Wenzel Downhole Tools Ltd.
TSX : WZL

Wenzel Downhole Tools Ltd.

August 12, 2011 06:00 ET

Wenzel Downhole Tools Ltd Announces Second Quarter Results for 2011

CALGARY, ALBERTA--(Marketwire - Aug. 12, 2011) - Wenzel Downhole Tools Ltd. (the "Company") (TSX:WZL) is pleased to report its financial results for the three month and six month periods ending June 30, 2011. Comparing the results for the second quarter of 2011 to those of 2010; Revenues were up 40%, Gross Profit was up 44% and Profit Before Income Tax was up 77%. Normally, because of spring breakup and wet conditions in Canada, the second quarter is the slowest quarter for the Company. While this pattern was true in 2011, increased revenues from US operations and from international sales produced these significant increases in comparison to last year.

2011 Second Quarter Results

Consolidated revenues for the second quarter were $18.3 million, compared to $13.1 for the same quarter in 2010. For the six month period ending June 30, 2011, revenues were at $35.6 million, a 33% increase over the same period in 2010. This improvement reflects the ongoing recovery from the recession-caused slow-down in oil and gas drilling but is also due to the increased use of downhole motors. The use of horizontal drilling techniques with large scale sectional fracturing in both gas and oil reservoirs continues to grow. Also, while downhole motors were primarily designed for directional drilling they are increasingly being used as well in vertical oil and gas wells.

In Canada, Q2 revenues for 2011 of $3.6 million were essentially the same as in 2010 and for the first six months of 2011 were $10.6, up 15% compared to $9.2 million for the same period in 2010. US revenues for Q2, 2011 were $10.0 million, an increase of 36% over the same period in 2010. Comparing the same two periods, the rig count in the US was up by 21%. For the six months ending June 30, the average rig count in the US was up 24% in 2011 compared to 2010 while US revenue was up 42%. This revenue growth in excess of rig count growth reflects the increased use of motors in drilling as well as increased market penetration and better pricing by the Company.

Revenues from sales outside of North America were $4.7 million for the second quarter of 2011, double those of 2010. The Company's international orders tend to be fewer in number but larger in size and thus quarter to quarter comparisons can be misleading. Another feature of international drilling activity is that outside of North America it is common for state owned, as opposed to privately owned E & P Companies to control capital budgets. The result is that changes in drilling activity reflect changes in oil and gas markets more slowly internationally than in North America. The Company however expects that international sales will continue to grow.

Overall Performance

The increase in revenues produced a net pre-tax profit for the second quarter of $3.3 million compared $1.9 million for the same period in 2010. Earnings before interest, taxes, depreciation and amortization and share-based compensation (EBITDA) for the second quarter of 2011 was $5.5 million compared to $3.8 million in the same period in 2010. Comparing the six month period ending June 30, earnings before taxes were $5.6 million in 2011 versus $3.2 million in 2010. For this six month period EBITDA was $10.9 million in 2011 and $7.0 million in 2010. The Company continues to keep operating expenses in check. Excluding foreign currency effects, operating expenses in the second quarters of 2010 and 2011 were the essentially the same at $2.9 million, in spite of increased business activity.

The addition of new manufacturing equipment during the last 12 months has enabled the Company to reduce both its costs and the time to produce new tools, which will lead to further efficiency improvements.

Internationally the Company continues to experience a growing interest from current and potential customers. The directional and horizontal drilling techniques developed and extensively used in North America are being applied in petroleum basins around the world, creating a growing market for the equipment, including downhole tools, needed for such drilling. The Company is receiving requests for quotations on downhole tools from a variety of areas and expects to see, in the coming months, growing sales into Europe, the Middle East, Latin America and North Africa.

Financially the Company remains in good shape. Capital expenditures needed to keep up to customer's demands can be financed from internally generated funds.

FINANCIAL HIGHLIGHTS

Highlights of the 3 and 6 month periods of 2011 and 2010 are summarized in the following table together with comparative year end 2010 highlights:

($000's except for earnings per share)
3 Months Ended
June 30
6 Months Ended
June 30
12 Months
Ended
2011 2010 2011 2010 Dec. 31,2010
Revenue 18,268 13,075 35,592 26,725 61,369
Gross Profit 6,247 4,340 12,777 9,161 22,791
Gross Profit Percentage 34 % 33 % 36 % 34 % 37 %
EBITDA(1) 5,530 3,787 10,869 7,048 16,826
Profit Before Income Tax 3,273 1,852 5,573 3,154 8,876
Net Profit 2,145 1,153 3,411 2,021 5,981
Total Comprehensive Income 2,105 1,353 3,201 2,108 5,717
Net Earnings per Share – basic 0.07 0.04 0.11 0.07 0.20
Net Earnings per Share – diluted 0.07 0.04 0.11 0.07 0.19
Total Assets 70,991 52,028 70,991 52,028 59,605
Long Term Debt - 563 - 563 -
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, share-based compensation expense and loss on re-measurement of derivative asset have been excluded so as to make year to year comparisons more comparable.
3 Months Ended June 30 6 Months Ended June 30 12 Months Ended
2011 2010 2011 2010 Dec 31, 2010
Net profit $ 2,145 $ 1,153 $ 3,411 $ 2,021 $ 5,981
Income taxes 1,128 699 2,162 1,132 2,895
Depreciation and amortization 2,123 1,877 4,196 3,777 7,732
Interest 94 58 136 102 196
Share-based compensation 40 - 964 16 16
Loss on re-measurement of derivative asset - - - - 6
EBITDA $ 5,530 $ 3,787 $ 10,869 $ 7,048 $ 16,826

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 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 a service and sales office in Casper, Wyoming and Morgantown, 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 Second Quarter Consolidated Financial Statements and Management's Discussion and Analysis will be posted on SEDAR (www.sedar.com) on or about August 12, 2011.

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.

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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)