EBITDA as a percentage of
revenue, as well as abbreviations and definitions for standard
industry terms are defined later in this press release. All
amounts are denominated in Canadian dollars (CDN$) unless otherwise
identified.
First Quarter 2022 Operating Results:
- First quarter revenue increased by $13.5
million or 37%, to $50.5
million in 2022 as compared to $37.0
million in the first quarter of 2021. In the contract
drilling segment, revenue totalled $31.0
million in the first quarter of 2022, an increase of
$10.7 million or 53%, compared to
$20.3 million in the first quarter of
2021. In the production services segment, revenue was $19.6 million for the three months ended
March 31, 2022, as compared to
$16.9 million in the same period of
the prior year, an increase of $2.7
million or 16%. While the ongoing COVID-19 pandemic
continued to impact the contract drilling and production services
segments in the first quarter of 2022, revenue was positively
impacted by improved demand compared to 2021 as described
below:
-
- In Canada, drilling rig
utilization averaged 32% in the first quarter of 2022, compared to
22% in the first quarter of 2021. The increase in activity in the
first quarter of 2022 was mainly attributable to the higher
commodity prices resulting from the war in Ukraine, the ongoing COVID-19 vaccination
rollouts and the lifting of government restrictions which re-opened
the economy, compared to the first quarter of 2021 when the
COVID-19 pandemic reduced demand across the industry. The Canadian
Association of Energy Contractors ("CAOEC") industry average
utilization of 39%1 for the first quarter of 2022
represented an increase of 1,200 basis points ("bps") compared to
the CAOEC industry average of 27% in the first quarter of 2021.
Western's market share, represented by the Company's Operating Days
as a percentage of the CAOEC's total Operating Days in the Western
Canadian Sedimentary Basin ("WCSB"), decreased to 6.7% for the
first quarter of 2022, as compared to 8.2% in the same period of
2021, as a result of limited capital spent on rig upgrades during
the economic downturn. Revenue per Operating Day averaged
$26,390 in the first quarter of 2022,
an increase of 28% compared to the same period of the prior year,
mainly due to improved market rates, as well as the 2021 CAOEC wage
increase that is passed through to the customer;
- In the United States ("US"),
drilling rig utilization averaged 14% in the first quarter of 2022,
compared to 5% in the first quarter of 2021, with Operating Days
improving from 38 days in 2021 to 100 days in 2022. Revenue per
Operating Day for the first quarter of 2022 averaged US$19,134, a 31% increase compared to
US$14,574 in the same period of the
prior year, mainly due to improved market conditions; and
- In Canada, service rig
utilization of 49% in the first quarter of 2022 was lower than 51%
in the same period of the prior year, mainly due to field crew
shortages across the industry and very cold weather to start the
quarter. Revenue per Service Hour averaged $876 in the first quarter of 2022 and was 20%
higher than the first quarter of 2021, as a result of improved
market conditions which led to higher hourly rates, as well as
increased labour and fuel charges passed through to the customer.
Higher pricing led to production services revenue totaling
$19.6 million in the first quarter of
2022, an increase of $2.7 million or
16%, as compared to the same period in the prior year.
- Administrative expenses increased by $0.2 million or 6%, to $3.4 million in the first quarter of 2022, as
compared to $3.2 million in the first
quarter of 2021, due to reduced receipts related to the
Canada Emergency Wage Subsidy
("CEWS") from the Government of Canada as the program ended October 2021.
- The Company incurred a net loss of $3.8
million in the first quarter of 2022 ($0.04 per basic common share) as compared to a
net loss of $6.4 million in the same
period in 2021 ($0.07 per basic
common share). The change can mainly be attributed to a
$1.6 million decrease in income tax
recovery, offset partially by a $3.5
million increase in Adjusted EBITDA, and a $0.9 million decrease in depreciation expense due
to certain assets being fully depreciated in the period.
- First quarter Adjusted EBITDA of $10.4
million in 2022 was $3.5
million, or 51%, higher compared to $6.9 million in the first quarter of 2021.
Adjusted EBITDA was higher due to improved activity in Canada and the US, offset partially by a
decrease of $3.3 million as no CEWS
was received since the program ended, compared to the same period
in 2021.
- First quarter additions to property and equipment of
$4.1 million in 2022 compared to
$0.9 million incurred in the first
quarter of 2021 and consisted of $2.5
million of expansion capital and $1.6
million of maintenance capital.
- As previously announced on December 30,
2021, the Company deferred the interest payment on its
second lien secured term loan facility (the "Second Lien Facility")
originally due on January 4, 2022
until February 28, 2022 which was
further deferred to March 21, 2022
and then paid "in kind" ("PIK") and added to the outstanding
principal loan amount.
- On March 22, 2022, Western
announced that it had entered into agreements to restructure a
portion of its outstanding debt and raise new capital (the
"Restructuring Transaction"). Pursuant to the Restructuring
Transaction, Western entered into a debt restructuring agreement
(the "Debt Restructuring Agreement") with Alberta Investment
Management Corporation ("AIMCo"), the lender under its Second Lien
Facility. Under the Debt Restructuring Agreement, subject to the
completion of the other components of the Restructuring Transaction
and the satisfaction of certain other conditions, the Company will
convert $100.0 million of the
principal amount outstanding under the Second Lien Facility into
common shares at a conversion price of $0.05 per share (the "Debt Exchange"). On
completion of the Debt Exchange, the Second Lien Facility will be
amended to, among other things, extend its maturity date from
January 31, 2023 to the fourth
anniversary of the closing date of the Debt Exchange.
-
- As a condition to the completion of the Debt Exchange, the
Company is conducting a rights offering of common shares to all of
its shareholders to raise proceeds of $31.5
million (the "Rights Offering"). Under the Rights Offering,
shareholders of record as of 5:00
p.m. on April 19, 2022 (the
"Record Date"), received one right (a "Right") for each common
share held on the Record Date, to purchase 21.4488803374 additional
common shares at a subscription price of $0.016 per share until 5:00 p.m. (Toronto time) on May
13, 2022. The Company filed a short form prospectus dated
April 11, 2022 (the
"Prospectus") with respect to the Rights Offering with the
securities regulators in the provinces of Canada, and concurrently filed an amendment to
its registration statement on Form F-7/A with the United States
Securities and Exchange Commission in the
United States. G2S2 Capital Inc. ("G2S2"), G2S2's subsidiary
Armco Alberta Inc. ("Armco"), Ronald P.
Mathison and Matco Investments Ltd. ("Matco"), currently the
Company's largest shareholders, have entered into a standby
purchase agreement with the Company wherein they have agreed to
exercise in full their basic subscription privilege in the Rights
Offering and, in the case of each of Armco and Matco, acquire any
shares not subscribed for by other shareholders under the Rights
Offering. The proceeds of the Rights Offering will be applied to
reduce the principal amount outstanding under the Second Lien
Facility by $10.0 million, with the
remaining net proceeds to be used for upgrades to the Company's rig
fleet.
The Rights were distributed to the holders of the Company's common
shares as of the Record Date and began trading on the Toronto Stock
Exchange under the symbol "WRG.RT" on April
18, 2022. The Rights will cease trading at noon
(Toronto time) on May 13, 2022, in advance of the expiry of the
Rights at 5:00 p.m. (Toronto time) that day.
In total, an aggregate of approximately 3.969 billion common shares
will be issued under the Restructuring Transaction, including 2
billion common shares will be issued to AIMCo upon completion of
the Debt Exchange at a deemed price of $0.05 per share, and approximately 1.969 billion
common shares will be issued to subscribers in the Rights Offering
and, if applicable, to Armco and Matco as standby purchasers, at an
issue price of $0.016 per
share. The Debt Exchange and the Rights Offering are subject
to a number of conditions and are expected to be completed on or
around May 17, 2022.
It is also a condition for completion of the Debt Exchange that the
Company and AIMCo enter into a registration rights agreement (the
"Registration Rights Agreement") and further that the Company,
AIMCo, G2S2, Armco, Matco and Mr. Mathison enter into an investor
rights agreement (the "Investor Rights Agreement"). Pursuant
to the Registration Rights Agreement, AIMCo will be granted the
right to cause the Company to file a prospectus to facilitate the
sale of its common shares in a public offering, or to allow it to
participate in a public offering of common shares by the Company,
in each case subject to certain customary restrictions and
limitations. The Registration Rights Agreement will terminate when
AIMCo and its affiliates or other permitted transferees
beneficially own, in the aggregate, less than 10% of the then
outstanding common shares. Pursuant to the Investor Rights
Agreement, AIMCo will be granted the right to appoint two nominees
for election as directors of the Company for so long as the
shareholding percentage of AIMCo and its affiliates of the
Company's common shares is 30% or greater.
In connection with the Restructuring Transaction, Western has
entered into a commitment letter with two of the lenders under its
senior secured credit agreement to make certain amendments to its
senior secured credit facilities.
Upon completion of the Restructuring Transaction, the principal
amount of the Second Lien Facility is expected to be approximately
$108.5 million and AIMCo is expected
to hold approximately 49.7% of the outstanding common shares in the
capital of the Company.
Completion of the Restructuring Transaction is subject to various
conditions, including completion of definitive amendments to the
Second Lien Facility agreement and the senior secured credit
facility substantially on the terms specified in the Debt
Restructuring Agreement, approval of the Restructuring Transaction
by the Toronto Stock Exchange and completion of the Rights
Offering. Details of the Restructuring Transaction and proposed
amendments to Western's senior credit facilities are contained in
the prospectus filed under Western's SEDAR profile on
www.sedar.com.
1 Source:
CAOEC, monthly Contractor Summary.
|
Selected Financial
Information
|
|
|
|
(stated in
thousands, except share and per share amounts)
|
|
|
|
|
Three months ended
March 31
|
Financial
Highlights
|
2022
|
2021
|
Change
|
Revenue
|
50,475
|
36,969
|
37%
|
Adjusted
EBITDA(1)
|
10,391
|
6,891
|
51%
|
Adjusted EBITDA as a
percentage of revenue(1)
|
21%
|
19%
|
11%
|
Cash flow from
operating activities
|
6,461
|
1,509
|
328%
|
Additions to property
and equipment
|
4,094
|
873
|
369%
|
Net loss
|
(3,834)
|
(6,454)
|
(41%)
|
– basic
and diluted net loss per share
|
(0.04)
|
(0.07)
|
(43%)
|
Weighted average number
of shares
|
|
|
|
– basic
and diluted
|
91,736,391
|
91,184,713
|
1%
|
Outstanding common
shares as at period end
|
91,788,008
|
91,200,072
|
1%
|
(1)
See "Non-IFRS measures" included in this
press release.
|
|
|
|
|
|
|
Three months ended
March 31
|
Operating
Highlights(2)
|
2022
|
2021
|
Change
|
Contract
Drilling
|
|
|
|
Canadian
Operations:
|
|
|
|
Contract drilling rig
fleet:
|
|
|
|
– Average
active rig count
|
12.0
|
10.6
|
13%
|
– End of
period
|
37(4)
|
49
|
(24%)
|
Operating
Days
|
1,081
|
953
|
13%
|
Revenue per Operating
Day
|
26,390
|
20,561
|
28%
|
Drilling rig
utilization
|
32%
|
22%
|
45%
|
CAOEC industry average
utilization – Operating Days(3)
|
39%
|
27%
|
44%
|
|
|
|
|
United States
Operations:
|
|
|
|
|
|
|
|
Contract drilling rig
fleet:
|
|
|
|
– Average
active rig count
|
1.1
|
0.4
|
175%
|
– End of
period
|
8
|
8
|
-
|
Operating
Days
|
100
|
38
|
163%
|
Revenue per Operating
Day (US$)
|
19,134
|
14,574
|
31%
|
Drilling rig
utilization
|
14%
|
5%
|
180%
|
|
|
|
|
Production
Services
|
|
|
|
Canadian
Operations:
Well servicing rig
fleet:
|
|
|
|
– Average
active rig count
|
31.0
|
31.8
|
(3%)
|
– End of
period
|
63
|
63
|
-
|
Service
Hours
|
20,173
|
20,702
|
(3%)
|
Revenue per Service
Hour
|
876
|
727
|
20%
|
Service rig
utilization
|
49%
|
51%
|
(4%)
|
(2) See "Defined
Terms" included in this press release.
|
(3) Source:
The CAOEC monthly Contractor Summary. The CAOEC industry average is
based on Operating Days divided by total available drilling
days.
|
(4) During the
first quarter of 2022, 12 drilling rigs were deregistered with the
CAOEC.
|
|
Financial Position
at (stated in thousands)
|
March 31,
2022
|
December 31,
2021
|
December 31,
2020
|
Working
capital
|
10,287
(5)
|
2,224
|
15,997
|
Total assets
|
457,226
|
456,003
|
495,625
|
Long term
debt
|
233,321
(6)
|
226,884
|
237,633
|
(5) Working
capital, as presented above, excludes the portion of the Second
Lien Facility that would otherwise be considered long term if not
for the January 31, 2023 maturity date and the expected closing of
the debt restructuring transaction in the second quarter of
2022.
|
(6) As at March
31, 2022, in the condensed consolidated financial statements the
Second Lien Facility is classified as a current liability and not
long term debt due to its maturity of January 31, 2023. Long term
debt stated above is before such classification for better
comparability to December 31, 2021.
|
Business Overview
Western is an energy services company that provides contract
drilling services and production services in Canada and the
United States through its various divisions, subsidiaries,
and first nations joint venture.
Contract Drilling Services
Western operates a fleet of 45 drilling rigs specifically suited
for drilling complex horizontal wells across Canada and the US. Western is currently
the fourth largest drilling contractor in Canada, based on the CAOEC registered drilling
rigs2. In the first quarter of 2022, Western
deregistered 12 drilling rigs with the CAOEC, all of which can be
reactivated at a later date.
Production Services
Production Services provides well servicing and oilfield
equipment rentals in Canada.
Western operates 63 well servicing rigs and is the third largest
well servicing company in Canada
based on CAOEC registered well servicing rigs3. During
the fourth quarter of 2021, the Company sold three well servicing
rigs that operated in the United
States.
Western's contract drilling and well servicing rig fleets
comprise the following:
|
Three months ended
March 31
|
Drilling
rigs
|
|
|
|
|
|
Well servicing
rigs
|
|
2022
|
|
2021
|
|
|
2022
|
2021
|
Rig
class(1)
|
Canada
|
US
|
Total
|
|
Canada
|
US
|
Total
|
|
Mast
type
|
Total
|
Total
|
Cardium
|
11
|
2
|
13
|
|
23
|
2
|
25
|
|
Single
|
30
|
33
|
Montney
|
19
|
-
|
19
|
|
19
|
-
|
19
|
|
Double
|
25
|
25
|
Duvernay
|
7
|
6
|
13
|
|
7
|
6
|
13
|
|
Slant
|
8
|
8
|
Total
|
37
|
8
|
45
|
|
49
|
8
|
57
|
|
|
63
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
See "Defined Terms"
included in this press release.
|
Business Environment
Crude oil and natural gas prices impact the cash flow of
Western's customers, which in turn impacts the demand for Western's
services. The following table summarizes average crude oil and
natural gas prices, as well as average foreign exchange rates, for
the three months ended March 31, 2022
and 2021.
|
|
|
Three months ended
March 31
|
|
2022
|
2021
|
Change
|
Average crude oil
and natural gas prices(1)(2)
|
|
|
|
Crude
Oil
|
|
|
|
West Texas Intermediate
(US$/bbl)
|
94.29
|
57.84
|
63%
|
Western Canadian Select
(CDN$/bbl)
|
101.03
|
57.43
|
76%
|
|
|
|
|
Natural
Gas
|
|
|
|
30 day Spot AECO
(CDN$/mcf)
|
4.94
|
3.24
|
52%
|
|
|
|
|
Average foreign
exchange rates(2)
|
|
|
|
US dollar to Canadian
dollar
|
1.27
|
1.27
|
-
|
|
(1)
See "Abbreviations" included in this
press release. (2)
Source: Sproule March 31, 2022 Price
Forecast, Historical Prices.
|
|
|
|
|
West Texas Intermediate ("WTI") on average improved by 63% for
the three months ended March 31,
2022, compared to the same period in the prior year.
Similarly, pricing on Western Canadian Select ("WCS") crude oil
increased by 76% for the three months ended March 31, 2022, compared to the same period in
the prior year. In the three months ended March 31, 2022, pricing increased due to the war
in Ukraine which caused
significant price volatility, as well as improved demand for crude
oil as vaccine rollouts continued worldwide. Natural gas prices in
Canada also strengthened in the
first quarter of 2022 due to the same factors causing lower
supplies and increased demand, as the 30-day spot AECO price
improved by 52% for the three months ended March 31, 2022, compared to the same period of
the prior year. While commodity prices improved, the US dollar
to the Canadian dollar foreign exchange rate in the first quarter
of 2022 was consistent with the same period of the prior year.
In the United States, industry
activity improved in the first quarter of 2022. As reported by
Baker Hughes Company4, the number of active drilling
rigs in the United States
increased by approximately 57% to 673 rigs as at March 31, 2022, as compared to 430 rigs at
March 31, 2021. There were 130
active rigs in the WCSB at March 31,
2022, compared to 79 active rigs as at March 31, 2021. The
CAOEC5 reported that for drilling in Canada, the total number of Operating Days in
the WCSB increased by approximately 38% for the three months ended
March 31, 2022, compared to the same
period in the prior year. Despite improved commodity prices, there
remains continued industry concerns over the prevailing customer
preference to return cash to shareholders, or pay down debt, rather
than grow production through the drill bit.
2 Source:
CAOEC Contractor Summary as at May 5, 2022.
|
3 Source:
CAOEC Fleet List as at May 5, 2022.
|
Outlook
In the first quarter of 2022, crude oil prices reached their
highest levels since 2014, due to recovering demand as governments
eased COVID-19 restrictions, the Russian invasion of Ukraine and supply
constraints. Heightened uncertainty persists concerning the
impact of global COVID-19 variants on possible future government
restrictions, which are expected to have an impact on demand in the
near term. Additionally, the ongoing war in Ukraine has caused further volatility in crude
oil prices and resulting supply. The precise duration and extent of
the adverse impacts of the current macroeconomic environment and
the COVID-19 pandemic on Western's customers, operations, business
and global economic activity remains highly uncertain at this time.
Additionally, the delayed timing of completion of construction on
the Trans Mountain pipeline expansion and the threatened shutdown
of Enbridge Line 5, have contributed to continued uncertainty
regarding takeaway capacity. However, activity levels in 2022
are expected to be higher than 2021 levels as a result of increased
capital spending by Western's customers. Controlling fixed costs,
maintaining balance sheet strength and flexibility and managing
through a post-pandemic market are priorities for the Company, as
prices and demand for Western's services continue to
improve.
Due to improved activity in the first quarter of 2022, as a
result of the successful COVID-19 vaccine rollout, the lifting of
government restrictions, and the expected closing of the
Restructuring Transaction, Western's Board of Directors has
approved a capital budget dependent upon the completion of the
Restructuring Transaction for 2022. Total budgeted capital for 2022
is expected to total approximately $34
million and is expected to be comprised of $23 million of expansion capital and $11 million of maintenance capital, with
$29 million allocated to the contract
drilling segment and $5 million
allocated to the production services segment. Subsequent to the
closing of the Rights Offering, substantially all of the proceeds
will be used to upgrade the Company's drilling rig fleet which will
drive further improvements in both utilization and pricing through
all industry cycles. Western will continue to manage its costs
in a disciplined manner and make required adjustments to its
capital program as customer demand changes. Currently, 5 of
Western's drilling rigs and 14 of Western's well servicing rigs are
operating.
As at March 31, 2022, Western had
$7.0 million drawn on its
$60.0 million revolving and operating
credit facilities (the "Credit Facilities"). As described
previously, subsequent to December 31,
2021, the Company agreed to amend the terms of its Credit
Facilities, including extending the maturity date and amending its
financial covenants. Western had drawn $12.5 million on its HSBC Bank Canada six-year
committed term non-revolving facility with the participation of
Business Development Canada (the "HSBC Facility"), which matures on
December 31, 2026. Western
currently has $218.0 million
outstanding on its Second Lien Facility. As previously announced on
March 22, 2022 and described above,
the Company has entered into a Debt Restructuring Agreement with
AIMCo, pursuant to which the maturity date of the Second Lien
Facility will be extended upon completion of the Debt Restructuring
Transaction. The Debt Restructuring Transaction will result in
the repayment of $100.0 million of
Second Lien Facility principal which will reduce the Company's
finance costs on a go forward basis. Additionally, the
$31.5 million proceeds from the
Rights Offering will be used to repay $10.0
million of principal on the Second Lien Facility and invest
the remainder in capital upgrades on its drilling rig fleet.
Oilfield service activity in Canada will be affected by the continued
development of resource plays in Alberta and northeast British Columbia which will be impacted by
continued pipeline construction, environmental regulations, and the
level of investment in Canada. In the short term, the largest
challenges facing the oilfield service industry are a lack of
qualified field personnel and the restrained growth in customer
drilling activity due to the continuing preference to return cash
to shareholders through share buybacks, increased dividends and
repayment of debt, rather than grow production. If commodity prices
remain high for an extended period and as customers strengthen
their balance sheets and satisfy shareholders, we expect that
drilling activity will continue to increase. In the medium term,
Western's rig fleet is well positioned to benefit from the LNG
Canada liquefied natural gas project now under construction in
British Columbia. It remains
Western's view that its upgraded drilling rigs and modern well
servicing rigs, reputation for quality, and disciplined cash
management provides Western with a competitive advantage.
4 Source: Baker Hughes Company, 2022
Rig Count monthly press releases.
|
5 Source: CAOEC, monthly Contractor
Summary.
|
Non-IFRS Measures and Ratios
Western uses certain financial measures in this press release
which do not have any standardized meaning as prescribed by
International Financial Reporting Standards ("IFRS"). These
measures and ratios, which are derived from information reported in
the condensed consolidated financial statements, may not be
comparable to similar measures presented by other reporting
issuers. These measures and ratios have been described and
presented in this press release in order to provide shareholders
and potential investors with additional information regarding the
Company. The non-IFRS measure and ratio used in this press
release is identified and defined as follows:
Adjusted EBITDA
Earnings before interest and finance costs, taxes, depreciation
and amortization, other non-cash items and one-time gains and
losses ("Adjusted EBITDA") is a useful supplemental measure as it
is used by management and other stakeholders, including current and
potential investors, to analyze the Company's principal business
activities. Adjusted EBITDA provides an indication of the
results generated by the Company's principal operating segments,
which assists management in monitoring current and forecasting
future operations, as certain non-core items such as interest and
finance costs, taxes, depreciation and amortization, and other
non-cash items and one-time gains and losses are removed. The
closest IFRS measure would be net loss for consolidated
results.
Adjusted EBITDA as a percentage of revenue is a non-IFRS
financial ratio which is calculated by dividing Adjusted EBITDA by
revenue for the relevant period. Adjusted EBITDA as a
percentage of revenue is a useful supplemental measure as it is
used by management and other stakeholders, including current and
potential investors, to analyze the profitability of the Company's
principal operating segments.
The following table provides a reconciliation of net loss, as
disclosed in the condensed consolidated statements of operations
and comprehensive income, to Adjusted EBITDA:
|
Three months ended
March 31
|
(stated in
thousands)
|
2022
|
2021
|
Net
loss
|
(3,834)
|
(6,454)
|
Income tax
recovery
|
(419)
|
(2,062)
|
Loss before income
taxes
|
(4,253)
|
(8,516)
|
Add
(deduct):
|
|
|
Depreciation
|
9,919
|
10,806
|
Stock
based compensation
|
32
|
68
|
Finance
costs
|
4,627
|
4,568
|
Other
items
|
66
|
(35)
|
Adjusted
EBITDA
|
10,391
|
6,891
|
Defined Terms:
Average active rig count (contract drilling): Calculated
as drilling rig utilization multiplied by the average number of
drilling rigs in the Company's fleet for the period.
Average active rig count (production services):
Calculated as service rig utilization multiplied by the average
number of service rigs in the Company's fleet for the period.
Drilling rig utilization: Calculated based on
Operating Days divided by total available days.
Operating Days: Defined as contract drilling days,
calculated on a spud to rig release basis.
Service Hours: Defined as well servicing hours
completed.
Service rig utilization: Calculated as total
Service Hours divided by 217 hours per month per rig multiplied by
the average rig count for the period as defined by the CAOEC
industry standard.
Contract Drilling Rig Classifications:
Cardium class rig: Defined as any contract drilling rig
which has a total hookload less than or equal to 399,999 lbs (or
177,999 daN).
Montney class rig:
Defined as any contract drilling rig which has a total hookload
between 400,000 lbs (or 178,000 daN) and 499,999 lbs (or 221,999
daN).
Duvernay class rig:
Defined as any contract drilling rig which has a total hookload
equal to or greater than 500,000 lbs (or 222,000 daN).
Abbreviations:
- Barrel ("bbl");
- Basis point ("bps"): A 1% change equals 100 basis points and a
0.01% change is equal to one basis point;
- Canadian Association of Energy Contractors ("CAOEC");
- DecaNewton ("daN");
- International Financial Reporting Standards ("IFRS");
- Pounds ("lbs");
- Thousand cubic feet ("mcf");
- Western Canadian Sedimentary Basin ("WCSB");
- Western Canadian Select ("WCS"); and
- West Texas Intermediate ("WTI").
Forward-Looking Statements and Information
This press release contains certain forward-looking statements
and forward-looking information (collectively, "forward-looking
information") within the meaning of applicable Canadian securities
laws, as well as other information based on Western's current
expectations, estimates, projections and assumptions based on
information available as of the date hereof. All information
and statements contained herein that are not clearly historical in
nature constitute forward-looking information, and words and
phrases such as "may", "will", "should", "could", "expect",
"intend", "anticipate", "believe", "estimate", "plan", "predict",
"potential", "continue", or the negative of these terms or other
comparable terminology are generally intended to identify
forward-looking information. Such information represents the
Company's internal projections, estimates or beliefs concerning,
among other things, an outlook on the estimated amounts and timing
of additions to property and equipment, anticipated future debt
levels and revenues or other expectations, beliefs, plans,
objectives, assumptions, intentions or statements about future
events or performance. This forward-looking information
involves known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from
those anticipated in such forward-looking information.
In particular, forward-looking information in this press release
includes, but is not limited to, statements relating to: commodity
pricing; the future demand for the Company's services and
equipment, in particular, the expectation of improved activity
levels in 2022 as a result of increased capital spending by
Western's customers; the potential impact of the ongoing COVID-19
pandemic on Western's customers, operations, business and global
economic activity; the potential impact of the current conflict in
Ukraine on commodity prices and
the demand for Western's services; the pricing for the Company's
services and equipment; the Company's expected total capital budget
for 2022, including the allocation of such budget; the Company's
liquidity needs including the ability of current capital resources
to cover Western's financial obligations; the use, availability and
sufficiency of the Company's Credit Facilities; the Company's
ability to maintain certain covenants under its Credit Facilities;
the repayment of the Company's debt; maturities of the Company's
contractual obligations with third parties; the Restructuring
Transaction, including the expected timing of completion and the
anticipated benefits to the Company; the anticipated proceeds of
the Rights Offering; the belief that all closing conditions of the
Restructuring Transaction and the other transactions contemplated
thereby, including the Rights Offering, will be satisfied or
obtained in a timely manner; expectations as to the principal
amount of the Second Lien Facility after giving effect to the
Restructuring Transaction; the anticipated ownership of AIMCo in
the Company upon completion of the Restructuring Transaction;
expectations as to the benefits of the LNG Canada natural gas
project in British Columbia on the
Company and its rig fleet; the potential impact of changes to laws,
governmental and environmental regulations, and the price on carbon
emissions; the expectation of continued investment in the Canadian
crude oil and natural gas industry; the development of Alberta and British
Columbia resource plays; expectations relating to producer
spending and activity levels for oilfield services; the Company's
ability to maintain a competitive advantage; and the Company's
ability to find and maintain enough field crew members.
The material assumptions that could cause results or events to
differ from current expectations reflected in the forward-looking
information in this press release include, but are not limited to:
demand levels and pricing for oilfield services; demand for crude
oil and natural gas and the price and volatility of crude oil and
natural gas; pressures on commodity pricing; the continued business
relationships between the Company and its significant customers;
crude oil transport, pipeline and LNG export facility approval and
development; liquidity and the Company's ability to finance its
operations; the effectiveness of the Company's cost structure and
capital budget; the effects of seasonal and weather conditions on
operations and facilities; the competitive environment to which the
various business segments are, or may be, exposed in all aspects of
their business and the Company's competitive position therein; the
ability of the Company's various business segments to access
equipment (including spare parts and new technologies); global
economic conditions and the accuracy of the Company's market
outlook expectations for 2022 and in the future; the impact, direct
and indirect, of the COVID-19 pandemic on Western's business,
customers, business partners, employees, supply chain, other
stakeholders and the overall economy; changes in laws or
regulations; currency exchange fluctuations; the ability of the
Company to attract and retain skilled labour and qualified
management; the ability to retain and attract significant
customers; the ability to maintain a satisfactory safety record;
the ability of the Company to satisfy the closing conditions of the
Restructuring Transaction in a timely manner and substantially on
the terms described therein; that there are no unforeseen events
preventing the performance of contracts and general business,
economic and market conditions.
Although Western believes that the expectations and assumptions
on which such forward-looking information is based on are
reasonable, undue reliance should not be placed on the
forward-looking information as Western cannot give any assurance
that such will prove to be correct. By its nature,
forward-looking information is subject to 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, the ongoing impact of the
COVID-19 pandemic on global demand and prices for oil and gas,
including the impact on demand for Western's services; volatility
in market prices for crude oil and natural gas and the effect of
this volatility on the demand for oilfield services generally;
reduced exploration and development activities by customers and the
effect of such reduced activities on Western's services and
products; political, economic, and environmental conditions in
Canada, the United States, Ukraine and globally; supply and demand for
oilfield services relating to contract drilling, well servicing and
oilfield rental equipment services; changes to laws, regulations
and policies; failure of counterparties to perform or comply with
their obligations under contracts; regional competition and the
increase in new or upgraded rigs; the Company's ability to attract
and retain skilled labour; Western's ability to obtain debt or
equity financing and to fund capital operating and other
expenditures and obligations; the potential need to issue
additional debt or equity and the potential resulting dilution of
shareholders; the Company's ability to comply with the covenants
under the Credit Facilities, HSBC Facility and the Second Lien
Facility and the restrictions on its operations and activities if
it is not compliant with such covenants; Western's ability to
protect itself from "cyber-attacks" which could compromise its
information systems and critical infrastructure; disruptions to
global supply chains; the ability of the Company to satisfy in a
timely manner, the conditions to closing of the Restructuring
Transaction and other general industry, economic, market and
business conditions. Readers are cautioned that the foregoing list
of risks, uncertainties and assumptions are not exhaustive.
Additional information on these and other risk factors that could
affect Western's operations and financial results are discussed
under the headings "Risk Factors" in Western's annual information
form for the year ended December 31,
2021, which may be accessed through the SEDAR website at
www.sedar.com. The forward-looking statements and information
contained in this news release are made as of the date hereof and
Western does not undertake any obligation to update publicly or
revise any forward-looking statements and information, whether as a
result of new information, future events or otherwise, unless so
required by applicable securities laws.
SOURCE Western Energy Services Corp.