/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES/
CALGARY, Aug. 30 /CNW/ - The second quarter of 2007 saw Western increase
its quarterly revenues compared to 2006, continue its positive income from
continuing operations before amortization, interest and income taxes
("EBITDA") and improve its pre tax bottom line as compared to 2006. This
despite the second quarter being a seasonally slow quarter and during a
significant industry wide cyclical downturn affecting Canadian oilfield
service companies. Highlights for the quarter include:
- Quarterly revenues are up 34% over 2006.
- General and administrative expenses for the quarter are down 36% from
- Quarterly EBITDA improved $927,575 from 2006
During the later part of 2006 and into 2007 Western's new management team
continued the implementation of a turnaround plan and change in direction for
the Company. The key components of the turnaround plan are: shifting the
direction of the Company's business to the less volatile production
optimization though stimulation services; concentrating the Company's services
in fewer operational bases; increasing efficiencies and reducing costs. The
Company's plan took a big step forward in the second quarter with the purchase
of the assets of Grenville Energy Partnership ("Grenville") and by disposing
of its non core well testing assets.
Quarterly revenues for the second quarter increased by 34%, year over
year compared to 2006. Revenues were $2,777,477 for the three months ended
June 30, 2007 compared to $2,073,318 for the three months ended June 30, 2006.
This increase was achieved as a result of the Company's new direction and
despite an industry wide downturn for Canadian oilfield service companies. The
second quarter is a seasonally slow quarter and revenues for the three months
ended June 30, 2007 were down 47% from the first quarter of 2007, this however
is a dramatic improvement over the 61% decline experienced comparing the
second to first quarters of 2006. Unusually wet weather in the state of Texas,
where the Western's US operations are based, also contributed to the lower
second quarter results. Revenues in Texas were off 9% in the second quarter
compared to the second quarter of 2006. Revenues to date during the third
quarter in Texas show an improvement.
Quarterly, EBITDA increased by $927,575 from Q2, 2006 to a positive
$219,666. Operating costs during the second quarter were 93% of revenues,
compared to 93% of revenues for the second quarter of 2006. General and
administrative expenses decreased 36% to 474,209 for the second quarter of
2007 compared to the second quarter of 2006. The Company's cost reduction
program saved $543,955 in general and administrative expenses for the first
six months of 2007 as compared to 2006.
Earnings were positively impacted by changes in foreign exchange during
the second quarter of 2007. With the Canadian dollar appreciating almost 10%
against the US dollar from March 31 to June 30 2007, the Company experienced
foreign exchange income of $501,730. The Company's US based capital assets are
recorded at historic exchange rates and do not fluctuate with exchange rates,
while the Company's monetary US liabilities do fluctuate with exchange rates
and the foreign exchange income's largest component is due to this devaluing
of the US liabilities.
During the second quarter of 2007 the Company and Grenville Energy
Partnership ("Grenville") completed the purchase by the Company of all of
Grenville's oilfield service equipment for $12.5 million and terminated their
revenue sharing joint venture. Commencing January 1, 2007 the Company was no
longer responsible to distribute a component of its revenues to Grenville.
This revenue savings will continue to be significant as the Company's business
grows. To complete the Grenville purchase the Company used approximately
$4.2 million of a new banking facility. This new demand term loan also funded
the repayment of existing demand term loans in the amount of $0.7 million and
a revolving credit facility in the amount of $1.5 million.
An 8% convertible note with a one year term was also issued to Grenville
on closing of the transaction, on May 16, 2007. The note is convertible into
shares of the Company at the option of its holders at $0.20 per share. The
Company can force conversion of the note if its shares trade over $0.30 for
20 consecutive days or if it raises or cash flows a total of $5.0 million. If
the Company forces conversion of the note, the conversion prices will be the
lesser of $0.20 and 120% of the greater of the weighted average issue price of
the shares issued in meeting the conversion tests or the 20 day weighted
average closing price of the Company's shares leading up to the conversion. In
no event will the conversion price be less than $0.12 per share.
Interest expense during 2007 is higher than in 2006, primarily due to the
financing of the purchase of the assets from Grenville. It is Western's
objective to convert or repay the convertible note issued to Grenville and to
reduce its interest carrying charges.
The Company's efforts to focus and streamline its business were enhanced
by the disposition of its well testing equipment. The $1,575,000 sale of the
well testing equipment was closed during the second quarter of 2007 and the
resulting proceeds were reinvested into new capital assets.
During the first two quarters of 2007 the Company achieved its objective
of streamlining and consolidating all Canadian activities under the StimSol
name. In addition to the cost savings that are being brought about, the
operational consolidation has allowed the Company to take advantage of
StimSol's excellent reputation in the Canadian marketplace. In addition, all
of the Company's US operations were consolidated into a single US subsidiary.
These reorganization steps significantly decrease the operational and
financial complexity of the Company.
Despite the progress that has been made, management recognizes that much
still needs to be done. Fiscal 2007 will see a continued expansion and
realignment of the Company's fleet of equipment. Continued attention will also
be spent on reducing overall administrative costs and operational
inefficiencies. By concentrating its focus on the Company's core business of
production optimization through stimulation services, management is confident
that Western will become increasingly profitable and generate positive returns
for our shareholders.
Western Energy Services Corp. also announces that it has commenced a non
brokered private placement of up to $5 million. The Company will issue units
consisting of one common share and one half a share purchase warrant for
$0.10 per unit. Each whole share purchase warrant will entitle the holder to
purchase one additional common share for $0.16 at anytime up to 18 months from
the date of closing the private placement.
Forward Looking Information
This release contains certain forward-looking statements related but not
limited to the Company's expectations, intentions, plans and beliefs.
Investment advisors, shareholders and potential investors are cautioned not to
place undue reliance on forward-looking information which by its nature
involves assumptions, risks and uncertainties, both general and specific, that
contribute to the possibilities that predictions, projections, forecasts and
future events will not occur. Consequently, actual results could differ
materially from the expectations expressed in these forward-looking
statements. The Company does not assume any responsibility to update this
information for events subsequent to its preparation.
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 quarter ended June 30, 2007 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 firstname.lastname@example.org