Petrowest Energy Services Trust announces second quarter and first six months financial results for 2008



    CALGARY, Aug. 13 /CNW/ - Petrowest Energy Services Trust (TSX: PRW.UN)
announced today its interim consolidated financial results for the second
quarter ended June 30, 2008. The interim consolidated financial results of the
Trust for the second quarter of 2008 reflect the current activity in the oil
and gas drilling sector, which is below the 2007 levels, and continued
pressure on margins.

    
    FINANCIAL HIGHLIGHTS

    Financial Summary

                                             Three months       Six months
                                             ended June 30     ended June 30
    (thousands)                              2008     2007     2008     2007
    -------------------------------------------------------------------------

    Revenue                                35,128   27,134   94,167   59,997
    Gross Margin(1)                         3,434    2,666   16,284   10,183
    Gross Margin Percentage(1)                10%      10%      17%      17%
    EBITDA(1)                               1,736    1,028   12,532    6,854
    EBITDA Percentage(1)                       5%       4%      13%      11%
    Cash provided from operating
     activities                                 6    1,792      293       64
    Net loss                              (11,223) (21,071) (10,838) (23,296)
    -------------------------------------------------------------------------
    Distributions declared                      -    9,364        -   17,847
    Total units outstanding                33,266   32,730   33,266   32,730
    Weighted average units outstanding     33,266   30,356   33,266   29,321
    -------------------------------------------------------------------------
     (1) See "Non-GAAP Measures" in Trust's interim MD&A (available at
         www.sedar.com)
    

    Consolidated revenue for the three months ended June 30, 2008 was
$35.1 million, a 30% increase over revenue of $27.1 million in the comparable
period of 2007. Included in these financial results is a full quarter of
revenue from the companies acquired in May 2007. The comparable period of 2007
contains 44 days of results for these companies. On a proforma basis
consolidated revenue for the three months ended June 30, 2008 increased 11%
over the comparable period of 2007. The gross margin percentage and EBITDA
percentage were both comparable between the second quarters of 2008 and 2007
and continue to be affected by lower equipment utilization, pricing pressures
and increasing costs which have not been fully passed on to the Trust's
customers.
    The revenue growth during the quarter was solid with a continued focus on
improving the margins. There were some positive events during the second
quarter which affected the energy sector in general and impacted the Trust.
The increase in the price of natural gas has been instrumental in maintaining
drilling activity at least close to 2007 levels. The amount of services
provided by the Trust to the energy sector was at a historical low due
primarily to the increased capacity in our civil segment. The Trust continues
to actively pursue civil infrastructure projects in our civil and construction
segments with the continued objective of diversification.

    OUTLOOK

    For 2008, the Canadian Association of Oilwell Drilling Contractors
("CAODC") was forecasting a 28% decrease in wells to be drilled in the western
Canadian sedimentary basin ("WCSB") from the 2007 level. In addition, CAODC
forecast lower utilization rates of drilling rigs at 34% for the year compared
to 38% in 2007. With approximately 45% of the Trust's services relating to the
energy sector for the first six months of 2008, the activity levels in the
sector do have a significant effect on the Trust and its financial results.
    During the three months ended June 30, 2008, there were 3,148 wells
completed in western Canada compared to 3,232 in the comparable period in 2007
which represented a decrease of 3%. For the six month period ended June 30,
2008, there were 8,134 wells completed in western Canada compared to 9,822 in
the comparable period of 2007, which represents a decrease of 17%. This
decrease was significantly lower than the average annual forecasted decrease
of 28%. Rig utilization for the six months ended June 30, 2008 was 42% which
is in line with the utilization in the comparable period of 2007. British
Columbia, Saskatchewan and Manitoba all experienced increased utilization. The
continued strength of the natural gas price during the first six months of
2008 has also been a positive for sector fundamentals. The increased price of
natural gas is mitigated to a degree by increased cost pressures such as those
related to the shortage of labour. On April 23, 2008 the Petroleum Services
Association of Canada ("PSAC") revised its forecast for 2008 to 16,500 wells
to be drilled in Canada, up from the previous forecast of 14,500 wells, which
is still below 2007 actual levels. This revised PSAC forecast was reconfirmed
in the third quarter update released on July 25, 2008. On April 10, 2008 the
Alberta Government introduced two new royalty programs to encourage the
development of deep drilling for oil and gas, which provided some clarity on
the royalty rates which will be applicable in 2009. All of these announcements
have contributed to stability and increased drilling activity and the
improvement of the economics and resultant activity of deep drilling. The
Trust currently has capacity which will be available to generate cash flow
when the oil and gas sector demand improves.
    The Trust continues to focus on industrial and civil infrastructure
activities. The 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 with more of the
Trust's activities and resources anticipated to be focused and deployed in
this area. 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 with
redeployment of equipment and skilled personnel to capitalize on demand in
nearby regions plus improving utilization rates and financial results.

    SELECTED FINANCIAL INFORMATION

    Selected financial information for the three and six month periods ended
June 30, 2008 and 2007 is attached below. This information should be read in
conjunction with the unaudited consolidated financial statements for the three
and six months ended June 30, 2008 and the Trust's interim Management,
Discussion and Analysis, available under the Trust's profile on the SEDAR
website at www.sedar.com and at www.petro-west.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)                              2008         2007
    -------------------------------------------------------------------------

    Assets
    Current assets
      Cash and cash equivalents                               -          215
      Accounts receivable                                47,338       44,281
      Prepaid expenses and other                          1,418        1,906
      Inventory                                           5,464        5,800
    -------------------------------------------------------------------------
                                                         54,220       52,202

    Property and equipment                              107,786      118,441
    Intangible assets                                    20,174       24,502
    Goodwill                                             49,371       49,402
    Future income taxes                                     913          698
    -------------------------------------------------------------------------

                                                        232,464      245,245
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Current liabilities
      Bank overdraft                                        988            -
      Accounts payable and accrued liabilities           22,062       28,775
      Distributions payable                                   -          953
      Current portion of revolving bank term loan        14,500            -
      Current portion of obligations under capital
       leases                                               585          489
    -------------------------------------------------------------------------
                                                         38,135       30,217

    Obligations under capital leases                        951          797
    Revolving bank term loan                             72,500       82,000
    Future income taxes                                  10,137       10,739
    -------------------------------------------------------------------------
                                                        121,723      123,753

    Unitholders' Equity
    Units                                               292,823      292,879
    Warrants                                                  -          270
    Contributed surplus                                     413            -
    Accumulated loss                                   (144,532)    (133,694)
    Accumulated distributions to unitholders            (37,963)     (37,963)
    -------------------------------------------------------------------------
                                                        110,741      121,492
    -------------------------------------------------------------------------

                                                        232,464      245,245
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                     Three months ended     Six months ended
                                          June 30               June 30
    -------------------------------------------------------------------------
    (In thousands of dollars,
     except per unit amounts)          2008       2007       2008       2007
    -------------------------------------------------------------------------

    Revenue                          35,128     27,134     94,167     59,997

    Expenses
      Operating expenses             31,694     24,468     77,883     49,814
      General and administrative      1,698      1,638      3,752      3,329
      Interest                        1,510      1,102      3,446      1,646
      Amortization of property
       and equipment                  7,134      6,620     14,203     11,751
      Amortization of intangible
       assets                         1,227      2,517      2,454      4,697
      Impairment of intangible asset  1,874          -      1,874
    -------------------------------------------------------------------------

                                     45,137     36,345    103,612     71,237
    -------------------------------------------------------------------------

                                    (10,009)    (9,211)    (9,445)   (11,240)
    -------------------------------------------------------------------------
    Other income (loss)
      Gain (loss) on disposal of
       property and equipment        (2,182)        11     (2,220)      (235)
      Interest and other income          34         98         10        148
    -------------------------------------------------------------------------

    Net loss and comprehensive
     loss before taxes              (12,157)    (9,102)   (11,655)   (11,327)

    Future income tax expense/
     (recovery)                        (934)    11,969       (817)    11,969
    -------------------------------------------------------------------------

    Net loss and comprehensive
     loss for the period            (11,223)   (21,071)   (10,838)   (23,296)

    Accumulated (loss) earnings -
     beginning of period           (133,309)     1,154   (133,694)     3,379
    -------------------------------------------------------------------------

    Accumulated loss - end of
     period                        (144,532)   (19,917)  (144,532)   (19,917)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per unit - basic
     and diluted                      (0.34)    ($0.69)     (0.33)    ($0.79)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                     Three months ended     Six months ended
                                          June 30               June 30
    -------------------------------------------------------------------------
    (In thousands of dollars)          2008       2007       2008       2007
    -------------------------------------------------------------------------

    Cash provided by (used in)

    Operating activities
    Net loss for the period         (11,223)   (21,071)   (10,838)   (23,296)
    Items not affecting cash
      Amortization of property
       and equipment                  7,134      6,620     14,203     11,751
      Amortization of intangible
       assets                         1,227      2,517      2,454      4,697
      Impairment of intangible asset  1,874          -      1,874          -
      Unit-based compensation
       expense                          143        342        143        612
      Future income taxes              (934)    11,969       (817)    11,969
      (Gain) loss on disposal of
        property and equipment        2,182        (11)     2,220        235
    -------------------------------------------------------------------------
                                        403        366      9,239      5,968
    Changes in non-cash working
     capital
      Accounts receivable             1,452        606     (3,057)     2,508
      Prepaid expenses and other       (282)       338        488       (387)
      Inventory                        (346)       475        336        199
      Accounts payable and accrued
       liabilities                   (1,221)         7     (6,713)    (8,224)
    -------------------------------------------------------------------------
                                          6      1,792        293         64
    -------------------------------------------------------------------------
    Financing activities
      Unitholder distributions            -     (8,462)      (953)   (16,382)
      Repayment of capital lease
       obligations                     (150)      (253)      (343)      (253)
      Proceeds from revolving term
       bank loan                          -     65,000      5,000     75,000
    -------------------------------------------------------------------------
                                       (150)    56,285      3,704     58,365
    -------------------------------------------------------------------------
    Investing activities
      Acquisition of acquired
       companies net of working
       capital adjustments and
       costs                              -    (51,799)         -    (51,799)
      Business alliance                   -     (2,000)         -        (74)
      Purchase of property and
       equipment                     (3,266)    (7,685)    (8,042)   (11,723)
      Proceeds on property and
       equipment disposals            2,751      2,767      2,867      1,521
      Purchase price adjustment         (34)     2,000        (25)    (4,422)
    -------------------------------------------------------------------------
                                       (549)   (56,717)    (5,200)   (66,497)
    -------------------------------------------------------------------------

    Increase (decrease) in cash
     and cash equivalents              (693)     1,360     (1,203)    (8,068)
    Cash and cash equivalents,
     beginning of period               (295)      (116)       215      9,312
    -------------------------------------------------------------------------
    Cash and cash equivalents, end
     of period                         (988)     1,244       (988)     1,244
    -------------------------------------------------------------------------
    Supplementary cash flow
     information
    Interest paid                     1,770      1,102      3,499      1,646
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Non cash transactions
    Property and equipment financed
     by capital leases                  231        565        593      1,155
    Units issued on acquisition           -     32,316          -     32,316
    Warrants issued                       -        270          -        270
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: 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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