Petrowest Energy Services Trust announces 2010 first quarter financial
results

CALGARY, May 14 /CNW/ - Petrowest Energy Services Trust (TSX: PRW.UN) announced today its consolidated financial results for the three months ended March 31, 2010.

Revenue from continuing operations for the three months ended March 31, 2010, was $35.8 million, a 6% decrease from revenue of $38.1 million in the comparable period of 2009. Gross margin and EBITDA margin percentages were in line with the comparable period of 2009. For the three month period ended March 31, 2010 the net earnings (loss) and comprehensive earnings (loss) from continuing operations was $(1.1) million compared to $0.7 million in 2009. For the three month period ended March 31, 2010 the net loss and comprehensive loss (including Discontinued Operations) was $1.1 million compared to $4.6 million in 2009. This represents net loss per unit of $0.03 and $0.14 respectively, basic and fully diluted.

On May 12, 2010 the Trust filed a preliminary short form prospectus (the "Offering") with the applicable securities regulatory authorities. The prospectus was for the offering and distribution of rights to subscribe for trust units of the Trust to raise a minimum of $7.5 million. On May 12, 2010 The Trust entered into a Standby Purchase Agreement with PetroCorp Group Inc. and seven other individual purchasers (the "Standby Purchasers") whereby the Standby Purchasers agreed to purchase all of the trust units not otherwise purchased pursuant to the Offering. The Offering remains subject to regulatory approval, including the receipt for a final prospectus relating to the Offering and that of the Toronto Stock Exchange. The Offering is conditional upon the entering into of an agreement by the Trust with the banking syndicate.

As at March 31, 2010, $69.3 million was outstanding under the Trust's revolving bank term loan (including bank overdraft). The Trust has substantially concluded negotiations with respect to the amendments to its existing secured credit facilities with the banking syndicate. These amendments remain subject to final approval by the syndicate and the execution of an amended and restated credit agreement. The Trust expects that such amended credit facilities will be in an initial aggregate principal amount of $70.0 million, consisting of a revolving credit facility in the principal amount of $63.0 million and a working capital facility in the principal amount of $7.0 million. The Trust has filed a preliminary short form prospectus with the applicable securities regulatory authorities to raise a minimum of $7.5 million through an offering and distribution of rights to subscribe for trust units of the Trust. Failure to raise proceeds of $7.5 million under the Offering is expected to be an event of default under the amended and restated credit agreement.

FINANCIAL HIGHLIGHTS

    
                                                 Three months ended March 31
    -------------------------------------------------------------------------
    (thousands of dollars, except per
     unit amounts, margins and ratios)                    2010          2009
    -------------------------------------------------------------------------
    Revenue from continuing operations                  35,756        38,137
    Gross margin from continuing operations(1)           6,131         6,640
    Gross margin percentage(1)                             17%           17%
    General and administrative                           1,558         1,848
    EBITDA from continuing operations(1)                 4,573         4,792
    EBITDA margin percentage(1)                            13%           13%
    Net earnings (loss) and comprehensive earnings
     (loss) from continuing operations                  (1,097)          688
    Discontinued operations, net of tax                    (45)       (5,334)
    Net loss and comprehensive loss                     (1,142)       (4,646)
    Cash provided from operating activities              1,234        10,657
    -------------------------------------------------------------------------
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    Units outstanding                               32,946,308    32,926,308
    Weighted average units outstanding - basic      32,946,308    32,926,308
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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 the bidding process with increased number of parties providing bids. The Construction segment, which comprised 44% of the Trust's consolidated revenue in 2010 has less non-energy related activities compared to other business segments, with 88% of activities directly relating to the energy sector during the three months ended March 31, 2010 compared to 96% in the comparable period of 2009.

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. The amount of the Trust's services directly 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 2010 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 months ended March 31, 2010 is attached below. This information should be read in conjunction with the audited consolidated financial statements for the twelve months ended December 31, 2009 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
                                                      March 31,  December 31,
    (In thousands of dollars)                             2010          2009
    -------------------------------------------------------------------------
    Assets

    Current assets
      Accounts receivable                               29,096        28,262
      Prepaid expenses and other                         2,992         2,158
      Inventory                                          4,071         3,984
      Assets related to discontinued operations             90           174
    -------------------------------------------------------------------------
                                                        36,249        34,578

    Property and equipment                              67,404        67,972
    Intangible assets                                    7,468         8,330
    -------------------------------------------------------------------------

                                                       111,121       110,880
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Current liabilities
      Bank overdraft                                     1,356           270
      Accounts payable and accrued liabilities          10,836        11,689
      Revolving bank term loan                          67,950        67,950
      Current portion of obligations under
       capital leases                                    1,117           544
      Liabilities related to discontinued operations         1            11
    -------------------------------------------------------------------------
                                                        81,260        80,464

    Obligations under capital leases                       790           331
    -------------------------------------------------------------------------
                                                        82,050        80,795

    Unitholders' Equity
    Units                                              292,498       292,498
    Contributed surplus                                  1,178         1,050
    Accumulated loss                                  (226,642)     (225,500)
    Accumulated distributions to unitholders           (37,963)      (37,963)
    -------------------------------------------------------------------------
                                                        29,071        30,085
    -------------------------------------------------------------------------

                                                       111,121       110,880
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Petrowest Energy Services Trust
    Consolidated Statements of Loss, Comprehensive Loss and Accumulated Loss
    -------------------------------------------------------------------------
    (Unaudited)

                                                          Three months ended
                                                               March 31
    -------------------------------------------------------------------------
    (In thousands of dollars,
     except per unit amounts)                             2010          2009
    -------------------------------------------------------------------------

    Revenue                                             35,756        38,137

    Expenses
      Operating expenses                                29,625        31,497
      General and administrative                         1,558         1,848
      Interest                                             863         1,027
      Amortization of property and equipment             4,118         5,022
      Amortization of intangible assets                    862           973
    -------------------------------------------------------------------------

                                                        37,026        40,367
    -------------------------------------------------------------------------

                                                        (1,270)       (2,230)
    -------------------------------------------------------------------------
    Other income (loss)
      Gain (loss) on disposal of property
       and equipment                                       169           (19)
      Interest and other income                              4             2
    -------------------------------------------------------------------------

    Net loss and comprehensive loss before taxes        (1,097)       (2,247)

    Future income tax recovery                               -        (2,935)
    -------------------------------------------------------------------------

    Net earnings (loss) and comprehensive
     earnings (loss)                                    (1,097)          688

    Discontinued operations, net of tax                    (45)       (5,334)
    -------------------------------------------------------------------------

    Net loss and comprehensive loss                     (1,142)       (4,646)
    -------------------------------------------------------------------------

    Accumulated loss - beginning of period            (225,500)     (166,270)
    -------------------------------------------------------------------------

    Accumulated loss - end of period                  (226,642)     (170,916)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per unit
      - basic and diluted from continuing
         operations                                     $(0.03)        $0.02
      - basic and diluted from discontinued
         operations                                      (0.00)        (0.16)
      - basic and diluted                                (0.03)        (0.14)
    -------------------------------------------------------------------------
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    Petrowest Energy Services Trust
    Consolidated Statements of Cash Flows
    -------------------------------------------------------------------------
    (Unaudited)

                                                          Three months ended
                                                               March 31
    -------------------------------------------------------------------------
    (In thousands of dollars)                             2010          2009
    -------------------------------------------------------------------------

    Cash provided by (used in)

    Operating activities
    Net earnings (loss) from continuing operations      (1,097)          688
    Items not affecting cash
      Amortization of property and equipment             4,118         5,022
      Amortization of intangible assets                    862           973
      Unit-based compensation expense                      128            28
      Future income tax recovery                             -        (2,935)
      (Gain) loss on disposal of property
       and equipment                                      (169)           19
    -------------------------------------------------------------------------
                                                         3,842         3,795
    Changes in non-cash working capital
      Accounts receivable                                 (834)       11,976
      Prepaid expenses and other                          (834)           34
      Inventory                                            (87)         (243)
      Accounts payable and accrued liabilities            (853)       (4,905)
    -------------------------------------------------------------------------
                                                         1,234        10,657
    -------------------------------------------------------------------------
    Financing activities
      Repayment of capital lease obligations              (290)         (169)
      Repayment of revolving term bank loan                  -       (11,000)
    -------------------------------------------------------------------------
                                                          (290)      (11,169)
    -------------------------------------------------------------------------
    Investing activities
      Purchase of property and equipment                (2,276)       (1,813)
      Proceeds on property and equipment disposals         217            68
    -------------------------------------------------------------------------
                                                        (2,059)       (1,745)
    -------------------------------------------------------------------------

    Net change in cash from continuing operations       (1,115)       (2,257)
    -------------------------------------------------------------------------

    Cash flow from discontinued operations
    Operating activities                                    29        (1,291)
    Financing activities                                     -            (3)
    Investing activities                                     -          (133)
    -------------------------------------------------------------------------
    Net change in cash from discontinued operations         29        (1,427)
    -------------------------------------------------------------------------
    Decrease in cash and cash equivalents               (1,086)       (3,684)
    -------------------------------------------------------------------------
    Cash and cash equivalents (bank overdraft),
     beginning of period                                  (270)        2,348
    -------------------------------------------------------------------------
    Bank overdraft, end of period                       (1,356)       (1,336)
    -------------------------------------------------------------------------

    Supplementary cash flow information
    Interest paid                                          866         1,225
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Non cash transactions
    Property and equipment financed by capital leases    1,322             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE PETROWEST ENERGY SERVICES TRUST

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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