Petrowest Energy Services Trust announces 2010 second quarter financial
results

CALGARY, Aug. 9 /CNW/ - Petrowest Energy Services Trust (TSX: PRW.UN) announced today its consolidated financial results for the three and six month periods ended June 30, 2010.

Revenue from continuing operations for the three months ended June 30, 2010, was $26.0 million, a 53% increase from revenue of $17.0 million in the comparable period of 2009. Gross margin and EBITDA margin percentages were 10% and 6% respectively, representing an increase of 22% and 26% over the comparable period of 2009. For the three month period ended June 30, 2010 the net loss and comprehensive loss from continuing operations was $5.5 million compared to $46.5 million in the comparable period of 2009. This represents net loss per unit of $0.16 and $1.41 respectively, basic and fully diluted. The net loss and comprehensive loss (including Discontinued Operations) was $5.5 million compared to $48.6 million in the comparable period of 2009. This represents net loss per unit of $0.16 and $1.48 respectively, basic and fully diluted.

Revenue from continuing operations for the six months ended June 30, 2010, was $61.8 million, a 12% increase from revenue of $55.1 million in the comparable period of 2009. Gross margin and EBITDA margin percentages were 14% and 12% respectively, representing an increae of 6% and 10% over the comparable period of 2009. For the six month period ended June 30, 2010 the net loss and comprehensive loss from continuing operations was $6.6 million compared to $45.8 million in the comparable period of 2009. This represents net loss per unit of $0.20 and $1.39 respectively, basic and fully diluted. The net loss and comprehensive loss (including Discontinued Operations) was $6.6 million compared to $53.3 million in the comparable period of 2009. This represents net loss per unit of $0.20 and $1.62 respectively, basic and fully diluted.

On June 29, 2010, pursuant to a public rights offering, the Trust issued an aggregate of 53,571,434 Trust units and 168,536 subordinated units at $0.14 per unit. The units issued pursuant to the rights offering were valued at $7,523,595 before issue costs of $1,043,099 (including $400,125 non-cash costs related to warrants). The Trust intends to utilize net proceeds of the rights offering to fund working capital requirements and daily operations, primarily fuel, salaries and operating lease payments.

The Trust's ability to continue operations is dependent on the continued support of the banking syndicate or the ability to refinance the existing bank credit facility. In the second quarter of 2010 the Trust and the banking syndicate executed the Credit Agreement. The Credit Agreement has a total commitment of $70.0 million, comprised of a $63.0 million syndicated facility and $7.0 million working capital facility. There are scheduled reductions and cancellations of commitments due June 30, 2010, September 30, 2010, and December 31, 2010 of $3.75 million on each date in addition to a further scheduled reduction of $2.5 million on March 31, 2011. As at June 30, 2010, after the scheduled reduction of $3.75 million there was a total commitment of $67.5 million, comprised of a $60.75 million syndicated facility and $6.75 million working capital facility ($1.2 million drawn June 30, 2010). The credit facility will have a total commitment of $57.5 million on the stated maturity date of April 30, 2011. The Credit Agreement contains two financial covenants, the "Funded debt to EBITDA Ratio" and the "Fixed Charge Coverage Ratio". As at June 30, 2010 the Trust was in compliance with these covenants. Under the Credit Agreement amounts outstanding bear interest at the prime rate plus 5.5.

    
    FINANCIAL HIGHLIGHTS

                                Three months ended       Six months ended
                                      June 30                 June 30
    -------------------------------------------------------------------------
    (thousands of dollars,
     except per unit amounts,
     margins and ratios)         2010        2009        2010        2009
    -------------------------------------------------------------------------
    Revenue from continuing
     operations                   26,037      17,003      61,793      55,139
    Gross margin from
     continuing operations(1)      2,560      (2,062)      8,691       4,577
    Gross margin percentage(1)       10%        (12%)        14%          8%
    General and administrative       883       1,409       2,441       3,257
    EBITDA from continuing
     operations(1)                 1,677      (3,471)      6,250       1,320
    EBITDA margin
     percentage(1)                    6%        (20%)        12%          2%
    Net loss and comprehensive
     loss from continuing
     operations                   (5,463)    (46,468)     (6,560)    (45,781)
    Discontinued operations,
     net of tax                        -      (2,170)        (45)     (7,503)
    Net loss and comprehensive
     loss                         (5,463)    (48,638)     (6,605)    (53,284)
    Cash provided from
     operating activities          1,032      (3,377)      2,266       7,280
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Units outstanding         86,686,228  32,946,308  86,686,228  32,946,308
    Weighted average units
     outstanding - basic      35,029,523  32,941,253  33,243,214  32,933,822
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) See "Non-GAAP Measures"
    

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 is continuing 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 and six months ended June 30, 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
                                                       June 30,  December 31,
    (In thousands of dollars)                             2010          2009
    -------------------------------------------------------------------------
    Assets
    Current assets
      Accounts receivable                               28,219        28,262
      Prepaid expenses and other                         2,979         2,158
      Inventory                                          4,086         3,984
      Assets related to discontinued operations             21           174
    -------------------------------------------------------------------------
                                                        35,305        34,578

    Property and equipment                              64,192        67,972
    Intangible assets                                    6,597         8,330
    -------------------------------------------------------------------------

                                                       106,094       110,880
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Current liabilities
      Bank overdraft                                     1,226           270
      Accounts payable and accrued liabilities          12,306        11,689
      Revolving bank term loan                          60,750        67,950
      Current portion of obligations under capital
       leases                                            1,067           544
      Liabilities related to discontinued operations         1            11
    -------------------------------------------------------------------------
                                                        75,350        80,464

    Obligations under capital leases                       804           331
    -------------------------------------------------------------------------
                                                        76,154        80,795
    Unitholders' Equity
    Units                                              298,978       292,498
    Warrants                                               400             -
    Contributed surplus                                    630         1,050
    Accumulated loss                                  (232,105)     (225,500)
    Accumulated distributions to unitholders           (37,963)      (37,963)
    -------------------------------------------------------------------------
                                                        29,940        30,085
    -------------------------------------------------------------------------

                                                       106,094       110,880
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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)    2010        2009        2010        2009
    -------------------------------------------------------------------------
    Revenue                       26,037      17,003      61,793      55,139

    Expenses
      Operating expenses          23,477      19,065      53,102      50,562
      General and administrative     883       1,409       2,441       3,257
      Interest                     2,444       1,312       3,307       2,339
      Amortization of
       property and equipment      3,673       5,261       7,791      10,283
      Amortization of intangible
       assets                        871         984       1,733       1,957
      Impairment of goodwill
       and intangible assets           -      35,446           -      35,446
    -------------------------------------------------------------------------

                                  31,348      63,477      68,374     103,844
    -------------------------------------------------------------------------

                                  (5,311)    (46,474)     (6,581)    (48,705)
    -------------------------------------------------------------------------
    Other income (loss)
      Gain (loss) on disposal
       of property and equipment    (154)          -          15         (19)
      Interest and other income        2           -           6           2
    -------------------------------------------------------------------------

    Net loss and comprehensive
     loss before taxes            (5,463)    (46,474)     (6,560)    (48,722)

    Future income tax recovery         -          (6)          -      (2,941)
    -------------------------------------------------------------------------

    Net loss and comprehensive
     loss from continuing
     operations                   (5,463)    (46,468)     (6,560)    (45,781)

    Discontinued operations,
     net of tax                        -      (2,170)        (45)     (7,503)
    -------------------------------------------------------------------------

    Net loss and comprehensive
     loss for the period          (5,463)    (48,638)     (6,605)    (53,284)
    -------------------------------------------------------------------------

    Accumulated loss -
     beginning of period        (226,642)   (170,916)   (225,500)   (166,270)
    -------------------------------------------------------------------------

    Accumulated loss - end of
     period                     (232,105)   (219,554)   (232,105)   (219,554)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per unit
      -basic and diluted from
       continuing operations      ($0.16)     ($1.41)     ($0.20)     ($1.39)
      -basic and diluted from
       discontinued operations     (0.00)      (0.07)      (0.00)      (0.23)
      -basic and diluted           (0.16)      (1.48)      (0.20)      (1.62)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Petrowest Energy Services Trust
    Consolidated Statements of Cash Flows
    -------------------------------------------------------------------------
    (Unaudited)

                                Three months ended       Six months ended
                                      June 30                 June 30
    -------------------------------------------------------------------------
    (In thousands of dollars)    2010        2009        2010        2009
    -------------------------------------------------------------------------
    Cash provided by (used in)

    Operating activities
    Net loss from continuing
     operations                   (5,463)    (46,468)     (6,560)    (45,781)
    Items not affecting cash
      Amortization of property
       and equipment               3,673       5,261       7,791      10,283
      Amortization of
       intangible assets             871         984       1,733       1,957
      Impairment of goodwill
       and intangible assets           -      35,446           -      35,446
      Unit-based compensation
       expense                      (548)        112        (420)        140
      Units issued for service         -           6           -           6
      Future income taxes
       (recovery)                      -          (6)          -      (2,941)
      (Gain) loss on disposal
       of property and equipment     154           -         (15)         19
    -------------------------------------------------------------------------
                                  (1,313)     (4,665)      2,529        (871)
    Changes in non-cash working
     capital
      Accounts receivable            877       4,010          43      15,986
      Prepaid expenses and other      13        (396)       (821)       (361)
      Inventory                      (15)        (94)       (102)       (337)
      Accounts payable and
       accrued liabilities         1,470      (2,232)        617      (7,137)
    -------------------------------------------------------------------------
                                   1,032      (3,377)      2,266       7,280
    -------------------------------------------------------------------------
    Financing activities
      Issuance of units            7,523           -       7,523           -
      Unit issue costs              (643)                   (643)
      Repayment of capital
       lease obligations            (302)       (150)       (592)       (319)
      Repayment of revolving
       term bank loan             (7,200)     (4,550)     (7,200)    (15,550)
    -------------------------------------------------------------------------
                                    (622)     (4,700)       (912)    (15,869)
    -------------------------------------------------------------------------
    Investing activities
      Purchase of property
       and equipment                (851)     (2,722)     (3,127)     (4,779)
      Proceeds on property and
       equipment disposals           502          16         719         328
      Purchase price adjustment        -           -           -           -
    -------------------------------------------------------------------------
                                    (349)     (2,706)     (2,408)     (4,451)
    -------------------------------------------------------------------------

    Net change in cash from
     continuing operations            61     (10,783)     (1,054)    (13,040)
    -------------------------------------------------------------------------

    Cash flow from discontinued
     operations
    Operating activities              69       1,407          98         116
    Financing activities               -          (7)          -         (10)
    Investing activities               -       5,927           -       5,794
    -------------------------------------------------------------------------
    Net change in cash from
     discontinued operations          69       7,327          98       5,900
    -------------------------------------------------------------------------
    Decrease in cash and cash
     equivalents                     130      (3,456)       (956)     (7,140)
    -------------------------------------------------------------------------
    Cash and cash equivalents
     (bank overdraft), beginning
     of period                    (1,356)     (1,336)       (270)      2,348
    -------------------------------------------------------------------------
    Cash and cash equivalents
     (bank overdraft), end of
     period                       (1,226)     (4,792)     (1,226)     (4,792)
    -------------------------------------------------------------------------
    Supplementary cash flow
     information
    Interest paid                  1,871       1,400       2,737       2,626
    -------------------------------------------------------------------------

    Non cash transactions
    Property and equipment
     financed by capital leases      266           -       1,588           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

Organization Profile

PETROWEST ENERGY SERVICES TRUST

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