Petrowest Energy Services Trust announces 2009 third quarter financial
results

CALGARY, Nov. 12 /CNW/ - Petrowest Energy Services Trust (TSX: PRW.UN) announced today its interim consolidated financial results for the three and nine month periods ended September 30, 2009.

Revenue from continuing operations for the three months ended September 30, 2009 was $32.1 million, a 40% decrease over revenue from continuing operations of $53.5 million in the comparable period of 2008. Revenue from Discontinued Operations for this period was $29,000 compared to $5.3 million in the comparable period of 2008. During the third quarter the Trust recorded a property and equipment impairment loss of $5.3 million as a result of the carrying values of certain assets exceeding the estimated fair values. This was the result of a change in circumstances relating to significant decreases in the market price of similar property and equipment.

For the three month period ended September 30, 2009 the net earnings (loss) and comprehensive income (loss) from continuing operations was $(1.9) million compared to $3.5 million in 2008. For the three months ended September 30, 2009 the net loss from Discontinued Operations was $0.1 million compared to a loss of $0.8 million in the comparable period of 2008.

Revenue from continuing operations for the nine months ended September 30, 2009 was $87.3 million, a decrease of 37% over consolidated revenue from continuing operations of $138.1 million in the comparable period of 2008. Gross margin and EBITDA percentages decreased by 8% and 11% respectively compared to 2008. For the nine month period ended September 30, 2009 the net earnings (loss) and comprehensive income (loss) from continuing operations was $(43.4) million compared to $(6.0) million in 2008. For the nine months ended September 30, 2009 the net loss from Discontinued Operations was $7.6 million compared to a loss of $2.0 million in the comparable period of 2008.

As at September 30, 2009 the revolving bank term loan (including bank overdraft) was $71.5 million, a reduction of $9.6 million from the $81.1 million of net debt as at December 31, 2008 and a reduction of $21.8 million since September 30, 2008. The Trust obtained waivers from the bank syndicate of the "funded debt to EBITDA ratio", "fixed charge coverage ratio" and "funded debt to capitalization ratio" financial covenants contained in the credit facility. In addition, the Trust obtained a deferral of the $4.75 million scheduled reduction and cancellation of commitment which was to take effect September 30, 2009 and reduce the total commitment from $75.5 million to $70.8 million. Both the waivers and the deferral were effective until October 30, 2009. The Trust has submitted a formal request to the banking syndicate to extend the above waivers and deferral to December 14, 2009 and is currently in discussions with the banking syndicate. The Trust is also in discussions with the banking syndicate with respect to amending the existing credit facility. If the discussions are not successful then a future covenant default or further reduction and cancellation of the total commitment could result in the demand for repayment of the current outstanding advances on the credit facility.

On July 27, 2009 the Trust announced the formation of a Special Committee of independent directors to investigate and evaluate various strategic alternatives available to the Trust. The Special Committee retained FirstEnergy Capital Corp to act as financial advisors in this review process, which is on going.

    
    FINANCIAL HIGHLIGHTS

                              Three months ended           Nine months ended
                                    September 30                September 30
    -------------------------------------------------------------------------
    (thousands of dollars,
     except per unit
     amounts, margins and
     ratios)                  2009          2008          2009          2008
    -------------------------------------------------------------------------
    Revenue from
     continuing operations  32,138        53,467        87,277       138,071
    Gross margin from
     continuing
     operations(1)           6,414        13,404        10,991        29,407
    Gross margin
     percentage(1)             20%           25%           13%           21%
    General and
     administrative          2,230         2,534         5,487         6,286
    EBITDA from
     continuing
     operations(1)           4,184        10,870         5,504        23,121
    EBITDA margin
     percentage(1)             13%           20%            6%           17%
    Net earnings (loss)
     and comprehensive
     income (loss) from
     continuing operations  (1,877)        3,546       (47,658)       (6,017)
    Discontinued
     operations, net of tax    (85)         (770)       (7,588)       (2,045)
    Net earnings (loss)
     and comprehensive
     income (loss)          (1,962)        2,776       (55,246)       (8,062)
    Cash provided from
     operating activities    1,249        (5,221)        8,529        (3,138)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total units
     outstanding        32,946,308    32,926,308    32,946,308    32,926,308
    Weighted average
     units outstanding
     - basic            32,946,308    33,171,308    32,938,030    33,238,104
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1)  See "Non-GAAP Measures" in Trust's MD&A (available at www.sedar.com)
    

The Trust continues to focus on diversification into industrial and civil infrastructure activities. This diversification objective has had limited success due to pricing pressures in the bidding process with increased number of parties providing bids. However, the Construction segment has more non-energy related activities with 65% of activities directly relating to the energy sector during the three month period ended September 30, 2009 compared to 82% in the comparable period of 2008. On April 7, 2009, the Government of Alberta released its 2009 budget (the "Budget"). The Budget included $23.2 billion of infrastructure projects over the next three years. These infrastructure projects will not only assist in stimulation of the economy, but will provide Albertans with jobs. Included in the capital plan is $5.8 billion for provincial highway networks.

The oil and 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 as a result of government stimulus packages, with more of the Trust's activities and resources anticipated to be focused and deployed in this area during the summer construction season. 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 in 2009 with redeployment of equipment and skilled personnel to capitalize on demand in nearby regions plus improving utilization rates and financial results. With the shift in the North American natural gas markets towards unconventional shale gas basins, the Trust has moved quickly to position itself in two of North America's premier shale gas plays. The Trust has opened a full service office and maintenance facility in Fort Nelson and increased marketing emphasis in the northeastern British Columbia emerging Horn River and Montney shale gas plays. Petrowest has also undertaken a strategy to expand its presence in the oil sands mining sector by appointing a divisional vice president and by securing office and industrial space in Fort McMurray. This sector represents the largest area of potential growth for the Trust.

SELECTED FINANCIAL INFORMATION

Selected financial information for the three and nine month periods ended September 30, 2009 and 2008 is attached below. This information should be read in conjunction with the audited consolidated financial statements for the twelve months ended December 31, 2008 and the Trust's Management, Discussion and Analysis, available under the Trust's profile on the SEDAR website at www.sedar.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
                                                  September 30,  December 31,
    (In thousands of dollars)                             2009          2008
    -------------------------------------------------------------------------

    Assets

    Current assets
      Cash and cash equivalents                              -         2,348
      Accounts receivable                               33,268        44,306
      Prepaid expenses and other                         2,750         1,083
      Inventory                                          4,426         4,495
      Assets related to discontinued operations            194         4,549
    -------------------------------------------------------------------------
                                                        40,638        56,781

    Property and equipment                              71,610        87,636
    Intangible assets                                    9,415        13,402
    Goodwill                                                 -        34,321
    Future income taxes                                  3,587           727
    Discontinued assets held for sale                        -        11,880
    -------------------------------------------------------------------------

                                                       125,250       204,747
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Current liabilities
      Bank overdraft                                     3,557             -
      Accounts payable and accrued liabilities          12,743        15,918
      Revolving bank term loan                          67,950        83,500
      Current portion of obligations under
       capital leases                                      573           651
      Liabilities related to discontinued operations       169         2,447
    -------------------------------------------------------------------------
                                                        84,992       102,516

    Obligations under capital leases                       461           874
    Future income taxes                                  5,856        12,463
    -------------------------------------------------------------------------
                                                        91,309       115,853
    Unitholders' Equity
    Units                                              292,498       292,492
    Contributed surplus                                    922           635
    Accumulated loss                                  (221,516)     (166,270)
    Accumulated distributions to unitholders           (37,963)      (37,963)
    -------------------------------------------------------------------------
                                                        33,941        88,894
    -------------------------------------------------------------------------

                                                       125,250       204,747
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                              Three months ended           Nine months ended
                                    September 30                September 30
    -------------------------------------------------------------------------
    (In thousands of
     dollars, except
     per unit amounts)        2009          2008          2009          2008
    -------------------------------------------------------------------------

    Revenue                 32,138        53,467        87,277       138,071

    Expenses
      Operating expenses    25,724        40,063        76,286       108,664
      General and
       administrative        2,230         2,534         5,487         6,286
      Interest               1,269         1,472         3,608         4,916
      Amortization of
       property and
       equipment             5,361         6,330        15,644        19,096
      Amortization of
       intangible assets       904         1,106         2,861         3,527
      Impairment of
       property and
       equipment             5,301             -         5,301             -
      Impairment of
       goodwill and
       intangible assets         -             -        35,446         1,874
    -------------------------------------------------------------------------

                            40,789        51,505       144,633       144,363
    -------------------------------------------------------------------------

                            (8,651)        1,962       (57,356)       (6,292)
    -------------------------------------------------------------------------
    Other income (loss)
      Gain (loss) on
       disposal of
       property and
       equipment               175           (37)          156        (2,172)
      Interest and other
       income                   73             -            75            10
    -------------------------------------------------------------------------

    Net earnings (loss)
     and comprehensive
     income (loss) before
     taxes                  (8,403)        1,925       (57,125)       (8,454)

    Future income tax
     recovery               (6,526)       (1,621)       (9,467)       (2,437)
    -------------------------------------------------------------------------

    Net earnings (loss)
     and comprehensive
     income (loss) from
     continuing operations  (1,877)        3,546       (47,658)       (6,017)

    Discontinued operations,
     net of tax                (85)         (770)       (7,588)       (2,045)
    -------------------------------------------------------------------------

    Net earnings (loss)
     and comprehensive
     income (loss) for the
     period                 (1,962)        2,776       (55,246)       (8,062)
    -------------------------------------------------------------------------

    Accumulated loss -
     beginning of period  (219,554)     (144,532)     (166,270)     (133,694)
    -------------------------------------------------------------------------

    Accumulated loss - end
     of period            (221,516)     (141,756)     (221,516)     (141,756)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings (loss)
     per unit
      -basic and diluted
       from continuing
       operations           $(0.06)        $0.11        $(1.45)       $(0.18)
      -basic and diluted
       from discontinued
       operations            (0.00)        (0.03)        (0.23)        (0.06)
      -basic and diluted     (0.06)         0.08         (1.68)        (0.24)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                              Three months ended           Nine months ended
                                    September 30                September 30
    -------------------------------------------------------------------------
    (In thousands
     of dollars)              2009          2008          2009          2008
    -------------------------------------------------------------------------

    Cash provided by (used in)

    Operating activities
    Net earnings (loss)
     from continuing
     operations             (1,877)        3,546       (47,658)       (6,017)
    Items not affecting cash
      Amortization of
       property and
       equipment             5,361         6,330        15,644        19,096
      Amortization of
       intangible assets       904         1,106         2,861         3,527
      Impairment of
       property and
       equipment             5,301             -         5,301             -
      Impairment of
       goodwill and
       intangible assets         -             -        35,446         1,874
      Unit-based
       compensation expense    147           189           287           332
      Units issued for
       service                   -             -             6             -
      Future income tax
       recovery             (6,526)       (1,621)       (9,467)       (2,437)
      (Gain) loss on
       disposal of property
       and equipment          (175)           37          (156)        2,172
    -------------------------------------------------------------------------
                             3,135         9,587         2,264        18,547

    Changes in non-cash
     working capital
      Accounts receivable   (4,948)      (14,533)       11,038       (15,397)
      Prepaid expenses
       and other            (1,306)         (144)       (1,667)          584
      Inventory                406        (1,007)           69           258
      Accounts payable and
       accrued liabilities   3,962           876        (3,175)       (7,130)
    -------------------------------------------------------------------------
                             1,249        (5,221)        8,529        (3,138)
    -------------------------------------------------------------------------
    Financing activities
      Unitholder
       distributions             -             -             -          (953)
      Repayment of capital
       lease obligations      (172)         (162)         (491)         (500)
      Proceeds from
       revolving term bank
       loan                      -             -             -         5,000
      Repayment of
       revolving term bank
       loan                      -             -       (15,550)            -
    -------------------------------------------------------------------------
                              (172)         (162)      (16,041)        3,547
    -------------------------------------------------------------------------
    Investing activities
      Purchase of property
       and equipment          (629)       (2,700)       (5,164)       (9,683)
      Proceeds on property
       and equipment disposals 322            (8)          406         2,722
      Purchase price
       adjustment                -             -             -           (25)
    -------------------------------------------------------------------------
                              (307)       (2,708)       (4,758)       (6,986)
    -------------------------------------------------------------------------

    Net change in cash from
     continuing operations     770        (8,091)      (12,270)       (6,577)
    -------------------------------------------------------------------------

    Cash flow from
     discontinued operations
    Operating activities       465         2,535           581           746
    Financing activities         -            (3)          (10)           (8)
    Investing activities         -           122         5,794          (801)
    -------------------------------------------------------------------------
    Net change in cash
     from discontinued
     operations                465         2,654         6,365           (63)
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and cash
     equivalents             1,235        (5,437)       (5,905)       (6,640)
    -------------------------------------------------------------------------
    Cash and cash
     equivalents (bank
     overdraft), beginning
     of period              (4,792)         (988)        2,348           215
    -------------------------------------------------------------------------
    Cash and cash
     equivalents (bank
     overdraft), end of
     period                 (3,557)       (6,425)       (3,557)       (6,425)
    -------------------------------------------------------------------------

    Supplementary cash
     flow information
    Interest paid            1,264         1,592         3,890         5,091
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Non cash transactions
    Property and equipment
     financed by capital
     leases                      -           294             -           887
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE PETROWEST ENERGY SERVICES TRUST

For further information: For further information: please contact Ralph Hesje, President and CEO, or 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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