Petrowest Energy Services Trust announces strong third quarter results and reduction in distributions



    CALGARY, Nov. 13 /CNW/ - Petrowest Energy Services Trust (TSX: PRW.UN)
announced today its financial results for the three and nine months ended
September 30, 2007. As a result of the natural gas drilling slowdown, the
Trust focused its business development efforts on infrastructure, logging,
conventional oil exploration and oil sand construction related development
projects. Management has achieved success with this strategy. Revenue for the
quarter was $50.9 million with year to date revenue of $110.9 million. With
increased volumes of activity, EBITDA has also increased to $12.7 million for
the quarter, resulting in year to date EBITDA of $19.4 million. Projects
related to natural gas exploration and development accounted for approximately
29% of the Trust's total revenues in Q3.

    
    FINANCIAL HIGHLIGHTS

    -------------------------------------------------------------------------
                                           For the     For the     For the
                                        three months  nine months   period
                                            ended       ended       ended
    $000's except per unit amounts,       September   September   September
     margins and ratios                    30, 2007    30, 2007   30, 2006(2)

    Revenue                                   50,856     110,853      10,907
    EBITDA(1)                                 12,654      19,421       2,708
    EBITDA margin(1)                           24.9%       17.5%       24.8%
    Cash provided by operating activities      1,883       1,772       2,902
    Future income tax recovery (expense)         467     (11,502)          -
    Net earnings (loss) excluding
     future income tax adjustment(1)            (596)    (11,923)        762
    Net earnings (loss)                         (129)    (23,425)        762
    Net earnings (loss) per unit - basic
     and diluted before future income
     tax adjustment(1)                        ($0.02)     ($0.39)      $0.03
    Net earnings (loss) per unit - basic
     and diluted                              ($0.00)     ($0.77)      $0.03
    Net working capital(3)                    32,470      32,470      22,731
    Total revolving bank term loan and
     obligations under capital leases
     (including current portion)(1)           91,170      91,170      15,256
    Total units outstanding               33,066,986  33,066,986  28,275,094
    Weighted average units
     outstanding - basic and diluted      32,902,498  30,528,083  28,275,094
    Distributions per unit                     $0.18       $0.78       $0.08
    Payout Ratio(4)                              54%        143%         83%
    -------------------------------------------------------------------------
    (1) See "Non-GAAP Measures" in the Trust's MD&A.
    (2) Q3-2006 Stub is for the period from inception on July 6, 2006 to
        September 30, 2006, however commercial operations commenced on
        September 7, 2006.
    (3) Calculated as current assets less current liabilities.
    (4) Calculated as ratio of unitholders distributions over the Adjusted
        Distribution Base as calculated in the Trust's MD&A.
    

    OUTLOOK

    Historically, Petrowest's businesses have been comprised of approximately
two thirds oil and gas drilling related activities and one third industrial
and infrastructure activities. In Q3 these percentages have shifted to
approximately 51% oil and gas and 49% infrastructure and commercial services.
In spite of an ongoing marketing focus away from the natural gas drilling
sector, the sector is still a critical component of the business.
Infrastructure project demand is expected to be strong over the next two
years; however, these projects are more seasonal in nature, with the majority
occurring in Q2 and Q3. Consequently the downturn in the natural gas drilling
sector will have the effect of reducing utilization of equipment in many of
the Trust's business segments. At lower capacity utilization, operating
margins will continue to be negatively impacted.
    The Trust has shown strong operating results in Q3, in spite of the
current circumstances in the oil and gas well drilling industry. Petrowest has
solid levels of working capital of more than $32.4 million and a diversified
base of operations. In addition, the Trust has taken a number of steps over
the last year to improve the financial position and balance sheet of the
Trust. These highlights include:

    
    -   Successful extension of the Trust's credit facility for another one
        year term until November 2008.
    -   Initiation of cost cutting measures, additional equipment cross
        utilization, less reliance on natural gas exploration activity and
        the completion of strategic acquisitions.
    -   Expanded relationships and alliances in the Peace River oil sands
        development.
    -   Acquisitions of five companies that were completed on May 18, 2007
        for aggregate consideration of $93.3 million, strengthening and
        expanding the Trust's Civil, Construction and Transportation business
        segments and expanding the Trust's geographical footprint further
        north to Peace River, High Level and Rainbow Lake areas of Alberta
        and Fort St. John and Fort Nelson in British Columbia. In addition to
        opening new markets, the acquisitions are beginning to contribute to
        the operating synergies of the Trust and reduce levels of third party
        subcontracting.
    

    The natural gas sector is being negatively affected by low gas prices due
to high storage levels. The recent royalty changes in Alberta have further
complicated and compounded the levels of uncertainty. Oil and gas exploration
and producing companies are currently assessing the impact of the new royalty
rules on their businesses. In light of this uncertainty, management of the
Trust expects 2008 drilling activities to be negatively impacted by the
royalty changes and it is not clear when a future turnaround in these
activities will occur.
    Notwithstanding the success of its non-oil and gas businesses, Petrowest
may be significantly affected by the recent Alberta royalty changes.
    Consequently, the Trust is announcing a reduction of its monthly
distribution to $0.03 per month ($0.36 per annum) commencing with the
distribution to be paid on December 15, 2007 to unitholders of record on
November 30, 2007. The Trust units will commence trading on an ex-distribution
basis on November 28, 2007. Maintenance of the Trust's distribution level to
day has resulted in the elimination of all current taxes.
    The retained cash will be utilized in the short term to maintain a strong
balance sheet and to enable the Trust to pursue accretive growth
opportunities, including in the non-oil and gas sector. In conjunction with
the reduction of distributions, management will be reviewing further
alternatives to reduce costs and enhance operational synergies and performance
in order to have a stronger operation moving forward and an organization that
will be prepared to benefit from a rebound in activity levels.

    DISTRIBUTION REINVESTMENT PROGRAM

    Petrowest is also announcing the suspension, effective immediately, of
the current Distribution Reinvestment Program ("DRIP") which provided the
opportunity for unitholders to reinvest their cash distributions towards the
purchase of additional units from treasury at a price equal to 95% of the
average market price based on weighted average trading price for the ten days
prior to the distribution payment date. The first distributions affected by
the suspension will be the December 15, 2007 distributions.

    CONFERENCE CALL

    Ken Drysdale, President and Chief Executive Officer, and John Paul, Chief
Financial Officer, will host a conference call to discuss the third quarter
results on Thursday November 15, 2007 at 9:00 a.m. MDT (11:00 a.m. EDT).
Interested parties are encouraged to participate by calling 866.250.4907 or
403.398.9531 (in Calgary, Alberta) at least ten minutes before the start of
the call. For those unable to participate in the live call, a replay will be
available at 877.289.8525 or 416.640.1917 (in Toronto, Ontario) passcode
21253385 followed by the pound sign and on Petrowest's website
(www.petro-west.com).

    SELECTED FINANCIAL INFORMATION

    Selected financial information for the three and nine months ended
September 30, 2007 is attached below. The Trust's Management, Discussion and
Analysis, detailed interim consolidated financial statements for the third
quarter along with other additional information, is available under the
Trust's profile on the SEDAR website at www.sedar.com and at
www.petro-west.com.


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

                                                               $000's
                                                          As at       As at
                                                       September    December
    Assets                                              30, 2007    31, 2006

    Current assets
    Cash and cash equivalents                                  -       9,312
    Accounts receivable                                   59,092      38,498
    Prepaid expenses and other                             1,990       1,517
    Inventory                                              4,507       3,454
                                                      ----------- -----------
                                                          65,589      52,781

    Property and equipment (note 5)                      124,761      91,298

    Intangible assets (note 6)                            63,228      53,438

    Goodwill (note 7)                                    120,007      98,068

    Future income taxes (note 11)                            749           -
                                                      ----------- -----------

                                                         374,334     295,585
                                                      ----------- -----------

    Liabilities
    Current liabilities
    Bank overdraft                                         6,705           -
    Accounts payable and accrued liabilities              21,748      20,296
    Corporate taxes payable                                  913           -
    Distributions payable                                  2,799       3,245
    Purchase consideration payable (note 4(a) and 4(c))      575       6,422
    Current portion of obligations under capital leases      379          87
                                                      ----------- -----------
                                                          33,119      30,050

    Obligations under capital leases                         791         169
    Revolving bank term loan (note 8)                     90,000      15,000
    Future income taxes (note 11)                         12,251           -
                                                      ----------- -----------
                                                         136,161      45,219
                                                      ----------- -----------

    Unitholders' Equity
    Units (note 9)                                       292,107     257,279
    Warrants (note 9)                                        270           -
    Contributed surplus                                        -         358
    Accumulated (loss) earnings                          (20,046)      3,379
    Accumulated distributions to unitholders             (34,158)    (10,650)
                                                      ----------- -----------
                                                         238,173     250,366
                                                      ----------- -----------

                                                         374,334     295,585
                                                      ----------- -----------
    Commitments and contingency (notes 4(c) and 13)

    See accompanying notes to the interim unaudited consolidated financial
    statements

    Approved on behalf of the board:

    Ken Drysdale                Mark Schweitzer



    Petrowest Energy Services Trust
    Consolidated Statement of Loss, Comprehensive Loss and Accumulated
    Earnings (Loss) (Unaudited)
    -------------------------------------------------------------------------
    For the three and nine months ended September 30, 2007 with comparative
    figures for the period July 6, 2006 to September 30, 2006 (Note 1)

                                                        $000's
                                             Three        Nine
                                            Months      Months      Period
                                             Ended       Ended       Ended
                                           September   September   September
                                           30, 2007    30, 2007   30, 2006(1)

    Revenue                                   50,856     110,853      10,907
                                          ----------- ----------- -----------
    Expenses
    Operating expenses                        37,571      87,386       7,755
    General and administrative                   379       3,708         507
    Interest                                   1,581       3,226         132
    Amortization of property and equipment     8,626      20,378       1,142
    Amortization of intangible assets          3,043       7,740         672
                                          ----------- ----------- -----------
                                              51,200     122,438      10,208
                                          ----------- ----------- -----------
                                                (344)    (11,585)        699
                                          ----------- ----------- -----------
    Other income
    Gain (loss) on disposal of property
     and equipment                              (299)       (534)         58
    Interest income                               47         196           5
                                          ----------- ----------- -----------
    Net earnings (loss) and comprehensive
     earnings (loss) for the period before
     taxes                                      (596)    (11,923)        762
    Future income tax recovery (expense)
     (note 11)                                   467     (11,502)          -
                                          ----------- ----------- -----------
    Net earnings (loss) and comprehensive
     earnings (loss) for the period             (129)    (23,425)        762
    Accumulated earnings (loss) -
     beginning of period                     (19,917)      3,379           -
                                          ----------- ----------- -----------
    Accumulated earnings (loss) - end
     of period                               (20,046)    (20,046)        762
                                          ----------- ----------- -----------
    Net earnings (loss) per unit - basic
     and diluted (note 9)                     ($0.00)     ($0.77)      $0.03
                                          ----------- ----------- -----------

    See accompanying notes to the interim unaudited consolidated financial
    statements
    (1) Commercial operations of the Trust commenced September 7, 2006



    Petrowest Energy Services Trust
    Consolidated Statement of Cash Flows (unaudited)
    -------------------------------------------------------------------------
    For the three and nine months ended September 30, 2007 with comparative
    figures for the period July 6, 2006 to September 30, 2006 (note 1)

                                                        $000's
                                             Three        Nine
                                            Months      Months      Period
                                             Ended       Ended       Ended
                                           September   September   September
                                           30, 2007    30, 2007   30, 2006(1)

    Cash provided by (used in)
    Operating activities
    Net earnings (loss) for the period          (129)    (23,425)        762
    Items not affecting cash
      Amortization of property and
       equipment                               8,626      20,378       1,142
      Amortization of intangible assets        3,043       7,740         672
      Unit-based compensation (recovery)
       (note 10)                                (898)       (358)        106
      Units issued for services                    -          72           -
      Future income taxes                       (467)     11,502           -
      Loss (gain) on disposal of property
       and equipment                             299         534         (58)
                                          ----------- ----------- -----------
                                              10,474      16,443       2,624
    Changes in non-cash working capital
      Accounts receivable                    (10,867)     (8,336)      1,321
      Prepaid expenses                         2,326       1,971      (1,073)
      Inventory                                 (778)       (579)        424
      Accounts payable and accrued
       liabilities                               749      (7,587)       (388)
      Income taxes payable                       (21)       (140)         (6)
                                          ----------- ----------- -----------
                                              (8,591)    (14,671)        278
                                          ----------- ----------- -----------
                                               1,883       1,772       2,902
                                          ----------- ----------- -----------
    Financing activities
      Unitholder distributions                (5,132)    (21,514)          -
      Issue of trust units - net of costs          -           -     129,597
      Repayment of capital lease
       obligations                              (111)       (364)          -
      Proceeds from revolving term bank
       loan                                        -      75,000           -
                                          ----------- ----------- -----------
                                              (5,243)     53,122     129,597
                                          ----------- ----------- -----------
    Investing activities
      Acquisition of acquired companies
       net of working capital adjustments
       and costs (note 4(b))                    (404)    (52,027)   (121,298)
      Business alliance (note 4(c))           (1,425)     (1,499)          -
      Purchase of property and equipment      (3,019)    (13,096)       (917)
      Proceeds on property and equipment
       disposals                                 259       2,133       2,610
      Purchase price adjustment                    -      (6,422)          -
                                          ----------- ----------- -----------
                                              (4,589)    (70,911)   (119,605)
                                          ----------- ----------- -----------
    Increase (decrease) in cash and cash
     equivalents                              (7,949)    (16,017)     12,894
    Cash and cash equivalents, beginning
     of period                                 1,244       9,312           -
                                          ----------- ----------- -----------
    Cash and cash equivalents (bank
     overdraft), end of period                (6,705)     (6,705)     12,894
                                          ----------- ----------- -----------
    Supplementary information
    Interest paid                              1,581       3,226         132
    Income taxes paid                              -           -           -

    Non cash transactions
    Property and equipment financed by
     capital leases                              123       1,278           -
    Units issued on acquisition (note 4(b))        -      32,316     127,651
    Warrants issued (note 9)                       -         270           -

    See accompanying notes to the interim unaudited consolidated financial
    statements.
    (1) Commercial operations of the Trust commenced September 7, 2006
    

    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.





For further information:

For further information: Kenneth N. Drysdale, President and Chief
Executive Officer, or John B. Paul, Chief Financial Officer, at (780) 830-0881
or info@petro-west.com

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PETROWEST ENERGY SERVICES TRUST

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