WESTERN ENERGY SERVICES CORP. RELEASES THIRD QUARTER 2024 FINANCIAL AND OPERATING RESULTS
Operational and Financial Highlights
Three Months Ended
Financial Highlights:
- Third quarter revenue of
$58.3 million in 2024 was$3.3 million (or 6%) higher than the third quarter of 2023, as higher contract drilling revenue inCanada , was offset partially by lower contract drilling revenue in the US and lower production services revenue. - The Company incurred a net loss of
$1.2 million in the third quarter of 2024 ($0.04 net loss per basic common share) as compared to a net loss of$1.3 million in the third quarter of 2023 ($0.04 net loss per basic common share) as higher Adjusted EBITDA and other items were offset by decreases in stock based compensation expense and finance costs. - Adjusted EBITDA of
$11.4 million in the third quarter of 2024 was$0.4 million (or 4%) higher compared to$11.0 million in the third quarter of 2023 due to higher drilling revenue inCanada , which was offset partially by lower production services activity inCanada , the continued slowdown of drilling activity in the US, higher operating costs and higher administrative costs due to one-time reorganization costs in the third quarter of 2024. - Third quarter additions to property and equipment of
$8.2 million in 2024 compared to$7.3 million in the third quarter of 2023, consisting of$5.2 million of expansion capital related to rig upgrades and$3.0 million of maintenance capital. - On
August 7, 2024 , the Company made a voluntary$10.0 million repayment on its Second Lien Facility (as defined in this press release) through available cash on hand and a draw on the Company's Credit Facilities (as defined in this press release).
Operational Highlights:
- In
Canada , Operating Days of 1,115 in the third quarter of 2024 were 232 days (or 26%) higher compared to 883 days in the third quarter of 2023. Drilling rig utilization inCanada was 36% in the third quarter of 2024, compared to 28% in the same period of the prior year, mainly due to improved demand for the Company's upgraded rig fleet. - Revenue per Operating Day in
Canada averaged$31,141 in the third quarter of 2024, a decrease of 2% compared to the same period of the prior year mainly due to changes in rig mix, which were offset partially by higher day rates and lower third party recoveries. - In the US, drilling rig utilization averaged 36% in the third quarter of 2024, compared to 34% in the third quarter of 2023, due to the change in the number of marketed rigs in 2023, as Operating Days decreased from 249 days in the third quarter of 2023 to 229 days in the third quarter of 2024.
- Revenue per Operating Day in the US for the third quarter of 2024 averaged
US$28,429 , an 8% decrease compared toUS$30,898 in the same period of the prior year, mainly due to changes in rig mix. - In
Canada , service rig utilization was 31% in the third quarter of 2024, compared to 33% in the same period of the prior year, as Service Hours decreased by 10% to 12,525 hours from 13,984 hours in the same period of the prior year, as customers deferred work to later in the year as capital budgets are fully utilized. - Revenue per Service Hour averaged
$979 in the third quarter of 2024 and was 3% lower than the third quarter of 2023, due to area specific rig requirements.
Nine Months Ended
Financial Highlights:
- Revenue for the nine months ended
September 30, 2024 , decreased by$13.8 million (or 8%), to$163.4 million compared to$177.2 million in the same period of 2023, as revenue was negatively impacted by lower activity in contract drilling in the US due to lower commodity prices in the first and third quarters of 2024 and lower third party recoveries inCanada , but positively impacted by higher production services activity in 2024. - The Company incurred a net loss of
$4.9 million for the nine months endedSeptember 30, 2024 ($0.14 net loss per basic common share) as compared to a net loss of$4.7 million in the same period in 2023 ($0.14 net loss per basic common share). The change can mainly be attributed to a decrease in stock based compensation expense, finance costs, and an increase in income tax recovery, which were partially offset by a decrease in Adjusted EBITDA and other items. - Administrative expenses for the nine months ended
September 30, 2024 were$2.9 million higher than the same period of 2023, due to higher employee related costs including one-time reorganization costs of$2.8 million incurred in 2024. - Adjusted EBITDA of
$31.9 million for the nine months endedSeptember 30, 2024 was$2.5 million (or 7%) lower compared to$34.4 million in the same period of 2023 and included one-time reorganization costs of$2.8 million . After normalizing for the one-time reorganization costs, Adjusted EBITDA for the nine months endedSeptember 30, 2024 would have totalled$34.7 million , an increase of$0.3 million from the same period in the prior year. Adjusted EBITDA in 2024 was comparable to the prior year as lower drilling activity inCanada and the US was partially offset by improved activity in production services. - Year to date 2024 additions to property and equipment of
$15.8 million compared to$19.2 million in the same period of 2023, consisting of$10.0 million of expansion capital related to rig upgrades and$5.8 million of maintenance capital. - On
March 22, 2024 , the Company extended the maturity of its$35.0 million syndicated revolving credit facility (the "Revolving Facility") and its$10.0 million committed operating facility (the "Operating Facility" and together the "Credit Facilities") fromMay 18, 2025 to the earlier of (i) six months prior to the maturity date of the Second Lien Facility (as defined in this press release) which is currentlyNovember 18, 2025 , or (ii)March 21, 2027 if the Second Lien Facility is extended. The total commitments under the Credit Facilities are unchanged and there were no changes to the Company's financial covenants, which are described in the Company's third quarter 2024 MD&A under "Liquidity and Capital Resources".
Operational Highlights:
- In
Canada , Operating Days of 2,724 days for the nine months endedSeptember 30, 2024 were 18 days (or 1%) lower compared to 2,742 days for the nine months endedSeptember 30, 2023 . Drilling rig utilization inCanada was 29% for the nine months endedSeptember 30, 2024 , compared to 30% in the same period of the prior year, mainly due to customers cancelling or deferring their programs into the latter part of 2024, as a result of lower natural gas prices throughout 2024. - Revenue per Operating Day in
Canada for the nine months endedSeptember 30, 2024 averaged$32,373 , which was 1% lower than the same period of the prior year mainly due to lower third party recoveries in 2024. - In the US, drilling rig utilization averaged 28% for the nine months ended
September 30, 2024 , compared to 39% in the same period of the prior year, with Operating Days decreasing from 843 days in the nine months endedSeptember 30, 2023 to 546 days in the same period of 2024 due to lower industry activity. - Revenue per Operating Day in the US for the nine months ended
September 30, 2024 , averagedUS$29,904 , a 7% decrease compared toUS$32,038 in the same period of the prior year, mainly due to higher day rates which were offset by lower third party recoveries in 2024 and higher mobilization revenue in 2023. - In
Canada , service rig utilization of 36% for the nine months endedSeptember 30, 2024 was higher than 33% in the same period of the prior year with Service Hours increasing by 5% from 42,081 hours in 2023 to 44,368 hours in 2024. - Revenue per Service Hour averaged
$1,023 for the nine months endedSeptember 30, 2024 and was 1% lower than the nine months endedSeptember 30, 2023 .
Selected Financial Information |
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(stated in thousands, except share and per share amounts) |
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Financial Highlights |
2024 |
2023 |
Change |
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2024 |
2023 |
Change |
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Revenue |
58,343 |
55,003 |
6 % |
|
163,358 |
177,196 |
(8 %) |
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Adjusted EBITDA(1) |
11,433 |
11,033 |
4 % |
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31,911 |
34,369 |
(7 %) |
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Adjusted EBITDA as a percentage of revenue(1) |
20 % |
20 % |
- |
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20 % |
19 % |
5 % |
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Cash flow from operating activities |
5,404 |
13,267 |
(59 %) |
|
32,466 |
45,085 |
(28 %) |
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Additions to property and equipment |
8,223 |
7,348 |
12 % |
|
15,760 |
19,218 |
(18 %) |
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Net loss |
(1,190) |
(1,267) |
6 % |
|
(4,871) |
(4,691) |
(4 %) |
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– basic and diluted net loss per share |
(0.04) |
(0.04) |
- |
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(0.14) |
(0.14) |
- |
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Weighted average number of shares |
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– basic and diluted |
33,843,022 |
33,841,781 |
- |
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33,843,017 |
33,841,478 |
- |
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Outstanding common shares as at period end |
33,843,022 |
33,843,009 |
- |
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33,843,022 |
33,843,009 |
- |
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(1) |
See "Non-IFRS Measures and Ratios" included in this press release. |
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Operating Highlights (2) |
2024 |
2023 Change |
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2024 |
2023 |
Change |
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Contract Drilling |
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Canadian Operations: |
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Operating Days |
1,115 |
|
883 |
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26 % |
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2,724 |
2,742 |
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(1 %) |
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Revenue per Operating Day(3) |
31,141 |
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31,698 |
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(2 %) |
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32,373 |
32,755 |
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(1 %) |
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Drilling rig utilization |
36 % |
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28 % |
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29 % |
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29 % |
30 % |
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(3 %) |
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CAOEC industry Operating Days(4) |
17,398 |
|
15,612 |
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11 % |
|
45,761 |
43,314 |
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6 % |
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United States Operations: |
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Operating Days |
229 |
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249 |
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(8 %) |
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546 |
843 |
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(35 %) |
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Revenue per Operating Day (US$)(3) |
28,429 |
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30,898 |
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(8 %) |
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29,904 |
32,038 |
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(7 %) |
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Drilling rig utilization |
36 % |
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34 % |
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6 % |
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28 % |
39 % |
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(28 %) |
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Production Services |
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Service Hours |
12,525 |
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13,984 |
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(10 %) |
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44,368 |
42,081 |
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5 % |
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Revenue per Service Hour(3) |
979 |
|
1,012 |
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(3 %) |
|
1,023 |
1,030 |
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(1 %) |
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Service rig utilization |
31 % |
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33 % |
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(6 %) |
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36 % |
33 % |
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9 % |
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(2) |
See "Defined Terms" included in this press release. |
(3) |
See "Non-IFRS Measures and Ratios" included in this press release. |
(4) |
Source: |
Financial Position at (stated in thousands) |
September 30, 2024 |
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Working capital(1) |
17,697 |
|
20,125 |
16,473 |
Total assets |
429,623 |
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442,933 |
453,980 |
Long-term debt – non current portion |
102,999 |
|
111,174 |
114,107 |
(1) |
See "Non-IFRS Measures and Ratios" included in this press release. |
Business Overview
Western is an energy services company that provides contract drilling services in
Contract Drilling
Western markets a fleet of 41 drilling rigs specifically suited for drilling complex horizontal wells across
Western's marketed and owned contract drilling rig fleets are comprised of the following:
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As at |
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2024 |
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2023 |
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Rig class(1) |
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US |
Total |
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Canada |
US |
Total |
Cardium |
11 |
- |
11 |
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11 |
1 |
12 |
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18 |
1 |
19 |
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18 |
1 |
19 |
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5 |
6 |
11 |
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5 |
6 |
11 |
Total marketed drilling rigs(2) |
34 |
7 |
41 |
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34 |
8 |
42 |
Total owned drilling rigs |
48 |
7 |
55 |
|
48 |
8 |
56 |
(1) |
See "Contract Drilling Rig Classifications" included in this press release. |
(2) |
Source: CAOEC Contractor Summary as at |
Production Services
Production services provides well servicing and oilfield equipment rentals in
Western's well servicing rig fleet is comprised of the following:
Owned well servicing rigs |
As at |
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Mast type |
2024 |
2023 |
Single |
28 |
30 |
Double |
27 |
27 |
Slant |
8 |
8 |
Total owned well servicing rigs |
63 |
65 |
Business Environment
Crude oil and natural gas prices impact the cash flow of Western's customers, which in turn impacts the demand for Western's services. The following table summarizes average crude oil and natural gas prices, as well as average foreign exchange rates, for the three and nine months ended
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2024 |
2023 |
Change |
2024 |
2023 |
Change |
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Average crude oil and natural gas prices(1)(2) |
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Crude Oil |
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West Texas Intermediate (US$/bbl) |
75.13 |
82.26 |
(9 %) |
77.55 |
77.40 |
- |
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Western Canadian Select (CDN$/bbl) |
84.93 |
93.19 |
(9 %) |
84.76 |
80.42 |
5 % |
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Natural Gas |
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30 day Spot AECO (CDN$/mcf) |
0.73 |
2.70 |
(73 %) |
1.40 |
2.86 |
(51 %) |
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Average foreign exchange rates(2) |
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US dollar to Canadian dollar |
1.36 |
1.34 |
1 % |
1.36 |
1.34 |
1 % |
(1) |
See "Abbreviations" included in this press release. |
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(2) |
Source: Sproule |
1 Source: CAOEC Drilling Contractor Summary as at |
2 Source: CAOEC Well Servicing |
West Texas Intermediate ("WTI") on average decreased for the three months ended
Despite stable crude oil prices in 2024 in the US, industry drilling activity weakened in the US. As reported by Baker Hughes Company3, the number of active drilling rigs in the US decreased by approximately 6% to 587 rigs as at
Outlook
In 2024, commodity prices are being impacted in the short term by concerns surrounding demand from continued uncertainty concerning the ongoing conflicts in
As at
Energy service activity in
3 Source: Baker Hughes Company, 2024 Rig Count monthly press releases. |
4 Source: Caoec, Monthly Contractor Summary. |
Non-IFRS Measures and Ratios
Western uses certain financial measures in this press release which do not have any standardized meaning as prescribed by International Financial Reporting Standards ("IFRS"). These measures and ratios, 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 and ratios have been described and presented in this press release to provide shareholders and potential investors with additional information regarding the Company. The Non-IFRS measures and ratios used in this press release are identified and defined as follows:
Adjusted EBITDA and Adjusted EBITDA as a Percentage of Revenue
Adjusted 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 Non-IFRS financial measure as it is used by management and other stakeholders, including current and potential investors, to analyze the Company's principal business activities prior to consideration of how Western's activities are financed and the impact of foreign exchange, income taxes and depreciation. Adjusted EBITDA provides an indication of the results generated by the Company's principal operating segments, which assists management in monitoring current and forecasting future operations, as certain non-core items such as interest and finance costs, taxes, depreciation and amortization, and other non-cash items and one-time gains and losses are removed. The closest IFRS measure would be net income (loss) for consolidated results.
Adjusted EBITDA as a percentage of revenue is a Non-IFRS financial ratio which is calculated by dividing Adjusted EBITDA by revenue for the relevant period. Adjusted EBITDA as a percentage of revenue is a useful financial measure as it is used by management and other stakeholders, including current and potential investors, to analyze the profitability of the Company's principal operating segments.
The following table provides a reconciliation of net loss, as disclosed in the condensed consolidated statements of operations and comprehensive loss, to Adjusted EBITDA:
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(stated in thousands) |
2024 |
2023 |
2024 |
2023 |
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Net loss |
(1,190) |
(1,267) |
(4,871) |
(4,691) |
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Income tax recovery |
(393) |
(268) |
(1,486) |
(931) |
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Loss before income taxes |
(1,583) |
(1,535) |
(6,357) |
(5,622) |
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Add (deduct): |
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Depreciation |
10,067 |
10,283 |
30,665 |
30,831 |
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Stock based compensation |
157 |
574 |
433 |
2,212 |
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Finance costs |
2,476 |
2,789 |
7,626 |
8,710 |
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Other items |
316 |
(1,078) |
(456) |
(1,762) |
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Adjusted EBITDA |
11,433 |
11,033 |
31,911 |
34,369 |
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Revenue per Operating Day
This Non-IFRS measure is calculated as drilling revenue for both
Revenue per Service Hour
This Non-IFRS measure is calculated as well servicing revenue divided by Service Hours. This calculation represents the average hourly rate charged to Western's customers.
Working Capital
This Non-IFRS measure is calculated as current assets less current liabilities as disclosed in the Company's consolidated financial statements.
Defined Terms
Drilling rig utilization: Calculated based on Operating Days divided by total available days.
Operating Days: Defined as contract drilling days, calculated on a spud to rig release basis.
Service Hours: Defined as well servicing hours completed.
Service rig utilization: Calculated as total Service Hours divided by 217 hours per month per rig multiplied by the average rig count for the period as defined by the CAOEC industry standard.
Contract Drilling Rig Classifications
Cardium class rig: Defined as any contract drilling rig which has a total hookload less than or equal to 399,999 lbs (or 177,999 daN).
Abbreviations
- Barrel ("bbl");
-
Canadian Association of Energy Contractors ("CAOEC"); - DecaNewton ("daN");
- International Financial Reporting Standards ("IFRS");
- Pounds ("lbs");
- Thousand cubic feet ("mcf");
-
Western Canadian Sedimentary Basin ("WCSB"); - Western Canadian Select ("WCS"); and
- West Texas Intermediate ("WTI").
Forward-Looking Statements and Information
This press release contains certain forward-looking statements and forward-looking information (collectively, "forward-looking information") within the meaning of applicable Canadian securities laws, as well as other information based on Western's current expectations, estimates, projections and assumptions based on information available as of the date hereof. All information and statements contained herein that are not clearly historical in nature constitute forward-looking information, and words and phrases such as "may", "will", "should", "could", "expect", "intend", "anticipate", "believe", "estimate", "plan", "predict", "potential", "continue", or the negative of these terms or other comparable terminology are generally intended to identify forward-looking information. Such information represents the Company's internal projections, estimates or beliefs concerning, among other things, an outlook on the estimated amounts and timing of additions to property and equipment, anticipated future debt levels and revenues or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. This forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information.
In particular, forward-looking information in this press release includes, but is not limited to, statements relating to: the business of Western; industry, market and economic conditions and any anticipated effects on Western and its customers; commodity pricing; the future demand for the Company's services and equipment; the effect of inflation and commodity prices on energy service activity; expectations with respect to customer spending; the impact of Western's upgraded drilling rigs; the potential continued impact of the current conflicts in
The material assumptions that could cause results or events to differ from current expectations reflected in the forward-looking information in this press release include, but are not limited to: demand levels and pricing for oilfield services; demand for crude oil and natural gas and the price and volatility of crude oil and natural gas; pressures on commodity pricing; the impact of inflation; the continued business relationships between the Company and its significant customers; crude oil transport, pipeline and LNG export facility approval and development; that all required regulatory and environmental approvals can be obtained on the necessary terms and in a timely manner, as required by the Company; liquidity and the Company's ability to finance its operations; the effectiveness of the Company's cost structure and capital budget; 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 and the Company's competitive position therein; the ability of the Company's various business segments to access equipment (including spare parts and new technologies); global economic conditions and the accuracy of the Company's market outlook expectations for 2024 and in the future; the impact, direct and indirect, of epidemics, pandemics, other public health crisis and geopolitical events, including the conflicts in
Although Western believes that the expectations and assumptions on which such forward-looking information is based on are reasonable, undue reliance should not be placed on the forward-looking information as Western cannot give any assurance that such will prove to be correct. By its nature, forward-looking information is subject to 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, volatility in market prices for crude oil and natural gas and the effect of this volatility on the demand for oilfield services generally; reduced exploration and development activities by customers and the effect of such reduced activities on Western's services and products; political, industry, market, economic, and environmental conditions in
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. Any forward-looking statements contained herein are expressly qualified by this cautionary statement.
SOURCE