Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd.

November 15, 2011 06:00 ET

Wenzel Downhole Tools Ltd Announces Third Quarter Results For 2011

CALGARY, ALBERTA--(Marketwire - Nov. 15, 2011) - Wenzel Downhole Tools Ltd. (the "Company") (TSX:WZL) is pleased to report on its financial results for the three month and nine month periods ending September 30, 2011. For the third quarter, revenues in 2011 were up 81% over the same quarter in 2010. Revenues for first nine months of 2011 were up 51% compared to the same period in 2010. This is a reflection of the continued growth in drilling, particularly horizontal drilling, in North America and internationally.

2011 Third Quarter Results

Earnings for the third quarter were $4.8 million ($0.15/share) compared to earnings for the third quarter of 2010 of $1.6 million ($0.05/share).

Consolidated revenues for the third quarter were $28.7 million, compared to $15.8 million for Q3 of 2010. With both the number of wells increasing and the fact that a growing percentage of those wells are directional or horizontal, the demand for motors has at times tested the Company's current capacity to supply. Industry forecasts suggest that this trend of increased motor use will continue.

In Canada Q3 revenues of $7.6 million were up 36% in 2011 compared to the same quarter in 2010. The average rig count in this period was up 40%, reflecting the increased use of mud-motors for well drilling. Much of the increase in drilling activity was attributable to the use of horizontal drilling and large sectional fractures on existing oil reservoirs, many of which are accessible before winter freeze up.

US revenues were a record $11.9 million in Q3 of 2011, up 39% compared to Q3 of 2010. Rig counts, compared on the same basis, were up by 20%. Besides the increase in rig counts, the factors contributing to this increase in revenues were; increased motor use, increased market coverage, increased market share, and modest increased pricing. Based upon industry forecasts and customer feed-back the Company believes this trend will continue into 2012.

Revenues for sales outside of North America were $9.1 million for Q3, up significantly from $1.6 million for Q3 of 2010. International sales tend to be fewer in number but larger in size than North American sales and thus quarter to quarter comparisons are difficult. Revenues for the first nine months of 2011 were $15.9 million, an increase of $9.8 million or 159% over the same period in 2010.. The outlook for international sales continues to be positive with an existing backlog and significant additional orders being developed.

Overall Performance

The net pre-tax earnings for the third quarter were $7.1 million compared to $2.5 million in the same quarter of 2011. EBITDA (earnings before interest, taxes, depreciation & amortization and share-based compensation) was $9.4 million compared to $4.4 million in quarter three of 2010. Comparing the nine month period ending September 30, earnings before taxes were $12.7 million in 2011 versus $5.6 million in 2010. For the nine month period, EDITDA was $20.3 million in 2011 and $11.4 million in 2010, an increase of 77%. For the same period Gross Margins increased to 37% from 35%.

In the late fall of 2010, when forecasts and budgets were being prepared for 2011, most in the industry, including Wenzel Downhole Tools Ltd., anticipated an increase in the level of activity over 2010. Thus far in 2011 revenues have exceeded forecasts and are expected to continue to grow into 2012. The demand for rental tools as well as for sales has caused the company to double its capital budget and conduct the manufacturing operations on a 24 hour basis. The new manufacturing equipment added earlier in 2011 has resulted in efficiency improvements which will enable the company to fulfill the increase in demand on an economic basis.


Highlights of the 3 and 9 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 9 Months 12 Months
Ended Sep 30 Ended Sep 30 Ended Dec 31
2011 2010 2011 2010 2010
Revenue 28,651 15,815 64,242 42,541 61,369
Gross Profit 10,725 5,779 23,502 14,940 22,791
Gross Profit Percentage 37 % 37 % 37 % 35 % 37 %
EBITDA(1) 9,408 4,375 20,277 11,424 16,826
Earnings Before Income Taxes 7,112 2,488 12,685 5,642 8,876
Net Earnings 4,765 1,640 8,176 3,661 5,981
Total Comprehensive Income 5,502 1,481 8,703 3,589 5,717
Net Earnings per Share – basic 0.15 0.05 0.26 0.12 0.20
Net Earnings per Share – diluted 0.15 0.05 0.26 0.12 0.19
Net Earnings per Share – pro forma 0.13 0.05 0.23 0.10 0.15
Total Assets 81,034 54,590 81,034 54,590 59,605
Long Term Debt - 295 - 295 -
Term Demand Loan 3,669 2,200 3,669 2,200 2,023
Bank Indebtedness 10,322 14 10,322 14 470

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 Sep 30 9 months ended Sep 30 12 months ended
2011 2010 2011 2010 Dec 31 2010
Net earnings $ 4,765 $ 1,640 $ 8,176 $ 3,661 $ 5,981
Income taxes $ 2,347 $ 847 $ 4,509 $ 1,980 2,895
Depreciation and amortization $ 2,164 $ 1,932 $ 6,360 $ 5,709 7,732
Interest $ 132 $ 39 $ 268 $ 141 196
Share-based compensation - - $ 964 $ 16 16
Gain on re-measurement of the derivative asset - $ (83 ) - $ (83 ) 6
EBITDA $ 9,408 $ 4,375 $ 20,277 $ 11,424 $ 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. Wenzel'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. Wenzel's main corporate office is located in Calgary, Alberta and it has US sales offices in Conroe, Casper and Oklahoma City, Oklahoma. Wenzel also has a sales and service facility in Celle, Germany. Wenzel Downhole Tools Ltd. is listed for trading on the TSX, symbol WZL. The Company's Third Quarter Consolidated Financial Statements and Management's Discussion and Analysis will be posted on SEDAR (www.sedar.com) on or about November 15, 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.


Contact Information

  • Wenzel Downhole Tools Ltd.
    Ken Hughes
    Chair and Interim 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)