Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd.

March 19, 2007 08:00 ET

Wenzel Downhole Tools Ltd Announces Financial Results for 2006

CALGARY, ALBERTA--(CCNMatthews - March 19, 2007) - Wenzel Downhole Tools Ltd. (TSX:WZL) ("WZL" or the "Company") announces financial results for the year ended December 31, 2006.

WZL's revenues for the full year 2006 came in at $55.6 million, a 41% increase over the revenues for 2005. Gross profit for the same periods went up 44% to $27.2 million in 2006, from $19.0 million in 2005. In addition, the gross margin (gross profit divided by revenues) increased for the third year in a row, reflecting stronger operating disciplines. Operating earnings before other expenses and income taxes went up a comparable 44% to $11.2 million. However $2.0 million of other expenses, primarily professional fees associated with the attempted takeover of the company, the cease trade order against the company and preparation for a planned income trust conversion, reduced earnings before income taxes to $9.2 million a 39% increase over the 2005 figure of $6.6 million. Earnings before interest, taxes, depreciation, amortization and other expenses (EBITDA) in 2006 came to $18.42 million, an increase of 34%.

Net Earnings for 2006 was $4.8 million or $0.16 per share compared to $6.5 million or $0.21 per share in 2005. This reduction is primarily due to tax payable of $4.4 million in 2006 compared to only $0.137 million in 2005. During 2006 an audit of the Company's, now closed, Barbados subsidiary was completed by the Canadian Revenue Agency for the years 2000 through 2005. This resulted in reassessments for income taxes for those periods of $2.3 million. The Barbados tax audit adjustment in 2006 was a one time item and will not be a factor going forward. This $4.4 million tax provision is $0.14 per share, although approximately $2 million is for future taxes.

The geographic source of revenues for 2006 was; $26.8 million in Canada, ($26.2 million in 2005), $16.1 million in the U.S. ($11.5 million in 2005) and $12.7 Million internationally ($1.6 million in 2005). The small increase of just 2.1% in Canadian revenue reflects the significant downturn in drilling activity in Canada in the second half of 2006. The average monthly drilling rig count of 502 was identical for 2006 and 2005.

The slower pace in drilling in the second half of 2006 is predicted to carry on into at least the first part of 2007.

U.S. revenues rose by 39% and this growth is expected to continue into 2007. The Company has doubled its complement of employees in the U.S., has expanded the fleet of rental tools as well as the service capabilities, and expects that 2007 may well see U.S. revenues surpass those in Canada. International
sales continue to be robust as the Company is being asked to bid on sale opportunities which were not available while the Company was cease traded.

During 2006 the Company spent $11.5 million on capital, expanding the rental fleet, its manufacturing capability as well as the service facilities and positioning the Company for continued growth and expansion in 2007 and beyond.

Comparative Results Table

Year Ended December 31
($000's, except for per share values)
2006 2005 2004
Revenue 55,552 39,397 31,938
Gross Profit 27,220 18,960 13,848
Gross Profit Percentage 49% 48% 43%
Earnings before interest, taxes,
depreciation, amortization and other
expenses Note(1) 18,421 13,757 9,114
Operating earnings before other
expenses and income taxes 11,241 7,820 2,987
Earnings before income taxes 9,197 6,644 1,776
Net earnings 4,817 6,507 1,395
Net earnings per share 0.16 0.21 0.05
Total Assets 61,060 43,625 38,912
Long Term Debt 5,115 6,806 6,575

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 and other expenses, due mainly to professional fees associated with the investigations arising from the cease trade, the takeover bid, and related regulatory matters have been excluded so as to make year to year comparisons more meaningful. Management uses EBITDA as a measurement to determine the ability of the Company to generate cash from recurring 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 earnings for the period nor should it be viewed as an alternative to operating or earnings or other measures of financial performance calculated in accordance with GAAP.

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 TSX, symbol WZL.

This news release may contain forward-looking information. Actual future 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 news release.

Contact Information

  • Wenzel Downhole Tools Ltd.
    Harvie Andre
    President and CEO
    (403) 262-3050
    (403) 265-8154 (FAX)
    Wenzel Downhole Tools Ltd.
    Ron Dooley
    Chief Financial Officer
    (403) 262-3050
    (403) 265-8154 (FAX)
    Website: www.downhole.com