/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES/
CALGARY, April 30 /CNW/ - Western Energy Services Corp. ("Western" or the
"Company") announces improved results for 2006 over 2005. Revenues of
$14.1 million reflect a 75% year over year increase. Earnings before Interest,
Taxes Depreciation and Amortization ("EBITDA") have improved by $1,397,732 or
73% over 2005. When the one time restructuring costs of $399,450 that resulted
from the operational realignment and base closures are added back, EBITDA from
continuing operations has improved by $1,797,182 to a small loss of $114,229
for the year. This result, when viewed in the context of the year over year
increase in revenues of $6,072,483, means that the Company has been able to
retain 29.5% of each new dollar of revenue generated in 2006.
Significant efficiencies in general and administrative ("G&A") costs have
also been achieved. Even with the $6,072,483 or 75.4% increase in revenues,
total G&A costs have increased only $92,700 or 4.2%. For the entire year G&A
costs have averaged 16.4% of revenues down from 27.7% for the previous period.
More importantly the changes implemented by the new management team during the
third and fourth quarters resulted in G&A costs dropping to a more acceptable
level of 12.1% of revenues for this period.
The decision was taken to write down the Company's mining properties.
Although these properties do have economic value, the realizable value and the
timing of any realization cannot be reasonably determined at this time. The
write off will help simplify Western's corporate structure making it more
understandable to the investment community and the investing public. The
mining properties are considered to be discontinued operations.
Selected Financial Information
Year ended Year ended ended
December 31, December 31, December 31,
2006 ($) 2005 ($) 2004 ($)
Revenue 14,118,622 8,046,139 711,438
Restructuring costs 399,450 - -
Loss from continuing operations,
before amortization, interest
and income taxes 513,679 1,911,411 984,629
Cash outflow from continuing
operations 921,005 2,059,014 905,052
Loss from continuing operations 3,222,375 3,487,461 1,211,364
- per share 0.03 0.05 0.05
Net loss 4,667,951 3,487,461 1,211,364
- per share 0.05 0.05 0.05
Total assets 19,015,931 11,299,158 8,942,819
Shareholder's equity 7,754,008 6,481,021 3,577,144
Fiscal 2006 was a year of change for Western. After two years of
unsatisfactory results, despite being in a period of unprecedented oil and gas
activity levels, the Board of Directors appointed a new management team part
way through the first quarter of 2006. In making the change the Board sought
to bring focus to the Company's business strategy and efficiency to its
The first step in the turnaround plan was to rigorously redefine the
business of the Company. Rather than trying to provide a broad range of
services over a wide geographic footprint, the decision was taken to focus the
Company on the less volatile production optimization through stimulation
services segment of the oil and gas services industry.
In making the decision to change the direction of the Company, the Board
of Directors fully recognized that the implementation of this strategy would
necessitate a realignment of the Company's fleet of equipment, the closing of
several operational bases as well as certain changes to its employee base.
However the advantages of the strategy in terms of a less volatile revenue
stream, greater operational efficiencies and greater profitability were seen
to far outweigh the costs of the restructuring. By the end of 2006 the
implementation of the turnaround plan was well underway. The initial step in
the process was the acquisition of StimSol Canada Inc. ("StimSol"), a
transaction which was negotiated in the second quarter and which closed at the
end of the third quarter. By acquiring StimSol, Western acquired a company
whose employees possessed the requisite skills, reputation and focus to be
successful in the production optimization services market.
Once the purchase of StimSol was complete, the process was begun whereby
Western's Canadian operations would be streamlined by consolidating all
activities under the StimSol name. Significant cost reductions and
efficiencies have now been realized with the closure of the Company's
unprofitable Lloydminster and Medicine Hat bases. In addition to the cost
savings that were brought about, the operational consolidation has allowed the
Company to take advantage of StimSol's excellent reputation in the Canadian
In the United States the process has begun whereby StimSol's technologies
are being introduced through the Company's Abilene, Texas operating base. By
the end of the year three acidizing units, four acid transports and a fully
certified acid storage and mixing facility had been put into service as well
as additional nitrogen pumping and transport capacity. U.S. operational
efficiencies have also been realized by closing the unprofitable Williston,
North Dakota and Casper, Wyoming bases. Results from the first quarter of 2007
indicate that the industry is beginning to understand the Company's new
capabilities as shown by the steady growth in utilization rates for the
Company's new and pre-existing equipment.
Consistent with the plan to focus Western's activities on production
optimization through stimulation services, the Company recently agreed to sell
its well test division after the completion of the profitable winter busy
season. The proceeds from this transaction, which is effective April 30, 2007
and is scheduled to close in early May 2007, have already been earmarked to
fund two of management's goals namely the introduction of additional nitrogen
pumping and stimulation equipment, as well as deeper coil tubing capacity.
Subsequent to the year end, the Company announced the acquisition of all
of the equipment operated under the joint venture agreement with Grenville
Energy Partnership ("Grenville"). This acquisition, which is effective as of
January 1, 2007, is scheduled to close in early May. With this acquisition the
Company's overly complex financial structure has been greatly simplified with
one result being that additional credit facilities have been made available to
the Company to fund Western's expansion.
The announced acquisition of Grenville's assets and the windup of the
joint venture with Grenville is a financially important step for the Company.
Had this acquisition been in effect throughout 2006, Western's revenues and
EBITDA would have been $1,183,627 higher. This acquisition will have a long
term positive advantage for Western as the Company will no longer be required
to turn over a significant share of its increasing revenue base to Grenville.
The acquisition of StimSol has also had a significant positive impact on
EBITDA and profitability. Only four months of StimSol's results have been
included in Western's year end financial statements. However if the results of
StimSol had been added to Western's, on a pro-forma basis, revenues for the
year would have increased by $4.9 million and EBITDA would have increased by
When aggregated together, the changes that management has brought about
will have a significant impact on future profitability. After eliminating one
time restructuring costs and giving effect to the acquisitions of StimSol and
Grenville's assets on a pro-forma basis for the entire year, EBITDA for 2006
would have been positive $1,643,398 compared to the reported loss of $513,679.
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 its financial statements for the year ended December 31, 2006 and
its Management's Discussion and analysis are filed on SEDAR at www.sedar.com.
Please visit the web site: www.WesternEnergyServices.com or contact: Jim
McQuarrie, President & CEO, (403) 266-0667 or Investor Relations at (403)
668-4880; If you would like to receive future information releases by email
please provide your email address to: email@example.com