Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd.

March 20, 2013 06:00 ET

Wenzel Downhole Tools Ltd. Announces 2012 Year End and Fourth Quarter Results

CALGARY, ALBERTA--(Marketwire - March 20, 2013) - Wenzel Downhole Tools Ltd.'s (the "Company") (TSX:WZL) consolidated revenues for the year ended December 31, 2012 were $87.3 million compared to $90.7 million in 2011. Gross profit was down to $27.5 million from $34.6 million. The net after tax earnings results were adversely affected by the settlement of a long-standing legal action, which resulted in the Company paying a settlement amount of $18.5 million. This entire amount was recorded in the fourth quarter. As a result, net after tax earnings fell to a loss of $5.5 million from earnings of $10.3 million in 2011. Without this settlement, the Company would have recorded earnings before income tax of $10.9 million compared to earnings before income tax of $15.2 in 2011. EBITDA in 2012 was $19.2 million compared to $24.9 million achieved in 2011. Annual revenues in Canada were up 6% at $30.2 million compared to 2011 and US rentals were up 7% at $45.9 million compared to 2011. International Sales were decreased to $11.2 million from $19.2 million in 2011.

2012 Fourth Quarter Results

Fourth quarter 2012 revenues of $19.0 million were 28% lower than those of the fourth quarter 2011. Gross profit dropped 50% to 5.6 million and net after tax loss was $11.9 million compared to earnings of $2.2 million in the same quarter of 2011. The fourth quarter results were adversely affected by the previously mentioned legal settlement resulting in the Company paying $18.5 million with the entire amount being recorded in the fourth quarter. Without this settlement, the Company would have recorded earnings before income tax of $1.9 million compared to earnings before income tax of $2.5 million in the fourth quarter of 2011. EBITDA in Q4 2012 decreased to $4.1 million from $4.6 million achieved in the same quarter of 2011.

Canadian drilling activity decreased 23% in the fourth quarter 2012 compared to the same period in 2011. The Company's revenues in Canada were also down 23% at $5.9 million. A general decrease in customer capital spending on new drilling tool products significantly reduced the Company's revenue from oilfield equipment sales. Decreased drilling rig activity resulted in lower rental and service revenue. US drilling activity decreased by 10% in the same period and the Company's US revenues for the same period were down by 10% at $10.7 million. International sales revenues decreased from $9.1 million in Q4 2011 to $2.4 million in Q4 2012. The Company's international orders declined in 2012 compared to 2011 primarily due to the political instability in some oil and gas producing areas of the world and an international customer having been acquired by a third party having competing product lines.

Despite the settlement of the legal action mentioned above, financially the Company remains in good shape. Credit facilities have been increased from a total of $26 million to a total of $40 million. The increased facilities consist of a $15 million revolving operating demand loan and a $25 million committed revolving loan, both subject to customary financial covenants & availability computations.

Financial Highlights

($000s except for earnings per share amounts)
3 months ended Dec. 31, Year ended Dec. 31,
2012 2011 2012 2011
Revenue 19,049 26,496 87,306 90,739
Gross Profit 5,593 11,137 27,475 34,638
Gross Profit % 29 % 42 % 32 % 38 %
EBITDA (1) 4,073 4,580 19,222 24,858
EBITDA % (1) 21 % 17 % 22 % 27 %
(Loss) Earnings Before Income Tax - Total

Earnings Before Litigation Settlement and Income Tax(2) 1,917 2,545 10,906 15,230
Net (Loss) Earnings (11,949 ) 2,159 (5,530 ) 10,335
Net (Loss) Earnings Per share
- basic (0.39 ) $0.07 (0.18 ) $0.34
- diluted (0.39 ) $0.06 (0.18 ) $0.29
As of December 31, 2012 2011
Total Assets 78,846 84,285
Short-term Debt 2,416 13,303
Long-term Debt - -
Shareholder's Equity 47,987 53,634

Note (1) Refer to Non-generally accepted accounting principles ("GAAP ") measures and Note (2) Litigation Settlement at the end of this news release.

The following table shows the quarter-to-quarter data for the two previous years.

($000s, except for per share amounts)
Three month periods
Dec 31
Sep 30
Jun 30
Mar 31
Dec 31 2011 Sep 30
Jun 30
Mar 31
Total revenue 19,049 19,191 24,520 24,545 26,496 28,651 18,267 17,324
Gross profit 5,593 5,529 7,270 9,083 11,137 10,725 6,247 6,530
Gross profit percentage 29 % 29 % 30 % 37 % 42 % 37 % 34 % 38 %
EBITDA 4,073 3,904 5,055 6,190 4,580 9,408 5,530 5,338
Total comprehensive (loss) income
) 1,129 1,999 2,997 1,973 5,502 2,105 1,096
Net (loss) earnings per share
- basic (0.39 ) 0.04 0.06 0.10 0.07 0.15 0.07 0.04
- diluted (0.39 ) 0.04 0.05 0.09 0.06 0.15 0.06 0.04


The Company shares the view of industry forecasters which suggests that the United States rig activity for 2013 will remain relatively flat. Canadian rig activity entering into Q1 of 2013 has proven strong and Q2 is expected to be at levels similar to Q2 2012. Service providers remain cautious with their capital expenditures for new drilling tool products. Rental activity within North America is anticipated to remain relatively strong as it is directly related to drilling rig activity. Service providers remain cautious with their capital spending preferring to rent drilling tools rather than purchase. The Company is optimistic regarding 2013 international activity within Europe, the Middle East and South America.

Ron Patterson, President and CEO, commented: "2012 was an important year of transition for Wenzel Downhole Tools. I am pleased that the great uncertainty related to the legal action the Company has faced over the last decade is now behind us. While 2013 may present us with new challenges, it will certainly also present us with opportunities. Our management team and employees are ready and excited to capture those."

About Wenzel Downhole Tools Ltd.

The Company is a designer, manufacturer, seller and renter of drilling tools used in oil and gas exploration,that operates in Canada, the United States and internationally; its shares trade on the Toronto Stock Exchange under the symbol "WZL".

The Company's Canadian sales, manufacturing and servicing facilities are located in Edmonton, Alberta and its US sales and servicing facilities are located in Conroe, Texas; Morgantown, West Virginia; Casper, Wyoming and Oklahoma City, Oklahoma. It also has a sales and service facility in Celle, Germany.

The main corporate office is located in Calgary, Alberta.

Non-GAAP Measure

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, share-based compensation expense, loss on derivative asset and litigation settlement have been excluded so as to make year to year comparisons more meaningful.

Years ended December 31, 2012 2011 2010
Net earnings $ (5,530 ) $ 10,335 $ 5,981
Income tax (2,040 ) 4,895 2,895
Depreciation and amortization 7,935 8,253 7,696
Interest 348 411 196
Share-based compensation 33 964 16
Loss on derivative asset - - 6
Litigation settlement 18,476 - -
EBITDA $ 19,222 $ 24,858 $ 16,790

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 International Financial Reporting Standards ("IFRS") 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 IFRS.

Litigation Settlement

Note (2) In December 2012, the Company settled a long-standing legal action. As a result of the settlement, the Company incurred a loss in 2012. The settlement is a non-recurring item that makes comparison with other periods difficult. As a result, the Company is presenting certain items on a basis wherein the $18,475,683 settlement is removed.

Forward Looking Statements

Certain statements contained in this press release constitute "forward-looking statements". These statements are based on current beliefs and assumptions of management, however are subject to known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from the forward-looking statements in this press release. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. For additional information with respect to certain of these beliefs, assumptions, risks and uncertainties, please refer to The Company's Annual Information Form for fiscal 2011 available on SEDAR at http://www.sedar.com.

Forward-looking statements are based on estimates and opinions of management of the Company at the time the statements are presented. The Company may, as considered necessary in the circumstances, update or revise such forward-looking statements, whether as a result of new information, future events or otherwise, but the Company undertakes no obligation to update or revise any forward-looking statements, except as required by applicable securities laws.

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

Contact Information

  • Wenzel Downhole Tools Ltd.
    Ron Patterson
    Chief Executive Officer
    (403) 262-3050
    (403) 265-8154 (FAX)