Western Energy Services Corp. Releases Second Quarter 2015 Financial and Operating Results and Declares Quarterly Dividend

ID: 1376006
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(businesspress24) - CALGARY, ALBERTA -- (Marketwired) -- 07/30/15 -- Western Energy Services Corp. ("Western" or the "Company") (TSX: WRG) is pleased to release its second quarter 2015 financial and operating results and declare a quarterly dividend of $0.075 per share. Additional information relating to the Company, including the Company''s financial statements and management''s discussion and analysis as at and for the three months and six months ended June 30, 2015 and 2014 will be available on SEDAR at . Non-International Financial Reporting Standards ("Non-IFRS") measures and abbreviations for standard industry terms are included in this press release. All amounts are denominated in Canadian dollars (CDN$) unless otherwise identified.

Second Quarter 2015 Highlights:

Year to Date Highlights:

Selected Financial Information

Western is an oilfield service company focused on three core business lines: contract drilling, well servicing and oilfield rental equipment services. Western provides contract drilling services through its division, Horizon Drilling ("Horizon") in Canada, and its wholly owned subsidiary, Stoneham Drilling Corporation ("Stoneham"), in the United States ("US"). Western provides well servicing operations in Canada through Western Energy Services Partnership''s (the "Partnership") division, Eagle Well Servicing ("Eagle") and oilfield rental equipment services in Canada through the Partnership''s division, Aero Rental Services ("Aero"). Financial and operating results for Horizon and Stoneham are included in Western''s contract drilling segment, while Eagle and Aero''s financial and operating results are included in Western''s production services segment.

Western currently has a drilling rig fleet of 54 rigs specifically suited for drilling horizontal wells of increased complexity. The average age of the drilling rig fleet is approximately seven years. In total, 96% of Western''s fleet are Efficient Long Reach ("ELR") drilling rigs with depth ratings greater than 3,000 meters and all of Western''s rigs are capable of drilling conventional and unconventional resource based horizontal wells. Conventional resource plays or formations, such as the Cardium in Canada, typically have higher permeability and tend to be less expensive to develop. As a result of the prior exploitation of conventional resource plays, which due to their increased permeability allows oil and natural gas to flow and be extracted more easily, over time production from these resource plays has declined. Unconventional resource plays or formations, such as the Montney and Duvernay in Canada and the Williston basin in the United States, typically have lower permeability and tend to be more expensive to develop. Horizontal drilling and multi zone hydraulic fracturing have continued to improve the access to and development of these unconventional resource plays.

Western is the sixth largest drilling contractor in Canada with a fleet of 49 rigs operating through Horizon. Of the Canadian fleet, 25 are classified as Cardium rigs, 19 as Montney rigs and 5 as Duvernay rigs. As compared to the Cardium classified rigs, Montney rigs have a larger hookload and capacity, while Duvernay rigs have the largest hookload and capacity. Additionally, Western has five ELR triple drilling rigs deployed in the United States operating through Stoneham. Western is also the sixth largest well servicing company in Canada with a current fleet of 66 rigs operating through Eagle. Western''s well servicing rig fleet is one of the newer fleets in the WCSB, with an average age of approximately six years. Western''s oilfield rental equipment division, which operates through Aero, provides oilfield rental equipment for frac services, well completions and production work, coil tubing services and drilling.

Crude oil and natural gas prices impact the cash flow of Western''s customers, which in turn impacts the demand for Western''s services. Overall performance of the Company continued to be affected by the decline in crude oil and natural gas prices for the three and six months ended June 30, 2015. While crude oil prices were strong in the first six months of 2014, they weakened significantly in the last half of 2014 and into the first half of 2015. Partially offsetting the decline in crude oil and natural gas prices for Western''s Canadian customers was the strengthening of the US dollar in comparison to the Canadian dollar. The following table summarizes the average oil and natural gas prices, as well as the average foreign exchange rates for the three and six months ended June 30, 2015 and 2014.

The significant reduction in commodity prices has resulted in a corresponding decrease in the demand for oilfield services in both Canada and the United States. The CAODC reported that, in Canada, the total number of Operating Days in the WCSB decreased approximately 59% and 49% for the three and six months ended June 30, 2015 respectively, as compared to the same periods in the prior year. Similarly, as reported by Baker Hughes Incorporated, the average number of active drilling rigs in the United States decreased approximately 51% and 37% respectively, for the three and six months ended June 30, 2015, as compared to the three and six months ended June 30, 2014. Well servicing hours were also impacted by the decline in demand, as the CAODC reported that Service Hours in the WCSB decreased approximately 33% and 36% respectively, for the three and six months ended June 30, 2015, as compared to the same periods in the prior year.

Outlook

Currently, 9 of Western''s 54 drilling rigs (or 17%) are operating under long term take-or-pay contracts providing a base level of future revenue, with 3 of these contracts expected to expire in each of 2015, 2016 and 2017 respectively. These contracts each typically generate 250 Operating Days per year in Canada, as spring breakup restricts activity during the second quarter, while in the United States these contracts each typically generate between 330 to 365 Revenue Days per year.

Western''s revised capital budget for 2015 remains unchanged at approximately $42 million, comprised of $23 million of expansion capital and $19 million of maintenance capital. The following table summarizes the 2015 revised capital budget, the capital spending incurred for the six months ended June 30, 2015 and the remaining capital budget expected to be incurred throughout the remainder of 2015:

Expansion capital relates to the completion of two 5,000m telescopic ELR double drilling rigs, one 6,000m ELR AC triple pad drilling rig and one slant well servicing rig carried forward from the 2014 capital budget. In addition, expansion capital includes $3 million related to the purchase of additional oilfield rental equipment. Spending on maintenance capital is weighted to the second half of 2015, which provides additional flexibility to allow for adjustments if market conditions change. Western believes the 2015 capital budget provides a prudent use of cash resources and ensures that it continues to maintain its balance sheet flexibility allowing for the execution on strategic opportunities as they arise. Western will continue to evaluate and expand its operations in a disciplined manner and make any required adjustments to its capital program when customer demand improves.

The continued pressure on crude oil and natural gas prices has resulted in reductions to the capital spending plans for the majority of Western''s customers. In some cases, the capital spending reductions have been significant. The extremely low activity in the second quarter of 2015 has generally resulted in a slower start to the summer drilling programs for many of Western''s customers. As a result, active drilling rig counts in both Canada and the United States are currently at, or near, five year lows for third quarter activity. Activity levels throughout the oilfield services industry for the remainder of 2015 are expected to be significantly lower as compared to the second half of 2014, when higher commodity prices and strong customer budgets supported increased utilization and a strong pricing environment across all of Western''s business lines. Lower activity and pricing pressure will impact Western''s Adjusted EBITDA and cash flow from operating activities in 2015. Western''s variable cost structure, under which approximately 80% of operating and administrative costs are variable, and a prudent capital budget will aid in preserving balance sheet strength. At June 30, 2015, Western''s Net Debt to trailing 12 month Adjusted EBITDA ratio was 1.3. In addition to $83.6 million in cash and cash equivalents at June 30, 2015, Western has $175 million available on the Company''s revolving credit facility (the "Revolving Facility"), which does not mature until December 17, 2018, $20 million available on the Company''s operating demand revolving loan (the "Operating Facility"), and no principal repayments due on the $265 million senior unsecured notes (the "Senior Notes") until they mature on January 30, 2019. As such, Western is well positioned to manage the current slowdown in activity and maintain its dividend.

Oilfield service activity will be impacted by the development of resource plays in Alberta and northeast British Columbia including those related to liquefied natural gas projects, increased crude oil transportation capacity through rail and pipeline development and foreign investment into Canada. Currently, the largest challenges facing the oilfield service industry are customer spending constraints as a result of lower commodity prices and the challenge to retain skilled labour. Western''s view is that its modern drilling and well servicing rig fleets, strong customer base and solid reputation provide a competitive advantage which will enable the Company to attract and retain skilled labour, continue its growth strategy and maintain its higher than industry average utilization.

Quarterly Dividend

On July 30, 2015, Western''s Board of Directors declared a quarterly dividend of $0.075 per share, which will be paid on October 15, 2015, to shareholders of record at the close of business on September 30, 2015. The dividends are eligible dividends for Canadian income tax purposes. On a prospective basis, the declaration of dividends will be determined on a quarter-by-quarter basis by the Board of Directors.

Non-IFRS Measures

Western uses certain measures in this press release which do not have any standardized meaning as prescribed by International Financial Reporting Standards ("IFRS"). These measures which are derived from information reported in the condensed consolidated financial statements may not be comparable to similar measures presented by other reporting issuers. These measures have been described and presented in this press release in order to provide shareholders and potential investors with additional information regarding the Company. These Non-IFRS measures are identified and defined as follows:

Operating Revenue

Management believes that in addition to revenue, Operating Revenue is a useful supplemental measure as it provides an indication of the revenue generated by Western''s principal operating activities, excluding flow through third party charges such as rig fuel, which at the customer''s request may be paid for initially by Western, then recharged in its entirety to Western''s customers.

Gross Margin

Management believes that in addition to net income, Gross Margin is a useful supplemental measure as it provides an indication of the results generated by Western''s principal operating activities prior to considering administrative expenses, depreciation and amortization, how those activities are financed, the impact of foreign exchange, how the results are taxed, how funds are invested, and how non-cash items and one-time gains and losses affect results.

The following table provides a reconciliation of revenue under IFRS, as disclosed in the condensed consolidated statements of operations and comprehensive income, to Operating Revenue and Gross Margin:

Adjusted EBITDA

Management believes that in addition to net income, earnings before interest and finance costs, taxes, depreciation and amortization, other non-cash items and one-time gains and losses ("Adjusted EBITDA") is a useful supplemental measure as it provides an indication of the results generated by the Company''s principal operating segments similar to Gross Margin but also factors in the cash administrative expenses incurred in the period.

Operating Earnings

Management believes that in addition to net income, Operating Earnings is a useful supplemental measure as it provides an indication of the results generated by the Company''s principal operating segments similar to Adjusted EBITDA but also factors in the depreciation expense incurred in the period.

The following table provides a reconciliation of net income under IFRS, as disclosed in the condensed consolidated statements of operations and comprehensive income, to earnings before interest and finance costs, taxes and depreciation and amortization ("EBITDA"), Adjusted EBITDA and Operating Earnings:

Net Debt

The following table provides a reconciliation of long term debt under IFRS, as disclosed in the condensed consolidated balance sheets to Net Debt:

Drilling rig utilization - Operating Day: Calculated based on Operating Days divided by total available days.

Drilling rig utilization - Revenue Day: Calculated based on Revenue Days divided by total available days.

Operating Days: Defined as contract drilling days, calculated on a spud to rig release basis.

Revenue Days: Defined as Operating Days plus rig mobilization days.

Service Hours: Defined as actual well servicing hours completed.

Service rig utilization: Calculated based on Service Hours divided by available hours, being 10 hours per day, per well servicing rig, 365 days per year.

Abbreviations:

2015 Second Quarter Results Conference Call and Webcast

Western has scheduled a conference call and webcast to begin at 10:00 a.m. MST (12:00 p.m. EST) on Friday, July 31, 2015.

The conference call dial-in number is 1-866-223-7781.

A live webcast of the conference call will be accessible on Western''s website at by selecting "Investors", then "Webcasts". Shortly after the live webcast, an archived version will be available for approximately 14 days.

An archived recording of the conference call will also be available approximately one hour after the completion of the call until August 14, 2015 by dialing 1-800-408-3053 or 905-694-9451, passcode 6011581.

Forward-Looking Statements and Information

This press release contains certain statements or disclosures relating to Western that are based on the expectations of Western as well as assumptions made by and information currently available to Western which may constitute forward-looking information under applicable securities laws. All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that Western anticipates or expects may, or will occur in the future (in whole or part) should be considered forward-looking information. In some cases forward-looking information can be identified by terms such as "forecast", "future," "may", "will", "expect", "anticipate,", "believe", "potential", "enable", "plan", "continue", "contemplate", "pro forma", or other comparable terminology.

In particular, forward-looking information in this press release includes, but is not limited to, statements relating to the declaration of dividends; the future demand for the Company''s services and equipment; the terms of existing and future drilling contracts in Canada and the US and the revenues resulting therefrom (including the number of Operating Days typically generated from the Company''s contracts); the Company''s expansion and maintenance capital plans for 2015, including the ability of current capital resources to cover Western''s financial obligations and the 2015 capital budget; the Company''s expected sources of funding to support such capital plans and the Company''s ability to adjust capital spending in the second half of 2015 if market conditions change; expectations as to the increase in crude oil transportation capacity through rail and pipeline development; expectations as to the necessary approvals for liquefied natural gas projects being obtained; the expectation of continued foreign investment into the Canadian oilfield industry; the expectation of significantly lower activity levels in the oilfield services industry in 2015 (compared to 2014); and the expectation that producer spending constraints will continue to be a large challenge facing the Company in 2015.

The material assumptions in making the forward-looking statements in this press release include, but are not limited to, assumptions relating to, demand levels and pricing for oilfield services; fluctuations in the price and demand for oil and natural gas; the continued low levels of and pressures on commodity pricing; the continued business relationship between the Company and its significant customers; general economic and financial market conditions; the development of liquefied natural gas projects, crude oil transport and pipeline approval and development; the Company''s ability to finance its operations; the effects of seasonal and weather conditions on operations and facilities; the competitive environment to which the various business segments are, or may be, exposed in all aspects of their business; the ability of the Company''s various business segments to access equipment (including spare parts and new technologies); changes in laws or regulations; currency exchange fluctuation; the ability of the Company to attract and retain skilled labour and qualified management; the ability to retain and attract significant customers; and other unforeseen conditions which could impact the use of services supplied by Western including Western''s ability to respond to such conditions.

Although Western believes that the expectations and assumptions on which such forward-looking statements and information are based on are reasonable, undue reliance should not be placed on the forward-looking statements and information as Western cannot give any assurance that they will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risk that the demand for oilfield services will not improve for the remainder of 2015 and that commodity price levels will remain low, and other general industry, economic, market and business conditions. Readers are cautioned that the foregoing list of risks, uncertainties and assumptions are not exhaustive. Additional information on these and other risk factors that could affect Western''s operations and financial results are included in Western''s annual information form which may be accessed through the SEDAR website at . The forward-looking statements and information contained in this press release are made as of the date hereof and Western does not undertake any obligation to update publicly or revise any forward-looking statements and information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Contacts:


Western Energy Services Corp.
Alex R.N. MacAusland
President and CEO
403.984.5916
403.984.5917 (FAX)

Western Energy Services Corp.
Jeffrey K. Bowers
Senior VP Finance and CFO
403.984.5916
403.984.5917 (FAX)



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Date: 07/30/2015 - 18:00
Language: English
News-ID 1376006
Character count: 0
Kontakt-Informationen:
Firma: Western Energy Services Corp.
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Stadt: CALGARY, ALBERTA
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