/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES/
CALGARY, Aug. 28 /CNW/ - Western Energy Services Corp. (WSV on the TSXV),
Calgary, Alberta is pleased to announce its results for the second quarter of
2008. Highlights for the second quarter of 2008 include:
- Revenues for the second quarter of 2008 were up 11% compared to the
second quarter in 2007.
- Contribution Margin (Revenues less Operating and G&A expenses) for
the second quarter of 2008 improved $311,481 to $40,918 from the
negative contribution margin realized in the second quarter of 2007.
- Primarily as a result of a $562,940 negative swing caused by
fluctuating exchange rates, EBITDA (Income before amortization,
interest and income taxes) for the quarter declined $289,068 from
- Quarterly revenues in the US are up 56% over comparable 2007 levels
or 43% after adjusting for exchange rate fluctuations.
- General and administrative expenses ("G&A") continue to be reduced
and are down 22% compared to the second quarter of 2007.
The Company continued to grow its business in the second quarter of 2008
by posting an 11% increase in revenues over the previous year. Quarterly
revenues totalled $3,071,372 during the three months ended June 30, 2008
contrasted with $2,777,477 for the three months ended June 30, 2007. This was
achieved despite the material negative impacts of the continuing slowdown in
oil & gas activity in Canada, the unusually long "breakup" in Western Canada
and fluctuations in the exchange rate between the US and Canadian dollars.
Revenues from US operations, expressed in US dollars, increased 56% in
the three months ended June 30, 2008 as compared to the same period in 2007.
However declines in the US currency relative to the Canadian dollar had the
effect of reducing this growth to 43% when these revenues are reported in
Canadian dollars. The continued growth in this revenue stream is reflective of
the strong market conditions for oil field services in the United States and
demand for the Company's services, particularly nitrogen pumping and
transportation services. To meet this demand the Company has continued to grow
its US based fleet of equipment.
Revenues from Canadian operations for the first two quarters of 2008,
from the core business of remedial stimulation services, were down 8% from the
first two quarters of 2007, reflecting the slower Canadian market conditions.
The slowdown in activity levels in Canada has resulted in oil and gas
producers pushing back on price increases from service companies, which has
made it extremely difficult to maintain operating margins. Despite this
pressure the Company was able to modestly improve its Contribution Margin
(Revenues less Operating and G&A expenses) for the period and to reduce
operating expenses to 88% of revenues from the 95% incurred for the second
quarter in 2007.
When the US dollar declines in value relative to the Canadian dollar the
US Revenues and Contribution Margins are reduced when translated into Canadian
dollars. Accordingly, the improvement in operating performance in the US was
more than offset by the effect of the 12.8% appreciation in the value of the
Canadian dollar relative to the US dollar. In the second quarter of 2008 the
effect of this exchange rate swing from the second quarter of 2007 was a
reduction in EBITDA of $562,940, resulting in negative EBITDA of $65,402.
Subsequent to June 30, 2008 the US dollar has materially appreciated relative
to the Canadian dollar. If this trend continues the effect of the exchange
rate swing which negatively impacted results in the year to date will be
Management's focus for the remainder of 2008 will be to continue to grow
revenues and increase profitability, to continue rationalizing non-core assets
and to address the maturities of the current liabilities which will occur in
the fall of 2008.
All of the Company's well testing assets were sold in the second quarter
of 2007. In addition, the Company downsized its Canadian shallow coiled tubing
services in 2007, effectively shutting down this service line given its
dependence upon the Canadian natural gas drilling business, pending an
improvement in the market for these services. Together these two discontinued
service lines contributed $1,978,537 in revenues in 2007 largely accounting
for the $1,621,642 drop in revenues for the six months ended June 30, 2008.
G&A expenses decreased throughout 2007 and the first half of 2008. G&A
expenses during the second quarter of 2008 are down $95,092 or 22% from the
second quarter of 2007 and $417,730 or 56% from the comparable period in 2006
when the current management team took over. Management is achieving its goal
of maintaining G&A expenses at 12% or less of revenues. G&A cost savings have
been realized as the result of implementing better management practices,
managing staff levels and reducing expenses attributable to head office
Interest expense during the first two quarters of 2008 was $680,623
compared to $971,198 for the six months ended June 30, 2007. This savings is
attributable to the reduction of the convertible note and the renegotiation of
the short term borrowings which occurred in the third quarter of 2007.
It is expected that 2008 will see a continued expansion and realignment
of the Company's fleet of equipment along with a concerted effort to improve
revenues while maintaining the cost control measures already achieved. By
focusing on the Company's core business of production optimization through
remedial stimulation services, management is confident that Western will
become increasingly profitable and generate positive returns for our
Forward Looking Statements
This press release contains forward-looking statements and
forward-looking information within the meaning of applicable securities laws.
The use of any of the words "expect", "anticipate", "continue", "estimate",
"objective", "ongoing", "may", "will", "project", "should", "believe",
"plans", "intends" and similar expressions are intended to identify
forward-looking information or statements. More particularly and without
limitation, this press release contains forward-looking statements and
information concerning market conditions in the energy services business in
Western Canada, currency fluctuations, asset dispositions and acquisitions by
Western and cost control factors. The forward-looking statements and
information are based on certain key expectations and assumptions made by
Western, including expectations and assumptions concerning market conditions
in the energy services business in Western Canada, currency fluctuations,
asset dispositions and acquisitions by Western and cost control factors.
Western has made such expectations and assumptions on factors it believes are
reasonable at this time. Although Western believes that the expectations and
assumptions on which such forward-looking statements and information are based
are reasonable at the date of this press release, undue reliance should not be
placed on the forward looking statements and information as Western can give
no assurance that they will prove to be correct. Since forward-looking
statements and information address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of factors
and risks. These factors include failure to obtain the required regulatory
approval and other.
Readers are cautioned that the foregoing list of factors is not
exhaustive. The forward-looking statements and information contained in this
press release are made as of the date hereof and Western undertakes no
obligation to update publicly or revise any forward-looking statements or
information, whether as a result of new information, future events or
otherwise, unless so required by applicable securities laws.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.
For further information:
For further information: Additional information relating to the Company
including the interim, unaudited, consolidated financial statements and
management discussion and analysis for the three and six months ended June 30,
2008 is filed on SEDAR at www.sedar.com; Please visit the web site:
www.wesc.ca or contact: Jim McQuarrie, President & CEO or Nick Pohorelic, CFO,
(403) 266-0667. If you would like to receive future information releases by
email please provide your email address to email@example.com