Wenzel Downhole Tools Ltd.

Wenzel Downhole Tools Ltd.

May 12, 2011 06:00 ET

Wenzel Downhole Tools Ltd.: First Quarter Financial Results Show Continuing Growth

CALGARY, ALBERTA--(Marketwire - May 11, 2011) - Wenzel Downhole Tools Ltd. (the "Company") (TSX:WZL) today announces its financial results for the first quarter ended March 31, 2011. First quarter revenues were $17.3 million compared to $13.7 million in the first quarter of 2010,a 27% increase. Gross profit for the period was $6.5 million, an increase of 35% from the same period in 2010. Profit before income taxes was up 77%. Total profit for the period was up 46%, which was at $1.3 million or $0.04 per share compared to $0.03 for Q1 2010.

The Company is pleased to announce that Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) for the first quarter of 2011 was $5.34 million compared to $3.26 million in quarter one of 2010, an increase of 64%.

On a sectorial basis, revenues were up in Canada by 21% at $7.0 million and in the United States up by 50% at $8.5 million, reflecting the increases in drilling activity in both countries. Revenues from international sales were down by 17.4% at $1.8 million but this is a result of the nature of international sales, which are fewer in number but larger in size. This means that quarterly revenues can vary widely, making quarter by quarter comparisons less relevant. For the full year 2011, the Company is forecasting international sales above the level of 2010.

While uncontrollable factors such as currency changes, and accounting for non-cash expenses such as stock-based compensation, make quarter to quarter expense comparisons deceptive, the percentage increase in expenses excluding stock-based compensation was less than the increase in revenue in Q1, 2011 compared to Q1, 2010.

                                 3 mos. ended   3 mos. ended       FY ended
                               March 31, 2011 March 31, 2010  Dec. 31, 2010
                                     ($000's, except for earnings per share)
Revenue                                17,324         13,651         61,369
Gross Profit                            6,530          4,821         22,791
Gross Profit Percentage                    38%            35%            37%
EBITDA(1)                               5,338          3,263         16,826
ProfitBefore Income Taxes               2,301          1,302          8,876
Net Profit                              1,266            868          5,981
Total Comprehensive Income              1,096            754          5,717
Net Earnings per Share - basic           0.04           0.03           0.20
Net Earnings per Share - diluted         0.04           0.03           0.19
Total Assets                           63,388         52,538         59,605
Long Term Debt                              -            500              -

Note (1) Refer to Non-GAAP measures at the end of this news release.

Outlook for the Remainder of 2011

The outlook for oil and gas drilling for the remainder of 2011 and beyond looks very buoyant. The bottom of the current cycle in industry activity occurred in the summer of 2009 andsince then there has been a gradual but continuous increase in rig count and drilling activity. The Company had forecast and prepared for significant business increases for 2011 compared to 2010but was still hard pressed to meet customer demands.

One impetus for this growth in activity is of course the recovery in oil prices from the very low values in 2009. However it is also the new technologies which allow for the exploitation of known gas and oil reservoirs, previously thought to be uneconomic or depleted, that has led to the majority of wells being drilled directionally and/or horizontally. Application of these new techniques requires the types of tools manufactured by the Company and Wenzel tools have an excellent reputation for quality and durability. It is a growing majority of wells that are now drilled with mud motors, including vertical wells. Therefore management feels very optimistic about its revenue and profit prospects for the remainder of 2011 and beyond

International opportunities continue to be attractive and to increase. Techniques and equipment developed in North America for the economic exploitation of older and smaller oil and gas deposits are increasingly being applied in international locations. This factor along with the growing positive reputation of Wenzel mud motors and other tools has resulted in the Company getting requests for quotations in greater numbers and from a greater number of countries than at any time in its past.

The current backlog of orders for tools from international and domestic customers, as well as for our rental fleet, is straining the Company's manufacturing capacity and new capacity will need to be added. The expanding energy industry in Alberta has led to shortages in skilled trades persons which could be a limiting factor to growth expansion but probably only to the rate of growth. One factor which could limit profitability is the appreciation of the Canadian dollar compared to the US dollar and the euro. This factor squeezes profits and increases competition in some markets. These qualifications notwithstanding, the Company expects 2011 to be a record year for Wenzel Downhole Tools.

Non-GAAP Measure

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.

                                         2011           2010           2010
                                           Q1             Q1           Year
Net profit                             $1,266           $868        $ 5,981
Income taxes                            1,034            434          2,895
Depreciation and amortization           2,072          1,900          7,732
Interest                                   42             45            196
Share-based compensation                  924             16             16
Loss on re-measurement of derivative
 asset                                      -              -              6
EBITDA                                 $5,338         $3,263        $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 service and sales offices in Casper, Wyoming and Morganton, 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 First Quarter Consolidated Financial Statements and Management's Discussion and Analysis will be posted on SEDAR (www.sedar.com) on or about May 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.


Contact Information

  • Wenzel Downhole Tools Ltd.
    Harvie Andre
    President and CEO
    (403) 265-8154 (FAX)

    Wenzel Downhole Tools Ltd.
    William T. Spence
    Chief Financial Officer
    (403) 265-8154 (FAX)