Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd.

August 13, 2007 18:20 ET

Wenzel Downhole Tools Ltd Announces Second Quarter Results for 2007

CALGARY, ALBERTA--(Marketwire - Aug. 13, 2007) - Wenzel Downhole Tools Ltd. (TSX:WZL) (the "Company") announces financial results for the second quarter ended June 30, 2007.

2007 Second Quarter Results and Highlights of Operations

The Company achieved revenues of $10.9 million in the second quarter of 2007, a slight increase above the $10.3 million for the same quarter in 2006. Revenues in Canada were $3.3 million for the quarter, a drop of 31.6% compared to the same quarter in 2006. Typically the second quarter is the slowest quarter for drilling in Canada and 2007 was particularly slow with the average monthly working rig count being down by 55% compared to the second quarter in 2006. Revenues from U.S. operations were $5.7 million, a gain of 69% over the same quarter in 2006. Revenue from international sales was essentially flat year over year, the small reduction due mainly to appreciation in the Canadian dollar.

While there were modest cost reductions in Canada, reflecting the lower level of activity, these did not offset the revenue reductions and produced losses. Cost increases in the U.S. resulting from the pressures of significant growth resulted in a reduction in gross margins. The appreciation in the Canadian dollar also contributed to narrower margins in the US. In addition the Company incurred a $.69 million foreign exchange loss. These factors led to a loss before taxes in the second quarter of $1.1 million, compared to earnings before taxes of $1.7 million in 2006.


Lower natural gas prices has led to a significant slowing in the number of wells being drilled in Canada. In addition the second quarter, particularly June, was much wetter than usual which also slowed the recovery in drilling activity. While a growing percentage of wells utilize the types of downhole tools the Company produces, and there will be an increase in activity in the remaining months of 2007, the extent of the recovery is uncertain. The Company expects to continue to grow market share but is uncertain as to the level of market growth in Canada.

Drilling activity in the U.S. however remains robust and the Company has been challenged to meet the opportunities that are available for revenue growth. At the end of the first and second quarters revenues in the U.S. have exceeded those in Canada for the first time. The Company expects that trend to continue, both because of the size of the U.S. market and the positive response the Company has been receiving from its customers. The Company also expects to see continued growth in international sales. International sales tend to be larger in size, albeit fewer in number, than sales in North America making quarter to quarter comparisons difficult. However the opportunities are considerable and the Company is pursuing these.

($000's except for earnings per share)
3 Months 3 Months 6 Months 6 Months 12 Months
ended ended ended ended ended
June 30, June 30, June 30, June 30, Dec. 31,
2007 2006 2007 2006 2006
Revenue 10,942 10,267 25,465 21,698 55,552

Gross Profit 3,913 5,725 11,138 11,724 27,220

Gross Profit Percentage 36% 56% 44% 54% 49%

Earnings before interest,
taxes, depreciation,
amortization, stock
based compensation and
other expenses(1) 944 3,785 6,297 8,620 18,421

Operating earnings(loss)
before other expenses
and income taxes (1,113) 2,231 2,301 4,730 11,241

Earnings (loss) before
income taxes (1,115) 1,736 2,258 3,967 9,197

Net (loss) earnings (821) 1,141 1,401 2,517 4,817

Net (loss) earnings per
share (0.03) 0.04 0.05 0.08 0.16

Total Assets 57,392 46,906 57,392 46,906 61,060

Long Term Debt 4,403 5,568 4,403 5,568 5,115

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 and other
expenses, due mainly to extra professional costs associated with the
investigations arising from the cease trade order, 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
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

Note (2) The three month period ended June 30, 2006 as previously reported
has been adjusted for $690,000 of stock based compensation expense that
should have been recorded in the first quarter of 2006.

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 Second Quarter consolidated financial statements and Management's Discussion and Analysis will be posted on SEDAR (www.sedar.com) on or about August 14, 2007.

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