Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd.

March 17, 2011 06:00 ET

Wenzel Downhole Tools Ltd. Announces Fourth Quarter and 2010 Year End Results

CALGARY, ALBERTA--(Marketwire - March 17, 2011) - Wenzel Downhole Tools Ltd. (TSX:WZL) (the "Company") is pleased to report on its financial results for the fourth quarter and full year ending December 31, 2010.

Revenues of $18.8 million for the fourth quarter of 2010 were up 96% or nearly twice the level of the previous year. For the whole year, revenues of$61.4 million for 2010were up 41% compared to 2009. From the substantially depressed levels of 2009, beginning in early 2010 drilling activity in North America has shown significant growth, both in absolute numbers of wells drilled and in the percentage of wells which are horizontal and/or directional and thus are likely to require the kinds of tools the Company supplies.

Selected Financial Information
  ($000's except for earnings per share)  
  3 months ended Dec. 31, Year ended Dec. 31,
  2010 2009 2010 2009
Revenue 18,829 9,624 61,369 43,579
Gross Profit 7,852 2,340 22,791 12,459
  Gross Profit % 42% 24% 37% 29%
EBITDA (1) 5,414 1,003 16,167 5,794
EBITDAS % (1) 29% 10% 26% 13%
Funds flow from operations 4,720 1,477 13,888 6,807
  Per share – basic & diluted $0.15 $0.05 $0.45 $0.22
Earnings Before Taxes (loss) 3,174 (1,063) 7,828 (2,659)
Net Earnings (loss) 2,320 (591) 5,181 (1,657)
  Per share – basic & diluted $0.08 $(0.02) $0.17 $(0.05)
Total Assets 61,291 56,621 61,291 52,621
Long Term Debt - 750 - 750
Shareholders' Equity 42,763 37,566 42,763 37,566
  1. Refer to Non-GAAP measures at the end of this news release.

As can be seen, there has been a significant improvement in every measure of performance between 2009 and 2010. For 2010, earnings before income taxes were up $10.5 million to $7.8 million from a loss in 2009 of $2.7 million. On a per share basis after tax profits were $0.17 compared to a loss of $0.05 in 2009.

Beginning in the second quarter of 2010, revenues for each quarter exceeded the revenues in the equivalent quarter of 2009. At year-end 2010 this trend continues. The following table shows the quarter to quarter data for the two previous years.

  ($000's except for earnings per share values)
  3 month periods ended
  Dec 31
Sep 30
Jun 30
Mar 31
Dec 31
Sept 30 2009 Jun 30 2009 Mar 31
Total revenue 18,829 15,815 13,075 13,651 9,624 9,031 8,896 16,027
Gross Profit 7,852 5,779 4,340 4,821 2,340 1,935 2,520 5,664
  Gross Profit % 42% 37% 33% 35% 24% 21% 28% 35%
EBITDA 5,414 4,365 3,251
3,138 1,003 743 186 3,863
  Net Earnings 2,320 1,579 590 693 (591) (843) (1,325) 1,102
  Net Earnings per share 0.08 0.05 0.02 0.02 (0.02) (0.03) (0.04) 0.04
Total Assets 61,291 56,016 53,260 54,572 52,621 60,174 61,222 64,592

Operating Highlights

The 2010 recovery in drilling activity in the US and in Canada was more than matched by the increase in revenues. Using average monthly rig count as a measure of activity, US drilling increased by an average of 42% in 2010 compared to 2009, while the Company's revenue from US operations increased by 88% to $30 million from $15.9 million. In Canada the average rig count increased by 59% while the revenue increased by 91% to $21.7 million from $11.4 million. The only sector to not experience an increase was international sales. This decrease was not due to loss of sales but rather due to delays in payments and letters of credit from a large customer. Thus this order was not shipped nor booked before year-end. The company ended the year with a backlog of international orders of over $13 million, some of which were manufactured and awaiting shipment.

The new technologies combined with the increase in oil prices produced a quick rebound in business in early 2010. Operationally the Company was challenged to meet the demand for downhole tools, particularly motors. The popular sizes in our rental fleet where either in the field or being serviced, with very little shelf time. Manufacturing, both for the rental fleet and for external sale was constrained by long lead times in acquiring steel, which for a good part of the year was in short supply globally. The Company's manufacturing capacity is currently being increased with the addition of new machine tools and machinists.

Financially the Company remains in good shape with zero long term debt. During 2010 the Company spent $8.3 million for the purchase and manufacture of capital assets and has budgeted $15 million for 2011. In early 2011 the Company opened a sales and service facility in Germany to service the growing European market and has commenced an agency arrangement with an established drilling equipment supplier in Colombia. International sales are expected to be strong in 2011.

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, stock based compensation expense and loss (gain) on derivative asset have been excluded so as to make year to year comparisons more meaningful.

  2010 2009
Net (loss) earnings $5,181 ($1,657)
Income taxes 2,647 (1,002)
Depreciation and amortization 8,121 7,728
Interest 196 453
Stock based compensation 16 9
Loss (gain) on derivative asset 6 263
EBITDA $16,167 $5,794

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 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 US headquarters and service facilities are in Conroe, Texas, with service and sales offices in Casper, Wyoming and Morganton, West Virginia and a sales office in Oklahoma City, Oklahoma. Wenzel Downhole Tools Ltd. is listed for trading on the TSX, symbol WZL. The Company's 2010Consolidated Financial Statements and Management's Discussion and Analysis will be posted on SEDAR (www.sedar.com) on or about March 17, 2010.

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.


Contact Information

  • Wenzel Downhole Tools Ltd.
    Harvie Andre
    President and CEO
    (403) 262-3050
    (403) 265-8154 (FAX)
    Wenzel Downhole Tools Ltd.
    William T. Spence
    Chief Financial Officer
    (403) 262-3050
    (403) 265-8154 (FAX)