Western Lakota Energy Services Inc.
TSX : WLE

Western Lakota Energy Services Inc.

March 08, 2005 14:07 ET

Western Lakota Increases Earnings Per Share by 100% for the Second Straight Year

CALGARY, ALBERTA--(CCNMatthews - March 8, 2005) - Western Lakota Energy Services
Inc. (TSX VENTURE:WLE), reports its third consecutive year of profitable
operations and substantial financial growth in fiscal 2004, the year ended
December 31, 2004. Capitalizing on record drilling activity in 2004 with rig
utilization rates that continued to exceed industry averages, the Company
entered 2004 with 11 rigs and had 15 in the field at year-end all built by the
Company. Revenue in 2004 increased 113% to $37.2 million, with earnings per
share from continuing operations doubling to $0.30 per share (2003 - $0.15).

Financial Highlights
(Stated in thousands of dollars, except per share amounts)

Year ended December 31 2004 2003 % Change
----------------------------------
Operating Results
Revenue $37,188 $17,483 113%
Operating expenses $19,293 $10,076 91%
Gross profit $17,895 $7,407 142%
Gross profit 48% 42% 14%
EBITDAS (1) $16,217 $6,500 149%
Income from continuing operations $7,739 $3,334 132%
Net income $7,297 $3,141 132%
Earnings per share from
continuing operations $0.30 $0.15 100%
Earnings per share $0.28 $0.14 100%
EBITDAS per share (1) $0.62 $0.28 121%
Diluted earnings per share from
continuing operations $0.29 $0.14 107%
Diluted earnings per share $0.27 $0.13 108%
Diluted EBITDAS per share (1) $0.60 $0.28 114%

Cash Flow
Cash flow from continuing operations(2) $12,606 $6,040 109%
Capital expenditures $24,309 $16,942 43%

Financial Position
Working capital (excluding term
and demand debt) $9,854 $7,980 23%
Property and equipment $48,177 $27,070 78%
Total assets $75,838 $49,956 52%
Term and demand debt $28,447 $20,522 39%
Shareholders' equity $32,465 $15,841 105%

(1) EBITDAS means earnings from continuing operations before interest, taxes,
depreciation, amortization and stock-based compensation. Readers are cautioned
that EBITDAS does not have a standardized meaning under GAAP. However, EBITDAS
is generally regarded as an indirect measure of operating cash flow and, as
such, the Company believes it is a significant indicator of success of any
business and is particularly relevant to readers within the investment
community.

(2) Cash flow from continuing operations is operating cash flow before net
changes in non-cash operating working capital. Readers are cautioned that cash
flow from continuing operations does not have a standardized meaning under GAAP.
However, management utilizes cash flow from continuing operations as a key
measure to assess the ability of the Company to finance operating activities and
capital expenditures.

Readers should be cautioned that these measures should not be construed as an
alternative to measures determined in accordance with GAAP as an indicator of
the Company's performance. The Company's method of calculating these measures
may differ from other companies and accordingly, these measures may not be
comparable to measures used by other companies.


Financial Highlights
(Stated in thousands of dollars, except per share amounts)

Three months ended December 31, 2004 2004 2003 % Change
----------------------------------
Operating Results
Revenue $10,818 $8,620 25%
Operating expenses $5,243 $4,835 8%
Gross profit $5,575 $3,785 47%
Gross profit % 52% 44% 17%
EBITDAS $5,126 $3,427 50%
Income from continuing operations $2,718 $2,113 29%
Net income $2,552 $2,129 20%
Earnings per share from continuing
operations $0.10 $0.09 11%
Earnings per share $0.10 $0.09 11%
EBITDAS per share $0.19 $0.14 36%
Diluted earnings per share from
continuing operations $0.10 $0.09 11%
Diluted earnings per share $0.09 $0.09 0%
Diluted EBITDAS per share $0.19 $0.14 36%

Cash Flow
Cash flow from continuing operations $3,783 $3,231 17%
Capital expenditures $9,963 $6,950 43%


The considerable increase in revenue for the year reflects growth in Western
Lakota's two operating segments, Contract Drilling and Rig Construction & Sale.


Rig Construction and Sale Contract Drilling
% %
(Stated in thousands 2004 2003 Change 2004 2003 Change
of dollars)
-----------------------------------------------------------------------------
Revenue $10,684 $6,813 57% $26,393 $10,670 147%
Cost of sales $7,698 $4,700 64% $13,410 $5,636 138%
---------------- -----------------
Gross profit $2,986 $2,113 41% $12,983 $5,034 158%
---------------- -----------------
Gross profit % 28% 31% 49% 47%
Cumulative net
revenue recovery(1) $1,815 $260 $ - $ -
---------------- -----------------
Gross profit after net
revenue recovery $4,801 $2,373 102% $12,983 $5,034 158%

(1) Cumulative net revenue recovery is the portion of revenue less operating
costs allocated to the interests in drilling rigs that were sold from the time
the rig began working in the field until the sale of that interest occurred.


Drilling Statistics
(Net to Western Lakota)

For the year ended December 31, 2004 2003 % Change
----------------------------------------------------------------------------
Rig utilization 59% 61%
(Industry(1) - 53%) (Industry(1) - 53%)
Net drilling days 1,368 633 116%
Revenue per drilling day $19,293 $16,850 14%
Operating costs per drilling day $9,803 $8,900 10%
Gross profit per drilling day $9,490 $7,950 19%

(1) Source of industry figures: Canadian Association of Oilwell Drilling
Contractors (CAODC)

Western Lakota reports its rig utilization based on the spud to release time for
the rigs and excludes moving and rig up and tear down time, even though revenue
is earned during this time. The Company's annual rig utilization rates have
consistently been above the industry's rig utilization rates which are based on
voluntary reporting of days by CAODC members.

Western Lakota's Aboriginal Partnership Program continued to be an important
part of its financial and operational growth in 2004. In this program, an
Aboriginal community typically invests in ownership of a 50% interest in a rig
through a limited partnership with Western Lakota, which is the operating
partner. In 2004, both the number of partnerships and the number of rigs in
partnership increased. Western Lakota will continue to build rigs for
partnerships as opportunities arise.

The increase in revenue from rig construction and sale was a result of the sale
of interests in six rigs in 2004 compared to the sale of interests in three rigs
in 2003. Revenue from contract drilling also increased significantly in 2004,
the result of increasing the number of rigs operated by the Company during the
year. Western Lakota's rig utilization rate in 2004 was 59% (2003 - 61%) while
the industry average was 53% (2003 - 53%), which reflects the unusually wet
weather that hampered drilling operations in many areas of Alberta and British
Columbia throughout the summer and into the fall. During the fourth quarter of
2004, however, the Company enjoyed a particularly healthy utilization rate of
81% compared to an industry average of 62%.

Building further on its rapid growth and development in the three years since
its entry into the contract drilling industry, the Company plans to build
another eight Western Lakota owned rigs in 2005, which will bring its fleet to
24 high-performance rigs by year-end. The new rigs will be a combination of
ultra-heavy telescopic doubles and pipe-arm singles that will be designed and
assembled by the Company.

Western Lakota is one of Canada's fastest-growing drilling contractors and at
present operates 16 drilling rigs, 13 of which are in partnerships with Dene
Tha' First Nation, Métis Nation of Alberta, Saddle Lake First Nation, Samson
Cree Nation, the Blood Tribe, Duncan's First Nation and Horse Lake First Nation.

The TSX Venture Exchange does not accept responsibility for
the adequacy or accuracy of this release.

Contact Information

  • Western Lakota Energy Services Inc.
    Elson McDougald
    President & CEO
    (403) 214-5953
    Email: elson@westernlakota.com
    Website: www.westernlakota.com
    or
    Western Lakota Energy Services Inc.
    1050, 400 - 5th Avenue SW,
    Calgary, Alberta T2P 0L6
    (403) 214-5970
    (403) 214-5955
    (FAX)