Strad Energy Services Ltd.
TSX : SDY

August 15, 2011 06:00 ET

Strad Energy Services Announces Record Results in Second Quarter 2011

CALGARY, ALBERTA--(Marketwire - Aug. 15, 2011) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.

The news release contains "forward-looking information and statements" within the meaning of applicable securities laws. For a full disclosure of the forward-looking information and statements and the risks to which they are subject, see the "Cautionary Statement Regarding Forward-Looking Information and Statements" later in this news release.

Strad Energy Services Ltd., ("Strad" or the "Company") (TSX:SDY), a North America focused, diversified energy services company, today announced its financial results for the three and six month periods ended June 30, 2011. All amounts are stated in Canadian dollars unless otherwise noted.

SELECTED FINANCIAL AND OPERATIONAL HIGHLIGHTS:

  • Record second quarter EBITDA(1) of $11.3 million, a 111% increase compared with $5.4 million in the second quarter of 2010 and a 34% increase in EBITDA compared with the first quarter of 2011;
  • Annualized EBITDA return on average total Drilling Services assets(2) for the six months ended June 30, 2011, of 33.1% and Drilling Services EBITDA margins of 33.3%;
  • Capital expenditures of $20.3 million in the second quarter. By the end of June, $52.1 million of the $86.5 million approved capital program for 2011 had been spent;
  • Continued deployment of assets to high growth resource areas in the United States. Record second quarter United States revenues of $15.7 million increased 138% compared to the second quarter of 2010. Total net assets based in the United States now comprise 48% of total Drilling Services net assets compared to 26% at the end of the second quarter of 2010; and
  • Ongoing success in the development of new products, including solids control, composite matting and satellite communications rental equipment.

"Strad's diversified strategy exposes the Company to a range of operating regions, resource plays and commodity types across North America and this approach allowed us to generate record financial performance in what is historically a challenging quarter for more regionally focused energy services companies," said Henry van der Sloot, Chief Executive Officer of Strad. "Our strong organic growth this quarter is a direct consequence of our successful deployment of capital, with a focus on higher value equipment utilizing advanced technologies, as well as strong demand from both new and existing customers eager to access our expertise in planning and supporting increasingly complex drilling programs. We believe our commitment to disciplined growth and a recent $20.0 million expansion of our 2011 capital budget will allow us to drive continued growth both through the balance of the year and beyond."

Notes:

  1. Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS or previous Generally Accepted Accounting Principles in Canada ("GAAP"); see "Non-IFRS Measures Reconciliation" in this press release.
  2. Annualized return on average total drilling assets is not a recognized measure under IFRS or previous GAAP; see "Non-IFRS Measures Reconciliation" in this press release.

Andy Pernal, President of Strad, stated "This quarter we were able to clearly demonstrate how the investments we have made in our asset base are translating into improved financial performance." He added, "With overall demand continuing to grow, increasing the size of our rental fleet and bringing new and innovative products to market has allowed us to deepen our relationships with existing customers and take market share, allowing us to build a broader customer base to support future stable growth."

FINANCIAL REVIEW FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2011

Effective January 1, 2011, Strad began reporting its financial results in accordance with International Financial Reporting Standards ("IFRS"). Prior year comparative amounts were changed to reflect results as if Strad had always prepared its financial results using IFRS. Please see additional discussion regarding IFRS later in this news release.

SELECTED FINANCIAL AND OPERATING HIGHLIGHTS
For the three and six months ended June 30,
($000's, except per share amounts)
Three months ended
June 30,
Six months ended
June 30,
2011 2010 % chg. 2011 2010 % chg.
Revenue 52,753 33,610 57 97,361 67,068 45
EBITDA(1) 11,320 5,356 111 19,765 11,851 67
Per share ($), basic 0.31 0.27 0.54 0.59
Per share ($), diluted 0.31 0.27 0.53 0.59
Net Income 3,557 852 5,144 2,410
Per share ($), basic 0.10 0.04 0.14 0.12
Per share ($), diluted 0.10 0.04 0.14 0.12
Funds from Operations(2) 11,653 4,669 150 20,022 10,170 97
Per share ($), basic 0.32 0.23 0.55 0.50
Per share ($), diluted 0.32 0.23 0.54 0.50
Capital Expenditures(3) 20,345 12,385 52,110 18,957
Total assets 231,058 153,535 50 231,058 153,535 50
Long term debt(4) 26,395 23,821 26,395 23,821
Total long term liabilities 39,433 28,677 39,433 28,677
Common Shares – end of period ('000's) 37,246 20,149 37,246 20,149
Weighted average Common Shares
basic 36,633 20,148 36,633 20,149
diluted 36,981 20,148 37,021 20,149
Notes:
(1) EBITDA is a non-IFRS measure. See "Non-IFRS Measures Reconciliation".
(2) Funds from operations is cash flow from operating activities before changes in working capital. Funds from operations is a non-IFRS measure. See "Non-IFRS Measures Reconciliation".
(3) Includes assets acquired under finance lease. Segmented information does not include capital expenditures for the corporate segment of Strad as they are minimal.
(4) Excluding current portion; includes long term portion of finance lease obligations and convertible debentures.
FINANCIAL POSITION AND RATIOS
June 30,
($000's except ratios) 2011 2010
Working Capital (1) 21,617 816
Funded Debt (2) 40,571 32,242
Total Assets 231,058 153,535
Funded Debt to EBITDA(2) 1.1 2.3
Notes:
(1) Working capital is calculated as current assets less current liabilities. See "Non-IFRS Measures Reconciliation".
(2) Funded debt includes bank indebtedness plus current and long-term portion of debt plus current and long-term obligations under finance lease. EBITDA is based on trailing twelve months. See "Non-IFRS Measures Reconciliation".

SEGMENTED INFORMATION

Strad operates in Canada and the United States through two business segments: Drilling Services and Production Services. Drilling Services includes a comprehensive range of drilling-related products and services, including a wide range of environmental solutions. Production Services includes mechanical services, production equipment packaging and electrical and instrumentation services. All divisional figures are reported based on these two segments.

Three months ended
June 30,
Six months ended
June 30,
($000's) 2011 2010 % chg. 2011 2010 % chg.
Drilling Services
Revenue 36,717 18,633 97 63,499 36,037 76
EBITDA(1) 12,490 5,379 132 21,200 11,575 83
EBITDA % 34.0 % 28.9 % 33.3 % 32.1 %
Capital Expenditures(2) 19,971 12,343 51,750 18,683
Gross Capital Assets 133,313 65,163 133,313 65,163
Total Assets 172,455 91,380 89 172,455 91,380 89
Annualized Return on Average Total
Assets %(3)
35.7 % 26.4 % 33.1 % 28.4 %
Production Services
Revenue 16,036 14,977 7 33,862 31,031 9
EBITDA(1) 822 1,579 (48 ) 2,109 3,176 (33 )
EBITDA % 5.1 % 10.5 % 6.2 % 10.2 %
Capital Expenditures(2) 72 114 87 247
Gross Capital Assets 15,560 14,961 15,560 14,961
Total Assets 56,595 60,000 56,595 60,000
Annualized Return on Average Total Assets %(3) 5.4 % 10.3 % 6.9 % 10.0 %
Corporate EBITDA(1) (1,992 ) (1,602 ) (3,544 ) (2,900 )
Total EBITDA(1) 11,320 5,356 19,765 11,851
Notes:
(1) EBITDA is a non-IFRS measure. See "Non-IFRS Measures Reconciliation".
(2) Includes assets acquired under finance lease. Segmented information does not include capital expenditures for the corporate segment of Strad as they are minimal.
(3) Annualized return on average total drilling assets is not a recognized measure under IFRS or previous GAAP; see "Non-IFRS Measures Reconciliation" in this press release.

RESULTS OF OPERATIONS

The record revenue and EBITDA results for the six months ended June 30, 2011, are due to the successful execution of Strad's 2010 and 2011 capital programs. In the second quarter, Strad increased its capital expenditure program to $86.5 million (from $66.5 million), of which 60% was purchased as of June 30, 2011. Strad's increased capital program is being driven by continued organic demand for the Company's rental products and services. Horizontal drilling and multi-stage fracing activity have increased in the industry. These trends have increased the amount of equipment required on sites, the technical nature of the equipment, and the planning time required prior to execution of drilling. Strad partners with customers at the planning phase to ensure all equipment, logistical and safety needs are being satisfied efficiently.

Consolidated revenue generated for the three and six months ended June 30, 2011, increased 57% and 45%, respectively, to $52.8 million and $97.4 million compared with $33.6 million and $67.1 million for the same periods in 2010. Higher rental equipment utilization and additional capital expenditures contributed to the significant increase in revenue compared to 2010. Wet weather conditions during the second quarter were beneficial for matting utilizations.

Revenues generated from the Company's Drilling Services segment for the three and six months ended June 30, 2011, increased 97% and 76%, respectively, to $36.7 million and $63.5 million versus $18.6 million and $36.0 million for the same periods in 2010. Increases resulted primarily from additions to the rental asset fleet in both Canada and the United States. Revenue generated from the United States for the three and six months ended June 30, 2011, increased to $15.7 million and $24.6 million, respectively, or 138% and 144%, from $6.6 million and $10.1 million in the same periods in 2010. Canadian Drilling Services revenue also improved; for the three and six months ended June 30, 2011, revenue of $21.0 million and $38.9 million increased 76% and 50%, respectively, compared with revenue of $12.0 million and $25.9 million for the same periods in 2010.

The Company's growing United States business is stabilizing seasonal impacts for its rental equipment operations. The typical decline experienced by Canadian oilfield service providers in the second quarter due to wet field conditions and road bans is increasingly mitigated by the Company's growing U.S. operations. The Western Canadian Sedimentary Basin ("WCSB") extended wet field conditions in the second quarter drove demand for the Company's matting products which helped to mitigate decreased utilization of drilling equipment products.

Production Services revenue improved 7% and 9% to $16.0 million and $33.9 million for the three and six months ended June 30, 2011, respectively, compared with $15.0 million and $31.0 million for the same periods in 2010. Revenue increased as the number of field technicians in the group increased 15% over June 30, 2011, but was negatively impacted by wet field conditions preventing technicians from accessing customer sites. Industry conditions in the WCSB have not changed significantly over that of last year due to continued depressed natural gas prices.

Consolidated EBITDA for the three and six months ended June 30, 2011, of $11.3 million and $19.8 million improved 111% and 67%, respectively, compared with $5.4 million and $11.9 million for the same periods in 2010 for the reasons stated above. EBITDA as a percentage of revenue for the three and six months ended June 30, 2011, was 21% and 20% compared with 16% and 18% for the same periods in 2010.

Drilling Services EBITDA for the three and six months ended June 30, 2011, of $12.5 million and $21.2 million improved 132% and 83%, respectively, compared with $5.4 million and $11.6 million for the same period in 2010 for the reasons stated above. EBITDA as a percentage of revenue for the three and six months ended June 30, 2011, was 34% and 33% compared with 29% and 32% for the same periods in 2010.

Production Services EBITDA for the three and six months ended June 30, 2011, of $0.8 million and $2.1 million decreased 48% and 33%, respectively, compared with $1.6 million and $3.2 million for the same periods in 2010 for the reasons stated above. EBITDA as a percentage of revenue for the three and six months ended June 30, 2011, was 5% and 6% compared with 10% for the same periods in 2010.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2011, Strad's principal sources of liquidity included working capital of $21.6 million, an increase of $20.8 million compared with June 30, 2010; a revolving demand facility of $25.0 million, of which $10.1 million was drawn; a 364-day revolving capital expenditure facility of $24.0 million, of which $22.0 million was drawn; and a lease facility of $10.0 million, of which $4.9 million was drawn as of June 30, 2011. Subsequent to the end of the second quarter, the Company entered into a three year agreement to syndicate its credit facility, increasing its credit limit to $100 million from a limit of $49 million.

As at June 30, 2011, the Company was in compliance with all of the bank facility covenants.

OUTLOOK

Industry conditions remained robust in the second quarter and all indications point toward this trend continuing through to the end of this year and into 2012. High oil and liquids rich natural gas prices driven by political instability, and strong global demand, have boosted exploration and development activity throughout North America. This strong demand could translate into improved pricing power for services companies as activity levels continue to improve. Weak natural gas pricing is dampening natural gas drilling activity in some areas of North America but has had limited overall impact on drilling activity in 2011.

In the WCSB, drilling utilization of 24% for the second quarter of 2011 was up from 21% in the second quarter of last year; well permits for the second quarter of 2011 increased 13% over the second quarter of 2010; and meters drilled in the second quarter of 2011 increased 12% over that of the second quarter of 2010. Positive industry indicators were also present in the United States where land rig counts grew due to a 29% increase in those targeting oil compared to a 5% decrease in those directed to natural gas. Horizontal drilling and multi-stage fracing are also being utilized more often to exploit both unconventional resource plays and mature conventional plays. So far this year, 57% of US rig activity was focused on horizontal drilling techniques, compared with 51% in 2010. In Canada, 52% of total wells drilled were horizontal, compared to 41% in 2010. Horizontal drilling techniques require a larger footprint and more advanced planning and equipment on the well site. Management is increasingly focused on signing contracts associated with these larger initiatives, which drive utilization and provide more stable revenue.

Despite global economic instability, the energy services market and Strad's market share have continued to grow and this has allowed the Company to post record quarterly revenue and EBITDA. Contributing to this achievement was the Company's larger asset base that was expanded in 2010 and into 2011. Strad's return on assets continues to be strong. New product initiatives such as solids control, satellite communications equipment and composite mats made up $8.2 million of capital expenditures in the first six months of 2011. The new products and services enhance the value the Company can offer to its customers and helps to further diversify the product suite. Further driving demand for these new products are the continuously evolving high standards of safety and environmental stewardship that continue to present significant concern for customers, particularly those in the high profile new resource plays. These higher standards have created a trend to single source, full service vendors like Strad.

New capital will continue to be allocated in the coming months with a focus on continued development of new and technically advanced products. The Company normally experiences a three month lag between the date of expenditures and the date that assets are deployed in the field and generating revenue. The lag is due to internal preparation necessary to ready the equipment for customer use.

During the second quarter, approximately 60% of the $20.3 million of capital expenditures had been placed in the United States. Total net assets based in the United States now comprise 48% of total Drilling Services net assets compared to 26% at the end of the second quarter of 2010. As such, the Company expects a greater proportion of revenue and EBITDA will be generated from the United States as the year progresses. Management also expects strong utilizations for all of its products and services typical of the positive seasonal pattern for the third and fourth quarters of the year.

The positive industry conditions continue to provide many opportunities and the Company remains focused on organic North American growth. In the second half of the year management expects to focus on executing on its capital program, further building customer relationships by creating strong partnerships, and advancing new product development initiatives. Strad's disciplined process of allocating capital based on four key strategies (customer, resource play, contract and economic return) encourages optimal deployment of capital. Strad is cognizant that a strong balance sheet is also part of being a successful company over the long term. The funds raised last November through the initial public offering, operational cash flow and the existing bank facilities, have provided a strong balance sheet and the funding for the 2011 capital program. Management views funded debt to EBITDA as an important tool in the prudent management of its balance sheet and intends to continue carefully allocating capital. At June 30, 2011, the funded debt to EBITDA ratio was 1.1.

NON-IFRS MEASURES RECONCILIATION

Certain supplementary measures in this press release do not have any standardized meaning as prescribed under IFRS and previous GAAP and, therefore, are considered non-IFRS measures. These measures are described and presented in order to provide shareholders and potential investors with additional information regarding the Company's financial results, liquidity and its ability to generate funds to finance its operations. These measures are identified and presented, where appropriate, together with reconciliations to the equivalent IFRS or previous GAAP measure. However, they should not be used as an alternative to IFRS or previous GAAP, because they may not be consistent with calculations of other companies. These measures are further explained below.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") is not a recognized measure under IFRS and previous GAAP. Management believes that in addition to net income, EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Company's principal business activities prior to consideration of how those activities are financed or how the results are taxed. EBITDA is calculated as net income plus interest, taxes, depreciation and amortization, non-controlling interest, other losses, loss on foreign exchange, less gain on foreign exchange and other gains. Segmented EBITDA is based upon the same calculation for defined business segments, which are comprised of Drilling Services, Production Services and Corporate.

Funds from operations are cash flow from operating activities excluding changes in working capital. It is a supplemental measure to gauge performance of the Company before non-cash items. Working capital is calculated as current assets minus current liabilities. Working capital is used by Management to gauge what banking facilities are available for reinvestment in the business.

Annualized return on average total assets for the first six months is calculated as annualized current period EBITDA divided by the average of total assets over Q4 2010 and Q1 2011. Annualized return on average total assets for the three months ended June 30, 2011, is calculated as annualized current period EBITDA divided by the averaged total assets over the prior quarter. The three month lag represents the time between the purchase of capital assets and when they are deployed in the field and earning revenue.

Funded debt is calculated as bank indebtedness plus current and long-term portion of debt plus current and long-term portion of finance lease obligations.

Reconciliation of EBITDA and Funds from operations

Reconciliation of non-IFRS measures
($000's)
Three Months
Ended
June 30
, Three Months
Ended
June 30
, Six Months
Ended
June 30
, Six Months
Ended
June 30
,
2011 2010 2011 2010
(unaudited ) (unaudited ) (unaudited ) (unaudited )
Net income 3,557 852 5,144 2,410
Add:
Depreciation and amortization 5,606 3,546 10,287 6,892
Gain on disposal of PP&E (145 ) (27 ) (157 ) (61 )
Share-based payments 241 151 455 305
Non-controlling interest (210 ) (20 ) 333 194
Deferred income tax (recovery) 2,094 (393 ) 3,216 (591 )
Interest expense 510 560 744 1,021
Funds from operations 11,653 4,669 20,022 10,170
Add:
Loss on foreign exchange 325 185 595 314
Income tax expense (417 ) 653 (397 ) 1,672
Subtotal 11,561 5,507 20,220 12,156
Deduct: Share-based payments 241 151 455 305
EBITDA 11,320 5,356 19,765 11,851
Reconciliation of quarterly non-IFRS measures
($000's)
Three months ended
(unaudited)
Jun. 30 , Mar. 31 , Dec. 31 , Sept. 30 ,
2011 2011 2010 (1 ) 2010 (1 )
Net income 3,557 1,587 2,579 2,323
Add:
Depreciation and amortization
Accretion of Convertible Debenture
5,606
4,681
4,043
13
3,775
22
Gain on disposal of PP&E (145 ) (12 ) (68 )
(Gain)/Loss on foreign exchange 325 270 526 (195 )
Non-controlling interest (210 ) 543 76 445
Income tax expense/(recovery) (417 ) 20 (522 ) (1,455 )
Deferred income tax expense/(recovery) 2,094 1,122 1,144 2,916
Interest expense 510 234 569 760
EBITDA 11,320 8,445 8,360 8,591
(1) 2010 amounts are presented in accordance with IFRS. 2009 amounts are presented in accordance with previous GAAP.
Reconciliation of quarterly non-IFRS measures
($000's)
Three months ended
(unaudited)
Jun. 30 , Mar. 31 , Dec. 31 , Sept. 30 ,
2010 (1 ) 2010 (1 ) 2009 (1 ) 2009 (1 )
Net income (loss) 852 1,558 (11,403 ) (2,090 )
Add:
Depreciation and amortization 3,546 3,346 3,080 3,082
Impairment of goodwill 11,000
(Gain)/Loss on disposal of PP&E (27 ) (34 ) 90 (38 )
(Gain)/Loss on foreign exchange 185 129 (245 ) 177
Non-controlling interest (20 ) 214
Income tax expense/(recovery) 653 1,019 (15 ) (608 )
Deferred income tax recovery (393 ) (198 ) (821 ) (871 )
Interest expense 560 461 424 434
EBITDA 5,356 6,495 2,110 86
(1) 2010 amounts are presented in accordance with IFRS. 2009 amounts are presented in accordance with previous GAAP.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Certain statements and information contained in this Press Release constitute forward-looking statements. These statements relate to future events or to the Company's future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.

The use of any of the words "expect", "plan", "continue", "estimate", "anticipate", "targeting", "intend", "could", "might", "should", "believe",, "may", or "will" and similar expressions are intended to identify forward-looking information or statements. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this Press Release. The forward-looking information and statements included in this Press Release are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements. These factors include, but are not limited to, such things as the impact of general industry conditions, fluctuation of commodity prices, industry competition, availability of qualified personnel and management, stock market volatility and timely and cost effective access to sufficient capital from internal and external sources. The risks outlined above should not be construed as exhaustive. Although management of the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Accordingly, readers should not place undue reliance upon any of the forward-looking information set out in this Press Release. All of the forward looking statements of the Company contained in this Press Release are expressly qualified, in their entirety, by this cautionary statement. Except as required by law, the Company disclaims any intention or obligation to update or revise any forward-looking information or statements, whether the results of new information, future events or otherwise.

SECOND QUARTER 2011 EARNINGS CONFERENCE CALL

Strad Energy Services Ltd. has scheduled a conference call to begin promptly at 9:00 a.m. MT on Monday, August 15, 2011.

The conference call dial in numbers are 1-866-226-1792 or 1-416-340-2216.

An archived recording of the conference call will be available approximately one hour after the completion of the call.

The replay dial in number is 1-800-408-3053 or 1-905-694-9451.

The pass code for replay is 8368231. This recording will be made available until Monday, August 22nd.

Strad Energy Services Ltd.
Consolidated Statement of Financial Position
(Unaudited)
(in thousands of Canadian dollar)
June 30 , December 31 ,
2011
$
2010
$
Assets
Current assets
Cash and cash equivalents - 8,416
Accounts receivable 45,387 41,700
Current portion of note receivable (note 5) 2,814 -
Inventories 15,995 15,171
Prepaid expenses and deposits 2,959 2,887
Income taxes receivable 481 241
67,636 68,415
Non-current assets
Property, plant and equipment (note 6) 112,352 70,128
Intangible assets (note 7) 10,025 11,446
Goodwill 36,004 36,004
Note receivable (note 5) 135 -
Deferred income taxes 4,906 5,475
Total assets 231,058 191,468
Liabilities
Current liabilities
Bank indebtedness (note 8) 10,070 -
Accounts payable and accrued liabilities 27,701 26,755
Deferred revenue 4,086 3,387
Current portion of obligations under finance lease (note 9) 4,106 4,662
Income taxes payable 56 36
46,019 34,840
Non-current liabilities
Long-term debt (note 10) 22,000 -
Obligations under finance lease (note 9) 4,395 5,282
Deferred income tax liabilities 13,038 10,462
Total liabilities 85,452 50,584
Equity
Equity attributable to owners of the parent
Share capital (note 11) 156,924 157,071
Contributed surplus 2,676 2,221
Accumulated other comprehensive loss (1,881 ) (924 )
Deficit (13,091 ) (18,235 )
144,628 140,133
Non-controlling interests 978 751
Total equity 145,606 140,884
Total liabilities and equity 231,058 191,468
Strad Energy Services Ltd.
Consolidated Statement of Income
For the three and six months ended June 30, 2011 and 2010
(Unaudited)
(in thousands of Canadian dollars, except per share data)
Three months ended
June 30
Six months ended
June 30
2011 2010 2011 2010
Revenue 52,753 33,610 97,361 67,068
Expenses
Operating expenses 32,044 21,707 60,830 42,967
Depreciation 4,702 2,634 8,537 5,059
Amortization of intangible assets 904 912 1,750 1,833
General administration 9,148 6,396 16,311 11,945
Share-based payments 241 151 455 305
Other gain (net) (145 ) (27 ) (157 ) (61 )
Foreign exchange loss 325 185 595 314
Net interest expense 510 560 744 1,021
Income before income tax 5,024 1,092 8,296 3,685
Income tax (note 12) 1,677 260 2,819 1,081
Net income for the period 3,347 832 5,477 2,604
Net income attributable to:
Owners of the parent

3,557

852

5,144

2,410
Non-controlling interests (210 ) (20 ) 333 194
3,347 832 5,477 2,604
Earnings per share: $0.10 $0.04 $0.14 $0.12
Basic $0.10 $0.04 $0.14 $0.12
Diluted
Consolidated Statement of Comprehensive Income
For the three and six months ended June 30, 2011 and 2010
(Unaudited)
(in thousands of Canadian dollar)
Three months ended
June 30
Six months ended
June 30
2011 2010 2011 2010
Net income for the period 3,347 832 5,477 2,604
Other comprehensive loss
Cumulative translation adjustment (267 ) - (1,063 ) -
Total other comprehensive loss (267 ) - (1,063 ) -
Comprehensive income for the period 3,080 832 4,414 2,604
Comprehensive income attributable to:
Owners of the parent 3,317 852 4,187 2,410
Non-controlling interests (237 ) (20 ) 227 194
3,080 832 4,414 2,604
Strad Energy Services Ltd.
Consolidated Statement of Cash Flow
For the six months ended June 30, 2011 and 2010
(Unaudited)
(in thousands of Canadian dollar)
2011
$
2010
$
Cash flow provided by (used in)
Operating Activities
Net income for the period 5,477 2,604
Adjustments for:
Depreciation and amortization 10,287 6,892
Deferred income tax 3,216 (591 )
Share-based payments 455 305
Net interest expense 744 1,021
Other (157 ) (61 )
Changes in items of non-cash working capital:
Accounts receivable (3,687 ) (12,006 )
Inventories (824 ) 3,428
Prepaid expenses (72 ) (1,295 )
Accounts payable and accrued liabilities 946 6,645
Note receivable (2,949 ) -
Other current liabilities 479 2,102
Net cash generated from operating activities 13,915 9,044
Investing activities
Purchase of property, plant and equipment (50,471 ) (18,075 )
Proceeds from sale of property, plant and equipment 452 462
Purchase of intangible assets (338 ) (154 )
Net cash generated from investing activities (50,357 ) (17,767 )
Financing activities
Change in bank indebtedness 10,070 4,552
Proceeds on issuance of debt 22,000 -
Repayment of debt - (10,960 )
Repayment of finance lease obligations (net) (3,084 ) (4 )
Proceeds on issuance of convertible debentures - 16,166
Interest paid on debt
Repurchase of share capital
(744)
-
(1,021)
(10
)
Share issuance costs (147 ) -
Net cash generated in financing activities 28,095 8,723
Effect of exchange rate changes on cash and cash equivalents (69 ) -
Increase (decrease) in cash and cash equivalents (8,416 ) -
Cash and cash equivalents – Beginning of period 8,416 -
Cash and cash equivalents – End of period - -

ABOUT STRAD ENERGY SERVICES LTD.

Strad is a diversified energy services company that focuses on providing oilfield solutions to the oil and natural gas industry in the WCSB and throughout the United States. Strad operates with two core divisions: Drilling Services and Production Services. Drilling Services focuses on providing complete customer solutions in drilling-related oilfield equipment for producers active in unconventional resource plays. Production Services focuses on delivering a range of products and services to support the ongoing maintenance of natural gas and oil production.

Strad is headquartered in Calgary, Alberta, Canada. Strad is listed on the Toronto Stock Exchange under the trading symbol "SDY".

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

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