Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd.

March 18, 2010 07:00 ET

Wenzel Downhole Tools Ltd. Announces Financial Results for 2009

CALGARY, ALBERTA--(Marketwire - March 18, 2010) - Wenzel Downhole Tools Ltd. (the "Company") (TSX:WZL) announces financial results for the fourth quarter and full year ended December 31, 2009.

Total revenues for 2009 were $43.6 million, 39% lower than 2008 revenues of $71.8 million. While EBITDA for the year was positive at $5.8 million, after tax earnings were a negative $1.7 million or $(0.05) per share. This compares to 2008 EBITDA and net earnings respectively, of $25.4 and $12.4 million. The pre-tax loss of $2.7 million includes $0.8 million in foreign exchange losses due to the appreciating Canadian dollar and re-measurement of backorders denominated in euros. 

The decrease in revenues from 2008 to 2009 is attributable to the major reduction in drilling activity in North America. In Canada the total wells drilled in 2009 was only 49% of the number drilled in 2008. In the US the average monthly rig count was 42% lower in 2009 compared to 2008. While drilling activity outside of North America was also down somewhat in 2009, the Company was able to achieve a modest 8.7% increase in its international sales.

The very significant decrease in petroleum industry activity started in the second half of 2008, reaching its nadir in the summer of 2009. Since then activity has increased at a modest but accelerating rate. Reflecting this, the Company's 2009 fourth quarter revenues were up about 7% from Q3, but still down over 50% from Q4 2008. Going into 2010 the Company is experiencing customer demand in Canada at levels similar to those in 2008. Activity in the US has not yet reached that level but continues to increase. Consolidated revenues for Q4 were $9.6 million, EBITDA was $1.0 million and the Company had a net loss of $0.6 million, of which $0.2 million was due to foreign exchange losses. The after tax loss per share was $0.02. 

Financially the Company remains in good shape. The net debt, defined as Total Liabilities minus Current Assets, is negative. Cash flow remains positive and the Company continues to pay down its long term debt obligations. During 2009, the Company spent $8.2 million for the purchase and manufacture of capital assets and reduced its long term debt to $0.75 million. In the last two years the Company has increased its manufacturing capabilities and thus capital expenditures in 2010 will be primarily directed at increasing the fleet of rental tools. 

While gas prices remain at relatively low levels, E & P companies remain active, particularly in the shale gas plays, which because of the new technologies are economic at lower price levels than had been the case. Oil prices have improved substantially, thus stimulating new drilling activity. While still cautious, predictions respecting drilling activity in 2010, are being adjusted upward from the levels predicted in late 2009. In addition it is evident that directional and horizontal wells will continue to be a growing percentage of these new wells. Both of these trends are bullish for the Company's growth prospects. The Company intends to retain its policy of continuing product improvement and to ensure that its reputation for producing the highest quality downhole tools is matched by the quality of its service. 

Internationally the Company is experiencing a growing interest from current and potential customers. The directional and horizontal drilling techniques developed and extensively used in North America are being applied in petroleum basins around the world, thus creating a growing market for the equipment, including downhole tools, needed for such drilling. The Company is receiving requests for quotations on downhole tools from a variety of regions and expects to see, in the coming months, growing sales into the Middle East, Latin America and North Africa. In anticipation new machine tools have been added to our manufacturing operations which will improve their efficiency and productivity. 

Highlights of the Company's results for 2007, 2008 and 2009 are compared in the table below. 
Selected Annual Information

  ($000's, except for earnings per share)  
  Year Ended December 31,  
  2009   2008   2007  
Revenue 43,579   71,767   54,228  
Gross profit 12,459   31,527   20,358  
Gross profit percentage 29 % 44 % 38 %
EBITDA Note(1) 5,794   25,428   12,173  
Earnings (loss) before  income taxes (2,659 ) 18,053   3,869  
Net (loss) earnings (1,657 ) 12,425   2,387  
Net (loss) earnings per share – basic & diluted (0.05 ) 0.41   0.08  
Total assets 52,621   66,750   56,100  
Long-term debt 750   2,220   3,572  
  Note (1) EBITDA, or earnings before interest, taxes, depreciation and amortization is calculated by adding these items back to reported net earnings. In addition to EBITDA, stock based compensation expense and loss on re-measurement of derivative asset have been excluded so as to make year to year comparisons more comparable.  
    2009   2008   2007  
  Net (loss) earnings $ (1,657 ) $ 12,425   $ 2,387  
  Income taxes   (1,002 )   5,628     1,483  
  Depreciation and amortization   7,728     6,726     6,578  
  Interest   453     775     1,559  
  Stock based compensation   9     138     166  
  Loss (gain) on re-measurement of derivative asset   263     (263 )   -  
  EBITDA $ 5,794   $ 25,428   $ 12,173  
  Management uses EBITDA as a measurement to determine the ability of the Company to generate cash from normal operations.EBITDA does not have a standardized meaning for Canadian generally accepted accounting principles ("GAAP") and therefore may not be comparable with calculations of similar measures presented by other issuers.EBITDA is not intended to represent net income for the period nor should it be viewed as an alternative to operating or net income or cash flow from operating activities or other measures of financial performance calculated in accordance with GAAP. EBITDA for the year ended December 31, 2008 as previously reported has been adjusted for a change in the definition used by the Company, whereby "loss (gain) on re-measurement of derivative asset" is a reconciling item.  

About Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd. is a manufacturer, seller and renter of drilling tools used in oil and gas exploration. In Canada the company has its manufacturing and servicing facilities located in Edmonton, Alberta and its corporate offices in Calgary, Alberta. Its US headquarters and service facilities are in Conroe, Texas, with service and sales offices in Casper, Wyoming and a sales office in Oklahoma City, Oklahoma. Wenzel Downhole Tools Ltd. is listed for trading on the TSX, symbol WZL. The Company's Consolidated Financial Statements and Management's Discussion and Analysis will be posted on SEDAR (www.sedar.com).

This news release may contain forward-looking information. Actual future results may differ materially from those contemplated. The risks, uncertainties and other factors, both known and unknown, that could influence actual results may be substantial and include those described in documents filed with regulatory authorities, such as the Company's most recently filed Annual Report and Annual Information Form. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom. Please refer to the Company's public disclosure documents for more information on these risks and uncertainties as they apply to the Company.


Contact Information

  • Wenzel Downhole Tools Ltd.
    Harvie Andre
    President and CEO
    (403) 262-3050
    (403) 265-8154 (FAX)
    Wenzel Downhole Tools Ltd.
    William T. Spence
    Chief Financial Officer
    (403) 262-3050
    (403) 265-8154 (FAX)