AB Calgary, October 25, 2021/CNW/-Western Energy Services Corporation ("Western" or "Company") (TSX: WRG) announced the release of financial and operating results for the third quarter of 2021. Other information about the company, including the company’s financial statements for the three and nine months ended September 30, 2021 and September 30, 2020, and management’s discussion and analysis ("MD&A"), will be available in Available on SEDAR at www.sedar.com. Non-International Financial Reporting Standards ("Non-International Financial Reporting Standards") measurement standards, such as adjusted EBITDA, and abbreviations and definitions of standard industry terms, will be defined later in this press release. Unless otherwise stated, all amounts are quoted in Canadian dollars (CDN$).
1 Source: CAOEC, monthly contractor summary.
Year-to-date operating performance in 2021:
2 Source: CAOEC, monthly contractor summary.
(In thousands, except for shares and per share amount)
Adjusted EBITDA as a percentage of revenue
Cash flow from operating activities (used in)
Increase property and equipment
– Basic and diluted net loss per share
Weighted average number of shares
Ordinary shares outstanding at the end of the period
(1) Please refer to the "Non-IFRS Measures" included in this press release.
– Average number of active rigs
Rig utilization rate-operating days
CAOEC industry average utilization rate-days of operation (3)
– Average number of active rigs
Revenue per business day (USD)
Rig utilization rate-operating days
– Average number of active rigs
Please refer to the "defining terms" contained in this press release.
Source: Canadian Energy Contractors Association ("CAOEC") Monthly Contractor Summary. The CAOEC industry average is based on the number of operating days divided by the total available drilling days.
Excluding the three months and nine months ended September 30, 2020, the revenue from the difference commitment of the US$300,000 and the US$5 million in accepting or paying contracts.
Financial status (in thousands)
Western is an energy services company that provides contract drilling services and production services in Canada and the United States through its various divisions, subsidiaries and First Nations joint ventures.
Western has 57 drilling rigs specially designed for drilling complex horizontal wells in Canada and the United States. Western is currently the fourth largest drilling contractor in Canada, based on the CAOEC registered drilling platform3.
Production Services mainly provides oil well maintenance and oilfield equipment leasing services in Canada. Western has 66 workover rigs and is the third largest workover company in Canada, based on the workover rigs registered by CAOEC4.
Western’s contract drilling and maintenance drilling team includes the following:
(1) Please refer to the "definition terms" in this press release.
The price of crude oil and natural gas affects the cash flow of Western customers, which in turn affects the demand for Western services. The following table summarizes the average crude oil and natural gas prices and average foreign exchange rates for the three and nine months ending September 30, 2021 and 2020.
Average crude oil and natural gas prices(1)(2)
West Texas Intermediate Crude Oil (USD/Barrel)
Selection of Western Canada (CDN$/bbl)
30-day spot AECO (CDN$/mcf)
U.S. dollar to Canadian dollar
(1) Please refer to "abbreviations" in this press release. (2) Source: Sproule price forecast on September 30, 2021, historical prices.
Compared with the same period last year, West Texas Intermediate Crude Oil (“WTI”) increased by an average of 72% and 69%, respectively, for the three and nine months ended September 30, 2021. Similarly, compared to the same period last year, the price of Western Canada Select ("WCS") crude oil increased by 69% and 98%, respectively, for the three and nine months ending September 30, 2021. Crude oil prices in Canada and the United States in 2020 have been severely affected by the COVID-19 pandemic. However, as the demand for crude oil rebounds and vaccines continue to be launched globally, pricing in 2021 has improved. Natural gas prices in Canada also strengthened in 2021, as the 30-day spot AECO prices for the three and nine months ending September 30, 2021 increased by 58% and 56%, respectively, compared to the same period last year. Compared with the same period of the previous year, the USD/Canadian dollar exchange rate weakened in the three and nine months ending September 30, 2021, which affected the cash flow of Western Canada’s customers and offset the impact of this increase in pricing . Sell goods priced in U.S. dollars.
3 Source: CAOEC contractor summary as of October 25, 2021. 4 Source: CAOEC fleet list as of October 25, 2021.
In the United States, industry activity improved in the third quarter of 2021. According to a report by Baker Hughes5, as of September 30, 2021, the number of drilling rigs in use in the United States has increased by about 98% to 528, compared with 266 in the same period. The drilling platform on September 30, 2020. However, the ongoing COVID-19 pandemic continues to have an impact on industry activities in the United States and Canada in 2021. Prior to the COVID-19 pandemic, industry concerns about market access, enhanced supervision, and a general customer preference for returning cash to shareholders or repaying debt, rather than increasing production through drills in Canada and the United States. The number of active rigs of WCSB increased from 71 active rigs on September 30, 2020 to 164 active rigs on September 30, 2021. CAOEC6 reported that for drilling in Canada, WCSB’s total operating days increased compared to the same period last year, and revenue for the three months ended September 30, 2021 was approximately 210%. For the nine months ended September 30, 2021, WCSB's total operating days increased by approximately 38% compared to the same period last year.
Due to the successful launch of the COVID-19 vaccine and the lifting of government restrictions, the activity level in 2021 has increased, coupled with the limited capital expenditure for maintenance of the drilling fleet in previous years, as previously announced, Western has increased its capital budget from 2021. US$2 million has increased to approximately US$8 million. The revised capital budget is expected to include USD 7 million in maintenance capital and USD 1 million in expansion capital, of which USD 5 million is allocated to the contract drilling department and USD 3 million is allocated to the production service department. Western believes that the revised 2021 capital budget provides a way to use cash resources carefully to manage its balance sheet. Western will continue to manage its costs in a rigorous manner and make necessary adjustments to its capital plans as customer needs change. Currently, 14 Western drilling rigs and 26 Western oil well maintenance rigs are in operation.
Although crude oil prices reached historical lows in 2020 due to demand disruption caused by the COVID-19 pandemic, in 2021, crude oil prices began to rebound. However, there is now uncertainty regarding the timing of the distribution of the COVID-19 vaccine and the potential impact of COVID-19 variants on possible future government restrictions, both of which will have an impact on near-term demand. The exact duration and extent of the adverse effects of the current macroeconomic environment and the COVID-19 pandemic on Western's customers, operations, business and global economic activities are still highly uncertain. In addition, the executive order of the President of the United States in January 2021 canceled the permit for the construction of the Keystone XL pipeline, the uncertainty of the completion time of the cross-mountain pipeline expansion project, and the threat of closure of Onkyo Line 5. All of these have led to continued uncertainty in the ability to deliver food. However, the activity levels in Canada and the United States for the remainder of 2021 are expected to be slightly higher than 2020 levels. Controlling fixed costs, maintaining the strength and flexibility of the balance sheet, and responding to the unprecedented market downturn are the company's top priorities because the price and demand for Western services are still below historical levels. Western continues to look for further opportunities to streamline its support structure and implement additional cost control measures.
As of September 30, 2021, Western has drawn US$8.4 million from its US$60 million credit line, including a US$50 million syndicated first lien credit line ("revolving line") and US$10 million of committed operations The quota ("operating quota" and collectively referred to as "credit facility"), expires on July 1, 2022. Western has drawn $12.5 million from its six-year commitment non-revolving loan from the HSBC Bank of Canada ("HSBC"), with the participation of the Business Development Department of Canada ("BDC"). "And "HSBC financing"), the financing will expire on December 31, 2026. Western currently has US$211.3 million in second lien secured term loan financing ("second lien financing"), which will be Expires on January 31, 2023.
Canadian oilfield service activities will be affected by the continued development of the resource areas in Alberta and northeastern British Columbia. These resource areas will be affected by pipeline construction, environmental regulations and the level of investment in Canada. In the short term, the biggest challenge facing the oilfield services industry is the lack of qualified on-site personnel and ongoing liquidity issues, because customers generally prefer to return cash to shareholders through stock repurchase, increase dividends or repay debt, rather than increase production. In the medium term, Western's drilling fleet is in a good position to benefit from the LNG Canada LNG project currently under construction in British Columbia. The West still believes that its modern drilling and maintenance rig fleet, reputation and strict cash management provide the West with a competitive advantage.
5 Source: Baker Hughes, 2021 rig number monthly press release.
6 Source: CAOEC, monthly contractor summary.
In this press release, Western uses certain measurement standards that do not have the standardized meaning of the International Financial Reporting Standards ("IFRS"). These measures are derived from the information reported in the condensed consolidated financial statements and may not be comparable with similar measures provided by other reporting issuers. These measures are described and introduced in this press release, with the purpose of providing shareholders and potential investors with more information about the company. The non-IFRS measures used in this press release are identified and defined as follows:
Interest and finance costs, taxes, depreciation and amortization, other non-cash items, and income before one-time gains and losses ("Adjusted EBITDA") is a useful supplementary measure because management and other stakeholders (including current (And potential stakeholders) to use it for investors to analyze the company’s main business activities. Adjusted EBITDA provides an indicator of the results produced by the company’s main operating segments, which helps management monitor current and forecast future operations because of certain non-core items such as interest and financial costs, taxes, depreciation and amortization , And other non-core projects. Cash items and one-time gains and losses are deleted. The closest IFRS measure is the net loss of the combined result.
The following table provides the reconciliation of the net loss and adjusted EBITDA disclosed in the condensed comprehensive operating and comprehensive income statement:
Impairment of property and equipment
Average number of rigs in service (contracted drilling): Calculated by multiplying the rig utilization rate by the average number of rigs in the company’s fleet during the period.
Average number of rigs in service (production service): The calculation method is the utilization rate of service rigs multiplied by the average number of service rigs in the company's fleet during the period.
Rig utilization rate: Calculated based on the number of operating days divided by the number of available days.
Operating days: Defined as the number of contract drilling days, calculated based on the release from drilling to the rig.
Service time: Definition and completed service time.
Service rig utilization rate: Calculated based on the number of service hours divided by the number of available hours, that is, 10 hours a day, and each well serves the rig, 365 days a year.
Cardium-class rig: Defined as any contract rig with a total hook load less than or equal to 399,999 pounds (or 177,999 daN).
Monterey rig: Defined as any contract rig with a total hook load between 400,000 pounds (or 178,000 daN) and 499,999 pounds (or 221,999 daN).
Duvernay-class rig: Defined as any contract rig with a total hook load equal to or greater than 500,000 pounds (or 222,000 daN).
This press release contains certain statements or disclosures related to Western that are based on Western expectations and assumptions made by Western and currently available information, which may constitute forward-looking information under applicable securities laws. All information and statements contained herein are not clear historical information in nature, and constitute forward-looking information, as well as information such as "may", "will", "should", "may", "expect", "intend", "anticipate" , "Believe", "estimate", "plan", "potential", "continue", "expect" or the negation of these terms or other similar terms are usually intended to identify forward-looking information. This type of information represents the company’s internal forecasts, estimates, or beliefs, including the prospects for increasing the estimated amount and timing of property and equipment, expected future debt levels and income, or other expectations, beliefs, plans, goals, assumptions, and about future events Or express intent or statement. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to be materially different from those expected in such forward-looking information.
In particular, the forward-looking information in this press release includes, but is not limited to, statements related to the following: commodity pricing; future demand for company services and equipment, especially considering the low commodity price environment associated with the COVID-19 pandemic and Relevant economic environment; the potential impact of the ongoing COVID-19 pandemic on the oil and gas industries in Canada and the United States, including the potential impact of vaccine launches and removal of government restrictions; pricing of company services and equipment; existing and future drilling wells in Canada and the United States The terms of the contract and the resulting income; the company's 2021 maintenance and expansion capital plan and its ability to adjust to customer needs; the company's liquidity requirements, including the current capital resources to pay the western financial obligations; the ability to transport crude oil Expectations of changes in pipeline development and related uncertainties; expectations of the benefits of the British Columbia LNG Canada natural gas project to the company and its drilling fleet; the potential impact of changes in laws, government, and environmental regulations; and Canadian crude oil and natural gas Expectations of continued industry investment; development of resource areas in Alberta and British Columbia; expectations related to producer expenditures and oilfield service activity levels; the company’s method of managing its budget and operations; the company’s ability to maintain a competitive advantage; and the company The ability to find and maintain sufficient on-site staff.
Important assumptions made in this press release for forward-looking statements include, but are not limited to: the level of demand and pricing of oilfield services; the demand for crude oil and natural gas and the prices and fluctuations of crude oil and natural gas; commodity pricing pressure; the relationship between the company and its important customers The company’s continuous business relationship; the company’s competitive advantage; the approval and development of crude oil transportation, pipelines and LNG export facilities; the company’s ability to finance its operations; the company’s cost structure and capital budget effectiveness; seasonal and weather conditions affect operations and The impact of facilities; the competitive environment that each business segment faces or may face in all aspects of its business and the company's competitive position in it; the ability of the company's business segments to obtain equipment (including spare parts and new technologies); information on the global economic situation Assumptions and the accuracy of the company’s expectations for 2021 and future market prospects; the company’s direct and indirect impact of the COVID-19 pandemic on our business, customers, business partners, employees, supply chain, other stakeholders, and the overall economy Expectations; changes in laws or regulations; currency exchange fluctuations; the company’s ability to attract and retain skilled labor and qualified management personnel; the ability to retain and attract important customers; the ability to maintain a satisfactory security record; and general business, Economic and market conditions.
Although Western believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, it should not rely excessively on these forward-looking statements and information, because Western cannot guarantee that they will prove to be correct. Due to forward-looking statements and information Involving future events and conditions, so by their nature, they involve inherent risks and uncertainties. Due to various factors and risks, the actual results may differ materially from the currently expected results. These include, but are not limited to, the risk that the improvement of the commodity price environment brought about by the introduction of vaccines and the lifting of restrictions by the government will not continue, resulting in price declines and low prices that will continue indefinitely, the impact of the COVID-19 pandemic and its impact on the economy The impact of the situation, restrictions imposed by public health authorities or governments, fiscal and monetary response measures by governments and financial institutions, the potential demand for issuing additional debt or equity, and the resulting dilution of shareholders’ equity, as well as impacts on global supply chains and other general industries, Disturbances in economic, market and business conditions. Readers are reminded that the above list of risks, uncertainties and assumptions is not exhaustive. More information on these and other risk factors that may affect Western’s operations and financial performance is discussed under the heading “Risk Factors” in Western’s Annual Information Sheet for the year ended December 31, 2020, available on the SEDAR website www.sedar visit .com. The forward-looking statements and information contained in this press release are made as of the date of this press release. Western assumes no obligation to publicly update or revise any forward-looking statements and information, whether due to new information, future events, or otherwise, unless applicable The securities law of China has this requirement.
SOURCE Western Energy Services Corporation
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