Central Alberta Well Services Corp.
TSX VENTURE : CWC.A

Central Alberta Well Services Corp.

November 16, 2007 18:26 ET

Central Alberta Well Services Releases 2007 Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 16, 2007) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Central Alberta Well Services Corp. ("CWC" or the "Company") (TSX VENTURE:CWC.A) is pleased to report its third quarter 2007 results. For the three months ending September 30, 2007, the Company generated $11.9 million in revenue, EBITDAS of $2.6 million or $0.11 per share and a loss of $0.6 million before tax. For the same period of 2006, the Company generated revenues of $13.3 million, EBITDAS of $4.1 million and a profit of $1.0 million before tax. This decrease from the same period in 2006 is a result of decreased utilizations and increased overheads to accommodate the additional equipment base the Company now operates.

HIGHLIGHTS

The following are the highlights for the quarter compared to the third quarter of 2006.



Three months ended Nine months ended
September 30 September 30
2007 2006 2007 2006

Revenues $ 11,913,026 $ 13,289,105 $ 34,776,387 $ 25,855,698
Operating costs 7,757,490 7,908,146 23,021,321 15,317,437
----------------------------- -----------------------------
4,155,536 5,380,959 11,755,066 10,538,261
----------------------------- -----------------------------
34.9% 40.5% 33.8% 40.8%
General and
administrative
expenses 1,613,818 1,294,871 4,887,478 3,680,141
----------------------------- -----------------------------
EBITDAS (1) 2,541,718 4,086,088 6,867,588 6,858,120
EBITDAS per
share (1)
Basic and diluted 0.11 0.39 0.30 0.78

Stock based
compensation - 261,872 1,257,117 1,266,007
Interest 744,671 786,669 4,508,906 1,541,658
Depreciation and
amortization 2,396,603 2,046,070 6,945,382 4,599,994

Net income (loss)
before tax (599,556) 991,477 (5,843,817) (549,539)
----------------------------- -----------------------------
Funds from
operations (2) 2,116,103 3,038,009 3,302,684 5,231,248
----------------------------- -----------------------------
Funds from
operations per
share (2)
Basic and
diluted $ 0.09 $ 0.29 $ 0.15 $ 0.56

Income (loss)
per share
Basic and
diluted $ (0.03) $ 0.02 $ (0.24) $ (0.05)

Purchase of
property and
equipment $ 5,550,611 $ 6,476,954 $ 24,897,616 $ 35,814,913

(1) EBITDAS is calculated from the statement of loss as revenue less
operating costs and general and administrative expenses, exclusive of
stock based compensation costs, and is used to assist management and
investors in assessing the Company's ability to generate cash from
operations. EBITDAS is a non-GAAP measure and does not have any
standardized meaning prescribed by GAAP and may not be comparable to
similar measures provided by other companies. Number of shares
outstanding is post consolidation of common shares described in note 8
of the financial statements.

(2) Funds from operations is defined as cash from operating activities
before changes in non-cash working capital. Funds from operations and
funds from operations per share are measures that provide investors
additional information regarding the Company's liquidity and its
ability to generate funds to finance its operations. Funds from
operations and Funds from operations per share do not have any
standardized meaning prescribed by GAAP and may not be comparable to
similar measures provided by other companies. Number of shares
outstanding is post consolidation of common shares described in note 8
of the financial statements.


SELECTED FINANCIAL INFORMATION

Working capital at the end of the quarter was $10.4 million net of restricted cash, an increase of $1.1 million from June 30, 2007 and shows the Company's focus on maintaining a strong balance sheet. At September 30, 2007, the Company has drawn an aggregate of $24.5 million on its $63 million long term debt facility and continues to meet all debt covenants.

The following table highlights selected financial information for the third quarter, 2007 and the previous seven consecutive quarters.



---------------------------------------------------
For the quarter ended Q3 2007 Q2 2007 Q1 2007 Q4 2006
---------------------------------------------------

Working capital
(deficiency) 10,766,402 9,679,652 11,588,974 (27,256,935)
Working capital
(deficiency) - net of
bridge loan and
restricted cash 10,351,402 9,264,652 11,173,974 7,330,725
Long-term debt 20,374,723 15,498,793 58,134,623 16,523,834
Shareholders' equity 82,032,188 82,550,545 37,148,201 34,626,065
Long-term debt to equity 0.25 0.19 1.56 0.48


For the quarter ended Q3 2006 Q2 2006 Q1 2006 Q4 2005
---------------------------------------------------
Working capital
(deficiency) (23,307,384) (17,519,991) (194,130) 2,813,640
Working capital
(deficiency) - net of
bridge loan and
restricted cash 6,120,890 3,074,368 (194,130) 2,813,640
Long-term debt 16,937,611 17,182,610 14,040,639 4,950,000
Shareholders' equity 45,578,780 45,300,850 45,628,496 18,595,144
Long-term debt to equity 0.37 0.38 0.31 0.27


The following table sets out comparative financial information for the reporting segments.



Three months ended September 30
2007 2006
---------------------------------
Well Servicing
Revenues 7,269,691 6,440,100
Income (loss) before income taxes 693,143 915,387
EBITDAS (1) 2,171,205 2,338,109

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Other Oilfield Services
Revenues 4,643,335 6,849,005
Income before income taxes 53,584 1,562,464
EBITDAS (1) 916,504 2,232,992

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Corporate
Revenues - -
Loss before income taxes (1,346,283) (1,486,373)
EBITDAS (1) (545,991) (485,013)


OVERVIEW

CWC is on the path of maintaining a strong balance sheet. The Company has structured itself for the future and will complete a capital build program of eight modern service rigs that will be delivered from October, 2007 to January, 2008. Following delivery of the new rigs, the Company will operate 29 service rigs along with its other services: coil tubing, nitrogen pumping and delivery, snubbing, production testing and a rental fleet.

WELL SERVICING

The well servicing segment generated revenues of $7.3 million with a utilization rate of 58% compared to revenues of $6.4 million with a 78% utilization rate in the same quarter of 2006. This segment contains service rigs as well as coil tubing operations. EBITDAS for quarter three was $2.2 million or 30% of revenue compared to $2.3 million or 36% of revenue in 2006.

OTHER OILFIELD SERVICES

The other oilfield services segment generated revenues of $4.6 million compared to $6.9 million in the comparative period of 2006. This segment, comprised of nitrogen delivery and pumping, snubbing, well testing and rentals, has been impacted by the decrease in activity. EBITDAS decreased to $0.9 million or 20% of revenue from $2.2 million or 32% of revenue. Utilization was 36% in quarter three of 2007 compared to 89% in the same period of 2006.

OUTLOOK

The Company operated in a challenging environment in the first nine months of 2007 with reduced activity levels compared to prior years as a result of the decreased natural gas prices, extended spring break-up and reduced capital budgets resulting from the recently announced royalty adjustments. Although the Company's business is not entirely dependent on new well completions, the expected 27% decrease in wells drilled during 2007 compared to 2006 and the expected further reduction by 15% in 2008, could have a negative impact on the Company's utilization rates. However, management is of the view that the slowdown in business due to reduced drilling activity is partially mitigated by workovers and recompletion services offered by CWC. The Company will focus on the efficiency of all its business segments through the remainder of 2007 and 2008.

The Company will exit 2007 with approximately 28 service rigs with one additional service rig to be delivered early 2008. With an expanded fleet of modern equipment, the Company is well positioned to react quickly to customer demand. CWC operates a fleet of efficient service rigs and related services for its customers and will continue to strive to achieve utilization rates above industry average. The Company will manage its balance sheet in order to remain as one of the financially strongest service companies. The Company is well positioned to react quickly to customer needs and growth opportunities as they arise and will capitalize on the challenging conditions facing the oilfield services industry.

At this time, the Company strongly believes its shares are undervalued and plans to continue to repurchase Class A Shares under its normal course issuer bid program.

2007 INTERIM FINANCIAL STATEMENTS

Attached to this release are the Company's Interim Financial Statements for the three months ended September 30, 2007. These Interim Financial Statements should be read in conjunction with the Interim Financial Statement and the Management's Discussion and Analysis as well as the Company's Audited Consolidated Financial Statements and Management Discussion and Analysis for the year ended December 31, 2006, all of which are filed on SEDAR at www.SEDAR.com.



BALANCE SHEETS Central Alberta Well Services Corp.
(unaudited)

September 30, 2007 December 31, 2006
----------------------------------------------------------------------------

ASSETS
Current assets
Cash $ 2,344,594 $ 1,688,926
Restricted cash 415,000 415,000
Accounts receivable 11,765,941 13,433,591
Shareholder loans 99,536 -
Inventory 2,041,345 1,729,040
Prepaid expenses and deposits 112,533 270,344
Income tax receivable 349,008 641,663
-------------------------------------
17,127,957 18,178,564
Property and equipment 88,842,348 70,524,885
Shareholder loans 70,625 118,000
Deferred financing costs - 803,194
Intangible assets 4,721,536 5,173,768
-------------------------------------
$ 110,762,466 $ 94,798,411
-------------------------------------
-------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities $ 6,361,555 $ 6,079,557
Short-term debt - 35,000,000
Shareholder loans - 76,855
Current portion of long-term debt - 4,279,087
-------------------------------------
6,361,555 45,435,499
Future income taxes 1,994,000 2,492,100
Long-term debt 20,374,723 12,244,747
-------------------------------------
28,730,278 60,172,346
-------------------------------------

SHAREHOLDERS' EQUITY
Share capital 81,597,801 47,661,284
Contributed surplus 3,369,145 2,062,738
Warrants 2,412,121 -
Deficit (5,346,879) (15,097,957)
-------------------------------------
82,032,188 34,626,065
-------------------------------------
$ 110,762,466 $ 94,798,411
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to financial statements.


STATEMENTS OF LOSS, COMPREHENSIVE LOSS AND DEFICIT
Central Alberta Well Services Corp.
(unaudited)

Three months ended Nine months ended
September 30 September 30
----------------------------- -----------------------------
2007 2006 2007 2006
----------------------------------------------------------------------------
REVENUE $ 11,913,026 $ 13,289,105 $ 34,776,387 $ 25,855,698
EXPENSES
Operating
expenses 7,757,490 7,908,146 23,021,321 15,317,437
General and
administrative 1,613,818 1,294,871 4,887,478 3,680,141
Stock based
compensation - 261,872 1,257,117 1,266,007
Interest 744,671 786,669 4,508,906 1,541,658
Depreciation and
amortization 2,396,603 2,046,070 6,945,382 4,599,994
----------------------------- -----------------------------
12,512,582 12,297,628 40,620,204 26,405,237
----------------------------- -----------------------------

NET INCOME/(LOSS)
BEFORE TAX (599,556) 991,477 (5,843,817) (549,539)
INCOME TAXES
Current - 257,726 1,162 98,229
Future (recovery) 184,000 551,000 (498,100) (172,000)
----------------------------- -----------------------------
184,000 808,726 (496,938) (73,771)
----------------------------- -----------------------------

NET INCOME/(LOSS)
AND COMPREHENSIVE
INCOME/(LOSS) (783,556) 182,751 (5,346,879) (475,768)
DEFICIT, BEGINNING
OF PERIOD (4,563,323) (3,774,228) (15,097,957) (3,115,709)
APPLICATION OF PRIOR
YEAR DEFICIT TO
SHARE CAPITAL - - 15,097,957 -
----------------------------- -----------------------------
DEFICIT, END OF
PERIOD $ (5,346,879) $ (3,591,477) $ (5,346,879) $ (3,591,477)
----------------------------- -----------------------------
----------------------------- -----------------------------

NET INCOME/(LOSS)
PER SHARE
Basic and
diluted $ (0.03) $ 0.02 $ (0.24) $ (0.05)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to financial statements.


STATEMENT OF CASH FLOWS
Central Alberta Well Services Corp.
(unaudited)

Three months ended Nine months ended
September 30 September 30
----------------------------- -----------------------------
2007 2006 2007 2006
----------------------------------------------------------------------------
CASH PROVIDED BY
(USED IN):

OPERATING:
Net income/(loss) $ (783,556) $ 182,751 $ (5,346,879) $ (475,768)
Items not
affecting cash:
Stock based
compensation - 261,872 1,257,117 1,266,007
Interest on
shareholder loans (2,057) (3,684) (7,858) (11,532)
Accretion of debt
financing costs
and warrants 375,929 - 976,528 -
Loss (gain) on
disposal of assets (54,816) - (23,506) 24,547
Future income tax
(reduction) 184,000 551,000 (498,100) (172,000)
Depreciation and
amortization 2,396,603 2,046,070 6,945,382 4,599,994
----------------------------- -----------------------------
2,116,103 3,038,009 3,302,684 5,231,248

Change in non-cash
working capital (4,135,940) (1,122,888) 2,087,809 (2,944,912)
----------------------------- -----------------------------
(2,019,837) 1,915,121 5,390,493 2,286,336
----------------------------- -----------------------------

INVESTING:
Business
acquisitions -
net of cash - 378,483 - (4,285,569)
Purchase of
property and
equipment (5,550,611) (6,476,954) (24,897,616) (35,814,913)
Proceeds on sale
of assets 105,000 - 110,508 110,508
Restricted cash - (5,166,085) - (5,571,726)
----------------------------- -----------------------------
(5,445,611) (11,264,556) (24,787,108) (45,561,700)
----------------------------- -----------------------------

FINANCING:
Issue of long-term
debt 4,500,000 - 67,500,000 8,050,000
Retirement of
long-term debt - (248,928) (59,499,334) (1,281,598)
Issue of
short-term debt - 14,000,000 - 35,000,000
Restructure of
short-term debt - - (35,000,000) -
Deferred financing
costs - (1,123,078) 803,194 (1,736,708)
Debt financing
costs and warrants - - (2,714,184) -
Issue of common
shares - - 50,000,000 5,126,002
Repurchase of
common shares (85,801) - (85,801) -
Share issue costs - - (830,434) (277,204)
Increase (repayment)
of shareholder loans - 12,083 (121,158) 21,087
----------------------------- -----------------------------
4,414,199 12,640,077 20,052,283 44,901,579
----------------------------- -----------------------------

INCREASE (DECREASE)
IN CASH (3,051,249) 3,290,642 655,668 1,626,215
CASH, BEGINNING OF
PERIOD 5,395,843 892,896 1,688,926 2,644,827
----------------------------- -----------------------------
CASH, END OF PERIOD $ 2,344,594 $ 4,183,538 $ 2,344,594 $ 4,271,042
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplementary
Information:
Interest paid $ 409,033 $ 794,280 $ 2,980,870 $ 1,577,219
Payout penalties
paid on
replacement of
old loans - - 608,071 -
Interest received 38,235 11,943 109,388 53,842
Income taxes paid - 132,783 48,824 132,783
Income taxes
refunded 381,381 - 381,381 -

See accompanying notes to financial statements.


RECENT DEVELOPMENTS

The Company is also pleased to announce that it has taken possession of two of the eight mobile single service rigs under construction. The third mobile single service rig is nearing completion and the Company expects to take delivery in the week ending November 22, 2007.

ABOUT CENTRAL ALBERTA WELL SERVICES

Central Alberta Well Services is headquartered in Red Deer, Alberta, with additional operating centres in eastern and northern, Alberta and a business office in Calgary. The Company provides oilfield services, including well servicing, coil tubing, snubbing, nitrogen, well testing and oilfield equipment rentals to oil and gas companies operating in the Western Canadian Sedimentary Basin.

READER ADVISORY

Certain statements contained in this press release, including statements which may contain such words as "could", "should", "believe", "expect", "will", and similar expressions and statements relating to matters that are not historical facts are forward-looking statements, including, but not limited to, statements as to: future capital expenditures, including the amount and nature thereof; business strategy; expansion and growth of the Company's business and operations; and other matters. Management has made certain assumptions and analyses which reflect their experiences and knowledge in the industry. These assumptions and analyses are believed to be accurate and truthful at the time but the company can not assure readers that actual results will be consistent with these forward-looking statements. However, whether actual results, performance, or achievements will conform to the Company's expectations and predictions is subject to known and unknown risks and uncertainties which could cause actual results to differ materially from the Company's expectations. All forward-looking statements made in the press release are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected outcomes to, or effects on, the Company or its business operations. The Company does not intend, and does not assume any obligation to update these forward-looking statements. Any forward-looking statements made previously may be inaccurate now.

Class A Shares (Trading): 22,125,430

Class B Shares (Non-Trading): 6,153,531

The TSXV has neither approved nor disapproved the contents of this news release. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Central Alberta Well Services Corp.
    Darryl E. Wilson
    President & Chief Executive Officer
    (403) 341-3933
    Email: darrylwilson@cawsc.com
    or
    Central Alberta Well Services Corp.
    6763 - 76th Street
    Red Deer, Alberta T4P 3R7
    (403) 341-3933
    or
    Central Alberta Well Services Corp.
    Darcy A. Campbell, CMA
    Vice-President, Finance and Chief Financial Officer
    (403) 264-2177
    Email: darcycampbell@cawsc.com
    or
    Central Alberta Well Services Corp.
    2325, 330 - 5th Avenue SW
    Calgary, Alberta T2P 0L4
    (403) 264-2177