Leader Energy Services Ltd.

Leader Energy Services Ltd.

March 26, 2010 16:00 ET

Leader Energy Services Announces Year End Results

CALGARY, ALBERTA--(Marketwire - March 26, 2010) - Leader Energy Services Ltd. (TSX VENTURE:LEA) ("Leader" or the "Company") today announced financial and operating results for the twelve-month period ended December 31, 2009.

Performance Summary(000's)                  
Years ended December 31, 2009     2008   Year over Year $ Change   Year over Year % Change  
Revenue – continuing operations $ 13,282     $ 17,400   (4,118 ) (24 )%
Operating Expenses – continuing operations   8,907       13,229   (4,322 ) (33 )%
General and Administrative – continuing operations   3,288       4,182   (894 ) (21 )%
Provision for Bad Debts – continuing operations   235       159   76   47 %
EBITDAS – continuing operations*   852       (170 ) 1,022   601 %
  Amortization – continuing operations   2,271       3,893   (1,622 ) (42 )%
  Asset write downs – continuing operations   -       1,780   (1,780 ) (100 )%
  Loss on Modification of Debenture   195       -   195   n/a  
  Stock Compensation – continuing operations   51       88   (37 ) (42 )%
  Interest – continuing operations   3,209       8,215   (5,006 ) (61 )%
  Other – continuing operations   68       781   (713 ) (91 )%
Net (Loss) before Tax – continuing operations   (4,942 )     (14,927 ) (9,985 ) (67 )%
Provision for taxes – continuing operations   -       633   (633 ) (100 )%
Net (Loss) – continuing operations   (4,942 )     (15,560 ) (10,618 ) (68 )%
Net Income – discontinued operations   2,018       1,938   80   4 %
Net Loss   (2,924 )     (13,622 ) (10,698 ) (78 )%

*  EBITDAS means earnings from continuing operations before interest, taxes, amortization, and stock based compensation. Readers are cautioned that EBITDAS is generally regarded as an indirect measure of operating cash flow, and, as such, the Company believes it is a significant indicator of success of public companies, and is particularly relevant to readers within the investment community. EBITDAS is not a measure that has a standardized meaning prescribed by Canadian GAAP, and accordingly may not be comparable to similar measures used by other companies.


Headquartered out of Calgary, Alberta, Leader Energy Services Ltd.'s ("Leader" or the "Company") operations are managed from its operations base in Grande Prairie, Alberta. From this base the Company offers well stimulation services across the Western Canadian Sedimentary Basin ("WCSB").

2009 western Canadian oil and gas activity levels remained at dramatically lower utilization rates relative to the preceding year due to low natural gas prices, high natural gas storage levels, the impact of the new royalty regime introduced by the Alberta government at the start of 2009, and the effect of the global credit crisis on our customers' abilities to raise capital. However there are signs that the industry is stabilizing. Oil prices stabilized somewhat during the year with gas prices improving with the onset of the winter season. There are also further indications that capital markets are moving towards more normal activity levels. Certain customers have been able to raise capital, some of which is expected to be spent on oilfield services. And, on March 11, 2010 the Alberta government announced reductions to conventional oil and gas royalty rates, effective January 1, 2011.

During the fourth quarter of 2009 revenues were below that of the prior year's fourth quarter, however, the revenues achieved were above forecast. The results above forecast were due to a spike in demand for the Company's services and a corresponding rise in revenues during the latter half of the quarter with demand for well stimulation services in the WCSB increasing as a result of higher natural gas prices and the onset of winter weather conditions. Focusing service activities in higher margin areas and management of costs and overhead expenses resulted in the Company achieving positive EBITDA in 2009 from continuing operations during the fourth quarter of 2009, and a higher EBITDA as a percentage of revenues than in the prior year.

The Company's net loss from continuing operations of $4.9 million for the 2009 year was a significant improvement over the prior year's net loss from continuing operations of $14.9 million. This improvement was due to the following: EBITDA increasing by $1.0 million in the current year over the prior year even though 2009 revenues declined by $4.1 million as compared to 2008; a $5.0 million decrease in current year interest expense with the Company having paid off its high interest credit facility in mid 2008; a $1.6 million decrease in 2009 amortization expense with the Company disposing of its operations in the United States in mid 2008; $1.8 million of assets being written down and recorded in 2008 with no write downs being required in the 2009 year; and a decrease in 2009 of approximately $500,000 in other charges. Net income from discontinued operations was also higher in the current year with recent information resulting in a partial reversal of estimated discontinued operations' tax expense accruals made in prior periods. 

Effective September 30, 2009, the Company entered into a Supplemental Indenture with holders of its $15.0 million Unsecured Convertible Debentures issued on February 27, 2007 and scheduled to mature on March 31, 2012 (the "Debentures"). The Supplemental Indenture provides that the conversion rate of the Debentures shall be adjusted from $4.80 per common share to $0.40 per common share for the Debenture holders who provided the Company with a deferral of interest payments due in the amount of $750,000 on each of September 30, 2009 and March 31, 2010. The interest deferrals will be in effect until the Debenture's March 31, 2012 maturity date at which time all such interest shall be paid in cash, together with interest on the deferred interest due at 10.0% per annum. All holders of the Debentures provided the Company with deferrals of interest payments that were due September 30, 2009 and March 31, 2010.

At December 31, 2009 the Company held cash and cash equivalents of $ 1.0 million and positive working capital of $1.8 million as compared to $3.4 million and $3.1 million respectively for the December 31, 2008 year ended. For the year ended December 31, 2009 cash flow from continuing operations before changes from non-cash working capital was negative $494,000, an improvement of $6.9 million over the previous year. 

The Company maintained a positive working capital balance throughout 2009; however, low oil and gas activity levels in the WCSB have resulted in cash flow before changes in non-cash working capital being negative $494,000 for the year ended December 31, 2009. The fourth quarter of 2009 showed improvement in cash flow before changes in non-cash working capital becoming positive at $1.3 million. Management is continuing to take action wherever possible to increase the Company's revenues and reducing administrative and operational costs.

The Company has yet to secure a credit facility to replace the facility that was paid out in mid 2008. Based on the Company's internal operating cash forecast, if the assumptions in the forecast hold true, access to additional financing does not appear to be necessary. However, given the uncertainty present in the current economic climate the Company will continue to pursue possible credit facility opportunities and hopes to secure a credit facility in the near future.

Effective August 11, 2009 the Company consolidated its outstanding common shares on a 3:1 basis.


The western Canadian energy sector was faced with a number of challenges in 2009 including an uncompetitive Alberta royalty regime, volatile commodity prices, the global economic recession and difficulty accessing credit and equity markets. However, Leader's outlook for 2010 is cautiously more optimistic than it was only six months ago for a number of reasons. 

On March 11, 2010 the Alberta government announced reductions to conventional oil and gas royalty rates, effective January 1, 2011. These changes are expected to have a positive impact on drilling activity rates beginning next year. Alberta land sale auctions and well licenses have increased substantially in the current year to date and the Alberta government has to date in 2010 already raised more than fifty percent of the revenues generated in the province by mid 2009 from land sale auctions. While these signs are encouraging, it must be noted that higher natural gas prices are likely required in order for there to be meaningful improvements in gas well drilling.

Drilling rig utilization has improved substantially during the first two months of 2010 averaging 58% compared to 44% for the same period in 2009. Year to date in 2010, demand for Leader's services has increased relative to last year at this time, and management is expecting EBITDA to show a substantial improvement as well. Although the operating environment appears to be improving, management continues to monitor internal and external factors in order to be able to react in a timely manner to changes in industry activity levels. The Company remains optimistic that demand for its services will continue to strengthen during 2010.

Leader's future success is contingent upon continued effective execution at the field level and achieving positive cash flow in a complex industry environment. 


Additional information can be found on SEDAR at www.sedar.com or the Company web site at www.leaderenergy.com. The number of common shares issued and outstanding at the date hereof was 13,265,000 which does not include 1,244,000 unexercised stock options.

Certain statements contained in this press release, including statements which may contain words such as "could", "should", "expect", "estimate", "believe", "likely", "will", or estimates of business activity, and similar expressions and statements relating to matters that are not historical facts, are forward looking statements. Such statements involve known and unknown risks and uncertainties that may cause the actual results, performance or achievements of Leader to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Factors include commodity prices, demand for oil and gas related products and service, competition, political and economic conditions, demand and acceptance of new products and ways of doing business, changes in laws and regulations to which Leader is subject, and the ability to attract and retain key personnel.

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

Contact Information