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Press release from CNW Group

PETROWEST ENERGY SERVICES TRUST ANNOUNCES 2010 THIRD QUARTER FINANCIAL RESULTS

Wednesday, November 10, 2010

PETROWEST ENERGY SERVICES TRUST ANNOUNCES 2010 THIRD QUARTER FINANCIAL RESULTS18:53 EST Wednesday, November 10, 2010CALGARY, Nov. 10 /CNW/ - Petrowest Energy Services Trust (TSX: PRW.UN) announced today its consolidated financial results for the three and nine month periods ended September 30, 2010.Revenue from continuing operations for the three months ended September 30, 2010, was $39.6 million, a 23% increase from revenue of $32.1 million in the comparable period of 2009. Gross margin and EBITDA margin percentages were 18% and 15% respectively, compared to 20% and 13% in the comparable period of 2009. For the three month period ended September 30, 2010 the net loss and comprehensive loss from continuing operations was $0.9 million compared to $1.9 million in the comparable period of 2009.  This represents net loss per unit of $0.01 and $0.06 respectively, basic and fully diluted. The net loss and comprehensive loss (including Discontinued Operations) was $0.9 million compared to $2.0 million in the comparable period of 2009.  This represents net loss per unit of $0.01 and $0.06 respectively, basic and fully diluted.Revenue from continuing operations for the nine months ended September 30, 2010, was $101.4 million, a 16% increase from revenue of $87.3 million in the comparable period of 2009.  Gross margin and EBITDA margin percentages were 16% and 12% respectively, representing an increase of 3% and 6% over the comparable period of 2009.  For the nine month period ended September 30, 2010 the net loss and comprehensive loss from continuing operations was $7.5 million compared to $47.6 million in the comparable period of 2009.  This represents net loss per unit of $0.15 and $1.45 respectively, basic and fully diluted. The net loss and comprehensive loss (including Discontinued Operations) was $7.5 million compared to $55.2 million in the comparable period of 2009.  This represents net loss per unit of $0.15 and $1.68 respectively, basic and fully diluted.The Trust's ability to continue operations is dependent on Petrowest's ability to maintain compliance with its credit facility or the ability to refinance the existing bank credit facility.  In the second quarter of 2010, the Trust and the banking syndicate executed the Credit Agreement.  The Credit Agreement provided for credit facilities in an initial aggregate principal amount of $70.0 million, consisting of a revolving credit facility in the principal amount of $63.0 million and a working capital facility in the principal amount of $7.0 million, subject to scheduled reductions over the term of the facility as follows: a reduction of $2.5 million on June 30, 2010; a reduction of $3.75 million on September 30, 2010; a reduction of $3.75 million on December 31, 2010; and a reduction of $2.5 million on March 31, 2011. As at September 30, 2010, after a reduction of $0.625 million from the net proceeds of a sale of assets and a $1.375 million additional reduction there was a total commitment of $65.5 million, comprised of a $58.95 million syndicated facility and $6.55 million working capital facility ($4.182 million drawn at September 30, 2010). The June 30, 2010 amendment became effective reducing the aggregate principal amount of the credit facility to $67,500,000.However, as a result of the increased levels of activity in Petrowest's business, increased funding of working capital was required.  As a result, Petrowest entered into an amending agreement effective September 30, 2010 which replaced the remaining three scheduled reductions with four reductions as follows: a reduction of $1.375 million on September 30, 2010, a reduction of $2.375 million on October 29, 2010, a reduction of $3.75 million on December 31, 2010 and a reduction of $2.5 million on March 31, 2011. In addition, the Credit Agreement contains two financial covenants, the "Funded debt to EBITDA Ratio" and the "Fixed Charge Coverage Ratio".  As at September 30, 2010 the Trust was in compliance with these covenants. Under the Credit Agreement amounts outstanding bear interest at the prime rate plus 5.5%.FINANCIAL HIGHLIGHTS  Three months ended September 30   Nine months endedSeptember 30(thousands of dollars, except per unit amounts, margins and ratios)2010 200920102009Revenue from continuing operations39,59432,138101,38787,277Gross margin from continuing operations(1)7,1886,41415,87910,991Gross margin percentage(1)18%20%16%13%General and administrative1,2062,2303,6475,487EBITDA from continuing operations(1)5,9824,18412,2325,504EBITDA margin percentage(1)15%13%12%6%Net loss and comprehensive loss from continuing operations(900)(1,877)(7,460)(47,658)Discontinued operations, net of tax(20)(85)(65)(7,588)Net loss and comprehensive loss(920)(1,962)(7,525)(55,246)Cash provided from operating activities(1,450)1,2498168,529Units outstanding86,686,278  32,946,308  86,686,278  32,946,308Weighted average units outstanding - basic86,686,27832,946,30851,253,33132,938,030(1)  See "Non-GAAP Measures"The oil and natural gas drilling sector will continue to impact the Trust's operations and financial results and remains an important part of the Trust's operations going forward. The amount of the Trust's services directly 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 is continuing to pursue geographic diversification in 2010 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 significant potential growth for the TrustSELECTED FINANCIAL INFORMATIONSelected financial information for the three and nine months ended September 30, 2010 is attached below. This information should be read in conjunction with the audited consolidated financial statements for the twelve months ended December 31, 2009 and the Trust's Management, Discussion and Analysis, available under the Trust's profile on the SEDAR website at www.sedar.com.FORWARD LOOKING INFORMATIONThis 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 TrustConsolidated Balance Sheets        (Unaudited)(In thousands of dollars)As at    September 30, 2010 As at   December 31, 2009Assets  Current assets   Accounts receivable37,44028,262 Prepaid expenses and other3,1382,158 Inventory4,3483,984 Assets related to discontinued operations-174 44,92634,578   Property and equipment60,14467,972Intangible assets5,7168,330    110,786110,880Liabilities  Current liabilities   Bank overdraft4,182270 Accounts payable and accrued liabilities15,93511,689 Revolving bank term loan60,18867,950 Current portion of obligations under capital leases963544 Liabilities related to discontinued operations-11 81,26880,464   Obligations under capital leases539331 81,80780,795Unitholders' Equity  Units298,937292,498Warrants400-Contributed surplus6301,050Accumulated loss(233,025)(225,500)Accumulated distributions to unitholders   (37,963)   (37,963) 28,97930,085    110,786110,880   Petrowest Energy Services TrustConsolidated Statements of Loss, Comprehensive Loss and Accumulated Loss(Unaudited)   Three months endedSeptember 30 Nine months endedSeptember 30(In thousands of dollars, except per unit amounts)      2010 2009     2010           2009     Revenue 39,59432,138101,38787,277     Expenses     Operating expenses32,40625,72485,50876,286 General and administrative1,2062,2303,6475,487 Interest1,4231,2694,7303,608 Amortization of property and equipment4,0495,36111,84115,644 Amortization of intangible assets8819042,6132,861 Impairment of property and equipment-5,301-5,301 Impairment of goodwill and intangible assets---35,446      39,96540,789108,339144,633      (371)(8,651)(6,952)(57,356)Other income (loss)     Gain (loss) on disposal of property and equipment(533)175(518)156 Interest and other income4731075     Net loss and comprehensive loss   before taxes(900)(8,403)(7,460)(57,125)     Future income tax recovery-(6,526)-(9,467)     Net loss and comprehensive loss from continuing operations(900) (1,877)(7,460)(47,658)     Discontinued operations, net of tax(20)(85)(65)(7,588)     Net loss and comprehensive loss for the period(920)(1,962)(7,525)(55,246)     Accumulated loss - beginning of period(232,105)(219,554)(225,500)(166,270)     Accumulated loss - end of period(233,025)(221,516)   (233,025)(221,516)     Net loss per unit - basic and diluted from continuing operations$(0.01)$(0.06)$(0.15)$(1.45) - basic and diluted from discontinued operations(0.00)(0.00)(0.00)(0.23) - basic and diluted (0.01)(0.06)(0.15)(1.68)Petrowest Energy Services TrustConsolidated Statements of Cash Flows       (Unaudited)             Three months endedSeptember 30   Nine months ended      September 30(In thousands of dollars)2010200920102009     Cash provided by (used in)         Operating activities    Net loss from continuing operations(900)(1,877)(7,460)(47,658)Items not affecting cash     Amortization of property and equipment4,0495,36111,84115,644 Amortization of intangible assets8819042,6132,861 Impairment of property and equipment-5,301-5,301 Impairment of goodwill and intangible assets-- 35,446 Unit-based compensation expense-147(420)287 Units issued for service---6 Future income tax recovery-(6,526)-(9,467) (Gain) loss on disposal of property and equipment533(175)518(156) 4,5633,1357,0922,264Changes in non-cash working capital     Accounts receivable           (9,221)(4,948)(9,178)11,038 Prepaid expenses and other(159)(1,306)(980)(1,667) Inventory(262)406(364)69 Accounts payable and accrued liabilities3,6293,9624,246(3,175) (1,450)1,2498168,529Financing activities     Issuance of units--7,523- Unit issue costs(41) (684)  Repayment of capital lease obligations(369)(172)(961)(491) Repayment of revolving term bank loan(562)-(7,762)(15,550) (972)(172)(1,884)(16,041)Investing activities     Purchase of property and equipment(1,150)(629)(4,277)(5,164) Proceeds on property and equipment disposals6163221,335406 (534)(307)(2,942)(4,758)     Net change in cash from continuing operations(2,956)770(4,010)(12,270)     Cash flow from discontinued operations    Operating activities-46598581Financing activities---(10)Investing activities---5,794Net change in cash from discontinued operations-465986,365Decrease in cash and cash equivalents(2,956)1,235(3,912)(5,905)Cash and cash equivalents (bank overdraft), beginning of   period(1,226)(4,792)(270)2,348Cash and cash equivalents (bank overdraft), end of period(4,182)(3,557)(4,182)(3,557)Supplementary cash flow information    Interest paid1,8581,2644,5953,890     Non cash transactions    Property and equipment financed by capital leases--1,588-For further information: Richard Quigley, Interim CEO, or Lloyd A. Wiggins, Chief Financial Officer, at (780) 830-0881 or info@petro-west.com.