CALGARY, May 14 /CNW/ - Petrowest Energy Services Trust (TSX: PRW.UN) announced today its interim consolidated financial results for the three month period ended March 31, 2008. The interim consolidated financial results of the Trust for the first quarter of 2008 reflect the lower activity in the oil and gas drilling sector where there was a 24% decrease in the number of wells completed in the western Canadian sedimentary basin compared to the first quarter of 2007. During the first quarter of 2008 approximately 52% of the Trust's services were related to the oil and gas sector compared to 67% in the first quarter of 2007. This is a combination of both an increased focus on industrial and civil infrastructure projects and the decreased demand for services in the oil and gas sector as a result of decreased drilling activity.
FINANCIAL HIGHLIGHTS
Financial Summary
Three months ended March 31
(thousands) 2008 2007
-------------------------------------------------------------------------
Revenue 59,039 32,863
Gross Margin(1) 12,850 7,517
Gross Margin Percentage(1) 22% 23%
EBITDA(1) 10,796 5,826
EBITDA Percentage(1) 18% 18%
Cash provided from operating activities 287 (1,728)
Net earnings (loss) 385 (2,225)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Distributions declared - 8,483
Total units outstanding 33,266 28,275
Weighted average units outstanding 33,266 28,275
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) See "Non-GAAP Measures" in Trust's interim MD&A (available at
www.sedar.com)
Consolidated revenue for the three months ended March 31, 2008 was $59.0 million, an increase of $26.1 million from the $32.9 million reported in the comparable period of 2007. Included in the first quarter 2008 financial results is revenue from the companies acquired in May 2007. On a proforma basis consolidated revenue increased 5%. Therefore, the comparable period in 2007 does not contain any financial results from the May 2007 acquisitions. The gross margin percentage and EBITDA percentage were both comparable between the first quarters of 2008 and 2007 and continue to be affected by lower equipment utilization, pricing pressures and increasing costs which can't be fully passed on to the Trust's customers.
Ken Drysdale, President and Chief Executive Officer of the Trust stated that "we are pleased with first quarter financial results, particularly with the current levels of drilling activity in the western Canadian sedimentary basin. Our diversification objective, which has been ongoing for over a year, is providing significant mitigation from the risk of dependency on the oil and gas sector. There were some positive developments in this sector during the quarter such as the new deep drilling royalty programs announced by the Alberta government, the firming of the price of natural gas and the announcement by the Petroleum Service Association of Canada of its revised forecast for 2008 drilling activity."
OUTLOOK
The Canadian Association of Oilwell Drilling Contractors ("CAODC") forecasted a 28% decrease in wells to be drilled in the western Canadian sedimentary basin in 2008 from the 2007 level. In addition, CAODC forecast lower utilization rates of drilling rigs to be 34% for the year compared to 38% in 2007. With approximately 52% of the Trust's first quarter 2008 services relating to the energy sector, the activity levels in the sector do have a significant effect on the Trust and its financial results.
During the first three months of 2008 there were 4,982 wells completed in western Canada compared to 6,589 in the comparable period of 2007. This 24% decrease was slightly lower than the average annual forecasted decrease of 28%. Rig utilization was approximately 56% for the first three months of 2008 compared to 61% in the comparable period of 2007. The strengthening of the natural gas price during the quarter has also been a positive for the sector fundamentals. On April 23, 2008 the Petroleum Services Association of Canada revised its forecast for 2008 to 16,500 wells to be drilled in Canada, up from the previous forecast of 14,500 wells. This is still below 2007 actual levels. On April 10, 2008 the Alberta Government introduced two new royalty programs to encourage the development of deep drilling for oil and gas, which provided some clarity on the royalty rates which will be applicable in 2009. This is intended to improve the economics and resultant activity of deep drilling. The Trust currently has capacity which will be available to generate cash flow when the oil and gas sector demand improves.
The Trust continues to focus on industrial and civil infrastructure activities. The 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 with more of the Trust's activities and resources anticipated to be focused and deployed in this area. 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 with redeployment of equipment and skilled personnel to capitalize on demand in nearby regions plus improving utilization rates and the financial results.
SELECTED FINANCIAL INFORMATION
Selected financial information for the three month periods ended March 31, 2008 and 2007 is attached below. This information should be read in conjunction with the unaudited consolidated financial statements for the three months ended March 31, 2008 and the Trust's interim Management, Discussion and Analysis, available under the Trust's profile on the SEDAR website at www.sedar.com and at www.petro-west.com.
Petrowest Energy Services Trust
Consolidated Balance Sheets
-------------------------------------------------------------------------
As at As at
March 31, December 31,
(In thousands of dollars) 2008 2007
-------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents - 215
Accounts receivable 48,790 44,281
Prepaid expenses and other 1,136 1,906
Inventory 5,118 5,800
-------------------------------------------------------------------------
55,044 52,202
Property and equipment 116,347 118,441
Intangible assets 23,275 24,502
Goodwill 49,371 49,402
Future income taxes 698 698
-------------------------------------------------------------------------
244,735 245,245
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities
Current liabilities
Bank overdraft 295 -
Accounts payable and accrued liabilities 23,283 28,775
Distributions payable - 953
Current portion of revolving bank term loan 7,250 -
Current portion of obligations under
capital leases 574 489
-------------------------------------------------------------------------
31,402 30,217
Obligations under capital leases 872 797
Revolving bank term loan 79,750 82,000
Future income taxes 10,856 10,739
-------------------------------------------------------------------------
122,880 123,753
Unitholders' Equity
Units 292,857 292,879
Warrants 270 270
Accumulated loss (133,309) (133,694)
Accumulated distributions to unitholders (37,963) (37,963)
-------------------------------------------------------------------------
121,855 121,492
-------------------------------------------------------------------------
244,735 245,245
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Petrowest Energy Services Trust
Consolidated Statement of Loss, Comprehensive Loss and Accumulated
------------------------------------------------------------------
Earnings (Loss)
---------------
Three months Three months
ended ended
March 31, March 31,
(In thousands of dollars) 2008 2007
-------------------------------------------------------------------------
Revenue 59,039 32,863
Expenses
Operating expenses 46,189 25,346
General and administrative 2,054 1,691
Interest 1,936 544
Amortization of property and equipment 7,069 5,131
Amortization of intangible assets 1,227 2,180
-------------------------------------------------------------------------
58,475 34,892
-------------------------------------------------------------------------
564 (2,029)
-------------------------------------------------------------------------
Other income
Loss on disposal of property and equipment (38) (246)
Interest and other income/(expense) (24) 50
-------------------------------------------------------------------------
Net earnings (loss) and comprehensive earnings
(loss) before taxes 502 (2,225)
Future income tax expense 117 -
-------------------------------------------------------------------------
Net earnings (loss) and comprehensive earnings
(loss) for the period 385 (2,225)
Accumulated (loss) earnings - beginning
of period (133,694) 3,379
-------------------------------------------------------------------------
Accumulated (loss) earnings - end of period (133,309) 1,154
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings (loss) per unit - basic and diluted $0.01 ($0.08)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Petrowest Energy Services Trust
Consolidated Statement of Cash Flows
------------------------------------
Three months Three months
ended ended
March 31, March 31,
(In thousands of dollars) 2008 2007
-------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net earnings (loss) for the period 385 (2,225)
Items not affecting cash
Amortization of property and equipment 7,069 5,131
Amortization of intangible assets 1,227 2,180
Unit-based compensation - 270
Future income taxes 117 -
Loss on disposal of property and equipment 38 246
-------------------------------------------------------------------------
8,836 5,602
Changes in non-cash working capital
Accounts receivable (4,509) 1,902
Prepaid expenses and other 770 (725)
Inventory 682 (276)
Accounts payable and accrued liabilities (5,492) (8,231)
-------------------------------------------------------------------------
287 (1,728)
-------------------------------------------------------------------------
Financing activities
Unitholder distributions (953) (8,603)
Repayment of capital lease obligations (193) -
Proceeds from revolving term bank loan 5,000 10,000
-------------------------------------------------------------------------
3,854 1,397
-------------------------------------------------------------------------
Investing activities
Acquisition of acquired companies net of working
capital adjustments and costs - 119
Purchase of property and equipment (4,776) (3,730)
Proceeds on property and equipment disposals 116 936
Purchase price adjustment 9 (6,422)
-------------------------------------------------------------------------
(4,651) (9,097)
-------------------------------------------------------------------------
Decrease in cash and cash equivalents (510) (9,428)
Cash and cash equivalents, beginning of period 215 9,312
-------------------------------------------------------------------------
Cash and cash equivalents, end of period (295) (116)
-------------------------------------------------------------------------
Supplementary cash flow information
Interest paid 1,729 544
Income taxes paid - -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Non cash transactions
Property and equipment financed by capital leases 353 590
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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.
