Dynastar Inc.

April 19, 2007 15:51 ET

Dynastar Announces Second Quarter Financial Results, Calls Meeting

CALGARY, ALBERTA--(CCNMatthews - April 19, 2007) - Dynastar Inc. (TSX VENTURE:DDC)("Dynastar" or the "Corporation") announces second quarter results. The Corporation also announces the Annual General and Special Meeting of Shareholders is called for Thursday June 14, 2007.


Dynastar's efforts in securing, new work contracts during the first half in the United States were largely successful with five (5) Dynastar drilling units now presently relocated with new US clients. US contracts helped offset reduced activity in Canada during a period of rapidly falling oil and gas commodity prices and announced government tax changes with Trusts on November 1, 2006. The corporation generated over $400,000 in new gross revenues internationally that offset all work declines in Canada, delivering a period on period gain of 1.0%, a significant growth achievement for Dynastar. The US geophysical drilling market remains strong and is expected to continue to grow as a percentage of total revenue and drilling capacity over the balance of 2007 and beyond.

On the expense side of the balance sheet, analysis of our three largest operating expenses in our second quarter shows salary & wages, repairs & maintenance and fuel are all related to the higher costs associated with travel and related expenses for operations in the US, together with ongoing maintenance and upgrading of some of the older units in the drilling fleet. Management took steps to address high operating and maintenance costs by commencing a staged modernization of its wheel rig units in mid 2006 focused on reducing fuel consumption and significantly reducing the cost of repair and maintenance. While management has little control over the price of fuel, steps taken to modernize some of our carriers has helped to reduce fuel consumption. Our maintenance expenses are running ahead of last year primarily due to upgrades made to the fleet. One new truck unit was completed in the fall of 2006 and a second truck unit is presently under fabrication in our Crossfield facility. Replacement and refurbishing expenses in equipment are expected to be capitalized by 2007 year-end. Any adjustments made will positively impact Dynastar's earnings. The third and largest expense is labour costs reflecting increased competition for qualified personnel in the oil and gas services sector. Management's initiatives to address operating costs over the first one-half should translate into improved margins and earnings in the third and fourth quarters.

The corporation also announces it has formed a Compensation Committee comprised of the three independent directors to address the sourcing of qualified senior personnel to fill vacancies associated with customer relations and new business growth in the US.


The following table highlights certain financial information about the Corporation's operations for the six-month periods ended January 31, 2007 and 2006 respectively:

2nd Quarter Ended January 31
2007 2006
------------ ------------
$ (except shares outstanding)

Revenue 1,294,844 1,275,650
Operating Expenses(2) 1,047,560 964,038
Income/(loss) from Operations 247,823 311,612

EBITDA(1) 16,005 180,339
per share - basic 0.001 0.015
per share - diluted 0.001 0.014

Net Income/(loss) (52,984) 60,827
per share - basic (0.003) 0.005
per share - diluted 0.005

Working capital 396,172 255,324

Total Assets 1,778,517 1,356,696

Shareholders' Equity 918,617 452,622

Weighted average shares outstanding
Basic 14,153,874 11,883,873
Diluted 16,021,709 12,616,707

(1) EBITDA is calculated from the statement of loss as revenue less
operating costs and general and administrative expenses and is used to
assist management and investors in assessing the Company's ability to
generate cash from operations. EBITDA is a non-GAAP earnings measure
that does not have any standardized meaning prescribed by GAAP and may
not be comparable to similar measures provided by other companies.

(2) Operating costs include Bad debts; Drillers living allowance, Equipment
rental, freight, Insurance, Repairs and maintenance, Sub-contracts,
Supplies, Training, Vehicle, and Wages and benefits (with Executive and
Administrative Salaries being included in G&A Expenses), all other
costs are considered Administrative costs. Please refer to financial


Revenue increased by 1.0% in the six-month period ending January 31, 2007. This small but significant increase was achieved despite a loss of all work contracts in the first quarter (August through October 2006) as crude oil prices softened significantly, falling from prices in excess of $75.00 US per barrel at mid year to below $60.00 US per barrel by the end of September, 2006. Crude oil prices continued lower through the fall of 2006 and into early 2007, approaching a low of $55.00 by mid February. This commodity price collapse, coupled with income tax changes to Oil & Gas Income Trusts announced November 1, 2006, caused a significant reduction in the approved exploration programs of most operators in Canada. The hidden accomplishment by Dynastar's management is the delivery of in excess of $400,000 in new business revenue during this period, a direct result of steps taken to secure business expansion into the United States immediately prior to the July 31, 2006 year-end.

Gross Margin decreased to 19.1% of sales from 24.4% . The decrease is due to two main factors. Firstly, increased competition and reduced work opportunities in our Canadian operations causing Dynastar to reduce day work bids to secure work. Secondly, start-up costs of establishing new operations in the United States were incurred. The corporation began certifying its personnel for US entry during the first quarter and secured additional work contracts in the US during the second quarter. We should see improvement over the next one-half year in our Gross Margins as these largely one time costs are expensed.

Cash flow from operations was lower by $63,789 or 20.5% than in the same period last year. Cash flow is expected to improve over the balance of the year as one-time costs associated with expansion into the United States are retired.

Working capital at January 31, 2007 stood at $396,172, an increase of $140,848 or 55.2% from the same period in 2006. This increase has been achieved in the face of increased capital purchases as we completed the initial steps in modernizing our drilling fleet.

Total assets have increased by $421,821 or 31.1% over the period ending January 31, 2006.

Shareholders equity increased by $465,995 or 103% to $918,617 for the period ended January 31, 2007. Management has been working to improve working capital and strengthen the Company's ability to grow and with the addition of new equity. Unfortunately, as a result of the significant decline in the oil and gas services sector following the announced tax changes by the Federal Government on November 1, 2006, Dynastar was not able to complete its announced equity financing closing the acquisition of its first major acquisition. Management believes the Corporation is now in a position to take on new acquisitions with prudent debt and is renegotiating terms for restructuring the existing acquisition, or adding new ones, as equity markets improve in our sector.

EBITDA is a supplemental earnings measure that does not have any standardized meaning prescribed by Canadian GAAP and may not be comparable to EBITDA calculated by other entities. EBITDA is a useful supplemental measure as it provides an indication of the financial results generated by Dynastar's principal business activities prior to consideration of how these activities are financed or how the results are taxed in various jurisdictions. EBITDA is defined as earnings before interest, taxes, depreciation and amortization.

This press release contains forward-looking statements subject to various risk factors and uncertainties, which may cause the actual results, performances or achievements of Dynastar to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, fluctuations in the market for oil and gas and related products and services, political and economic conditions, the demand for services provided by Dynastar, industry competition and Dynastar's ability to attract and retain both customers and key personnel.

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

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