Flint Energy Services Ltd. announces second quarter earnings



    (TSX: FES)

    CALGARY, Aug. 7 /CNW/ - Flint Energy Services Ltd. (the "Company" or
"Flint") reported net earnings for the three months and six months ended
June 30, 2008 of $11.8 million and $30.3 million respectively ($0.25 and $0.63
per common share - diluted) compared to $6.3 million and $28.5 million
respectively in 2007 ($0.13 and $0.59 per common share - diluted). Revenue
increased 26% to $531.7 million from $421.8 million for the quarter and to
$1,047.3 million compared to $924.5 million for the first six months of the
year. Funds provided by operations before changes in non-cash working capital
for the second quarter were $32.2 million compared to $28.3 million for the
same period in 2007.
    The increase in revenue of $109.9 million was primarily due to increased
operations in Plant Maintenance and Other. FT Services, in its maintenance
contracts combined with Flint's other joint ventures, generated $101.5 million
in revenue compared to $4.1 million for the same period in 2007. Pricing
pressure experienced in the second quarter of 2007 combined with extended
spring breakup and limited drilling activity in Western Canada continued to
negatively impact the Oilfield Transportation operating segment. The extended
spring breakup also negatively impacted the Production Services Canadian
operating segment.
    According to Bill Lingard, President and Chief Executive Officer of the
Company, "While we are pleased with our position and progress in oil sands
construction and plant maintenance, the second quarter proved very challenging
for our operating segments with exposure to Canadian drilling activities. The
second half of 2008 looks much stronger, with July rig counts over 400, our
July price increases in place and equipment utilization improving."
    The Oilfield Transportation operating segment saw an increase in revenue
from the same period in 2007. However, competitive pricing, fixed and variable
cost increases, and spring breakup extended by wet weather resulted in an
operating loss in this division for the second year in a row during this
quarter.
    Tubular Management and Manufacturing revenues were down $4.3 million
compared to the second quarter of last year, primarily due to changes in U.S.
product mix, and stronger Canadian dollar during the current quarter. For the
six month period, this same division had a $12.4 million decrease in revenue
from 2007 due to the same trends.
    The Production Services operating segment's revenue was down $11.7
million from the prior year due to the continued weakness in Canadian gas
drilling. U.S. revenues in this segment remained even with 2007 due to
continued robust gas drilling activity in the United States. For the six month
period the results were similar with a slight decrease in Canadian activity
and fairly consistent results from the United States operations.
    Facility Infrastructure revenues increased by $25.3 million from the
second quarter of 2007, due to the continued ramp up on contracts for Shell's
Albian Sands and Suncor's Firebag and other oil sands projects.



    
                                                  Three months ended June 30
    (unaudited)                             ---------------------------------
    (in milions of Canadian dollars,        ---------------------------------
     except share data)                           2008       2008       2007
    -------------------------------------------------------------------------

    Revenue                                  $   531.7      100.0% $   421.8
    Direct costs                                 459.8       86.5%     347.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gross profit                                  71.9       13.5%      73.9

    General & administrative expense              40.8        7.7%      38.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA(1)                                     31.1        5.8%      35.5

    Stock based compensation expense               1.2        0.2%       1.3
    Amortization                                  16.8        3.2%      17.5
    Interest                                       1.4        0.3%       7.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings before income taxes                  11.7        2.2%       9.1

    Income taxes                                  (0.1)       0.0%       2.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings                                  11.8        2.2%       6.3

      Per common share - basic               $    0.25             $    0.13

      Per common share - diluted             $    0.25             $    0.13

    Total assets                               1,542.1               1,486.4
    Total long-term liabilities                  452.8                 459.2

    Funds provided by operations before
     changes in non-cash working capital(1)       30.5                  28.3


                                                    Six months ended June 30
    (unaudited)                             ---------------------------------
    (in milions of Canadian dollars,        ---------------------------------
     except share data)                           2007       2008       2007
    -------------------------------------------------------------------------

    Revenue                                      100.0% $ 1,047.3      924.5
    Direct costs                                  82.5%     883.6      744.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gross profit                                  17.5%     163.7      180.5

    General & administrative expense               9.1%      78.9       85.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA(1)                                      8.4%      84.8       95.2

    Stock based compensation expense               0.3%       2.4        2.5
    Amortization                                   4.1%      34.6       35.3
    Interest                                       1.8%       7.3       14.4
    -------------------------------------------------------------------------
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    Earnings before income taxes                   2.2%      40.5       43.0

    Income taxes                                   0.7%      10.2       14.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings                                   1.5%      30.3       28.5


      Per common share - basic                          $    0.63  $    0.60

      Per common share - diluted                        $    0.63  $    0.59

    Total assets
    Total long-term liabilities

    Funds provided by operations before
     changes in non-cash working capital(1)                  60.6       54.4

    (1) The Company presents EBITDA as a supplemental earnings measure as it
        is used by the chief operating decision makers of the Company to
        measure operating segment profitability. EBITDA is equal to earnings
        before interest, taxes, depreciation, amortization and stock based
        compensation. Management uses EBITDA to establish performance
        benchmarks for incentive compensation for employees, to evaluate the
        performance of its operating segments, and in valuing existing
        operations to determine potential goodwill impairment. EBITDA is a
        non-GAAP financial measure that does not have any standardized
        meaning prescribed by GAAP, and may not be comparable to similar
        measures presented by other issuers.



    Selected Segmented Information
    (unaudited)
    (in millions of Canadian dollars)       Three months ended June 30
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       2008                  2007
                                 --------------------------------------------
                                 --------------------------------------------
    Revenue by operating segment
      Production Services         $   248.0       46.6% $   259.7       61.5%
      Facility Infrastructure         120.4       22.6% $    95.2       22.6%
      Oilfield Transportation          17.9        3.4%      14.7        3.5%
      Tubular Management and
       Manufacturing                   43.9        8.3%      48.1       11.4%
      Plant Maintenance and Other     101.5       19.1%       4.1        1.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Total                       $   531.7      100.0% $   421.8      100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EBITDA(1) by operating segment
      Production Services         $    20.7       66.6% $    27.3       76.9%
      Facility Infrastructure          10.3       33.1%       9.6       27.0%
      Oilfield Transportation         (10.6)     (34.1%)     (9.2)     -25.9%
      Tubular Management and
       Manufacturing                    3.6       11.6%       7.9       22.3%
      Plant Maintenance and Other       7.1       22.8%      (0.1)      -0.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Total                       $    31.1      100.0% $    35.5      100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (unaudited)
    (in millions of Canadian dollars)       Six months ended June 30
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       2008                  2007
                                 --------------------------------------------
                                 --------------------------------------------
    Revenue by operating segment
      Production Services         $   518.0       49.5% $   536.4       58.0%
      Facility Infrastructure         221.5       21.1%     200.7       21.7%
      Oilfield Transportation          76.8        7.3%      74.9        8.1%
      Tubular Management and
       Manufacturing                   91.0        8.7%     103.4       11.2%
      Plant Maintenance and Other     140.0       13.4%       9.1        1.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Total                       $ 1,047.3      100.0% $   924.5      100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EBITDA(1) by operating segment
      Production Services         $    48.2       56.8% $    55.8       58.7%
      Facility Infrastructure          18.4       21.7%      16.2       17.0%
      Oilfield Transportation          (0.7)      (0.8%)      4.6        4.8%
      Tubular Management and
       Manufacturing                    8.9       10.5%      18.3       19.2%
      Plant Maintenance and Other      10.0       11.8%       0.3        0.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Total                       $    84.8      100.0% $    95.2      100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) The Company presents EBITDA as a supplemental earnings measure as it
        is used by the chief operating decision makers of the Company to
        measure operating segment profitability. EBITDA is equal to earnings
        before interest, taxes, depreciation, amortization and stock based
        compensation. Management uses EBITDA to establish performance
        benchmarks for incentive compensation for employees, to evaluate the
        performance of its operating segments, and in valuing existing
        operations to determine potential goodwill impairment. EBITDA is a
        non-GAAP financial measure that does not have any standardized
        meaning prescribed by GAAP, and may not be comparable to similar
        measures presented by other issuers.
    

    Outlook

    Western Canadian drilling activity, with an average of around 170 of 854
rigs active in the second quarter, has picked up considerably since spring
breakup and industry forecasts are now calling for more than 19,000 wells to
be drilled in 2008. While this would see activity levels similar to 2007,
because of a weaker first half in 2008, the second half of the year is
expected to be busier. This increased level of activity should positively
impact both the Oilfield Transportation and Tubular Management and
Manufacturing business segments in the second half of the year. Industry
statistics show well completions for the first half of the year were down 18%
to 8,129 compared to 9,897 in 2007. During July rig activity increased to over
400 active rigs with a number of customers increasing their 2008 well drilling
and completion budgets.
    U.S. rig counts continue to remain strong with an average of over 1,860
active rigs in the second quarter, up 5% over 2007. July rig activity
increased to 1,936 active rigs up 9% from last year. The resulting increased
level of gas well tie-ins is expected to keep the U.S. Production Services
operations busy and the J.W. Williams' Manufacturing business running at near
capacity.
    Canadian Production Services activity which was down in the first half of
2008 is expected to see a seasonal increase in activity, especially in well
tie-ins and transmission lines, over the next two quarters and into early
2009.
    The Facility Infrastructure business segment will continue to ramp up on
both the Suncor Energy and Shell Albian Sands projects throughout the second
half of 2008 and into 2009. While we expect to see an increase in quarterly
revenues for this segment, with the growth also comes the challenge of finding
enough skilled construction employees. Recruitment remains a key priority for
Facility Infrastructure.
    The Plant Maintenance and Other business segment saw a significant
increase in revenue due in part to Flint's 50% owned joint venture company, FT
Services, which completed a major turnaround on one of Suncor Energy's
up-graders in Fort McMurray, Alberta during the second quarter. Work on
regular plant maintenance under contract in the oil sands area of Alberta,
employs approximately 1,000 employees. FT Services is scheduled to take over
maintenance work at Suncor Energy's Sarnia, Ontario refinery during the third
quarter. While revenues were higher than normal in the second quarter due to
the turnaround, we expect more normal revenue levels in the last half of 2008
and continued growth in 2009.
    Oilfield Transportation and Tubular Management operating segments are
both experiencing an increase in activity levels and we have initiated price
increases for July 1st in both divisions as we move from a heavy discount
environment to one where demand is increasing and resources are tight.

    Additional Information

    Complete copies of the Company's Q2 2008 Management Discussion and
Analysis (MD&A), Interim Financial Statements and the Notes to Financial
Statements are available on SEDAR at www.sedar.com. Additional information
related to the Company is available on SEDAR, including a copy of the latest
Annual Information Form of the Company. Electronic copies of the company's
quarterly and annual reports and other public filings may also be obtained by
visiting www.flintenergy.com.
    A conference call with Flint management is scheduled for 11:00 AM Eastern
Time on Friday, August 8, 2008. Information on how to participate in the call
or listen to live or archived playback of the call is available on Flint's
website www.flintenergy.com.





For further information:

For further information: W.J. (Bill) Lingard, President & Chief
Executive Officer; Paul M. Boechler, Chief Financial Officer; or Guy Cocquyt,
Director of Investor Relations; Telephone: (403) 218-7100, Fax: (403)
215-5481

Organization Profile

FLINT ENERGY SERVICES LTD.

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