Production Enhancement Group announces 2007 annual results: revenue grows by 50% from USD 21.0 million to USD 31.5 million; reorganization to benefit 2008



    HOUSTON, TX, March 31 /CNW/ - Production Enhancement Group, Inc. (TSX:
WIS) ("PEG" or the "Company") today announced financial and operating results
for the three months and twelve months ended December 31, 2007.

    The following is a summary of selected financial information of the
Company:

    
                    SELECTED FINANCIAL INFORMATION(1),(2)
                               (Stated in USD)

    -------------------------------------------------------------------------
                                              Three months ended
                                                  December 31
                                          --------------------------       %
                                                 2007          2006   Change
                                          -----------------------------------
    Revenue(1)                              8,307,203     6,850,175      21%
    EBITDAS(2)                               (678,870)      385,352    -276%

    Loss before income taxes               (6,678,647)   (1,084,490)   -516%
    Net loss from continuing operations    (7,393,379)   (1,363,751)   -442%
    Loss from discontinued operations      (3,159,663)            -
    Loss per share from continuing
     operations (basic and diluted)             (0.13)        (0.02)   -555%
    Loss per share from discontinued
     operations (basic and diluted)             (0.06)            -
    Total assets                           54,753,431    32,018,488      71%

    Notes and reclassification of
     Long term debt                        47,838,163    14,275,015     235%
    Number of common shares outstanding:
    Weighted average - basic and diluted   56,403,874    54,655,632       3%
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                             Twelve months ended
                                                  December 31
                                          --------------------------       %
                                                 2007        2006(3)  Change
                                          -----------------------------------
    Revenue(1)                             31,507,611    21,035,307      50%
    EBITDAS(2)                             (1,255,668)      144,570    -969%

    Loss before income taxes              (15,862,234)   (4,645,833)   -241%
    Net loss from continuing operations   (16,576,966)   (4,240,547)   -291%
    Loss from discontinued operations      (3,159,663)            -
    Loss per share from continuing
     operations (basic and diluted)             (0.30)        (0.09)   -233%
    Loss per share from discontinued
     operations (basic and diluted)             (0.06)            -
    Total assets                           54,753,431    32,018,488      71%

    Notes and reclassification of
     Long term debt                        47,838,163    14,275,015     235%
    Number of common shares outstanding:
    Weighted average - basic and diluted   55,827,957    48,977,421      14%
    -------------------------------------------------------------------------

    (1) Revenue, EBITDAS and operating loss for WISE Alberta were reversed in
        Q4 2007 and classified as loss from operations of discontinued
        operations in the financial statements.

    (2) EBITDAS means earnings from continuing operations before interest,
        taxes, depreciation and amortization and stock based compensation.
        Readers are cautioned that EBITDAS is generally regarded as an
        indirect measure of operating cash flow and, as such, the Company
        believes it is a significant indicator of success of public
        companies, and is particularly relevant to readers within the
        investment community. These measures do not have any standardized
        meaning prescribed by Canadian GAAP and may not be comparable to
        similar measures presented by other companies; however, PEG is
        consistent in its calculation of EBITDAS for each reporting period.

    (3) The Company became a reporting issuer on March 29, 2006, being the
        date of receipt for its initial public offering prospectus.


    Revenue for the 2007 fiscal year was USD 31.5 million, an increase of 50%,
compared to revenue of USD21.0 million for the twelve months ended December
31, 2006.

    -   Coiled Tubing Division revenue for the 2007 fiscal year was
        USD 19.0 million, an increase of 31%, compared to revenue of
        USD 14.5 million for the twelve months ended December 31, 2006. The
        increase was primarily attributable to price improvement, higher
        demand for WISE(R) multifunctional units, larger equipment fleet, and
        the Company's expansion of its operations into such areas as south
        Texas and the Barnett Shale in north Texas.

    -   Pumping Division revenue for the 2007 fiscal year was
        USD 7.3 million, an increase of 4%, compared to revenue of
        USD 7.0 million for the twelve months ended December 31, 2006. The
        increase was largely attributable to the third-quarter reorganization
        of the Pumping Division's management and sales force.

    -   The Wireline Services Division, which was acquired on March 5, 2007,
        contributed USD 5.6 million total revenue during the twelve months of
        2007.

    -   The new Nitrogen Services Division and WISE Tools Division
        contributed USD 356,713 and USD 80,121 to revenue during the twelve
        months of 2007, respectively. Both divisions began operating in the
        fourth quarter.

    -   WISE Alberta, which was acquired on April 27, 2007, has been
        classified in the fourth quarter of 2007 as discontinued operations
        due to the Company's decision to close the Canadian operations and
        the Brooks, Alberta field office. The loss from operations of
        discontinued operations for the twelve months ended December 31, 2007
        was USD 824,646. The cost of shutting down the Company's Canadian
        operations was USD 2,335,017 and was an additional charge to
        discontinued operations in the fourth quarter of 2007. The assets and
        liabilities have been reclassified as discontinued operations and the
        Company's Canadian operations for the 2007 period are reported as
        discontinued operations as detailed in Note 16 to the Company's 2007
        annual consolidated financial statements.
    

    The Company restructured its organization during the fourth quarter of
2007 to focus exclusively on delivering high quality oil and gas well
intervention services in the United States and overseas. The Company recorded
a one-time restructuring charge in the fourth quarter of 2007 of
USD 1,430,729. The costs associated with the restructuring are detailed in
Note 15 to the Company's 2007 annual consolidated financial statements.
    EBITDAS for the 2007 fiscal year was USD (1,255,668), compared to EBITDAS
of USD 144,570 for the twelve months ended December 31, 2006. EBITDAS for the
three months ended December 31, 2007 was USD (678,870), compared to 2006
fourth quarter EBITDAS of USD 385,352. EBITDAS declined in 2007 due primarily
to the lower fleet utilization in the third quarter of 2007 caused by project
delays associated with storm activity in the Gulf of Mexico. The EBITDAS
decline from the fourth quarter last year was primarily attributable to lower
equipment utilization. Organization restructuring initiated in the fourth
quarter of 2007 are expected to benefit EBITDAS beginning in early 2008.
EBITDAS excludes one-time charges recorded in the fourth quarter of 2007,
including a restructuring charge of USD 1.4 million and a USD 359,523 loss on
disposal of assets.
    The Company had cash and restricted cash of USD 4,924,961 as at
December 31, 2007 and USD 1,065,645 at December 31, 2006. The increase in the
cash reserve was due to proceeds from the new senior credit facility. Included
is a requirement by the lender to maintain a restricted cash balance equal to
six months interest payments, totaling approximately USD 3.2 million. The
restricted cash was used to pay the fourth quarter of 2007 interest payment
due to the lender. The Company expects to use this reserve to pay interest in
early 2008.
    The Company was in breach of its debt covenants with its lender at
December 31, 2007. The lender has agreed to waive said violations and has
entered into negotiations with the Company to amend the terms of the loan
agreements. The Company has reclassified USD 45.5 million such long-term debt
as current until such time as the amendment is finalized. The Company believes
such amendment will be finalized by May 2008. The Company may be in breach of
its debt covenants in the future and this may affect its ability to borrow
additional funds and/or the operations of the Company should the lender call
the note.

    Fourth Quarter Highlights

    Revenue for the three months ended December 31, 2007 was USD 8.3 million,
a 21% increase over 2006 fourth quarter revenue of USD 6.9 million. The
Company experienced improved overall market conditions for the quarter,
particularly in the Gulf Coast area, which had been negatively affected by
weather in the third quarter of 2007.

    
    -   Coiled Tubing Division revenue for the fourth quarter of 2007 was
        USD 4.3 million, a 23% decrease over the 2006 fourth quarter revenue
        of USD 5.6 million. The current year quarterly decrease over the
        corresponding quarterly period in 2006 was primarily attributable to
        lower utilization in the field.

    -   Pumping Division revenue for the fourth quarter of 2007 was
        USD 2.4 million, a 71% increase over 2006 fourth quarter revenue of
        USD 1.4 million. The increase was largely attributable to the
        reorganizational changes that occurred during the third quarter of
        2007. Operating management was changed and the pumping sales force
        was restructured.

    -   The Wireline Services Division, which was acquired on March 5, 2007,
        contributed USD 1.9 million of revenue during the fourth quarter of
        2007. The division recovered from last quarter's weather disruptions
        in the Gulf of Mexico, which significantly impacted fleet utilization
        in the third quarter due to the division's fleet being comprised
        mostly of skid-mounted offshore equipment.

    -   WISE Alberta, a Canadian coiled tubing operation that was acquired on
        April 27, 2007, was classified in the fourth quarter of 2007 as
        discontinued operations due to the Company's decision to close the
        Canadian operations and the Brooks, Alberta field office.

    -   The new Nitrogen Services Division and WISE Tools Division
        contributed USD 356,713 and USD 80,121 to revenue, respectively, in
        the fourth quarter of 2007. Both divisions began operating in the
        fourth quarter.
    

    Reorganization Initiated in Fourth Quarter

    The Company undertook a detailed review of its organizational structure
in the fourth quarter of 2007 to address shortfalls that the board of
directors deemed unacceptable. The Company implemented organizational changes
and operational improvements that have led to significant reductions in cost
of sales and general operating expenses, which in turn led to sequential
quarterly revenue improvement in all divisions and a corresponding improvement
in gross profit in the fourth quarter of 2007.
    The Company continues to redeploy its equipment to maximize fleet
utilization, and is increasing its focus on meeting the stringent vendor
qualification requirements of major oil and gas producers. Although the
Company suffered reduced utilization of its equipment in the third quarter of
2007, it is experiencing renewed demand growth for its services and equipment
as strong oil and gas demand encourages the Company's customers to extract
more production from existing wells.

    New Chief Executive Officer

    The Company has also strengthened its corporate and operations management
with the appointment of Don B. Cobb as Chief Executive Officer ("CEO") and a
Director of PEG on December 24, 2007. Mr. Cobb joined the Company on
October 1, 2007 as President and Chief Operating Officer of its operating
subsidiary, WISE Well Intervention Services, Inc. Mr. Cobb has domestic and
international oil and gas services experience spanning 33 years, and most
recently was Executive Vice President of Boots and Coots Services in charge of
all international operations. Prior to that, he served in significant
operational roles with Baker Hughes. The Company announced the departure of
its previous CEO in October 2007.
    "We have repositioned our company to focus on delivering value to our
customers with quality services and to our shareholders with improved
equipment utilization," said Don B. Cobb, PEG's Chief Executive Officer. "In
the fourth quarter, we achieved significant cost reductions, which have begun
to improve results in 2008."
    For a complete copy of PEG's 2007 annual financial statements and
management's discussion and analysis, please visit www.sedar.com or PEG's
website at www.productionenhancement.com.

    About Production Enhancement Group, Inc.

    Production Enhancement Group, Inc., a Houston-based energy services
company incorporated in Alberta, Canada, trades on the TSX under the symbol
WIS. PEG's wholly owned subsidiary, WISE(R) Well Intervention Services, Inc.,
has developed patented WISE multifunction coiled tubing technologies and
markets a full range of coiled tubing, pressure pumping, nitrogen, and
wireline services.
    WISE(R) is a registered trademark of Production Enhancement Group, Inc.

    Disclaimers

    The TSX does not accept responsibility for the adequacy or accuracy of
    this release.

    This release and PEG's website referenced in this release may contain
forward-looking information, including expectations of future components of
revenue, cash flow and earnings. By their very nature, the preparation of such
forward-looking information requires the Company to make assumptions, and
involves inherent risks and uncertainties, both general and specific. There is
significant risk that express or implied projections contained in such
forward-looking information will not materialize or will be inaccurate. A
number of factors could cause actual future results, conditions, actions or
event to differ materially from the targets, expectations, estimates or
intentions expressed in the forward-looking information. Such differences may
be caused by factors, many of which are beyond PEG's control, which include,
but are not limited to, the level of operations carried on by PEG's customers,
oil and gas prices, weather conditions in offshore and land markets including
natural disasters, availability of capital, access to current or future
financing arrangements, manufacturing cycles of new equipment, the effects of
competition in the markets in which PEG operates, difficulty in continuing to
develop, produce and commercialize technologically advanced services,
availability of human resources and PEG's success in anticipating and managing
the foregoing risks. The preceding list is not comprehensive, and as such,
investors and others who rely on these statements should consider the above
factors as well as the uncertainties they represent and the risk they entail.
The risks outlined above should not be construed as exhaustive. Investors are
cautioned not to place undue reliance on any forward-looking information. PEG
undertakes no obligation to update or revise any forward-looking information.





For further information:

For further information: visit www.productionenhancement.com or contact:
Douglas Parker, Chief Financial Officer, Production Enhancement Group, Inc.,
(281) 282-1851, dparker@wisewellintervention.com

Organization Profile

PRODUCTION ENHANCEMENT GROUP, INC.

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