WESTERN ENERGY SERVICES CORP. RELEASES Q4 AND YEAR END 2010 RESULTS AND ANNOUNCES Q1 2011 OPERATIONAL UPDATE

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

CALGARY, April 13 /CNW/ - Western Energy Services Corp. ("Western" or the "Company") (TSX Venture: WRG) is pleased to release its fourth quarter and year end 2010 results.  Additional information relating to the Company, including the Company's financial statements and management's discussion and analysis for the year ended December 31, 2010 will be available on SEDAR at www.sedar.com.

Highlights:

  • Revenue in Q4 totalled $30.5 million, a $29.4 million increase over the prior year and an $11.2 million increase (58%) over Q3.  Year to date revenue totalled $67.5 million, a $63.6 million increase over the prior year;
  • EBITDA totalled $10.4 million (34% of revenue) and $19.6 million (29% of revenue) in Q4 and year to date, respectively, as a result of our focused business strategy concentrating on customers operating in the resource plays in Canada;
  • Utilization in the contract drilling subsidiary Horizon Drilling Inc. ("Horizon") averaged 65% in Q4 as compared to an industry average of 50%.  Since the acquisition of Horizon on March 18, 2010, year to date utilization averaged 58% as compared to an industry average of 37%;
  • The number of jobs completed in the production services subsidiary StimSol Canada Inc. ("StimSol") in Q4 increased by 147% to 885 as compared to the prior year.  Year to date StimSol completed 2,951 jobs, a 120% increase over the prior year;
  • On December 17, 2010, Western acquired all of the issued and outstanding units of Pantera Drilling Income Trust ("Pantera") in exchange for shares in Western.  The total transaction value was approximately $93.2 million, including the assumption of debt.  Pantera's assets consisted of seven drilling rigs, three top drives, and various spare tubulars, matting and ancillary equipment.  The acquisition of Pantera increased Western's contract drilling fleet to twenty-two rigs.

Selected Financial Information              
(stated in thousands of Canadian dollars, except share and per share amounts) After comprehensive revaluation After comprehensive revaluation Before comprehensive revaluation After comprehensive revaluation   After comprehensive revaluation Before comprehensive revaluation
Financial Highlights Three months
ended
Dec 31, 2010
Dec 23, 2009
to
Dec 31, 2009
Oct 1, 2009
to
Dec 22, 2009
Year
ended
Dec 31, 2010
  Dec 23, 2009
to
Dec 31, 2009
Jan 1, 2009
to
Dec 22, 2009
Revenue                30,509                      151                      999 67,543   151 3,785
EBITDA(1)                10,392                    (102)                    (636) 19,568                      (102)                (1,194)
Cash from operating activities from continuing operations    3,943                    (424)                  1,436 10,901                      (424)                (1,218)
Capital expenditures                14,181                              -                         58 24,590                                -                         99
Net income (loss) from continuing operations      5,971                (1,975)                (1,051) 28,111                  (1,975)                (3,984)
   -basic and diluted net income (loss) per share       0.01                   (0.01)                   (0.03) 0.06                     (0.01)                   (0.12)
Net income (loss)       5,887                (2,011)                (2,840) 27,049 (2)                (2,011)                (6,488)
   -basic and diluted net income (loss) per share       0.01                   (0.02)                   (0.09) 0.06                     (0.02)                   (0.20)
Weighted average number of shares                
   -basic 564,408,355 132,031,830 32,246,405 454,485,404   132,031,830 32,246,405
   -diluted 595,395,650 132,031,830 32,246,405 485,414,516   132,031,830 32,246,405
Outstanding common shares as at period end 753,618,882 132,031,830 132,031,830 753,618,882   132,031,830 132,031,830
Dividends declared                  -                              -                              -                              -                                -                              -
(1) Non-GAAP measure.                  
(2) Includes a $19.7 million non-recurring gain on acquisitions.            
                 
                 
                 
Operating Highlights Three months
ended
Dec 31, 2010
Dec 23, 2009
to
Dec 31, 2009
Oct 1, 2009
to
Dec 22, 2009
Year
ended
Dec 31, 2010
  Dec 23, 2009
to
Dec 31, 2009
Jan 1, 2009
to
Dec 22, 2009
Contract Drilling                
  Contract drilling rig fleet:                
     -Average   16.1                              -                              - 13.1 (2)                              -                              -
     -End of period   22.0                              -                              - 22.0                                -                              -
  Drilling revenue per operating day 27,487                              -                              - 25,349 (1)                              -                              -
  Drilling rig utilization rate   65%                              -                              - 58% (2)                              -                              -
  CAODC industry average utilization rate   50%                              -                              - 37% (2)                              -                              -
Production Services                
  Jobs completed          885                         44                      315 2,951                           44                  1,300
  Average revenue per job completed      4,435                  3,422                  3,170 3,909                    3,422                  2,912
                 
Financial Position at   December 31, 2010 December 31, 2009      
Working capital                                     15,117                                                        831      
Property and equipment                                  195,286                                                    5,414      
Total assets                                  264,653                                                 12,219      
Long term debt                                     46,054                                                           17      
(1) Includes shortfall commitment revenue of $1.2 million on a take-or-pay contract.        
(2) Calculated from the date of acquisition of the Contract Drilling segment (March 18, 2010).  Utilization calculated on a spud to rig release
       basis.

 

First Quarter 2011 Operational Update

For the first quarter of 2011, Western's consolidated revenue is $55.4 million, a $24.9 million (82%) increase over the fourth quarter of 2010.  Horizon's average number of rigs increased to twenty-three in the first quarter of 2011 from sixteen in the fourth quarter of 2010 and Horizon exited the first quarter with twenty-four rigs.  Additionally, in the first quarter of 2011 utilization in the contract drilling segment averaged 85% compared to the reported industry average of 68%.  The increased number of rigs and high utilization in the first quarter of 2011 contributed to a $23.5 million increase in Horizon's estimated revenue to $50.1 million representing an 88% increase over the fourth quarter of 2010.  In addition, StimSol's estimated revenue increased by $1.4 million to $5.3 million or 35%, as the number of jobs completed in the first quarter of 2011 increased to 1,115, or 26% higher than the 885 jobs completed in the fourth quarter of 2010.  Further, StimSol's estimated average price per job completed increased by 7% to $4,746 in the first quarter of 2011 as compared to $4,435 in the fourth quarter of 2010.

Proposed Acquisition of Stoneham Drilling Trust ("Stoneham")

Subsequent to year end, on April 7, 2011 the Company announced that it had entered into an Arrangement Agreement whereby, subject to certain conditions, the Company will acquire all of the issued and outstanding units of Stoneham in exchange for a combination of cash and common shares of Western.  The total transaction value is approximately $245 million, including the assumption of approximately $53 million in debt and transaction costs.  A portion of the consideration will be paid for in shares of the Company at an ascribed value of $0.39 per Western share.  In accordance with IFRS 3, Business Combinations, the actual consideration will be determined based on the closing price of Western's shares immediately before the acquisition.  The transaction is expected to be completed by way of a Plan of Arrangement under the Business Corporations Act of Alberta and is subject to normal stock exchange, court and regulatory approvals and the approval by at least 66 2/3 percent of the outstanding units of Stoneham voted at the special meeting.  A special meeting of the unitholders of Stoneham will be held in mid-June to vote on the transaction.

Outlook

The drilling industry in Canada is moving towards drilling wells of increased complexity.  Currently, the Company is the seventh largest drilling company in Canada with a fleet of twenty-four drilling rigs which are specifically suited for today's drilling environment.  Horizon's ELR single rigs are specifically designed with integrated top-drives, triplex mud pumps, mechanized pipe handling equipment and range III tubulars. Horizon's telescopic ELR doubles are also of modern design including the necessary hook load capabilities, triplex mud pumps and are equipped with top-drives at the customer's request.  Horizon's ELR triples are also designed with integrated top-drives, triplex mud pumps, mechanized pipe handling equipment including iron derrickman and range III tubulars.

With the strong market for oil and natural gas liquids, and the depressed market for natural gas, our customers are targeting oil and liquids-rich natural gas wells.  Of the seventy-three wells drilled by the Company in the fourth quarter of 2010, 70% targeted oil, which is a trend that is expected to continue.  The increased demand for oil and natural gas liquids has also led to an increase in the drilling of horizontal wells.  During 2010, 42% of the wells drilled in western Canada were horizontal wells, representing a 43% increase over the prior year, all of which fits well with the Company's current rig fleet with respect to pumping capabilities, top-drive requirements, and depth capacities.

Currently the industry is experiencing a shortage of qualified people; however our fleet is fully crewed with qualified personnel.  We believe our modern fleet and corporate culture will provide a distinct advantage in attracting qualified individuals.  Horizon has a proven track record for delivering high quality equipment and well trained, highly skilled crews to its customers who rely on Horizon to drill increasingly complex long reach horizontal wells.  As such, Horizon is well positioned for future growth.

During 2010, the Company's utilization rates have consistently been above industry average, due to our modern rig fleet, strong customer base, and solid reputation.  We expect this trend to continue into 2011.  Additionally, with the integration of Western's acquisitions throughout 2010, Horizon has been able to justify performance-based rates to our customers by delivering a solid product, adding capital and adapting to our changing customer needs.  During the first quarter of 2011, Horizon's rig fleet was fully contracted resulting in utilization of 85%, continuing to exceed industry utilization by approximately 25%.  Currently during spring break-up, which started near the end of March, Horizon has approximately 45% of the fleet working in this period which typically reflects low utilization.

As previously announced by the Company, total capital expenditures are expected to be approximately $50 million in 2011. Subsequent to the successful completion of the proposed acquisition of Stoneham, 2011 capital spending will be reassessed.

The Company has successfully integrated Horizon, Cedar Creek Drilling Ltd., Impact Drilling Ltd. and Pantera, acquired an additional drilling rig from a private company early in 2011, as well as completed the construction of and crewed a fit for purpose telescopic ELR double drilling rig in the first quarter of 2011. By maintaining an above average utilization rate, improved contract drilling day rates and low personnel turnover, the Company has established a strong platform to be able to integrate future acquisitions.

Western continues to focus its efforts on consolidating within the Canadian oilfield service industry.  Management believes the current market conditions in the Canadian oilfield service sector still provide opportunity to grow through acquisition and organic growth into three core business lines comprised of contract drilling, service rigs, and rental and production services.

2010 Fourth Quarter and Year End Results Conference Call and Webcast

Western has scheduled a conference call and webcast to begin promptly at 9:00 a.m. MST (11:00 a.m. EST) on Thursday April 14, 2011.

The conference call dial-in number is 1-888-231-8191.

A live webcast of the conference call will be accessible on Western's website at www.wesc.ca by selecting "Investor Relations", then "Webcasts".  Shortly after the live webcast, an archived version will be available for approximately 30 days.

An archived recording of the conference call will also be available approximately one hour after the completion of the call until April 28, 2011 by dialing 1-800-642-1687 or 1-416-849-0833, passcode 49379149.

Forward-looking statements

This press release contains certain statements or disclosures relating to Western that are based on the expectations of Western as well as assumptions made by and information currently available to Western which may constitute forward-looking information under applicable securities laws.  All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that Western anticipates or expects may, or will occur in the future (in whole or in part) should be considered forward-looking information. In some cases, forward-looking information can be identified by terms such as "forecast", "future", "may", "will", "expect", "anticipate", "believe", "potential", "enable", "plan", "continue", "contemplate", "pro-forma", or other comparable terminology.

In particular this press release makes reference to the proposed acquisition of Stoneham Drilling Trust (the "Transaction") and that if the trust unitholders of Stoneham Drilling Trust approve the arrangement, it is expected to be completed in mid-June of 2011. The foregoing statement assumes completion of the Transaction.  Readers are cautioned that there are a number of conditions that must be met, including the approval of the securityholders of Stoneham Drilling Trust before the Transaction can be completed.  There is no assurance that all of the conditions to the Transaction will be met and therefore there is a risk that the Transaction will not be completed.  As such, many factors could cause the performance or achievement of Western to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements.  Because of the risks, uncertainties and assumptions contained herein, readers should not place undue reliance on these forward-looking statements.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 

SOURCE Western Energy Services Corp.

For further information:

Dale E. Tremblay    
Chief Executive Officer
403.984.5929
dtremblay@wesc.ca    
Alex MacAusland     
President and COO
403.984.5932
amacausland@wesc.ca   
Jeffrey K. Bowers
VP Finance and CFO
403.984.5933
 jbowers@wesc.ca

 


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