IROC Energy Services Corp. announces second quarter 2009 results and management changes



    
    /THIS PRESS RELEASE IS NOT FOR DISSEMINATION IN UNITED STATES OR TO ANY
    UNITED STATES NEWS SERVICES/
    

    CALGARY, Aug. 10 /CNW/ - IROC Energy Services Corp. ("IROC" or the
"Company") (TSX: "ISC") announces the Company's financial results for the
three and six months ended June 30, 2009 and certain management changes.


    
    FINANCIAL HIGHLIGHTS
    --------------------

                                              For the 3 months ended June 30,
                                         ------------------------------------
                                          (Unaudited) (Unaudited)
                                                2009        2008    % Change
    -------------------------------------------------------------------------
    Revenue - continuing operations           $9,302     $10,154         -8%
    -------------------------------------------------------------------------
    Operating costs                            6,567       7,519        -13%
    -------------------------------------------------------------------------
    Gross margin                               2,735       2,635          4%
    Gross margin %                               29%         26%         12%
    -------------------------------------------------------------------------
    General and administrative expenses        2,159       2,150          0%
    -------------------------------------------------------------------------
    EBITDAS - continuing operations(1)           576         485         19%
    Per share diluted(1)                        0.01        0.01          0%
    -------------------------------------------------------------------------
    Net earnings (loss) - continuing
     operations                               (1,260)     (1,894)        33%
    Per share diluted                          (0.03)      (0.04)        25%
    -------------------------------------------------------------------------
    Net earnings (loss)                       (1,260)     (2,142)        41%
    Per share diluted                          (0.03)      (0.05)        40%
    -------------------------------------------------------------------------
    Number of shares outstanding
      Basic                               44,200,651  44,301,080          0%
      Diluted                             44,200,651  44,321,531          0%
    -------------------------------------------------------------------------


                                            For the six months ended June 30,
                                         ------------------------------------
                                          (Unaudited) (Unaudited)
                                                2009        2008    % Change
    -------------------------------------------------------------------------
    Revenue - continuing operations          $23,310     $29,674        -21%
    -------------------------------------------------------------------------
    Operating costs                           15,793      19,239        -18%
    -------------------------------------------------------------------------
    Gross margin                               7,517      10,435        -28%
    Gross margin %                               32%         35%         -9%
    -------------------------------------------------------------------------
    General and administrative expenses        4,360       4,036          8%
    -------------------------------------------------------------------------
    EBITDAS - continuing operations(1)         3,157       6,399        -51%
    Per share diluted(1)                        0.07        0.14        -50%
    -------------------------------------------------------------------------
    Net earnings (loss) - continuing
     operations                               (1,176)        256       -559%
    Per share diluted                          (0.03)       0.01       -560%
    -------------------------------------------------------------------------
    Net earnings (loss)                         (772)        595       -230%
    Per share diluted                          (0.02)       0.01       -230%
    -------------------------------------------------------------------------
    Number of shares outstanding
      Basic                               44,248,284  44,276,080          0%
      Diluted                             44,248,284  44,304,325          0%
    -------------------------------------------------------------------------

    (1) EBITDAS and EBITDAS per share are "NON-GAAP MEASURES". EBITDAS is
        defined as "earnings before interest, taxes, depreciation and
        amortization, stock-based compensation expense, foreign exchange
        gains and losses and gains or losses on disposal of property and
        equipment." EBITDAS and EBITDAS per share are not recognized measures
        under GAAP.

    Overview
    --------
    

    Despite the continued low activity levels in our industry during the
second quarter, IROC was able to achieve positive cash flow. However, the
continued downturn in activity has lead to substantial pricing pressure and
lower utilization in all oilfield related services, and so IROC's management
remains focused managing costs during this downturn in the cycle. As a result
of previous actions taken, including the appropriate asset rationalizations
and continued administrative cost cutting our balance sheet remains strong,
and therefore with our equipment still being the "best in class" we believe
our Company is well positioned to grow when opportunities present themselves.

    
    Highlights for the Quarter:
    ---------------------------

    -   IROC's revenue from continuing operations for the second quarter
        ended June 30, 2009 decreased 8%, from $10.2 million to $9.3 million
        compared to the same period in 2008. Revenue for the six months ended
        June 30, 2009 was $23.3 million compared to $29.7 million,
        representing a decrease of 21%. Although IROC had additional
        equipment capacity year over year from the service rig build program
        in the second half of fiscal 2008, additional revenue growth was
        hampered as a result of lower than expected utilization and
        competitive pressure on pricing. Activity levels were slightly higher
        in both Aero Rentals and Canada Tech divisions' year over year for
        the second quarter; however, the increases were not enough to offset
        the decline in our service rig segment during the quarter. All
        divisions on a year to date basis to the end of June 30, 2009 are
        lower than the previous year as a result of the significant reduction
        in demand for services brought about by the low commodity price
        environment.

    -   EBITDAS from continuing operations for the second quarter ended
        June 30, 2009 was $0.6 million or $0.01 per share, compared to
        0.5 million, or $0.01 per share, in the same period of 2008. For the
        six months ended June 30, 2009 EBITDAS was $3.2 million or $0.07 per
        share compared to $6.4 million or $0.14 per share in the same period
        of 2008, a decrease of 51%. EBITDAS for the second quarter of 2009
        was relatively flat compared to the same period of 2008 even though
        utilization and pricing were down year over year as result of
        continued focus on cost management and indefinite deferral on
        discretionary spending. EBITDAS for the six months decreased year
        over year mainly as a result of lower activity levels across the
        industry. Additionally, operating costs were higher as field
        personnel wages were increased in October 2008 at a time when the
        industry activity levels were reducing. In the past pricing to
        customers was increased to partially offset some of these higher
        costs and with the increased competitive environment and lower demand
        from customers, pricing increases were not achievable. Generally
        costs associated with field activities have not moved directionally
        with the lower demand environment despite best efforts of our people
        as there is a base line of costs necessary to operate. EBITDAS as a
        percentage of revenue was 13.5% and 21.6% for the six months ended
        June 30, 2009 and 2008, respectively.

    -   The Company had a net loss from continuing operations of
        $1.3 million, or loss of $0.03 per share, for the three months ended
        June 30, 2009 compared to a net loss of $1.9 million, or loss of
        $0.04 per share, for the comparable period for 2008. For the six
        months ended June 30, 2009 the Company had a net loss from continuing
        operations of $1.2 million, or a loss of $0.03 per share, compared to
        net earnings of $0.3 million, or $0.01 per share, for the same period
        of 2008. The improvement in earnings for the three month period is
        from lower interest costs as a result of reduced debt levels from the
        same period of 2008 as well an increase in the income tax recovery in
        the current quarter. The reduction in earnings for the six month
        period compared to 2008 is due to lower margins on its services and
        products as a result of lower utilization and lower prices in some
        cases and partially offset by lower interest costs for debt servicing
        due to significant debt reductions.

    -   On April 27, 2009 IROC's board of directors declared a semi-annual
        cash dividend on its common shares of three cents. The dividend was
        paid on May 21, 2009, to shareholders of record at the close of
        business on May 7, 2009. Over the past year months IROC has
        significantly reduced debt obligations through the strategic
        dispositions of three divisions. While the total proceeds from these
        dispositions were approximately $40-million, the dispositions did not
        significantly reduce the profitability or cash flow. Also, we expect
        to incur only minimal capital costs in the near term given the newer,
        high-quality assets in all our businesses. Management and the board
        believe our balance sheet is strong, ongoing cash flows are adequate
        and that pursuing a business model that includes paying a dividend in
        addition to funding accretive expansion over time is a prudent course
        of action. Accordingly, the board determined that it was appropriate
        to initiate a dividend for the benefit of our shareholders.

    -   On May 28, 2009 the Company renewed its credit facility with its
        syndicate of lenders. The renewal extends the revolving feature of
        the facility to May 29, 2010. Due to a significant increase in
        renewal and standby fees, management requested a decrease in the
        facility size from $75.5-million to $40-million. The credit facility
        has an accordion feature that allows the Company to increase the
        credit facility by $20-million at a future date, subject to certain
        terms and conditions. The $40 million credit facility consists of an
        extendible revolving operating credit facility of $10 million and an
        extendible revolving term facility of up to $30 million available to
        finance equipment purchases for organic growth and potential
        acquisitions.

    Eagle Well Servicing
    

    Eagle Well Servicing ("Eagle"), which comprises a significant portion of
the Drilling and Production Services segment, finished the second quarter of
2009 with a fleet of 36 service rigs. Eagle continued to increase its capacity
by completing the build of two previously announced service rigs during the
first quarter of 2009. Eagle's utilization during the second quarter of 2009
was approximately 25% compared to 36% utilization in the comparable period of
2008. Revenue per hour also decreased in the second quarter by $46 per hour or
6.7% from same period in 2008. Revenue generated from Eagle during the second
quarter of 2009 was $5.3 million compared to $6.9 million in the same period
of 2008, a decrease of 23%. For the six months ended June 30, 2009 revenue was
$15.8 million compared to $20.4 million in the same period of 2008, a decrease
of 23%. EBITDAS for the second quarter of 2009 from Eagle was $1 million
compared to $1.4 million in the same period of 2008, a decrease of 29%. For
the six months ended June 30, 2009 EBITDAS decreased to $4.4 million from $7
million in the same period of 2008, a decrease of 37%. EBITDAS was hampered by
higher variable operating costs primarily from the increase in field wage
costs implemented during the fourth quarter of 2008 based on recommended wage
increases by the CAODC and lower customer demand that lead to one of the
lowest historical utilization levels experienced.

    Aero Rentals

    Aero Rental Services ("Aero") provides rental equipment for surface
pressure control in drilling and workover operations and tubular handling
equipment in the workover, re-entry and completion areas. Aero's results are
affected by the level of drilling activity in the industry. During the second
quarter of 2009 Aero contributed revenue of $0.9 million compared to $0.6
million in the prior year period, an increase of 50%. Revenue for the six
months ended June 30, 2009 was flat at $2.3 million compared to $2.3 million
in the same period of 2008. Aero operating a breakeven on EBITDAS was for the
second quarter of 2009 compared to negative EBITDAS of $0.3 million in the
same period of 2008. EBITDAS for the six months ended June 30, 2009 was flat
at $0.3 million. Aero was significantly affected by the slower industry
activity during the first half of 2009 which resulted in equipment utilization
and pricing at lower levels than expected. The costs in this division are
somewhat fixed in nature and as such has led to lower EBITDAS for the periods
of low activity. Depending on activity levels, Aero should generate higher
gross margins as activity improves leading to better performance.

    Canada Tech

    Canada Tech is a developer, manufacturer and marketer of a wide line of
tools and systems that measure pressures and temperatures in the downhole and
surface environment of oil and gas wells. This segment generated revenue of
$3.1 million, or 33% of the Company's total consolidated revenue, for the
three months ended June 30, 2009, compared to $2.7 million or 27% of total
consolidated revenue for the comparable period of fiscal 2008. For the six
months ended June 30, 2009 revenue decreased to $5.3 million from $7 million
in 2008 a decrease of 25%. Product sales decreased year over year as Canada
Tech was affected by the slowdown in the oil and gas industry worldwide. In
the past year the Canada Tech division has focused significant efforts on
developing international market penetration. The international market
generally has longer lead times to complete the sales process as it is more
complex on all levels, including but not limited to bid processes, logistics
of delivery and collection of receivables. For the three months ended June 30,
2009, Canada Tech had positive EBITDAS of $0.6 million compared to positive
EBITDAS of $0.2 million in the same period of 2008, an increase of 200%.
EBITDAS for the six months ended June 30, 2009 was $0.4 million compared to $1
million in the same period of 2008, a decrease of 62%. The primary result of
decreased EBITDAS is attributable to the lower than expected product sales
volume year over year. The margin on products improved by approximately 10%
from the benefit of improved foreign exchange rates on our sales denominated
in US dollars offset by lower volume of sales to spread the same level of
fixed overhead costs leading to lower profitability in the quarter. Also
during the quarter we initiated cost reductions in a number of areas including
reduced head count and elimination of discretionary spending in a number of
areas to assist in improving profitability for the remainder of the year.

    
    Outlook
    -------
    

    The outlook for 2009 remains uncertain. The global economic crisis is
affecting all industries and the fall in oil and gas commodity pricing from
the highs seen in the third quarter of 2008 continue to have a significant
adverse affect on the oilfield service business. The conditions appear to have
hindered the ability for oil and gas producers to access debt or equity
markets to finance their operations. Most producers have substantially reduced
their spending for 2009 with a focus on balance sheet preservation and
matching spending with realistic cash flows. Increased spending by producers
are expected to begin again when producers see sustained periods of higher
natural gas and oil prices. Any positive change in commodity pricing will
positively affect our outlook with any movement in oil providing the most
immediate increase in utilization. The depressed utilization and competitive
pricing environment will likely continue through the remainder of 2009 and
potentially longer depending upon oil and gas prices.

    
    Management Changes
    ------------------
    

    IROC also announces that Mr. Kevin Howell has informed the Company of his
intention to pursue another career opportunity. As a result, Mr. Howell will
be stepping down from his role as Chief Financial Officer effective August 20,
2009. Mr. Alford, President and Chief Executive Officer of IROC said "on
behalf of the board of directors, management and staff, I would like to thank
Kevin for his efforts and we wish him all the success in his next endeavour".
A search is currently being conducted for Mr. Howells' replacement and it is
expected that an announcement will be forthcoming shortly regarding the new
incumbent.
    Publicly reported information for IROC Energy Services Corp. is available
at www.sedar.com.

    About IROC Energy Services Corp.

    IROC Energy Services Corp. is an Alberta oilfield services company that,
through the IROC Energy Services Partnership, provides a diverse range of
products, services and equipment to the oil and gas industry that are among
the newest and most innovative in the WCSB. IROC combines cutting-edge
technology with depth of experience to deliver a product and services offering
in three core areas: Well Servicing & Equipment, Downhole Temperature &
Pressure Monitoring Tools, and Rental Services. For more information on IROC
Energy Services Corp. visit our website at www.iroccorp.com.

    Cautionary Statements

    Certain statements contained in this press release may constitute forward
looking statements concerning, among other things, expected revenues, expected
expenses, profits, developments and strategies for IROC's operations all of
which are subject to certain risks, uncertainties and assumptions. These
forward looking statements are identified by their use of terms and phrases
such as "anticipate", "continue", "estimate", "expect", "may", "will",
"projected", "should", "believe" and other similar terms and phrases. By its
nature, such forward looking information involves known and unknown risks,
uncertainties and other factors that may cause actual results or events to
differ materially from those anticipated in such forward looking statements.
These risks include, but are not limited, to the risks associated with the oil
and gas industry generally, fluctuating prices in crude oil and natural gas,
changes in drilling activity, general global economic, political and business
conditions, weather conditions, regulatory changes and availability of
products, qualified personnel and manufacturing capacity and raw materials. If
any of these uncertainties materialize, or if assumptions are incorrect actual
results may vary materially from those expected. IROC relies on litigation
protection for any forward looking statements.

    This press release is not for dissemination in United States or to any
United States news services. The Common Shares of IROC have not and will not
be registered on the United States Securities Act of 1933, as amended (the
"United States Securities Act") or any state securities laws and are not
offered or sold in the United States or to any US person except in certain
transactions exempt from the registration requirements of the United States
Securities Act and applicable state securities laws.





For further information:

For further information: IROC Energy Services Corp., Mr. Thomas M.
Alford, President and CEO, Telephone: (403) 263-1110, email:
investorrelations@iroccorp.com

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IROC Energy Services Corp.

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