Wenzel Downhole Tools Ltd.
TSX : WZL

Wenzel Downhole Tools Ltd.

May 13, 2009 16:35 ET

Wenzel Downhole Tools Ltd. Announces First Quarter Results for 2009

CALGARY, ALBERTA--(Marketwire - May 13, 2009) - Wenzel Downhole Tools Ltd. (TSX:WZL) (the "Company") announces financial results for the first quarter ended March 31, 2009.

2009 First Quarter Results and Highlights of Operations

The Company achieved revenues of $16 million in the first quarter of 2009, the same level of revenues achieved in the first quarter of 2008. Earnings before income taxes in quarter one were $1.8 million compared to $3.4 million for the same period in 2008. After tax earnings were $1.1 million or $0.04 per share versus $2.3 million or $0.08 per share. EBITDA for the first quarter of 2009 was $3.8 million.

As anticipated, drilling activity in North America in Q1 was down from recent years. US drilling activity was down 24% in Q1 2009 compared to Q1 2008 and Canadian drilling activity was down about 36%. This resulted in a revenue drop from North American rentals, service and sales of 30%. While management has taken steps to reduce variable costs such as by a reduction in staff of 21% over the course of Q1 2009, margins were negatively impacted because of the fixed costs and the delay of the financial impact of these staff reductions. Another factor negatively impacting margins arises because service and repair costs related to income from late 2008 are expensed when done in Q1 2009. Though normally minor in nature, in Q1 2009 this factor had a larger effect on
margins. In response to the significant downturn in drilling activity, management felt it would be prudent to increase the reserve for doubtful accounts which also reduced margins.

Increases in international sales revenues equal to the decrease in North American revenues kept consolidated revenues at the same level as those in Q1 2008. At the plant gate, international sales enjoy the same margins as domestic sales but when transportation and expenses are added, even though these are recovered from the customer, the margins appear to be lower. The company feels that international sales represent a continuing area of growth opportunities for the company.

OVERALL PERFORMANCE

In order to determine the company's performance relative to the market, the company tracks the ratio of the rental revenue divided by the average rig count in the US and in Canada. In Canada the revenue in Q1 2009 divided by the average rig count was the same as in Q1 2008. In the US this ratio was 7% higher in 2009 than in 2008. While imperfect this measure indicates that the company held or modestly grew market share.

Wenzel's drilling tools continue to be well received in the international markets the company has entered. Quarter 2 of 2009 should see a continuation of the sales seen in Q1. International sales tend to be smaller in number but larger in size than domestic sales and they also take longer to develop. Thus predictions for the second half of the year and beyond are difficult to make confidently but management remains optimistic.

The company is adding to its manufacturing capacity and productivity with new machine tools and is building up its fleet of the new "short bit-to-bend" motor which has tested well and attracted significant interest from our customers.



FINANCIAL HIGHLIGHTS

($000's, except for earnings per share)
----------------------------------------
3 Months 3 Months 12 Months
ended March ended March ended Dec.
31, 2009 31, 2008 31, 2008
----------------------------------------

Revenue 16,027 15,994 71,767
Gross Profit 5,664 6,539 31,527
Gross Profit Percentage 35% 41% 44%
EBITDA 3,778 5,281 25,692
Earnings before income taxes 1,825 3,376 18,053
Net Earnings 1,102 2,319 12,425
Net Earnings per share 0.04 0.08 0.41
Total Assets 64,592 57,094 66,750
Long Term Debt 1,955 3,204 2,220

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. 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 US headquarters and service facilities are in Conroe, Texas, with service and sales offices in Casper, Wyoming and Oklahoma City, Oklahoma. The Company's First Quarter 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 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
    (403) 265-8154 (FAX)
    or
    Wenzel Downhole Tools Ltd.
    William T. Spence
    CFO
    (403) 262-3050
    (403) 265-8154 (FAX)
    Website: www.downhole.com