Petrowest Energy Services Trust announces 2009 second quarter financial results



    CALGARY, Aug. 13 /CNW/ - Petrowest Energy Services Trust (TSX: PRW.UN)
announced today its interim consolidated financial results for the three and
six month periods ended June 30, 2009.
    Consolidated revenue from continuing operations for the three months
ended June 30, 2009 was $17.0 million, a 48% decrease over consolidated
revenue from continuing operations of $32.8 million in the comparable period
of 2008. Gross margin and EBITDA percentages both decreased significantly
compared to the comparable period of 2008. During the quarter a $35.4 million
impairment relating to goodwill ($34.3 million) and intangible assets ($1.1
million) was recorded, as management of the Trust determined the carrying
values of goodwill and intangible assets exceeded their estimated fair values.
On May 14, 2009 the Trust closed the sale of certain under-performing rig
mobilization and demobilization assets in the Transportation sector. For the
three months ended June 30, 2009 the net loss from these discontinued
operations was $2.2 million compared to a loss of $1.6 million in the
comparable period of 2008. As at June 30, 2009 the revolving bank term loan
(including bank overdraft) was $72.7 million, a reduction of $8.4 million from
the $81.1 million of net debt as at December 31, 2008 and a reduction of $20.6
million since September 30, 2008. During the second quarter of 2009 there was
a $3.8 million reduction in working capital after adjusting for net debt. The
Trust obtained waivers from the bank syndicate for three financial covenants
contained in the credit facility until September 25, 2009.
    Consolidated revenue from continuing operations for the six months ended
June 30, 2009 was $55.1 million, a decrease of 35% over consolidated revenue
from continuing operations of $84.6 million in the comparable period of 2008.
Gross margin and EBITDA percentages decreased by 11% and 12% respectively
compared to 2008. For the six months ended June 30, 2009 the net loss from
discontinued operations was $7.5 million compared to a loss of $1.3 million in
the comparable period of 2008.
    Ralph Hesje, President and Chief Executive Officer of the Trust stated
that "the second quarter financial results continue to reflect the
significantly reduced activity in the energy sector. While oil prices
strengthened during the quarter, the price of natural gas deteriorated
further. With spring break-up the financial results for the second quarter are
typically the lowest of the year. However, margins were negative during the
quarter as a result of revenue decreases exceeding cost reductions in addition
to continuing pricing pressures from customers and reduced equipment
utilization rates. We are effecting further cost cutting measures and pursuant
to the press release issued on July 27, 2009, the Trust is reviewing all
available strategic and financial restructuring options."

    
    FINANCIAL HIGHLIGHTS

    Financial Summary

                                  Three months ended       Six months ended
                                        June 30                June 30
    -------------------------------------------------------------------------
    (thousands of dollars,
     except per unit amounts,
     margins and ratios)            2009        2008        2009        2008
    -------------------------------------------------------------------------
    Revenue from
     continuing operations        17,003      32,834      55,139      84,603
    Gross margin from
     continuing operations(1)     (2,062)      4,230       4,577      16,002
    Gross margin percentage(1)      (12%)        13%          8%         19%
    General and administrative     1,409       1,698       3,257       3,752
    EBITDA from
     continuing operations(1)     (3,471)      2,532       1,320      12,250
    EBITDA margin percentage(1)     (20%)         8%          2%         14%
    Net loss and
     comprehensive loss from
     continuing operations       (46,468)     (9,595)    (45,781)     (9,563)
    Discontinued operations,
     net of tax                   (2,170)     (1,628)     (7,503)     (1,275)
    Net loss and
     comprehensive loss          (48,638)    (11,223)    (53,284)    (10,838)
    Cash provided from
     operating activities         (3,377)      2,872       7,280       2,082
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total units outstanding   32,946,308  33,266,308  32,946,308  33,266,308
    Weighted average units
     outstanding - basic      32,941,253  33,266,308  32,933,822  33,266,308
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) See "Non-GAAP Measures" in Trust's MD&A (available at www.sedar.com)
    

    The Trust continues to focus on diversification into industrial and civil
infrastructure activities. This diversification objective has had limited
success due to pricing pressures in bidding processes with numerous parties
providing bids. On April 7, 2009, the Government of Alberta released its 2009
budget (the "Budget"). The Budget included $23.2 billion of infrastructure
projects over the next three years. These infrastructure projects will not
only assist in stimulation of the economy, but will provide Albertans with
jobs. Included in the capital plan is $5.8 billion for provincial highway
networks.
    The oil and natural gas drilling sector will continue to impact the
Trust's operations and financial results and will remain an important part of
the Trust's operations going forward. However, infrastructure project demand
is expected to be strong over the next couple of years as a result of
government stimulus packages, with more of the Trust's activities and
resources anticipated to be focused and deployed in this area during the
summer construction season. The amount of the Trust's services relating to the
oil and gas sector will fluctuate as the activity in this sector changes in
addition to the amount of non-oil and gas related projects which the Trust is
successful in securing. The Trust continued to pursue geographic
diversification in 2009 with redeployment of equipment and skilled personnel
to capitalize on demand in nearby regions plus improving utilization rates and
financial results. With the shift in the North American natural gas markets
towards unconventional shale gas basins, the Trust has moved quickly to
position itself in two of North America's premier shale gas plays. The Trust
has opened a full service office and maintenance facility in Fort Nelson and
increased marketing emphasis in the northeastern British Columbia emerging
Horn River and Montney shale gas plays. Petrowest has also undertaken a
strategy to expand its presence in the oil sands mining sector by appointing a
Divisional vice president and by securing office and industrial space in Fort
McMurray. This sector represents the largest area of potential growth for the
Trust.

    SELECTED FINANCIAL INFORMATION

    Selected financial information for the three and six month periods ended
June 30, 2009 and 2008 is attached below. This information should be read in
conjunction with the audited consolidated financial statements for the twelve
months ended December 31, 2008 and the Trust's Management, Discussion and
Analysis, available under the Trust's profile on the SEDAR website at
www.sedar.com.

    FORWARD LOOKING INFORMATION

    This news release contains forward-looking statements that involve
substantial known and unknown risks and uncertainties. These forward-looking
statements are identified by their use of terms and phrases such as
"anticipate," "achievable," "believe," "expect," "estimate," "plan," "intend,"
"project," "may," "should", "could", "predict", "may," "will," or similar
words suggesting future outcomes or language suggesting an outlook.
Forward-looking statements and information are based on Petrowest's current
beliefs as well as assumptions made by and information currently available to
Petrowest concerning anticipated business performance. Although management of
Petrowest considers these assumptions to be reasonable based on information
currently available to it, they may prove to be incorrect. Forward-looking
statements are subject to many external variables that are beyond Petrowest's
control, such as fluctuating prices for crude oil and natural gas, changes in
drilling activity, and general local and global economic, political, business
and weather conditions. If any of these, or other uncertainties, materialize
the actual results of Petrowest may vary materially from those expected.

    
    Petrowest Energy Services Trust
    Consolidated Balance Sheets
    -------------------------------------------------------------------------
    (Unaudited)

                                                         As at         As at
                                                       June 30,  December 31,
    (In thousands of dollars)                             2009          2008
    -------------------------------------------------------------------------
    Assets
    Current assets
      Cash and cash equivalents                              -         2,348
      Accounts receivable                               28,320        44,306
      Prepaid expenses and other                         1,444         1,083
      Inventory                                          4,832         4,495
      Assets related to discontinued operations            666         4,549
    -------------------------------------------------------------------------
                                                        35,262        56,781

    Property and equipment                              81,780        87,636
    Intangible assets                                   10,319        13,402
    Goodwill                                                 -        34,321
    Future income taxes                                    734           727
    Assets held for sale                                     -        11,880
    -------------------------------------------------------------------------

                                                       128,095       204,747
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Current liabilities
      Bank overdraft                                     4,792             -
      Accounts payable and accrued liabilities           8,781        15,918
      Revolving bank term loan                          67,950        83,500
      Current portion of obligations
       under capital leases                                600           651
      Liabilities related to discontinued operations        81         2,447
    -------------------------------------------------------------------------
                                                        82,204       102,516

    Obligations under capital leases                       606           874
    Future income taxes                                  9,529        12,463
    -------------------------------------------------------------------------
                                                        92,339       115,853
    Unitholders' Equity
    Units                                              292,498       292,492
    Contributed surplus                                    775           635
    Accumulated loss                                  (219,554)     (166,270)
    Accumulated distributions to unitholders           (37,963)      (37,963)
    -------------------------------------------------------------------------
                                                        35,756        88,894
    -------------------------------------------------------------------------

                                                       128,095       204,747
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Petrowest Energy Services Trust
    Consolidated Statements of Loss, Comprehensive Loss and Accumulated Loss
    -------------------------------------------------------------------------
    (Unaudited)
                                  Three months ended       Six months ended
                                        June 30                June 30
    -------------------------------------------------------------------------
    (In thousands of dollars,
     except per unit amounts)       2009        2008        2009        2008
    -------------------------------------------------------------------------

    Revenue                       17,003      32,834      55,139      84,603

    Expenses
      Operating expenses          19,065      28,604      50,562      68,601
      General and administrative   1,409       1,698       3,257       3,752
      Interest                     1,312       1,509       2,339       3,444
      Amortization of property
       and equipment               5,261       6,405      10,283      12,766
      Amortization of
       intangible assets             984       1,210       1,957       2,421
      Impairment of goodwill
       and intangible assets      35,446       1,874      35,446       1,874
    -------------------------------------------------------------------------

                                  63,477      41,300     103,844      92,858
    -------------------------------------------------------------------------

                                 (46,474)     (8,466)    (48,705)     (8,255)
    -------------------------------------------------------------------------
    Other income (loss)
      Loss on disposal of
       property and equipment          -      (2,097)        (19)     (2,135)
      Interest and other income        -          34           2          10
    -------------------------------------------------------------------------

    Net loss and comprehensive
     loss before taxes           (46,474)    (10,529)    (48,722)    (10,380)

    Future income tax
     expense (recovery)               (6)       (934)     (2,941)       (817)
    -------------------------------------------------------------------------

    Net loss and comprehensive
     loss from continuing
     operations                  (46,468)     (9,595)    (45,781)     (9,563)

    Discontinued operations,
     net of tax                   (2,170)     (1,628)     (7,503)     (1,275)
    -------------------------------------------------------------------------

    Net loss and comprehensive
     loss for the period         (48,638)    (11,223)    (53,284)    (10,838)
    -------------------------------------------------------------------------

    Accumulated loss -
     beginning of period        (170,916)   (133,309)   (166,270)   (133,694)
    -------------------------------------------------------------------------

    Accumulated loss -
     end of period              (219,554)   (144,532)   (219,554)   (144,532)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per unit
      -basic and diluted from
        continuing operations     ($1.41)     ($0.29)     ($1.39)     ($0.29)
      -basic and diluted from
        discontinued operations    (0.07)      (0.05)      (0.23)      (0.04)
      -basic and diluted           (1.48)      (0.34)      (1.62)      (0.33)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Petrowest Energy Services Trust
    Consolidated Statements of Cash Flows
    -------------------------------------------------------------------------
    (Unaudited)
                                  Three months ended       Six months ended
                                        June 30                June 30
    -------------------------------------------------------------------------
    (In thousands of dollars)       2009        2008        2009        2008
    -------------------------------------------------------------------------

    Cash provided by (used in)

    Operating activities
    Net loss from continued
     operations                  (46,468)     (9,595)    (45,781)     (9,563)
    Items not affecting cash
      Amortization of
       property and equipment      5,261       6,405      10,283      12,766
      Amortization of
       intangible assets             984       1,210       1,957       2,421
      Impairment of goodwill
       and intangible assets      35,446       1,874      35,446       1,874
      Unit-based compensation
       expense                       112         143         140         143
      Units issued for service         6           -           6           -
      Future income taxes
       (recovery)                     (6)       (934)     (2,941)       (817)
      Loss on disposal of
       property and equipment          -       2,097          19       2,135
    -------------------------------------------------------------------------
                                  (4,665)      1,200        (871)      8,959
    Changes in non-cash working
     capital
      Accounts receivable          4,010       3,645      15,986        (864)
      Prepaid expenses and other    (396)        (42)       (361)        728
      Inventory                      (94)        583        (337)      1,265
      Accounts payable and
       accrued liabilities        (2,232)     (2,514)     (7,137)     (8,006)
    -------------------------------------------------------------------------
                                  (3,377)      2,872       7,280       2,082
    -------------------------------------------------------------------------
    Financing activities
      Unitholder distributions         -           -           -        (953)
      Repayment of capital
       lease obligations            (150)       (147)       (319)       (338)
      Proceeds from revolving
       term bank loan                  -           -           -       5,000
      Repayment of revolving
       term bank loan             (4,550)          -     (15,550)          -
    -------------------------------------------------------------------------
                                  (4,700)       (147)    (15,869)      3,709
    -------------------------------------------------------------------------
    Investing activities
      Purchase of property
       and equipment              (2,722)     (2,465)     (4,779)     (6,983)
      Proceeds on property
       and equipment disposals        16       2,615         328       2,731
      Purchase price adjustment        -         (34)          -         (25)
    -------------------------------------------------------------------------
                                  (2,706)        116      (4,451)     (4,277)
    -------------------------------------------------------------------------

    Net change in cash from
     continuing operations       (10,783)      2,841     (13,040)      1,514
    -------------------------------------------------------------------------

    Cash flow from discontinued
     operations
    Operating activities           1,407      (2,866)        116      (1,789)
    Financing activities              (7)         (3)        (10)         (5)
    Investing activities           5,927        (665)      5,794        (923)
    -------------------------------------------------------------------------
    Net change in cash from
     discontinued operations       7,327      (3,534)      5,900      (2,717)
    -------------------------------------------------------------------------
    Decrease in cash and
     cash equivalents             (3,456)       (693)     (7,140)     (1,203)
    -------------------------------------------------------------------------
    Cash and cash equivalents
     (bank overdraft),
     beginning of period          (1,336)       (295)      2,348         215
    -------------------------------------------------------------------------
    Cash and cash equivalents
     (bank overdraft),
     end of period                (4,792)       (988)     (4,792)       (988)
    -------------------------------------------------------------------------

    Supplementary cash flow
     information
    Interest paid                  1,400       1,770       2,626       3,499
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Non cash transactions
    Property and equipment
     financed by capital leases        -         231           -         593
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Ralph Hesje, President and CEO, or Lloyd A.
Wiggins, Chief Financial Officer, at (403) 237-0881 or info@petro-west.com

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PETROWEST ENERGY SERVICES TRUST

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