Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd.

August 09, 2006 07:30 ET

Wenzel Downhole Tools Ltd. Announces Record Second Quarter and First Half Results for 2006

CALGARY, ALBERTA--(CCNMatthews - Aug. 9, 2006) - Wenzel Downhole Tools Ltd. ("WZL" or the "Company") (TSX:WZL) announces financial results for the second quarter ended June 30, 2006.

2006 Second Quarter Results and Highlights of Operations

The Company achieved record revenues of $10.3 million in the second quarter
of 2006 compared to $6.7 million in 2005, a 53.5% increase. The increase in
revenues continues to be linked to the high level of drilling activity in North
America, the full impact of our restructured US Operations, more efficient use of rental tools in the US during the Canadian spring breakup and increased
international sales which amounted to $2.1 million in this period.

Earnings before income taxes were $1.05 million in 2006 compared to a loss of
$1.9 million in 2005. The increase in earnings over the second quarter 2005 is a
direct result of increased rental revenues, international sales and significantly lower US restructuring costs, while general and administrative costs remained comparable to 2005 with the exception of Stock Based Compensation. Stock based compensation of $0.8 million in the second quarter reflects an adjustment of $0.69 million of such costs that should have been included in first quarter costs. EBITDA of $3.8 million for the second quarter of 2006 is a significant improvement over the EBITDA loss of $0.03 million for the same period in 2005.

Gross profit margins of 58% are also among the best ever achieved for a single
quarter. The economic and industry factors in which the Company operates are
substantially unchanged from the year ended December 31, 2005.

2006 First Half Results and Highlights

For the first 6 months of 2006, the Company has also achieved record revenues
of $21.7 million an increase of 21.2% over last year's first six months of $17.9
million. Earnings before taxes of $4.0 million are an approximate increase of
185% over the $1.4 million for the same period last year. EBITDA of $8.7
million for the first six months is also a significant improvement over the $4.9
million generated in the first half of 2005. Net earnings for the first half of the year 2006 were $2.5 million or $0.08 per share basic compared to $1.3 million or $0.04 per share basic for the same period in 2005.

International sales of approximately $2.1 million delivered in the first half of 2006 compare to only $1.3 million in the first six months of 2005. Several additional large international orders were received in the second quarter of 2006 and these plus additional orders expected to be finalized shortly may result in near record international revenues for all of 2006.

Highlights of the second quarters of 2006 and 2005 together with the six months
ended June 30th 2006 and 2005 are summarized in the following table together
with comparative year end 2005 highlights:

3 months ended 6 months ended Year Ended
June 30 June 30 December 31
($000's) ($000's) ($000's)
2006 2005 2006 2005 2005

Revenue 10,267 6,690 21,698 17,907 39,397

Gross Profit 5,950 1,404 11,949 7,495 18,960

Gross Profit Percentage 58% 21% 55% 42% 48%

Earnings (loss) before
interest, taxes,
amortization and other
expenses Note (1) 3,818 (32) 8,653 4,898 13,758

Operating earnings
(loss) before other
expenses and income
taxes 1,541 (1,642) 4,730 1,771 7,820

Earnings (loss) before
income taxes 1,046 (1,888) 3,967 1,379 6,644

Net earnings (loss) 451 (1,890) 2,517 1,297 6,507

Net earnings (loss)
per share - basic 0.01 (0.06) 0.08 0.04 0.21

Total Assets As At 46,906 37,488 46,906 37,488 43,625

Long Term Debt 5,568 7,115 5,568 7,115 6,806

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, other expenses due mainly to
professional fees associated with the investigations arising from the
cease trade, the recent takeover bid, and other 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 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

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. Since April 3, 2006 the Company has been the subject of a hostile take-over bid threat which was launched at the end of May and finally expired unsuccessfully on July 18, 2006.

Wenzel Downhole Tools Ltd. is listed for trading on the TSX, symbol WZL. The Company's Second Quarter consolidated financial statements and Management's Discussion and Analysis will be posted on SEDAR (www.sedar.com) on or about August 15, 2006.

Forward Looking Statements

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) 205-6696
    (403) 265-8154 (FAX)
    Wenzel Downhole Tools Ltd.
    Ron Dooley
    Chief Financial Officer
    (403) 205-6696
    (403) 265-8154 (FAX)