Pure Energy Services Ltd.
TSX : PSV

Pure Energy Services Ltd.

August 13, 2008 08:45 ET

Pure Energy- 2008 Second Quarter Results and Operational Update

CALGARY, ALBERTA--(Marketwire - Aug. 13, 2008) - Pure Energy Services Ltd. (TSX:PSV):



FINANCIAL REVIEW

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Three Months ended June 30, Change
($ millions, except per
share amounts, unaudited) 2008 % 2007 % $ %
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Consolidated Results

Revenue $ 32.1 100% $ 16.5 100% $ 15.6 95%

EBITDA(1) (1.0) (3%) (10.4) (63%) 9.4 90%

EBITDAS(1) (0.8) (2%) (10.1) (61%) 9.3 92%

Net loss (3.8) (12%) (9.3) (56%) 5.5 59%

Net loss per share
Basic $ (0.24) $ (0.58) $ 0.34
Diluted $ (0.24) $ (0.58) $ 0.34

Canadian Completion Services
Results

Revenue $ 7.1 100% $ 6.6 100% $ 0.5 9%
Income (loss) before
income taxes (3.7) (52%) (5.4) (82%) 1.7 32%

US Completion Services
Results

Revenue $ 22.1 100% $ 8.5 100% $ 13.6 159%
Income (loss) before
income taxes 1.5 7% (0.7) (8%) 2.2 315%

Canadian Drilling Services
Results

Revenue $ 2.8 100% $ 1.4 100% $ 1.4 100%
Income (loss) before
income taxes (0.8) (30%) (1.3) (94%) 0.5 35%

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Six Months ended June 30, Change
($ millions, except per
share amounts, unaudited) 2008 % 2007 % $ %
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Consolidated Results

Revenue $ 78.8 100% $ 62.6 100% $ 16.2 26%

EBITDA(1) 6.3 8% (1.1) (2%) 7.4 673%

EBITDAS(1) 7.1 9% (0.4) (1%) 7.5 1875%

Net loss (1.8) (2%) (5.4) (9%) 3.6 67%

Net loss per share
Basic $ (0.11) $ (0.34) $ 0.23
Diluted $ (0.11) $ (0.34) $ 0.23

Canadian Completion Services
Results

Revenue $ 25.4 100% $ 30.5 100% $ (5.1) (16%)
Income (loss) before
income taxes (1.3) (5%) (1.5) (5%) 0.2 9%

US Completion Services
Results

Revenue $ 35.8 100% $ 17.3 100% $ 18.5 107%
Income (loss) before
income taxes 1.1 3% (1.0) (6%) 2.1 210%

Canadian Drilling Services
Results

Revenue $ 17.5 100% $ 14.8 100% $ 2.7 18%
Income (loss) before
income taxes 2.9 16% 2.9 20% - -
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(1) EBITDA and EBITDAS do not have standardized meanings prescribed by GAAP.
Management believes that, in addition to net income, EBITDA and EBITDAS
are useful supplemental measures. EBITDA and EBITDAS are provided as
measures of operating performance without reference to financing
decisions and income tax impacts, which are not controlled at the
operating management level. EBITDAS also excludes stock-based
compensation expense as it is also not controlled at the operating
management level. Investors should be cautioned that EBITDA and EBITDAS
should not be construed as alternatives to net income determined in
accordance with GAAP as an indicator of the Corporation's performance.
The Corporation's method of calculating EBITDA and EBITDAS 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" for the reconciliation to net income.


Highlights and Outlook

The Corporation's revenue for the 2008 second quarter increased $15.6 million compared to the same period in 2007. The Corporation's 2008 second quarter net loss decreased $5.5 million compared to the 2007 second quarter. US Completion Services experienced improved financial results as a result of the utilization of the equipment previously transferred from Canadian Operations, increased utilization experienced in the US Logging & Perforating division and the improved financial performance of the Fracturing division. All three of the US divisions recorded positive income before income taxes for the quarter. As a result, the effect of spring break-up (and the resultant seasonal decrease in activity levels in the WCSB) on the Corporation's consolidated financial results for the 2008 second quarter was lessened by the positive financial results realized from US Completion Services. Management expects that the financial results of US Completion Services will have a larger impact in the remainder of 2008 and in 2009 as its financial performance continues to improve.

Management is cautiously optimistic regarding activity levels in the WCSB and the effect on Canadian Operations in the second half of 2008. The Petroleum Services Association of Canada ("PSAC") is forecasting a 13% increase in the natural gas well count for 2008 to 9,336 wells, compared to 8,233 natural gas wells drilled in 2007(1). PSAC reports that 3,972 natural gas wells were drilled in the first half of 2008 and is forecasting that an additional 5,364 natural gas wells will be drilled in the second half of 2008.

Revenue for the 2008 second quarter for the Drilling Services segment increased by 100% compared to the second quarter of 2007 as a result of continued higher than anticipated drilling rig utilization. Consistent with the PSAC forecast, the Drilling Services segment is expecting increased utilization for its drilling services, tool rentals and directional drilling services in the 2008 third and fourth quarters. The Quintera Drilling division has received commitments for the majority of its drilling rigs for the winter drilling season. The Motorworks division has experienced good utilization of its mud motors year to date and Management expects that both mud motor rentals and directional drilling services will continue to grow during the 2008 third and fourth quarters and in 2009.

Revenue for the Canadian Completion Services segment increased 9% in the 2008 second quarter when compared to the same period in 2007, mainly as a result of a 9% increase in the job count. Canadian Completion Services' loss before income taxes for the 2008 second quarter decreased 32% compared to the 2007 second quarter. This decrease was largely attributable to higher revenues and lower operating expenses resulting from cost cutting measures implemented during the last year.

For the Canadian Completion Services segment, Management anticipates slightly stronger utilization in the second half of 2008 when compared to the same period in 2007, but expects that utilization rates will increase more significantly in 2009. Management also expects that higher pricing opportunities will present themselves in the 2008 fourth quarter and in 2009, especially as the Corporation focuses on the provision of services for unconventional gas and oil plays. The Canadian Logging and Perforating division is transferring a logging and perforating derrick unit from its southern operations to Fort St. John to increase services in that area.

US Completion Services are focused on the provision of services in unconventional plays or tight reservoirs in the US Rocky Mountain region. Similar services will be required in the WCSB with the further development of unconventional plays in the northern regions of the WCSB and other areas. The Canadian Completion Services segment has already taken advantage of the knowledge and experience of the US Logging and Perforating division to gain the expertise necessary to perform multi-stage perforating for customers in the WCSB. Management anticipates the further transfer of knowledge for other processes and services performed by US Completion Services in the US Rocky Mountain region which will have similar application in the WCSB.

All of the divisions of US Completion Services experienced strong utilization during the period. Revenues from US Completion Services increased 159% for the 2008 second quarter when compared to the 2007 second quarter, with the largest increase occurring in the Fracturing division. Income before income taxes from US Completion Services for the 2008 second quarter increased 315% when compared to the same period in 2007. All of the divisions of US Completion Services recorded positive income before income taxes for the quarter.

Revenue for the Fracturing division in the 2008 second quarter increased by 768% and 190%, respectively, compared to revenue for the 2007 second quarter and the 2008 first quarter. The Fracturing division continues to increase utilization and gain customer acceptance as a result of the recognition by customers of the quality and high efficiency of the division's services. The first two fracturing spreads are currently operating at high utilization, both under contract and for spot market services. The third fracturing spread is currently being crewed and is expected to be operational in September 2008. The third fracturing spread is expected to be active in the spot market once the spread becomes fully crewed. Management is confident that all three fracturing spreads will achieve good utilization rates during the 2008 fourth quarter and 2009 first quarter.

Management has been advised that the reconstruction of the Corporation's principal sand supplier's processing facility has been completed and the facility is currently being commissioned to become fully operational. The Corporation has commenced receiving deliveries of sufficient quantities of 20/40 sand to meet its contractual commitments.

With the addition of seven production testing units transferred from the Canadian Operations during the first half of 2008, the US Production Testing division now has 33 production testing units working in the US Rocky Mountain region. Management is confident that opportunities continue to exist to grow production testing services in all three of the Corporation's US markets.

The financial performance of the US Logging and Perforating division continues to improve as a result of increased customer acceptance and complementary services performed as a result of the increased utilization of the Fracturing division's equipment. The division's revenue for the 2008 second quarter increased 183% and 65% compared to the revenue for the 2007 second quarter and 2008 first quarter, respectively. A third wireline unit has been transferred from Canadian Operations to Colorado to meet customer demand. One wireline truck currently operates in Wyoming. The Wyoming operations are considered to be start-up operations, as regulatory approvals and licenses have only been recently received to allow for the provision of perforating services.

For further information on Pure Energy's financial results, please refer to Pure Energy's MD&A for the three and six months ended June 30, 2008 on SEDAR at www.sedar.com or available on our website at www.pure-energy.ca.

Non-GAAP Disclosure

EBITDA and EBITDAS do not have standardized meanings prescribed by GAAP and therefore may not be comparable to similar measures presented by other issuers. Management believes that, in addition to net income, EBITDA and EBITDAS are useful supplemental measures. EBITDA and EBITDAS are provided as measures of operating performance without reference to financing decisions and income tax impacts, which are not controlled at the operating management level. EBITDAS also excludes stock-based compensation expense as it is also not controlled at the operating management level. The following is a reconciliation of EBITDA and EBITDAS to net income, being the most directly comparable measure calculated in accordance with Canadian GAAP.



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Three Months Six Months
ended ended
June 30, June 30,
($ millions, unaudited) 2008 2007 2008 2007
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EBITDAS $ (0.8) $ (10.1) $ 7.1 $ (0.4)

Deduct:
Stock-based compensation expense 0.2 0.3 0.8 0.7

EBITDA $ (1.0) $ (10.4) $ 6.3 $ (1.1)
Deduct:
Depreciation and amortization 3.8 2.9 7.6 6.0
Interest expense 0.6 0.6 1.3 1.0
Income taxes (1) (1.6) (4.6) (0.9) (2.7)
Net income (GAAP financial measure) (3.8) (9.3) (1.8) (5.4)
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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", "should" "will", "intend", "expect", "believe", "plan", "anticipate", "estimate", "forecast", "project" 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, except to the extent required by 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 may contain 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 legislated targets to reduce emissions; 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