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

Central Alberta Well Services Corp.

August 28, 2007 09:25 ET

Central Alberta Well Services Releases 2007 Second Quarter Results

CALGARY, ALBERTA--(Marketwire - Aug. 28, 2007) -

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

Central Alberta Well Services Corp. (TSX VENTURE:CWC.A) ("CWC" or the "Company") is pleased to report its second quarter results. For the three months ending June 30, 2007, the Company generated $6.0 million in revenue and a loss of $4.8 million before tax compared to 2006 revenues of $7.6 million and a loss of $1.6 million before tax. The following are the highlights for the quarter compared to the second quarter of 2006.



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Three months ended June 30 Six months ended June 30
2007 2006 2007 2006

Revenues $ 5,965,572 $ 7,635,119 $ 22,863,361 $ 12,566,593
Operating costs 4,878,916 4,719,546 15,263,831 7,409,291
---------------------------------------------------------
1,086,656 2,915,573 7,599,530 5,157,302
---------------------------------------------------------
18.2% 38.2% 33.2% 41.0%

General and
administrative
expenses 1,392,741 1,680,407 3,273,659 2,385,269
---------------------------------------------------------
EBITDAS (1) (306,085) 1,235,166 4,325,871 2,772,033

EBITDAS per
share (1)
Basic and diluted (0.01) 0.12 0.19 0.32

Stock based
compensation 893,416 431,915 1,257,117 1,004,135
Interest 1,451,364 635,393 3,764,236 754,989
Depreciation and
amortization 2,132,172 1,811,964 4,548,779 2,553,925
Net loss before tax (4,783,037) (1,644,106) (5,244,261) (1,541,016)
---------------------------------------------------------

Funds from
operations (2) (1,364,245) 780,049 1,186,581 2,193,240
---------------------------------------------------------
Funds from
operations
per share (2)

Basic and diluted $ (0.06) $ 0.07 $ 0.05 $ 0.25
Loss per share
Basic and diluted $ (0.19) $ (0.07) $ (0.20) $ (0.08)

Purchase of
property
and equipment $ 6,769,800 $ 20,075,689 $ 19,347,005 $ 29,337,959


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

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

The Company was severely hampered by wet weather and prolonged road bans in the quarter. Also during the quarter, the Company experienced stock based compensation expense resulting from the change of control provision in the stock option plan which resulted in an expense of $893,000. The equity placement of $50 million in which one party purchased the majority of the shares issued caused the change of control clause in the stock option plan to be exercised. As a result of the vesting, the Company had to take into expense the full future expense in the current period. From this point forward, there is no stock based compensation expense unless the Company issues more options to employees in which the normal vesting program will begin again.

EBITDAS for the quarter ending June 30, 2007, is a negative $306,000 compared to a positive $1.2 million in the same period of 2006. This is a result of the prolonged spring break-up and the costs associated with the growth of the Company through the fabrication of new equipment and deploying it to the field.

Utilization for the second quarter for Well Servicing was 36% (6,221 hours) and 17% for Other Oilfield Services. Utilization for Well Servicing is based on the number of hours worked and in the Other Oilfield Services segment is based on the number of jobs performed in the period.

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



Well Servicing Three months ended June 30
2007 2006
------------------------------------------

Revenues 3,968,059 3,903,409
Income (loss) before income taxes (421,917) 461,128
EBITDAS (1) 1,684,652 1,775,107

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Other Oilfield Services Three months ended June 30
2007 2006
------------------------------------------

Revenues 1,997,513 3,731,710
Loss before income taxes (1,403,486) (258,571)
EBITDAS (1) (539,110) 373,987
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Corporate Three months ended June 30
2007 2006
------------------------------------------

Revenues - -
Loss before income taxes (2,957,635) (1,846,664)
EBITDAS (1) (1,451,627) (913,928)
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(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.

WELL SERVICING

The Well Servicing Segment generated revenue of $4 million compared to $3.9 million in the comparative period in 2006. EBITDAS decreased as a percentage of revenue to 42% compared to 49% in 2006. This decrease is a result of having more service rigs, higher fixed costs and lower utilization compared to the same period of 2006. Utilization for quarter two for Well Servicing was 36% or 6,221 hours.

The Company added one additional service rig into production in the quarter. The Company has two service rigs still under construction at the end of the quarter which will be received early in the third quarter. The Company has also committed to the fabrication of eight additional service rigs through to the end of 2007.

OTHER OILFIELD SERVICES

Other Oilfield Services produced revenue of $2 million compared to $3.7 million in the comparative period 2006. This segment is comprised of nitrogen delivery and pumping, snubbing, well testing and rentals which were acquired at the end of the first quarter 2006. EBITDAS decreased as a percentage of revenue to a negative position compared to 10% in 2006. This decrease is a result of having higher fixed costs and lower utilization compared to the same period of 2006. Utilization for the second quarter for Other Oilfield Services was 17%.



SELECTED FINANCIAL INFORMATION

2007
---------------------------------------------
For the quarter ended June 30 March 31 December 31
---------------------------------------------

Working capital (deficiency) 9,679,652 11,588,974 (27,256,935)
Working capital (deficiency)
- net of bridge loan and
restricted cash 9,264,652 11,173,974 7,330,725
Long-term debt 15,498,793 58,134,623 16,523,834
Shareholders' equity 82,550,545 37,148,201 34,626,065
Long-term debt to equity 0.19 1.56 0.48
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2006
---------------------------------------------
For the quarter ended September 30 June 30 March 31
---------------------------------------------

Working capital (deficiency) (23,307,384) (17,519,991) (194,130)
Working capital (deficiency)
- net of bridge loan and
restricted cash 6,120,890 3,074,368 (194,130)
Long-term debt 16,937,611 17,182,610 14,040,639
Shareholders' equity 45,578,780 45,300,850 45,628,496
Long-term debt to equity 0.37 0.38 0.31
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2005
---------------------------------------------
For the quarter ended December 31 September 30 June 30
---------------------------------------------

Working capital (deficiency) 2,813,640 6,745,091 8,636,777
Working capital (deficiency)
- net of bridge loan and
restricted cash 2,813,640 6,745,091 8,636,777
Long-term debt 4,950,000 13,595,425 13,845,574
Shareholders' equity 18,595,144 5,654,048 5,558,314
Long-term debt to equity 0.27 2.40 2.49
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Working capital at the end of the quarter was $9.3 million net of restricted cash, a decrease of $1.9 million from March 31, 2007.

As at June 30, 2007, the Company had 90,687,720 Class A Common Shares issued and outstanding and 22,614,124 Class B Common Shares outstanding. On July 12, 2007, the Company completed a consolidation of all Common Shares by issuing one Common

Share for each four (1:4) existing Common Shares. Upon completion of the consolidation, the Company has 22,671,930 Class A Common Shares and 5,653,531 Class B Common Shares outstanding. Each Class B Common Share is convertible into a Class A Common Share upon certain circumstances.

OUTLOOK

The first six months of 2007 has been challenging in that activity levels have dropped from prior years. Demand for oilfield services has decreased significantly, and the increased capacity from the capital build programs in the past has come to leave excess capacity in many areas of the service sector. The Company believes that there is still an opportunity to replace older, inefficient service rigs in the industry with new technology. With this in mind, the Company has undertaken to fabricate an additional eight (8) service rigs at an estimated cost of $20 million that are anticipated to begin working in September with the last rig being delivered by the end of December, 2007. Upon completion of this build program, the Company will operate 29 service rigs, 8 coil tubing units, 7 snubbing units, 13 nitrogen tankers and pumpers, and 12 pressure tanks as well as a small fleet of rental equipment.

The Company has completed the restructuring of the long-term debt and at the end of June had $20 million drawn on a $63 million facility. This has positioned the Company to be in a financially stable position and able to react to potential opportunities as they arise.

2007 INTERIM FINANCIAL STATEMENTS

Attached to this release are the Company's Interim Financial Statements for the three months ended June 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)

June 30, 2007 December 31, 2006
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ASSETS
Current assets
Cash $ 5,395,843 $ 1,688,926
Restricted cash 415,000 415,000
Accounts receivable 7,796,469 13,433,591
Shareholder loans 97,479 -
Inventory 1,915,529 1,729,040
Prepaid expenses and deposits 225,660 270,344
Income tax receivable 730,369 641,663
---------------------------------------
16,576,349 18,178,564
Property and equipment 85,587,781 70,524,885
Shareholder loans 70,625 118,000
Deferred financing costs - 803,194
Intangible assets 4,872,280 5,173,768
---------------------------------------
$ 107,107,035 $ 94,798,411
---------------------------------------
---------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 6,896,697 $ 6,079,557
Short-term debt (note 6) - 35,000,000
Shareholder loans - 76,855
Current portion of long-term
debt (note 7) - 4,279,087
---------------------------------------
6,896,697 45,435,499
Future income taxes 1,810,000 2,492,100
Long-term debt (note 7) 15,498,793 12,244,747
---------------------------------------
24,205,490 60,172,346
---------------------------------------

SHAREHOLDERS' EQUITY
Share capital (note 8) 81,732,892 47,661,284
Contributed surplus 3,319,855 2,062,738
Warrants (note 8 (e)) 2,412,121 -
Deficit (4,563,323) (15,097,957)
---------------------------------------
82,901,545 34,626,065
---------------------------------------
$ 107,107,035 $ 94,798,411
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See accompanying notes to financial statements.


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

Three Months Ended
June 30, 2007 June 30, 2006
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REVENUE $ 5,965,572 $ 7,635,119
EXPENSES
Operating expenses 4,878,916 4,719,546
General and administrative 1,392,741 1,680,407
Stock based compensation 893,416 431,915
Interest 1,451,364 635,393
Depreciation and amortization 2,132,172 1,811,964
-----------------------------------
10,748,609 9,279,225
-----------------------------------
NET LOSS BEFORE TAX (4,783,037) (1,644,106)
INCOME TAXES
Current (recovery) - (159,497)
Future (recovery) (473,400) (723,000)
-----------------------------------
(473,400) (882,497)
-----------------------------------
NET LOSS AND COMPREHENSIVE LOSS (4,309,637) (761,609)
DEFICIT, BEGINNING OF PERIOD (15,351,643) (3,012,619)
APPLICATION OF PRIOR YEAR DEFICIT
TO SHARE CAPITAL 15,097,957 -
-----------------------------------
DEFICIT, END OF PERIOD $ (4,563,323) $ (3,774,228)
-----------------------------------
-----------------------------------

NET LOSS PER SHARE (note 8 (d))
Basic and diluted $ (0.19) $ (0.07)
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Six Months Ended
June 30, 2007 June 30, 2006
---------------------------------------------------------------------------
REVENUE $ 22,863,361 $ 12,566,593
EXPENSES
Operating expenses 15,263,831 7,409,291
General and administrative 3,273,659 2,385,269
Stock based compensation 1,257,117 1,004,135
Interest 3,764,236 754,989
Depreciation and amortization 4,548,779 2,553,925
-----------------------------------
28,107,622 14,107,609
-----------------------------------
NET LOSS BEFORE TAX (5,244,261) (1,541,016)
INCOME TAXES
Current (recovery) 1,162 (159,497)
Future (recovery) (682,100) (723,000)
-----------------------------------
(680,938) (882,497)
-----------------------------------
NET LOSS AND COMPREHENSIVE LOSS (4,563,323) (658,519)
DEFICIT, BEGINNING OF PERIOD (15,097,957) (3,115,709)
APPLICATION OF PRIOR YEAR DEFICIT
TO SHARE CAPITAL 15,097,957 -
-----------------------------------
DEFICIT, END OF PERIOD (4,563,323) $ (3,774,228)
-----------------------------------
-----------------------------------

NET LOSS PER SHARE (note 8 (d))
Basic and diluted (0.20) $ (0.08)
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STATEMENT OF CASH FLOWS
Central Alberta Well Services Corp.
(unaudited)

Three Months Ended Three Months Ended
June 30, 2007 June 30, 2006
------------------------------------------------------------------------

CASH PROVIDED BY (USED IN):

OPERATING:
Net loss $ (4,309,637) $ (761,609)
Items not affecting cash:
Stock based compensation 893,416 431,915
Interest on shareholder loans (2,276) (3,768)
Accretion of debt financing
costs and warrants 364,170 -
Loss on disposal of assets 31,310 24,547
Future income tax (reduction) (473,400) (723,000)
Depreciation and amortization 2,132,172 1,811,964
-------------------------------------
(1,364,245) 780,049
Change in non-cash working
capital 6,700,021 2,779,789
-------------------------------------
5,335,776 3,559,838
-------------------------------------

INVESTING:
Business acquisitions -
net of cash (note 5) - -
Purchase of property and
equipment (6,769,800) (20,075,689)
Proceeds on sale of assets 5,508 23,004
Restricted cash - (405,641)
-------------------------------------
(6,764,292) (20,458,326)
-------------------------------------

FINANCING:
Issue of long-term debt - 4,174,640
Retirement of long-term debt (43,000,000) (1,032,670)
Issue of short-term debt - 10,000,000
Restructure of short-term debt - -
Deferred financing costs - (358,576)
Debt financing costs and
warrants - -
Issue of common shares 50,000,000 -
Share issue costs (830,434) 2,048
Increase (repayment) of
shareholder loans 67,442 (29,745)
-------------------------------------
6,237,008 12,755,697
-------------------------------------

INCREASE (DECREASE) IN CASH 4,808,492 (4,142,791)
CASH, BEGINNING OF PERIOD 587,351 5,035,687
------------------------------------
CASH, END OF PERIOD $ 5,395,843 $ 892,896
------------------------------------------------------------------------
------------------------------------------------------------------------

Supplementary Information:
Interest paid $ 1,130,301 $ 655,267
Payout penalties paid on
replacement of old loans - -
Interest received 55,650 37,660
Income taxes paid - -

See accompanying notes to financial statements.


Six Months Ended Six Months Ended
June 30, 2007 June 30, 2006
------------------------------------------------------------------------

CASH PROVIDED BY (USED IN):

OPERATING:
Net loss $ (4,563,323) $ (658,519)
Items not affecting cash:
Stock based compensation 1,257,117 1,004,135
Interest on shareholder loans (5,801) (7,848)
Accretion of debt financing
costs and warrants 600,599 -
Loss on disposal of assets 31,310 24,547
Future income tax (reduction) (682,100) (723,000)
Depreciation and amortization 4,548,779 2,553,925
-------------------------------------
1,186,581 2,193,240
Change in non-cash working capital 6,223,749 (1,822,025)
-------------------------------------
7,410,330 371,215
-------------------------------------

INVESTING:
Business acquisitions -
net of cash (note 5) - (4,664,052)
Purchase of property and equipment (19,347,005) (29,337,959)
Proceeds on sale of assets 5,508 23,004
Restricted cash - (405,641)
-------------------------------------
(19,341,497) (34,384,648)
-------------------------------------

FINANCING:
Issue of long-term debt 63,000,000 8,050,000
Retirement of long-term debt (59,499,334) (1,032,670)
Issue of short-term debt - 21,000,000
Restructure of short-term debt (35,000,000) -
Deferred financing costs 803,194 (613,631)
Debt financing costs and warrants (2,714,184) -
Issue of common shares 50,000,000 5,126,507
Share issue costs (830,434) (277,709)
Increase (repayment) of
shareholder loans (121,158) 9,005
-------------------------------------
15,638,084 32,261,502
-------------------------------------

INCREASE (DECREASE) IN CASH 3,706,917 (1,751,931)

CASH, BEGINNING OF PERIOD 1,688,926 2,644,827
-------------------------------------
CASH, END OF PERIOD 5,395,843 $ 892,896
------------------------------------------------------------------------
------------------------------------------------------------------------

Supplementary Information:
Interest paid 2,571,837 $ 783,181
Payout penalties paid on
replacement of old loans 608,071 -
Interest received 71,153 41,898
Income taxes paid 48,824 -

See accompanying notes to financial statements.


ABOUT CENTRAL ABLERTA 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): 22,671,930

Class B Shares (Non-Trading): 5,653,531

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
    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