/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES/
CALGARY, Aug. 28 /CNW/ - Western Energy Services Corp. (WSV on the TSXV), Calgary, Alberta is pleased to announce its results for the second quarter of 2008. Highlights for the second quarter of 2008 include:
- Revenues for the second quarter of 2008 were up 11% compared to the
second quarter in 2007.
- Contribution Margin (Revenues less Operating and G&A expenses) for
the second quarter of 2008 improved $311,481 to $40,918 from the
negative contribution margin realized in the second quarter of 2007.
- Primarily as a result of a $562,940 negative swing caused by
fluctuating exchange rates, EBITDA (Income before amortization,
interest and income taxes) for the quarter declined $289,068 from
2007 levels.
- Quarterly revenues in the US are up 56% over comparable 2007 levels
or 43% after adjusting for exchange rate fluctuations.
- General and administrative expenses ("G&A") continue to be reduced
and are down 22% compared to the second quarter of 2007.
The Company continued to grow its business in the second quarter of 2008 by posting an 11% increase in revenues over the previous year. Quarterly revenues totalled $3,071,372 during the three months ended June 30, 2008 contrasted with $2,777,477 for the three months ended June 30, 2007. This was achieved despite the material negative impacts of the continuing slowdown in oil & gas activity in Canada, the unusually long "breakup" in Western Canada and fluctuations in the exchange rate between the US and Canadian dollars.
Revenues from US operations, expressed in US dollars, increased 56% in the three months ended June 30, 2008 as compared to the same period in 2007. However declines in the US currency relative to the Canadian dollar had the effect of reducing this growth to 43% when these revenues are reported in Canadian dollars. The continued growth in this revenue stream is reflective of the strong market conditions for oil field services in the United States and demand for the Company's services, particularly nitrogen pumping and transportation services. To meet this demand the Company has continued to grow its US based fleet of equipment.
Revenues from Canadian operations for the first two quarters of 2008, from the core business of remedial stimulation services, were down 8% from the first two quarters of 2007, reflecting the slower Canadian market conditions.
The slowdown in activity levels in Canada has resulted in oil and gas producers pushing back on price increases from service companies, which has made it extremely difficult to maintain operating margins. Despite this pressure the Company was able to modestly improve its Contribution Margin (Revenues less Operating and G&A expenses) for the period and to reduce operating expenses to 88% of revenues from the 95% incurred for the second quarter in 2007.
When the US dollar declines in value relative to the Canadian dollar the US Revenues and Contribution Margins are reduced when translated into Canadian dollars. Accordingly, the improvement in operating performance in the US was more than offset by the effect of the 12.8% appreciation in the value of the Canadian dollar relative to the US dollar. In the second quarter of 2008 the effect of this exchange rate swing from the second quarter of 2007 was a reduction in EBITDA of $562,940, resulting in negative EBITDA of $65,402. Subsequent to June 30, 2008 the US dollar has materially appreciated relative to the Canadian dollar. If this trend continues the effect of the exchange rate swing which negatively impacted results in the year to date will be largely mitigated.
Management's focus for the remainder of 2008 will be to continue to grow revenues and increase profitability, to continue rationalizing non-core assets and to address the maturities of the current liabilities which will occur in the fall of 2008.
All of the Company's well testing assets were sold in the second quarter of 2007. In addition, the Company downsized its Canadian shallow coiled tubing services in 2007, effectively shutting down this service line given its dependence upon the Canadian natural gas drilling business, pending an improvement in the market for these services. Together these two discontinued service lines contributed $1,978,537 in revenues in 2007 largely accounting for the $1,621,642 drop in revenues for the six months ended June 30, 2008.
G&A expenses decreased throughout 2007 and the first half of 2008. G&A expenses during the second quarter of 2008 are down $95,092 or 22% from the second quarter of 2007 and $417,730 or 56% from the comparable period in 2006 when the current management team took over. Management is achieving its goal of maintaining G&A expenses at 12% or less of revenues. G&A cost savings have been realized as the result of implementing better management practices, managing staff levels and reducing expenses attributable to head office operations.
Interest expense during the first two quarters of 2008 was $680,623 compared to $971,198 for the six months ended June 30, 2007. This savings is attributable to the reduction of the convertible note and the renegotiation of the short term borrowings which occurred in the third quarter of 2007.
It is expected that 2008 will see a continued expansion and realignment of the Company's fleet of equipment along with a concerted effort to improve revenues while maintaining the cost control measures already achieved. By focusing on the Company's core business of production optimization through remedial stimulation services, management is confident that Western will become increasingly profitable and generate positive returns for our shareholders.
Forward Looking Statements
This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this press release contains forward-looking statements and information concerning market conditions in the energy services business in Western Canada, currency fluctuations, asset dispositions and acquisitions by Western and cost control factors. The forward-looking statements and information are based on certain key expectations and assumptions made by Western, including expectations and assumptions concerning market conditions in the energy services business in Western Canada, currency fluctuations, asset dispositions and acquisitions by Western and cost control factors. Western has made such expectations and assumptions on factors it believes are reasonable at this time. Although Western believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable at the date of this press release, undue reliance should not be placed on the forward looking statements and information as Western can give no 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 factors include failure to obtain the required regulatory approval and other.
Readers are cautioned that the foregoing list of factors is not exhaustive. The forward-looking statements and information contained in this press release are made as of the date hereof and Western undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.