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CALGARY, May 30 /CNW/ - Revenues increased by 42% from the fourth quarter of 2006 to $5,251,618. Income from continuing operations before amortization, interest and income taxes ("EBITDA") increased by $1,391,081 from Q4, 2006 to a positive $668,796. Adding back the non cash stock compensation expense to EBITDA results in $866,181 or 16.5% of revenue for the first quarter of 2007. Net loss was $423,493 for the quarter. General and administrative expenses were 10.6% of revenues compared to 13.1% for the fourth quarter of 2006. Stock based compensation recorded for the first quarter of 2007 of $197,385 represents the value of the vested portion of currently granted options and the vesting of options granted in prior years.
The new management team continued the implementation of the turnaround plan during the first quarter of 2007. The key components of the turnaround plan are: shifting the direction of the Company's business to the less volatile production optimization through stimulation services; concentrating the Company's services in fewer operational bases; increasing efficiencies and reducing costs. The Company's plan took a big step forward with the purchase of the assets of the Grenville Energy Partnership ("Grenville") and by disposing of its non core well testing assets. Grenville has provided equipment financing to Western through a revenue sharing joint venture since July 2005.
During the first quarter of 2007 the Company and Grenville negotiated an end to their joint venture and the purchase by the Company of all of Grenville's oilfield service equipment for $12.5 million. Commencing January 1, 2007 the Company was no longer responsible to distribute a component of its revenues to Grenville. This revenue savings will become significant as the Company's business grows. To complete the Grenville purchase the Company used approximately $4.2 million of a new banking facility. This new demand term loan also funded the repayment of existing demand term loans in the amount of $0.7 million and a revolving credit facility in the amount of $1.5 million.
An 8% convertible note with a one year term was also issued to Grenville on closing of the transaction, on May 16, 2007. The note is convertible into shares of the Company at the option of its holders at $0.20 per share. The Company can force conversion of the note if its shares trade over $0.30 for 20 consecutive days or if it raises or cash flows a total of $5.0 million. If the Company forces conversion of the note, the conversion prices will be the lesser of $0.20 and 120% of the greater of the weighted average issue price of the shares issued in meeting the conversion tests or the 20 day weighted average closing price of the Company's shares leading up to the conversion. In no event will the conversion price be less than $0.12 per share.
The Company's efforts to focus and streamline its business were enhanced by the disposition of its well testing equipment. The disposition which followed the busy winter season will allow the Company to redeploy its capital and resources into its core stimulation services business. The sale of the well testing equipment was closed during the second quarter of 2007 and additional nitrogen pumping equipment has been added to the Canadian fleet as a result. This equipment expands the capability of the Canadian fleet. The Company can now offer a complete package of well stimulation equipment for its Canadian customers without relying upon third party vendors or support from its US operations.
During the first quarter and to date in the second quarter of 2007 the Company achieved its objective of streamlining and consolidating all Canadian activities under the StimSol name. In addition to the cost savings that are being brought about, the operational consolidation has allowed the Company to take advantage of StimSol's excellent reputation in the Canadian marketplace. In addition, all of the Company's the US operations were consolidated into a single US subsidiary. These reorganization steps significantly decrease the operational and financial complexity of the Company.
Despite the progress that has been made, management recognizes that much still needs to be done. 2007 will see a continued expansion and realignment of the Company's fleet of equipment. Continued attention will also be spent on reducing overall administrative costs and inefficiencies. By concentrating its focus on the Company's core business of production optimization through stimulation services, management is confident that Western will become increasingly profitable and generate positive returns for our shareholders.
Forward Looking Information
This release contains certain forward-looking statements related but not limited to the Company's expectations, intentions, plans and beliefs. Investment advisors, shareholders and potential investors are cautioned not to place undue reliance on forward-looking information which by its nature involves assumptions, risks and uncertainties, both general and specific, that contribute to the possibilities that predictions, projections, forecasts and future events will not occur. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements. The Company does not assume any responsibility to update this information for events subsequent to its preparation.
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