Wenzel Downhole Tools Ltd.
TSX : WZL

Wenzel Downhole Tools Ltd.

May 12, 2008 14:55 ET

Wenzel Downhole Tools Ltd. Announces First Quarter Results for 2008

CALGARY, ALBERTA--(Marketwire - May 12, 2008) - Wenzel Downhole Tools Ltd. (the "Company") (TSX:WZL) announces financial results for the first quarter ended March 31, 2008.

2008 First Quarter Results and Highlights of Operations

The Company achieved record first quarter revenues of $16 million in 2008. Earnings before income taxes in quarter one were $3.4 million. After tax earnings were $2.3 million or $0.08 per share. EBITDA for the first quarter of 2008 was $5.3 million. These performance measures all exceed the values which had been expected when the Company did its forecasts in late 2007.

In Canada the first quarter of 2008 saw a 7% reduction in revenues compared to the same period in 2007. This reflects the overall reduction in drilling activity in the Canadian oil and gas sector which was down in Q1 2008 compared to 2007, but higher than had been predicted by industry sources. The Canadian revenue reduction of $0.5 million was more than compensated by an increase in revenues from U.S. operations of $0.9 million and an increase in international sales in Q1 2008 of $1.1 million.

OVERALL PERFORMANCE

As a result of higher gas and oil prices than had been expected and greater certainty in regards to royalties, the level in drilling activity in Canada is now expected to be higher in 2008 than had been originally forecast. In anticipation, the Company is adding to its Canadian fleet of rental tools which will necessitate an expansion of its service capability as well. The capital budget will be increased substantially to cover these expenditures but will be funded from internally generated funds.

While drilling activity in the US increased by 7% in Q1 compared to the same period a year earlier, the Company's United States revenues increased by 18%. This reflects a growing recognition of the exceptional performance of the Wenzel Downhole motors, which just three years ago were hardly known in the US market. As a result of this growth and the Company's belief that the US market will provide an ongoing growth opportunity, the Company has located 60% of its rental fleet in the US. The rapid appreciation in the Canadian dollar during 2007 has squeezed profit margins throughout the Company but particularly in the US. The Company's overall Gross Profit margin for Q1 2008 was 41% compared to 46% in Q1 2007, a reflection, in part, of the fact that in Q1 2007 the Canadian dollar was valued at US$0.85, whereas in Q1 2008 the currencies were at par. The Gross Margin for Q1, while less than that of a year earlier, is better than the 35% margin of Q4 2007. Improving this margin further is a fundamental goal of the Company in the ensuing months.

In the first quarter of 2008 the Company's international sales were 45% higher than for the same period in 2007. Currently two large international orders are in production and the Company is in discussions and is bidding on several other projects. The Company continues to pursue international sales opportunities and believes that there are significant opportunities for growth which it can pursue.



FINANCIAL HIGHLIGHTS

($000's, except for earnings per share)
---------------------------------------
3 Months 3 Months 12 months
ended ended ended
March 31, March 31, Dec 31,
2008 2007 2007
---------------------------------------
Revenue 15,994 14,523 54,228
Gross Profit 6,539 6,672 20,358
Gross Profit Percentage 41% 46% 38%
EBITDA(1) 5,281 5,311 12,173
Earnings before income taxes 3,376 3,373 3,869
Net Earnings 2,319 2,223 2,387
Net Earnings per share 0.08 0.07 0.08
Total Assets 57,094 61,494 56,100
Long Term Debt 3,204 4,765 3,572

Note (1) EBITDA, or earnings before interest, taxes, depreciation and
amortization and stock based compensation expense, is calculated
by adding these items back to reported net earnings. 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
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 TSX, symbol WZL. The Company's First Quarter consolidated financial statements and Management's Discussion and Analysis will be posted on SEDAR (www.sedar.com) on or about May 13, 2008.

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 therefrom. 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
    or
    Wenzel Downhole Tools Ltd.
    William T. Spence
    Chief Financial Officer
    (403) 262-3050
    (403) 265-8154 (FAX)
    Website: www.downhole.com