Pure Energy Services Ltd.
TSX : PSV

Pure Energy Services Ltd.

March 19, 2008 18:21 ET

Pure Energy- 2007 Fourth Quarter and Year End Results

CALGARY, ALBERTA--(Marketwire - March 19, 2008) - Pure Energy Services Ltd. (TSX:PSV):



FINANCIAL REVIEW

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Three Months ended December 31, Change

($ millions of dollars, except
per share amounts, unaudited) 2007 % 2006 % $ %
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Consolidated Results

Revenue $ 31.0 100% $ 34.9 100% ($3.9) (11)%

EBITDA(1) 3.6 11% 6.3 18% (2.7) (44)%

Net income / (loss) 1.1 3% 2.8 8% (1.7) (61)%
Net income / (loss)
Basic $ 0.07 $ 0.17 ($0.10) (59)%
Diluted $ 0.07 $ 0.17 ($0.10) (59)%

Canadian Completion Services
Results

Revenue $ 15.1 100% $ 19.9 100% ($ 4.8) (24)%
Income / (loss) before income
taxes 0.1 1% 3.0 15% (2.9) (97)%

US Completion Services Results

Revenue $ 11.0 100% $ 7.3 100% $ 3.7 51%
Income / (loss) before income
taxes (1.0) (9)% 0.1 2% (1.1) (812)%

Canadian Drilling Services
Results

Revenue $ 4.9 100% $ 7.7 100% ($2.8) (36)%
Income / (loss) before income
taxes (0.8) (17)% 1.7 23% (2.5) (147)%

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Twelve Months ended December 31, Change

($ millions of dollars, except
per share amounts, unaudited) 2007 % 2006 % $ %
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Consolidated Results

Revenue $ 125.1 100% $ 135.4 100% ($10.3) (8)%

EBITDA(1) 6.7 5% 27.7 20% (21.0) (76)%

Net income / (loss) (3.5) (3)% 13.0 10% (16.5) (127)%
Net income / (loss)
Basic $ (0.22) $ 0.84 ($1.06) (126)%
Diluted $ (0.22) $ 0.81 ($1.03) (127)%

Canadian Completion Services
Results

Revenue $ 61.1 100% $ 80.4 100% ($19.3) (24)%
Income / (loss) before income
taxes (1.0) (2)% 14.6 18% (15.6) (107)%

US Completion Services
Results

Revenue $40.1 100% $22.5 100% $ 17.6 78%
Income / (loss) before income
taxes (1.4) (4)% 0.0 0% (1.4) (100)%

Canadian Drilling Services
Results

Revenue $ 23.9 100% $ 32.5 100% ($8.6) (26)%
Income / (loss) before income
taxes 3.7 16% 10.1 31% (6.4) (63)%

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(1) EBITDA does not have a standardized meaning prescribed by GAAP.
Management believes that, in addition to net income, EBITDA is a useful
supplemental measure. EBITDA is provided as a measure of operating
performance without reference to financing decisions and income tax
impacts, which are not controlled at the operating management level.
Investors should be cautioned that EBITDA should not be construed as an
alternative to net income determined in accordance with GAAP as an
indicator of the Corporation's performance. The Corporation's method of
calculating EBITDA may differ from that of other corporations and
accordingly may not be comparable to measures used by other
corporations. Please refer to the "Non-GAAP Disclosure".


Pure Energy's 2007 fourth quarter consolidated revenue decreased by 11% when compared to its 2006 fourth quarter results. Consolidated EBITDA for the 2007 fourth quarter decreased by 44% when compared to the 2006 fourth quarter. Net income of $1.1 million and a diluted earnings per share of $0.07 were recorded during the 2007 fourth quarter.

Operational Review and Highlights

The financial results of the Corporation for the 2007 fourth quarter reflect the effect of certain negative factors experienced by Pure Energy in its operations during the 2007 fourth quarter, including decreased industry activity levels in the Western Canadian Sedimentary Basin ("WCSB") during the 2007 fourth quarter compared to the 2006 fourth quarter, the operating loss experienced by the US Fracturing division during the quarter, the goodwill impairment recognized during the quarter and the recognition during the quarter of a contingent loss relating to an overtime claim in US Completion Services. These negative factors were partially offset by the receipt of US $4.9 million relating to the repayment of the note receivable and reimbursement of certain operating expenses from the US Fracturing division's primary fracturing sand supplier, increased equipment utilization and solid financial results for the US Production Testing division, improved financial results for the US Logging & Perforating division and the strong financial contribution by the Canadian Completion Services Specialty Logging group.

In Canada, both Canadian Completion Services and Drilling Services experienced declines in job count and utilization as a result of the decreased activity levels in the WCSB. In response to these decreased activity levels and increased customer demand in the US Rocky Mountain region, five production testing units and one wireline truck were transferred from Canadian Completion Services to US Completion Services during 2007. Additional equipment transfers may be considered if the reduced activity levels in Canada and stronger activity levels in the US Rocky Mountain region persist.

During the 2007 fourth quarter, the Corporation reviewed the cost structure of its Canadian operations. While certain cost reductions were implemented during the quarter, the majority of cost reductions were implemented in the 2008 first quarter.

The US Production Testing division continued to record strong operational and financial results during the quarter. Revenue, job count and equipment utilization all increased for the quarter when compared to the 2006 fourth quarter. Average revenue per job decreased slightly as a result of a larger proportion of work being performed under contract and a decrease in the amount of under-balanced drilling services performed during the quarter.

The Fracturing division recorded an operating loss during the 2007 fourth quarter, but saw its revenues increase by $2.3 million when compared to the 2006 fourth quarter. During the quarter, the Corporation was awarded fracturing service contracts and commitments which are expected to increase the division's equipment utilization and improve its financial results during 2008. In addition, the sale of the Corporation's primary fracturing sand supplier was completed. On the closing of that sale, the Corporation entered into a revised sand supply agreement with the sand supplier and received US $4.9 million relating to the repayment of the note receivable and reimbursement of certain operating expenses. Management expects the sand supplier to complete the reconstruction of the sand processing facility and re-commence sand production and deliveries during the 2008 second quarter.

The US Logging & Perforating division's revenue increased by 31% in the quarter compared to the 2006 fourth quarter. Equipment utilization increased by approximately 20 percentage points compared to the 2006 fourth quarter. This division is now experiencing acceptable utilization levels, but still can increase to achieve full utilization. The services agreement previously entered into with a major independent oil and gas producer was recently renewed and the Corporation recently received a commitment from another independent oil and gas producer for the provision of logging and perforating services, as well as production testing services and fracturing services.

QUARTERLY RESULTS

2007 Fourth Quarter financial highlights include:

Canadian Completion Services income before income taxes decreased $2.9 million

- Income before income taxes as a percentage of revenue for this segment decreased significantly in the 2007 fourth quarter when compared to the same period in 2006. The financial results reflect the significant decrease in revenue and goodwill impairment of $0.7 million.

Canadian Drilling Services income before income taxes decreased $2.5 million

- The decrease in income before income taxes reflected the significant decrease in revenue in the quarter compared to the 2006 fourth quarter as a result of the slowdown in industry activity levels in the WCSB and goodwill impairment of $0.5 million.

US Completion Services income before income taxes decreased $1.1 million

- Income before income taxes for the 2007 fourth quarter decreased compared to the 2006 fourth quarter primarily as a result of the operating loss recorded by the US Fracturing division, the recognition during the quarter of a contingent loss relating to an overtime claim, an increase in depreciation expense relating to equipment added during the year and increased administrative expenses associated with the growth of the US corporate office in Denver, Colorado.

For further information on Pure Energy's financial results, please refer to Pure Energy's MD&A for the three and 12 months ended December 31, 2007 on SEDAR at www.sedar.com or available on our website at www.pure-energy.ca.

Outlook

Activity levels for natural gas directed services in the WCSB are difficult to predict. Uncertainty continues to exist regarding the price for natural gas and the effect of the Alberta Royalty Review on activity levels in the WCSB. While natural gas prices have strengthened since the beginning of the year, it is not known whether the increased prices are sustainable. Consequently, the increased natural gas prices have not yet resulted in any appreciable increases in the exploration and development budgets of natural gas producers. While activity levels in the WCSB are expected to remain relatively low for 2008, the Corporation will continue to focus on maximizing equipment utilization in its Canadian operations and to increase its exposure to services related to oil directed activities. In addition, the Corporation will continue to review opportunities to transfer equipment from its Canadian operations to its US operations.

Management believes that the cost structure of the Corporation's Canadian operations has been addressed, resulting in expected cost savings of approximately $2.5 million annually. The increased cash flow resulting from such cost savings and available credit facilities provide the Corporation with sufficient financial resources to endure prolonged decreased activity levels in the WCSB. The Corporation's lender has recently agreed to the extension of the Corporation's $60 million revolving facility to June 30, 2009 evidencing the lender's confidence in the Corporation's current and future financial position.

Management remains confident in the Corporation's US operations. Activity levels in the US Rocky Mountain region have not declined in the same manner as experienced in the WCSB. The US Production Testing division continues to deliver strong financial results from its operations. Two additional production testing units were transferred from the Canadian Production Testing division to the US Production Testing division in the 2008 first quarter to meet customer needs. Management will consider transferring additional Canadian production testing units to the US if customer demand in the US Rocky Mountain region warrants.

Management expects that the US Fracturing division will deliver higher utilization and improved financial results during 2008 with the commencement of services under the contracts and commitments awarded to the Corporation. The Corporation has stockpiled sand reserves to allow it to meet its commitments for the 2008 first quarter and expects the recommencement of fracturing sand deliveries from its primary sand supplier during the 2008 second quarter. The Corporation has also established relationships with, and received deliveries from, other suppliers of fracturing sand.

Non-GAAP Disclosure

EBITDA does not have a standardized meaning prescribed by Canadian generally accepted accounting principles ("GAAP") and therefore may not be comparable to similar measures presented by other issuers. The following is a reconciliation of EBITDA, as used in this press release, to net income, being the most directly comparable measure calculated in accordance with Canadian GAAP.



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Three Months ended Year ended
($ millions of dollars, December 31, December 31,
except per share amounts) 2007 2006 2007 2006 2005
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(unaudited) (unaudited)

EBITDA $ 3.6 $ 6.3 $ 6.7 $ 27.7 $ 23.8
Deduct:
Depreciation and
amortization 3.4 2.3 12.6 8.5 5.7
Interest expense 0.8 0.4 2.5 0.9 1.4
Income taxes (1) (1.7) 0.8 (4.9) 5.3 5.8
Net income (GAAP
financial measure) 1.1 2.8 (3.5) 13.0 10.9
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(1) Income taxes consist of current income taxes and future income taxes.


Forward-Looking Statements

Certain statements in this press release may constitute "forward-looking information" which involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Pure Energy, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. When used in this press release, such information uses such words as "may", "would", "could", "will", "intend", "expect", "believe", "plan", "anticipate", "estimate", "continue" and other similar terminology. This information reflects Pure Energy's current expectations regarding future events and operating performance and speaks only as of the date of this press release. Forward-looking information involves significant risks and uncertainties, should not be read as a guarantee of future performance or results, and will not necessarily be an accurate indication of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information, including, but not limited to, the factors discussed below. Although the forward-looking information contained in this press release is based upon what management of Pure Energy believes are reasonable assumptions, Pure Energy cannot assure investors that actual results will be consistent with this forward-looking information. This forward-looking information is provided as of the date of this press release, and, subject to applicable securities laws, Pure Energy assumes no obligation to update or revise such information to reflect new events or circumstances.

In particular, this press release contains forward-looking information pertaining to the following: capital expenditure programs; financing of Pure Energy's activities including capital expenditures, supply and demand for oilfield services and industry activity levels, commodity prices, dependence on suppliers, dependence on personnel, collection of accounts receivable, expectations regarding market prices and costs, expansion of services in Canada and the United States and competitive conditions.

Pure Energy's actual results could differ materially from those anticipated in the forward-looking information as a result of the following factors: general economic conditions in Canada and the United States; demand for oilfield services during drilling and completion of oil and natural gas wells; volatility in market prices for oil and natural gas and the effect of this volatility on the demand for oilfield services generally; competition; liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations; sourcing, pricing and availability of raw materials, consumables, component parts, equipment, suppliers, facilities, and skilled management, technical and field personnel; ability to integrate technological advances and match advances of competition; availability of capital; uncertainties in weather and temperature affecting the duration of the oilfield service periods and the activities that can be completed; changes in legislation and the regulatory environment, including uncertainties with respect to implementing the Kyoto Protocol; and the other factors considered under "Risk Factors" in Pure Energy's Annual Information Form dated March 19, 2008 which is available under Pure Energy's profile at www.sedar.com.

Contact Information

  • Pure Energy Services Ltd.
    Kevin Delaney
    President and CEO
    (403) 262-4000
    (403) 262-4005 (FAX)
    Email: kdelaney@pure-energy.ca
    or
    Pure Energy Services Ltd.
    Michael Baldwin
    Chief Financial Officer
    (403) 262-4000
    (403) 262-4005 (FAX)
    Email: mbaldwin@pure-energy.ca
    or
    Pure Energy Services Ltd.
    #300, 1010 - 1st Street S.W.
    Calgary, Alberta T2R 1K4
    Website: www.pure-energy.ca