Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd.

August 15, 2012 06:00 ET

Wenzel Downhole Tools Ltd Announces Second Quarter Results for 2012

CALGARY, ALBERTA--(Marketwire - Aug. 15, 2012) - 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, 2012. Comparing the results for the second quarter of 2012 to those of 2011, Revenues were up 34%, Gross Profit was up 16% and Profit Before Income Tax was down 9%. Normally, because of spring breakup and wet conditions in Canada, the second quarter is the slowest quarter for the Company. While this pattern was also there in 2012, revenues in both Canada and the US showed significant increases in comparison to last year.

Ron Patterson, President and CEO, commented: "We have seen a successful first half of the year, and I am very pleased with the gains we have made both in market penetration and overall customer satisfaction with our products and service. Current short term market uncertainty is being reflected in the Company's backlog for new product orders, and we have also completed early shipment of select orders scheduled originally for the third quarter, but we are optimistic that our rental business will remain solid for the remainder of the year. Our North American rental business relies substantially on horizontal and directional drilling activity and this activity is expected to be resilient.

Increased direct labour costs, partly due to overtime, and certain costs that do not move in direct correlation to revenues contributed to an increase in cost of sales on a percentage basis compared to the previous year. Increases in legal and other fees relating to legal actions the Company is involved in, which we do not expect to recur at these levels, employee incentive accruals, termination benefits and a modestly increased allowance for doubtful accounts contributed to increased administrative expenses in the second quarter of 2012 compared to the same period in 2011."

2012 Second Quarter Results

Consolidated revenues for the second quarter were $24.5 million, compared to $18.3 for the same quarter in 2011. For the six month period ending June 30, 2012, revenues were at $49.1 million, a 38% increase over the same period in 2011. This improvement can be attributed to strong domestic sales as well as a continued increase in horizontal drilling activity in North America. The use of downhole drilling motors in all types of wells being drilled continues to grow as well.

In Canada, 2012 Q2 revenues were $8.4, compared to $3.5 million in 2011 and for the first six months of 2012 revenues were $18.6, up 76% compared to $10.6 million for the same period in 2011. US revenues for Q2, 2012 were $12.6 million, an increase of 26% over the same period in 2011. Comparing the same two periods, the rig count in the US was up by 8%. For the six months ending June 30, the average rig count in the US was up 12% in 2012 compared to 2011 while US revenue was up 30%. This revenue growth in excess of rig count growth reflects the increased use of motors in drilling as well as increased market penetration.

Revenues from sales outside of North America were $3.5 million for the second quarter of 2012, a 26% decrease from those of 2011. The Company's international orders have declined compared to 2011 primarily due to political turmoil and uncertainty in certain countries. The opening of a sales and rental facility in Celle Germany in the fall of 2011 exposed new markets in West/East Europe and the Mediterranean.

Overall Performance

The pre-tax profit for the second quarter was $3.0 million compared to $3.3 million for the same period in 2011. Earnings before interest, taxes, depreciation and amortization and share-based compensation ("EBITDA") for the second quarter of 2012 was $5.1 million compared to $5.5 million in the same period in 2011. Comparing the six month period ending June 30, earnings before taxes were $7.2 million in 2012 versus $5.6 million in 2011. For this six month period EBITDA was $11.2 million in 2012 and $10.9 million in 2011.

Internationally the Company continues to experience 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.

Financially the Company remains in good shape. Capital expenditures needed to keep up to customer's demands can be financed from internally generated funds. Total debt at June 30, 2012 was $7.3 million, compared to $13.3 million on December 31, 2011.

Financial Highlights

Highlights of the 3 and 6 month periods of 2012 and 2011 are summarized in the following table together with comparative year end 2011 highlights:

3 months ended
June 30,
6 months ended
June 30,
12 months ended December 31,
2012 2011 2012 2011 2011
($000s except for earnings per share)
Revenue 24,520 18,268 49,065 35,592 90,739
Gross Profit 7,270 6,247 16,352 12,777 34,638
Gross Profit Percentage 30 % 34 % 33 % 36 % 38 %
EBITDA(1) 5,055 5,530 11,245 10,869 24,858
Earnings Before Income Taxes 2,975 3,273 7,183 5,573 15,230
Net Earnings 1,921 2,145 5,080 3,411 10,335
Total Comprehensive Income 1,999 2,105 4,996 3,201 10,676
Net Earnings per Share - basic 0.06 0.07 0.17 0.11 0.34
Net Earnings per Share - diluted 0.05 0.06 0.14 0.10 0.29
Short-term debt 7,308 9,648 7,308 9,648 13,303
Long-term debt - 250 - 250 -
Shareholders' Equity 58,692 46,159 58,692 46,159 53,634

Note (1) Refer to Non-generally accepted accounting principles ("GAAP") measure at the end of this news release.

About Wenzel Downhole Tools Ltd.

WZL is a manufacturer, seller and renter of drilling tools used in oil and gas exploration that operates in Canada, the United States and internationally. The Company's shares trade on the Toronto Stock Exchange under the symbol "WZL". The Company's Canadian sales, manufacturing and servicing facilities are located in Edmonton, Alberta and its US servicing facilities are located in Conroe, Texas, Morgantown, West Virginia and Casper, Wyoming. The Company's main corporate office is located in Calgary, Alberta, and it has a sales and service facility in Celle, Germany. 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, 2012.

Forward-Looking Information

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 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.

Non-GAAP Measure

  • Non-GAAP Measure: 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 6 months ended 12 months ended
June 30, June 30, December 31,
2012 2011 2012 2011 2011
Net earnings $ 1,921 $ 2,145 $ 5,080 $ 3,411 $ 10,335
Income taxes 1,054 1,128 2,102 2,162 4,895
Depreciation and amortization 1,959 2,123 3,791 4,196 8,253
Interest 105 94 239 136 411
Share-based compensation 16 40 33 964 964
EBITDA $ 5,055 $ 5,530 $ 11,245 $ 10,869 $ 24,858

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 IFRS or GAAP.


Contact Information

  • Wenzel Downhole Tools Ltd.
    Ron Patterson
    Chief Executive Officer
    (403) 262-3050
    (403) 265-8154 (FAX)