/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES/
CALGARY, April 30 /CNW/ - Western Energy Services Corp. ("Western" or the "Company") announces improved results for 2006 over 2005. Revenues of $14.1 million reflect a 75% year over year increase. Earnings before Interest, Taxes Depreciation and Amortization ("EBITDA") have improved by $1,397,732 or 73% over 2005. When the one time restructuring costs of $399,450 that resulted from the operational realignment and base closures are added back, EBITDA from continuing operations has improved by $1,797,182 to a small loss of $114,229 for the year. This result, when viewed in the context of the year over year increase in revenues of $6,072,483, means that the Company has been able to retain 29.5% of each new dollar of revenue generated in 2006.
Significant efficiencies in general and administrative ("G&A") costs have also been achieved. Even with the $6,072,483 or 75.4% increase in revenues, total G&A costs have increased only $92,700 or 4.2%. For the entire year G&A costs have averaged 16.4% of revenues down from 27.7% for the previous period. More importantly the changes implemented by the new management team during the third and fourth quarters resulted in G&A costs dropping to a more acceptable level of 12.1% of revenues for this period.
The decision was taken to write down the Company's mining properties. Although these properties do have economic value, the realizable value and the timing of any realization cannot be reasonably determined at this time. The write off will help simplify Western's corporate structure making it more understandable to the investment community and the investing public. The mining properties are considered to be discontinued operations.
Selected Financial Information
Eight months
Year ended Year ended ended
December 31, December 31, December 31,
2006 ($) 2005 ($) 2004 ($)
-----------------------------------------
Revenue 14,118,622 8,046,139 711,438
Restructuring costs 399,450 - -
Loss from continuing operations,
before amortization, interest
and income taxes 513,679 1,911,411 984,629
Cash outflow from continuing
operations 921,005 2,059,014 905,052
Loss from continuing operations 3,222,375 3,487,461 1,211,364
- per share 0.03 0.05 0.05
Net loss 4,667,951 3,487,461 1,211,364
- per share 0.05 0.05 0.05
Total assets 19,015,931 11,299,158 8,942,819
Shareholder's equity 7,754,008 6,481,021 3,577,144
Fiscal 2006 was a year of change for Western. After two years of unsatisfactory results, despite being in a period of unprecedented oil and gas activity levels, the Board of Directors appointed a new management team part way through the first quarter of 2006. In making the change the Board sought to bring focus to the Company's business strategy and efficiency to its operations.
The first step in the turnaround plan was to rigorously redefine the business of the Company. Rather than trying to provide a broad range of services over a wide geographic footprint, the decision was taken to focus the Company on the less volatile production optimization through stimulation services segment of the oil and gas services industry.
In making the decision to change the direction of the Company, the Board of Directors fully recognized that the implementation of this strategy would necessitate a realignment of the Company's fleet of equipment, the closing of several operational bases as well as certain changes to its employee base. However the advantages of the strategy in terms of a less volatile revenue stream, greater operational efficiencies and greater profitability were seen to far outweigh the costs of the restructuring. By the end of 2006 the implementation of the turnaround plan was well underway. The initial step in the process was the acquisition of StimSol Canada Inc. ("StimSol"), a transaction which was negotiated in the second quarter and which closed at the end of the third quarter. By acquiring StimSol, Western acquired a company whose employees possessed the requisite skills, reputation and focus to be successful in the production optimization services market.
Once the purchase of StimSol was complete, the process was begun whereby Western's Canadian operations would be streamlined by consolidating all activities under the StimSol name. Significant cost reductions and efficiencies have now been realized with the closure of the Company's unprofitable Lloydminster and Medicine Hat bases. In addition to the cost savings that were brought about, the operational consolidation has allowed the Company to take advantage of StimSol's excellent reputation in the Canadian marketplace.
In the United States the process has begun whereby StimSol's technologies are being introduced through the Company's Abilene, Texas operating base. By the end of the year three acidizing units, four acid transports and a fully certified acid storage and mixing facility had been put into service as well as additional nitrogen pumping and transport capacity. U.S. operational efficiencies have also been realized by closing the unprofitable Williston, North Dakota and Casper, Wyoming bases. Results from the first quarter of 2007 indicate that the industry is beginning to understand the Company's new capabilities as shown by the steady growth in utilization rates for the Company's new and pre-existing equipment.
Consistent with the plan to focus Western's activities on production optimization through stimulation services, the Company recently agreed to sell its well test division after the completion of the profitable winter busy season. The proceeds from this transaction, which is effective April 30, 2007 and is scheduled to close in early May 2007, have already been earmarked to fund two of management's goals namely the introduction of additional nitrogen pumping and stimulation equipment, as well as deeper coil tubing capacity.
Subsequent to the year end, the Company announced the acquisition of all of the equipment operated under the joint venture agreement with Grenville Energy Partnership ("Grenville"). This acquisition, which is effective as of January 1, 2007, is scheduled to close in early May. With this acquisition the Company's overly complex financial structure has been greatly simplified with one result being that additional credit facilities have been made available to the Company to fund Western's expansion.
The announced acquisition of Grenville's assets and the windup of the joint venture with Grenville is a financially important step for the Company. Had this acquisition been in effect throughout 2006, Western's revenues and EBITDA would have been $1,183,627 higher. This acquisition will have a long term positive advantage for Western as the Company will no longer be required to turn over a significant share of its increasing revenue base to Grenville.
The acquisition of StimSol has also had a significant positive impact on EBITDA and profitability. Only four months of StimSol's results have been included in Western's year end financial statements. However if the results of StimSol had been added to Western's, on a pro-forma basis, revenues for the year would have increased by $4.9 million and EBITDA would have increased by $574,000.
When aggregated together, the changes that management has brought about will have a significant impact on future profitability. After eliminating one time restructuring costs and giving effect to the acquisitions of StimSol and Grenville's assets on a pro-forma basis for the entire year, EBITDA for 2006 would have been positive $1,643,398 compared to the reported loss of $513,679.
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.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.