BlackWatch Energy Services Corp.
TSX : BWT

BlackWatch Energy Services Corp.

November 10, 2009 08:30 ET

BlackWatch Energy Services Corp. Announces Financial Results for the Three and Nine Months Ended September 30, 2009

CALGARY, ALBERTA--(Marketwire - Nov. 10, 2009) - BlackWatch Energy Services Corp. ("BlackWatch" or the "Company") (TSX:BWT) announces its results for the three and nine months ended September 30, 2009. All figures are reported in Canadian dollars unless otherwise stated.

FINANCIAL & OPERATING SUMMARY

The table below provides a summary of BlackWatch's financial and operating results for the three and nine months ended September 30, 2009. BlackWatch's announced acquisition of drilling rigs in Mexico on September 30, 2009 and agreement to acquire a directional services business in Latin America are not reflected in these operating results but will have a material impact on the fourth quarter ending December 31, 2009. Our unaudited consolidated financial statements with notes and related MD&A for this period will be filed separately on SEDAR on November 10, 2009 (www.sedar.com). Please review that material in conjunction with this press release.



Summary Financial Information

($ thousands, except per share unit Three months ended Nine months ended
amounts) September 30, September 30,
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2009 2008 2009 2008
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Revenue from continuing operations $ 6,085 $ 8,356 $ 23,461 $ 28,676

Gross margin(1) from continuing
operations $ 152 $ 633 $ 3,995 $ 4,771

Adjusted EBITDA(1) $ (553) $ (463) $ 1,761 $ 1,745

Loss from continuing operations $(1,334) $ (3,128) $ (4,292) $ (6,706)
Per common share - basic and diluted $ (0.01) $ (0.09) $ (0.06) $ (0.20)

1 See definition within the Non-GAAP Measures section.


As at As at
($ thousands) September 30, December 31,
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2009 2008
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Total assets $ 140,889 $ 64,437

Debt and capital lease obligations:
Current $ 202 $ 42,907
Long-term $ 113 $ 189

Shareholders' equity $ 123,901 $ 15,038


In the three months ended September 30, 2009 revenues and Adjusted EBITDA were lower compared to the same quarter in 2008. In the nine months ended September 30, 2009 the Company had decreased revenues compared to 2008. Adjusted EBITDA for the nine months ended September 30, 2009 has remained consistent because of lower selling, general and administration costs and improved margins within the drilling division.

The decrease in revenue in the three and nine months ended September 30, 2009 is due to significantly lower customer demand for oilfield services in the western Canadian sedimentary basin. In the nine months ended September 30, 2009 the number of wells drilled is 41% lower than the comparable period in the previous year. In spite of this dramatic reduction in activity, we have adapted to the new environment and demonstrated an ability to manage costs effectively, which has minimized the impact of the operating environment on our results.

One of the most significant of the changes we have made is the successful introduction of fixed-price performance-based contracts. These contracts involve the coordination of multiple services offered by BlackWatch and other service companies. Additionally BlackWatch has successfully completed an increasing number of drilling projects using casing drilling technology. Casing drilling continues to prove itself as one of the most cost-effective methods to drill certain types of shallow wells. This is reflected in the growing number of clients that have selected casing drilling over other drilling methods for shallow drilling. The Company has also added pipe recovery services and borehole acoustic monitoring services. The borehole acoustic monitoring service provides the client with seismic information for horizontal, multi-stage fracturing operations, which are becoming more prevalent as oil and natural gas companies utilize these new technologies to enhance production. The addition of these new service delivery models are part of the Company's strategy to reposition its Canadian services in order to capitalize on the growing business opportunities in emerging unconventional resource plays.

The recent equity offerings which raised over $91 million in net cash proceeds, have significantly improved BlackWatch's balance sheet and given it the flexibility to fund further growth through a blend of prudent leverage and improved cash flows.

On September 30, 2009 the Company established an international presence when it acquired six drilling rigs in Mexico for US$67.5 million and entered into a binding letter of intent to purchase a private directional services business for approximately US$16.5 million. The Company anticipates that the purchase of the private directional services business, which operates primarily in Mexico, will close in November. These acquisitions are consistent with the Company's strategy of developing a complementary range of well construction services in targeted international markets, supported by the existing Canadian base of operations. The acquisition of the private directional services business will provide the Company with a new well construction related service line, which complements the growing drilling business.

The Company believes that these acquisitions will provide a stable platform to capitalize on the experience and skills of management. The Company's focus remains on growing its well construction business domestically and internationally. The Company remains encouraged by the outlook for spending on drilling activities in our target international markets and continues to evaluate opportunities to acquire assets cost effectively.

BlackWatch has taken positive steps in building a new management team. In addition to the appointments of John King as President and Chief Executive Officer and Hank Swartout as Chairman, we have added several key individuals with significant experience in Latin America, the Middle East as well as the domestic Canadian marketplace.

BlackWatch recognizes that significant challenges remain while the western Canadian oilfield market is experiencing such low activity levels. We believe that ultimately, this market will recover. In a very difficult business environment in the last year we have controlled costs, re-capitalized our balance sheet and re-focused some of our service lines. We have positioned BlackWatch in more lucrative applications where new industry trends are fueling increased demand and taken meaningful first steps in building our international business. BlackWatch is confident that these steps will create a strong business platform which is well positioned to deliver shareholder value.

ABOUT BLACKWATCH ENERGY SERVICES CORP.

BlackWatch Energy Services Corp is a diversified energy services company that provides a range of services to its customers, predominantly focused in well construction, in Canada and Latin America. The common shares of BlackWatch trade on the Toronto Stock Exchange under the symbol "BWT".

For more information regarding these financial and operating results or the reorganization, please contact John King or Wiley Auch.

FORWARD LOOKING STATEMENTS

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly, and without limitation, this news release contains forward-looking statements and information concerning anticipated activity levels in western Canada; BlackWatch's strategy to capitalize on the experience and skills of the new members of BlackWatch's management team and to explore the investment opportunities available in the current environment; the effect of ongoing reductions in utilization rates on pricing of BlackWatch's services and the Company's margins; timing of work of BlackWatch's rig under long-term contract; expected revenue from rigs in the third quarter; announcement of new incentive program by the Alberta government and its effect on industry activity levels in Alberta and BlackWatch's utilization in 2009; and BlackWatch's plans to grow profitable businesses both domestically and internationally while maintaining financial flexibility.

These forward-looking statements and information are based on certain key expectations and assumptions made by the Company regarding business prospects; strategies; conditions in general economic and financial markets; regulatory developments; competition; exchange rates; applicable royalty rates; the sufficiency of budgeted capital expenditures in carrying out planned activities; and the availability and cost of labour and services, which are subject to change based on market conditions. Although the Company believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because the Company can give no assurance that they will prove to be correct.

Since forward-looking statements and information address future events, by their nature, such statements and information involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks, including fluctuations in the market for oil and gas and related products and services; failure of counter-parties to perform on contracts; political and economic conditions; the demand for BlackWatch's services; competition; and BlackWatch's ability to attract and retain customers and employees. The Company has provided the forward-looking statements herein in reliance on certain assumptions that they believe are reasonable at this time. These forward-looking statements may change for a number of reasons. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release concerning these times.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of the Company are included in reports on file with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). The forward-looking statements and information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless as required by applicable securities laws.

NON GAAP MEASURES

The following measures are used within this release, but not recognized under GAAP. As a result, the method of calculation may not be comparable with other companies. These measures should not be considered alternatives to net earnings and net earnings per share as calculated in accordance with GAAP:

Gross margin - This measure is considered a primary indicator of operating performance and is calculated as revenue less operating expenses.

Adjusted EBITDA (Earnings before interest, income taxes, depreciation and amortization and share based compensation) - Management believes that Adjusted EBITDA as derived from information reported in the Consolidated Statement of Operations and Comprehensive Loss and Deficit is a useful supplemental measure as it provides an indication of the Company's ability to generate funds by the Company's core business activities prior to consideration of how those activities are financed, the impact of foreign exchange, how the results are taxed, how funds are invested or how non-cash depreciation and amortization charges affect results.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • BlackWatch Energy Services Corp.
    John King
    President and Chief Executive Officer
    (403) 225-3879
    (403) 366-2066 (FAX)
    or
    BlackWatch Energy Services Corp.
    Wiley Auch
    Vice President, Finance & CFO
    (403) 225-3879
    (403) 366-2066 (FAX)
    or
    BlackWatch Energy Services Corp.
    300, 855 - 8 Avenue SW
    Calgary, Alberta T2P 3P1
    www.blackwatchenergy.ca