Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd.

March 09, 2009 07:00 ET

Wenzel Downhole Tools Ltd. Announces 2008 Results

CALGARY, ALBERTA--(Marketwire - March 9, 2009) - Wenzel Downhole Tools Ltd. (the "Company") (TSX:WZL) announces financial results for the year ended December 31, 2008.

The Company's revenues for the full year 2008 were a record $71.77 million, a 32% increase over the $54.23 million in revenue in 2007. This increase in revenues resulted from expanded rentals and sales in both Canada and the US, as well as sales internationally where revenues grew by 70%. These revenues produced consolidated net earnings for 2008 of $12.42 million or $0.41 per share compared to $2.39 million or $0.08 per share in 2007. Earnings before interest, taxes, depreciation and amortization and stock based compensation (EBITDA) was $25.7 million in 2008, compared to $12.2 million in 2007.

Drilling activity in Canada in 2008 was up by 7% compared to 2007, while Canadian revenues increased by 25%, in part due to increased market share but also due to the fact more horizontal and directional wells were drilled. Similarly, rig counts in the US increased by 6% and US revenues increased by 25%. International sales of $14.99 million reflect a growth in the number of international customers but also some captured slippage from 2007. International sales tend to be fewer in number but larger in size than domestic or US sales. A shipment just before or just after year-end, which occurred in January 2008, means that the percentage growth comparison can give a distorted picture of the true situation. The rapid changes in the value of the Canadian dollar during the last two years, also has the effect of distorting the year to year comparison of revenue and profit figures. Foreign exchange adjustment increased 2008 earnings before tax by $1.9 million while in 2007 foreign exchange adjustments decreased earnings by $1.4 million. Removing the direct effects of currency fluctuations yields an increase in earnings before income tax of $10.5 million, a 200% increase over 2007.

The cost of goods and services, as well as general and administrative expenses both increased by 19%, significantly less than the 32% revenue increase. The gross margin increased to 44% from 38% in 2007.

Speaking about the prospects for 2009, Mr. Andre said, "The global recession and related decrease in the price of both oil and natural gas is producing industry estimates of a significant reduction in wells to be drilled during 2009, particularly in North America. In response, the Company is taking steps to reduce costs while focusing on new market opportunities internationally and on new products. The Company has a strong balance sheet and should have no difficulty during the current down cycle in the industry. The Company maintains its reputation for producing the highest quality downhole tools and providing excellent service."

"All things considered", he added, "we expect 2009 to be challenging but believe the Company is well positioned to meet these challenges."

Selected Annual Information
Year Ended December 31
($000's, except for per share values)
2008 2007 2006
Revenue 71,767 54,228 55,552
Gross Profit 31,527 20,358 27,220
Gross Profit Percentage 44% 38% 49%
EBITDA Note(1) 25,692 12,173 16,377
Earnings before income taxes 18,053 3,869 9,197
Net earnings 12,425 2,387 4,817
Net earnings per share 0.41 0.08 0.16
Total Assets 66,750 56,100 61,060
Long-Term Debt 2,220 3,572 5,115

Note (1) EBITDA, or earnings before interest, taxes, depreciation and
amortization is calculated by adding these items back to reported net
earnings. In addition to EBITDA, stock based compensation expense has been
excluded so as to make year to year comparisons more meaningful.

(000's) 2008 2007 2006
Net earnings $ 12,425 $ 2,387 $ 4,817
Income taxes 5,628 1,483 4,380
Depreciation 6,726 6,578 5,152
Interest 775 1,559 926
Stock based compensation 138 166 1,102
EBITDA $ 25,692 $ 12,173 $ 16,377

Management uses EBITDA as a measurement to determine the ability of the
Company to generate cash from normal operations. EBITDA does not have a
standardized meaning for Canadian generally accepted accounting principles
("GAAP") and therefore may not be comparable with calculations of similar
measures presented by other issuers. EBITDA is not intended to represent net
income for the period nor should it be viewed as an alternative to operating
or net income or cash flow from operating activities or other measures of
financial performance calculated in accordance with GAAP.

About Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd. is a manufacturer, seller and renter of drilling tools used in oil and gas exploration. In Canada the company has its manufacturing and servicing facilities located in Edmonton, Alberta and its corporate offices in Calgary, Alberta. Its U.S. headquarters and service facilities are in Conroe, Texas, with a service and sales office in Casper, Wyoming and a sales office in Oklahoma City, Oklahoma.

Wenzel Downhole Tools Ltd. is listed for trading on the Toronto Stock Exchange, symbol WZL. The Company's consolidated financial statements and Management's Discussion and Analysis will be posted on SEDAR (www.sedar.com).

This news release may contain forward-looking information. Actual results may differ materially from those contemplated. The risks, uncertainties and other factors, both known and unknown, that could influence actual results may be substantial and include those described in documents filed with regulatory authorities, such as the Company's most recently filed Annual Report and Annual Information Form. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive there from. Please refer to the Company's public disclosure documents for more information on these risks and uncertainties as they apply to the Company.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy and accuracy of this release.

Contact Information

  • Wenzel Downhole Tools Ltd.
    Harvie Andre
    President and CEO
    (403) 205-6696
    (403) 265-8154 (FAX)
    Wenzel Downhole Tools Ltd.
    William Spence
    (403) 205-6696
    (403) 265-8154 (FAX)