Hyduke Energy Services Inc. announces record profitability for eight months ended December 31, 2006



    TSX-V Symbol: HYD

    EDMONTON, April 23 /CNW/ - Hyduke Energy Services Inc. (HYD - TSX
Venture), announced operating results for the eight months ended December 31,
2006. Hyduke maintained record levels of revenues through continued strong
domestic demand, ongoing efforts to increase domestic market share and
continued development of international markets. Realized production
efficiencies have resulted in significantly improved gross margin percentages.
A combination of record revenues, improved gross margins, strong control over
operating expenses and a significant gain on sale of assets have resulted in a
49% increase in net income when annualized and compared to net income for the
twelve months ended April 30, 2006.
    For the eight months ended December 31, 2006, revenue of $65.7 million
represents a 6% increase when annualized and compared to revenue of
$92.7 million for the twelve months ended April 30, 2006. For the eight months
ended December 31, 2006, gross margin of $12.9 million represents a 19%
increase when annualized and compared to gross margin of $16.3 million for the
twelve months ended April 30, 2006. For the eight months ended December 31,
2006, net income of $6.3 million ($0.287 per basic share) represents a 49%
increase when annualized and compared to net income of $6.3 million ($0.334
per basic share) for the twelve months ended April 30, 2006. Included in net
income for the eight months ended December 31, 2006, is a gain on sale of
property, plant and equipment. In November of 2006, Hyduke realized a pre-tax
gain of $1.2 million on the sale of land and building.

    CHANGE IN YEAR END AND COMPARABILITY OF FINANCIAL INFORMATION

    Hyduke changed its fiscal year end from April 30 to December 31 effective
December 31, 2006. For purposes of the following discussion and analysis, the
annual results analysis compares the eight month period ended December 31,
2006 to the twelve month period ended April 30, 2006. Additionally,
supplementary unaudited financial information is provided comparing the twelve
month period ended December 31, 2006 to the twelve month period ended
December 31, 2005.
    For the purposes of the quarterly results analysis, the two month period
ended December 31, 2006 is compared to the three month period ended
January 31, 2006. The comparibility of these periods is reduced due to two
seasonality factors. First, the holiday season slowdown in December has a
greater negative impact on revenue and gross margin for the eight month and
two month periods ended December 31, 2006 compared to the twelve month period
ended April 30, 2006 and the three month period ended January 31, 2006.
Second, January is typically a very busy month due to high drilling activity.
The omission of January results has a negative impact on revenue and gross
margin in the eight month and two month periods ended December 31, 2006
compared to the twelve month period ended April 30, 2006 and the three month
period ended January 31, 2006. Readers are cautioned to consider the effect of
these seasonality factors on the comparibility of results when reviewing the
following discussion and analysis.

    
    -------------------------------------------------------------------------
    Selected Financial            Eight Months  Twelve Months  Twelve Months
     Information                      Ended          Ended          Ended
    -------------------            December 31,     April 30,      April 30,
    ($000's, except per share          2006           2006           2005
         data and ratios)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Revenues                            65,708         92,681         70,424
    -------------------------------------------------------------------------
    Gross margin                        12,884         16,298         11,807
    -------------------------------------------------------------------------
    Gross margin (%)                      19.6%          17.6%          16.8%
    -------------------------------------------------------------------------
    Income before income taxes
     and gain on sale of assets          8,137          9,655          5,622
    -------------------------------------------------------------------------
    Pre-tax gain on sale of
     assets                              1,213              3             76
    -------------------------------------------------------------------------
    Net income                           6,293          6,323          3,822
    -------------------------------------------------------------------------
    Net income per share
     - basic ($)                         0.287          0.334          0.221
    -------------------------------------------------------------------------
    Net income per share
     - diluted ($)                       0.287          0.330          0.217
    -------------------------------------------------------------------------
    Total assets                        57,802         50,372         37,176
    -------------------------------------------------------------------------
    Total long-term debt                 2,933          3,312          5,425
    -------------------------------------------------------------------------
    Total shareholders' equity          33,757         27,213         11,085
    -------------------------------------------------------------------------
    Current ratio (current
     assets divided by current
     liabilities)                 2.01 to 1.00   1.99 to 1.00   1.30 to 1.00
    -------------------------------------------------------------------------
    Debt to equity ratio
     (long-term debt divided by
     shareholders' equity)        0.09 to 1.00   0.12 to 1.00   0.49 to 1.00
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Selected Financial Information
    -------------------------------------------------------------------------
                                        Two Months Ended  Three Months Ended
    ($000's, except per share data)    December 31, 2006   January 31, 2006
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Revenues                                 14,251             24,847
    -------------------------------------------------------------------------
    Gross margin                              2,301              4,059
    -------------------------------------------------------------------------
    Gross margin (%)                           16.1%              16.3%
    -------------------------------------------------------------------------
    Net income                                1,583              1,514
    -------------------------------------------------------------------------
    Net income per share - basic ($)          0.072              0.078
    -------------------------------------------------------------------------
    Net income per share - diluted ($)        0.072              0.077
    -------------------------------------------------------------------------

    Note: Please refer to the published audited financial statements and
    management's discussion and analysis as reported on the System for
    Electronic Document Analysis and Retrieval ("SEDAR") website at
    www.sedar.com for full details on the financial position, results of
    operations and cash flows of the organization.


    SUMMARY OF OPERATING RESULTS

    Revenues

    -------------------------------------------------------------------------
    Revenues by Industry Segment
    -------------------------------------------------------------------------
                                        Eight    Twelve      Two      Three
                                       Months    Months    Months    Months
                                        Ended     Ended     Ended     Ended
                                      December    April   December   January
                                      31, 2006  30, 2006  31, 2006  31, 2006
             ($000's)                    ($)       ($)       ($)       ($)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Drilling equipment                 37,713    58,309     9,533    14,968
    -------------------------------------------------------------------------
    Well service equipment             18,533    23,959     4,002     7,954
    -------------------------------------------------------------------------
    Other oilfield services             9,462    10,413       716     1,925
    -------------------------------------------------------------------------
    Total revenue                      65,708    92,681    14,251    24,847
    -------------------------------------------------------------------------

    Supplementary Unaudited Financial Information
    -------------------------------------------------------------------------
    Revenues by Industry Segment          Twelve Months Ended December 31
    -------------------------------------------------------------------------
               ($000's)                 2006      2005          Change
    -------------------------------------------------------------------------
                                         ($)       ($)       ($)       (%)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Drilling equipment                 58,048    58,884      (836)       (1%)
    -------------------------------------------------------------------------
    Well service equipment             27,809    21,802     6,007        28%
    -------------------------------------------------------------------------
    Other oilfield services            13,675     9,266     4,409        48%
    -------------------------------------------------------------------------
    Total revenue                      99,532    89,952     9,580        11%
    -------------------------------------------------------------------------
    

    Total revenues of $65,708,149 for the eight months ended December 31,
2006 represents average monthly revenues of $8,213,519. This represents a 6%
increase over average monthly total revenues of $7,723,446 million for the
twelve months ended April 30, 2006. Referring to the supplementary unaudited
financial information, total revenues for the twelve months ended December 31,
2006 are 11% greater than total revenues for the twelve months ended
December 31, 2005.
    Drilling equipment segment average monthly revenues of $4.7 million for
the eight months ended December 31, 2006 represents a slight decrease of 3%
over drilling equipment segment average monthly revenues of $4.9 million for
the twelve months ended April 30, 2006. Referring to the supplementary
unaudited financial information, drilling equipment segment revenues for the
twelve months ended December 31, 2006 are comparable to the twelve months
ended December 31, 2005. Hyduke has been able to maintain these historically
high levels of drilling equipment segment revenues primarily due to three
factors. First, over the past twenty months, Canadian drilling activity has
been at historically high levels and demand for new equipment, consumables and
repair services has been strong. Second, Hyduke's strategic initiative to
develop international markets continues to be successful with international
revenues representing a significant portion of total revenues. Specifically,
international revenues represent 11% of total revenues for the eight months
ended December 31, 2006 and 22% for the twelve months ended April 30, 2006.
Finally, Hyduke is continuing its emphasis on expanding market share in
existing products and services and through providing additional products and
services to the drilling equipment segment.
    Well service equipment segment average monthly revenues of $2.3 million
for the eight months ended December 31, 2006 represents an increase of 16%
over well service equipment segment average monthly revenues of $2.0 million
for the twelve months ended April 30, 2006. Referring to the supplementary
unaudited financial information, well service equipment segment revenues for
the twelve months ended December 31, 2006 are 28% greater than revenues for
the twelve months ended December 31, 2005. Well service equipment segment
revenue growth is due to strong demand over the past twenty months for this
segment's services overall combined with emphasis on expanding market share
and achieving particular success in well service consumable supplies.
    Other oilfield services segment average monthly revenues of $1.2 million
for the eight months ended December 31, 2006 represents an increase of 36%
over other oilfield services segment average monthly revenues of $0.9 million
for the twelve months ended April 30, 2006. Referring to the supplementary
unaudited financial information, other oilfield services segment revenues for
the twelve months ended December 31, 2006 are 48% greater than revenues for
the twelve months ended December 31, 2005. Other oilfield services segment
revenue growth is due to strong demand over the past twenty months for this
segment's services.

    
    Gross margin

    -------------------------------------------------------------------------
    Gross Margin by Industry Segment
    -------------------------------------------------------------------------
                      Eight Months  Twelve Months   Two Months  Three Months
                          Ended          Ended         Ended         Ended
                        December         April       December       January
         ($000's)       31, 2006       30, 2006      31, 2006      31, 2006
    -------------------------------------------------------------------------
                       ($)     (%)    ($)     (%)   ($)     (%)   ($)     (%)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Drilling
     equipment        8,261  21.9%  10,900  18.7%  1,534  16.1%  2,068  13.8%
    -------------------------------------------------------------------------
    Well service
     equipment        2,581  13.9%   3,374  14.1%    659  16.5%  1,372  17.2%
    -------------------------------------------------------------------------
    Other oilfield
     services         2,042  21.6%   2,024  19.4%    108  15.1%    549  28.5%
    -------------------------------------------------------------------------
    Total gross
     margin          12,884  19.6%  16,298  17.6%  2,301  16.1%  3,989  16.1%
    -------------------------------------------------------------------------

    Supplementary Unaudited Financial Information
    -------------------------------------------------------------------------
    Gross Margin by Industry
           Segment                       Twelve Months Ended December 31
    -------------------------------------------------------------------------
           ($000's)                     2006           2005         Change
    -------------------------------------------------------------------------
                                     ($)     (%)    ($)     (%)   ($)     (%)
    -------------------------------------------------------------------------
    Drilling equipment             12,268  21.1%  11,370  19.3%    898   7.9%
    -------------------------------------------------------------------------
    Well service equipment          3,850  13.8%   2,774  12.7%  1,076  38.8%
    -------------------------------------------------------------------------
    Other oilfield services         2,713  19.8%   1,643  17.7%  1,070  65.1%
    -------------------------------------------------------------------------
    Total gross margin             18,831  18.9%  15,787  17.6%  3,044  19.3%
    -------------------------------------------------------------------------
    

    Total gross margin of $12,884,381 for the eight months ended December 31,
2006 represents average monthly total gross margin of $1,610,548. This
represents a 19% increase over average monthly total gross margin of
$1,358,200 for the twelve months ended April 30, 2006. Total gross margin
percentage of 19.6% for the eight months ended December 31, 2006 represents an
11% increase over total gross margin percentage of 17.6% for the twelve months
ended April 30, 2006. Referring to the supplementary unaudited financial
information, total gross margin for the twelve months ended December 31, 2006
is 19% greater than total gross margin for the twelve months ended
December 31, 2005. Referring again to the supplementary unaudited financial
information, total gross margin percentage for the twelve months ended
December 31, 2006 has improved to 18.9% from the 17.6% total gross margin
percentage for the twelve months ended December 31, 2005.
    Drilling equipment segment average monthly gross margin of $1,033,000 for
the eight months ended December 31, 2006 represents an increase of 14% over
drilling equipment segment average monthly gross margin of $908,000 for the
twelve months ended April 30, 2006. Drilling equipment segment gross margin
percentage of 21.9% for the eight months ended December 31, 2006 represents an
increase of 3.2 percentage points over the gross margin percentage of 18.7%
for the twelve months ended April 30, 2006. Referring to the supplementary
unaudited financial information, drilling equipment segment gross margin
percentage for the twelve months ended December 31, 2006 has improved to 21.1%
from 19.3% gross margin percentage for the twelve months ended December 31,
2005. Hyduke has been able to continue to experience improvement in drilling
equipment segment gross margins primarily due to three factors. First,
continued emphasis on coordinating quoting, contract terms to customers and
raw material procurement functions have resulted in reduced exposure to
fluctuations in input cost. Second, continued emphasis on training,
supervision and production efficiencies have resulted in improved margins.
Third, continued strong customer demand combined with industry capacity
constraints eased competitive pricing pressure during much of 2006.
    Well service equipment segment average monthly gross margin of $323,000
for the eight months ended December 31, 2006 represents an increase of 15%
over average monthly gross margin of $281,000 for the twelve months ended
April 30, 2006. Well service equipment segment gross margin percentage of
13.9% for the eight months ended December 31, 2006 is comparable to the 14.1%
gross margin percentage for the twelve months ended April 30, 2006. Referring
to the supplementary unaudited financial information, well service equipment
segment gross margin percentage for the twelve months ended December 31, 2006
has improved to 13.8% from 12.7% gross margin percentage for the twelve months
ended December 31, 2005. Hyduke continues to emphasize accurate quoting, input
cost control and production efficiencies in order to maintain and increase
gross margin percentages.
    Other oilfield services segment average monthly gross margin of $255,000
for the eight months ended December 31, 2006 represents an increase of 51%
over average monthly gross margin of $169,000 for the twelve months ended
April 30, 2006. Other oilfield services segment gross margin percentage of
21.6% for the eight months ended December 31, 2006 represents an increase of
2.2 percentage points over the gross margin percentage of 19.4% for the twelve
months ended April 30, 2006. Referring to the supplementary unaudited
financial information, other oilfield services segment gross margin percentage
for the twelve months ended December 31, 2006 has improved to 19.8% from 17.7%
gross margin percentage for the twelve months ended December 31, 2005. Hyduke
continues to emphasize accurate quoting, input cost control and production
efficiencies in order to maintain and increase gross margin percentages.

    Expenses

    Total expenses (before gain on sale of property, plant and equipment) of
$4,747,255 for the eight months ended December 31, 2006 represents average
monthly expenses of $593,407. This represents a 7% increase over average
monthly total expenses of $553,626 for the twelve months ended April 30, 2006.
Total expenses as a percentage of revenue remains consistent at 7.2% for each
period.

    OUTLOOK

    Industry expectations for 2007 continue to reflect a reduction in overall
activity in Western Canada as measured by the number of wells drilled. In
October of 2006, the Canadian Association of Oilwell Drilling Contractors
(CAODC) forecasted a 14% reduction in the number of wells drilled (on a
completion basis) over 2006 to approximately 19,000. In January 2007, the
Petroleum Services Association of Canada (PSAC) forecasted a 11% reduction in
wells drilled (rig released) over 2006 to approximately 21,000. Both industry
associations are basing these forecasts on oil prices of USD$60-65 per barrel
(WTI) and natural gas prices of USD$5.75-6.50 per mcf (AECO-spot and NYMEX).
Additionally, the biggest reduction in drilling activity is expected to be in
shallow natural gas drilling. It is expected that drilling for oil and deep
well natural gas will continue to be strong. It is important to keep in mind
that while expectations for 2007 reflect a decrease in year-over-year
activity, overall activity levels are still very strong compared to historical
levels.
    Actual Western Canadian drilling activity in the first quarter of 2007
has supported these projections. Per the CAODC, average monthly drilling rig
count in 2007Q1 was 526 compared to 702 in the prior year. However, commodity
prices have been strong throughout the first quarter of 2007 with natural gas
prices averaging approximately USD$6.60 per mcf (AECO-spot) and crude oil
prices averaging approximately USD$60 per barrel (WTI). Currently, the
National Energy Board (NEB) is expecting overall upward pressure on natural
gas due to upcoming strong summer demand (ie. air conditioning needs in a
projected hot summer), high storage injections (ie. gas storage levels are
below last year) and the uncertainty associated with hurricane season. Over
the past 5 years, drilling for natural gas in Western Canada has comprised
approximately 70% of drilling activity and the better than expected commodity
price for natural gas experienced in the first quarter of 2007 combined with
the expected upward pricing pressure throughout the summer is supportive of
strong drilling activity in Western Canada throughout the remainder of 2007.
    Hyduke is well positioned to respond to this environment. With respect to
new build capital equipment revenue, which approximates 50% of overall Hyduke
revenue, we are well positioned to respond to reduced domestic orders with an
increasing presence in international markets. While it is expected that new
rig builds in Western Canada during 2007 will be significantly less than 2006
and 2005, Hyduke continues to work through a backlog that will take us into Q3
of this year. Additionally, our domestic customers have indicated that they
will be approaching their capital build programs from a longer-term
perspective and while the short-term uncertainties in commodity prices may
delay some projects, it will not cause them to be cancelled. Offsetting this
potential slowdown domestically, Hyduke continues to actively market its
products and services to international markets in Russia, South America, North
Africa, Middle East, Asia-Pacific and Cuba. Over the past two years, Hyduke's
international revenues have approximated 20% of total revenue and it is
expected that the volume and proportion of international revenue will increase
as we respond to international opportunities.
    The historically high levels of activity expected in 2007 will continue
to benefit Hyduke's repair and maintenance, inspections and certification, and
consumable businesses. These activity-based businesses comprise approximately
50% of overall Hyduke revenue, are less reliant on capital spending and are
not expected to experience any decline in 2007. We continue to increase our
market share through marketing our Life Cycle Management and Single Source
Supply platforms to our customers. These platforms benefit our customers by
offering continued support throughout the useful life of their equipment and
by offering a wide array of consistent, reliable services from a single
source.
    Hyduke continues to be confident that our strategic plan considers
current and expected market conditions and that continued growth and expansion
will be achieved throughout 2007.

    Forward-looking Statements

    This news release contains forward-looking statements based upon current
expectations that involve a number of business risks and uncertainties. These
business risks and uncertainties may cause actual results, events or
developments to be materially different from any future results, events or
developments expressed or implied by such forward looking statements.

    About Hyduke

    Hyduke is an integrated oilfield services company with over thirty years
experience in the manufacture, repair and distribution of oilfield equipment
and supplies in Canada and worldwide. Hyduke specializes in providing
customized, integrated solutions to the drilling and well service industries:

    
    -   Turn-Key Equipment - drilling rig and service rig packages including
        in-house design, engineering and drafting, major component
        procurement and overall project management
    -   Life Cycle Management - inspection, certification, service, repair
        and supply services throughout the operating life of the drilling or
        well service rig
    -   Single Source Supply - providing new capital equipment, repair and
        maintenance on existing capital equipment and supply of operating
        consumables
    

    Hyduke is headquartered in Nisku, Alberta and has facilities in Edmonton,
Calgary, Nisku, Red Deer and Lloydminster, Alberta.
    Hyduke operates in three industry segments. The Drilling Equipment
segment includes manufacture and repair of land based drilling rigs and
drilling rig structures, supply and repair of drilling rig equipment,
procurement and distribution of drilling supplies, supply and service of
pneumatic controls, engineering and design of drilling rigs and inspection and
certification of drilling rig equipment. The Well Service Equipment segment
includes manufacture and repair of well service rigs, mobile and skid mounted
pump units and other well service equipment, procurement and distribution of
well servicing supplies, supply and service of pneumatic controls, engineering
and design of well service rigs and inspection and certification of well
service equipment. The Other Oilfield Services segment includes manufacture
and distribution of cased hole and overburden drill bits and drilling systems,
custom and production machining services, and distribution and repair of
truck-mounted equipment including cranes, winches and dump boxes.

    TSX Venture Exchange has not reviewed and does not accept responsibility
    for the adequacy or accuracy of this News Release.





For further information:

For further information: Gordon R. McCormack, President and Chief
Executive Officer, (780) 955-0355; or Bob van Schaik, Investor Relations,
(780) 955-0355


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