Press Release
July 25, 2022
CALGARY, ALBERTA – Western Energy Services Corp. (“Western” or the “Company”) (TSX: WRG) announces the release of its second quarter 2022 financial and operating results. Additional information relating to the Company, including the Company’s financial statements and management’s discussion and analysis as at June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 will be available on SEDAR at www.sedar.com. Non‐International Financial Reporting Standards (“Non‐IFRS”) measures and ratios, such as Adjusted EBITDA and Adjusted EBITDA as a percentage of revenue, as well as abbreviations and definitions for standard industry terms are defined later in this press release. All amounts are denominated in Canadian dollars (CDN$) unless otherwise identified.
Second Quarter 2022 Operating Results:
o In Canada, drilling rig utilization averaged 10% in the second quarter of 2022, compared to 9% in the second quarter of 2021. The increase in activity in the second quarter of 2022 was mainly attributable to the higher commodity prices resulting from the war in Ukraine, the COVID‐19 vaccination rollouts and the lifting of government restrictions which re‐opened the economy, compared to the second quarter of 2021 when the COVID‐19 pandemic reduced demand across the industry. The Canadian Association of Energy Contractors (“CAOEC”) industry average utilization of 23%1 for the second quarter of 2022 represented an increase of 800 basis points (“bps”) compared to the CAOEC industry average of 15% in the second quarter of 2021. Western’s market share, represented by the Company’s Operating Days as a percentage of the CAOEC’s total Operating Days in the Western Canadian Sedimentary Basin (“WCSB”), decreased to 3.3% for the second quarter of 2022, as compared to 6.2% in the same period of 2021, as a result of limited capital spent on rig upgrades during the economic downturn and wet weather in the areas the Company operates. Revenue per Operating Day averaged $29,800 in the second quarter of 2022, an increase of 34% compared to the same period of the prior year, mainly due to improved market rates, as well as the 2021 CAOEC wage increase that is passed through to the customer;
o In the United States (“US”), drilling rig utilization averaged 34% in the second quarter of 2022, compared to 21% in the second quarter of 2021, with Operating Days improving from 151 days in 2021 to 250 days in 2022. Revenue per Operating Day for the second quarter of 2022 averaged US$23,945, a 67% increase compared to US$14,312 in the same period of the prior year, mainly due to improved market conditions and changes in rig mix, as there was more activity with the Company’s higher spec rigs which command higher day rates; and
o In Canada, service rig utilization of 32% in the second quarter of 2022 was higher than 27% in the same period of the prior year, mainly due to improved activity resulting from higher commodity prices. Revenue per Service Hour averaged $943 in the second quarter of 2022 and was 38% higher than the second quarter of 2021, as a result of improved market conditions which led to higher hourly rates, as well as increased labour and fuel charges passed through to the customer. Higher pricing led to production services revenue totaling $13.5 million in the second quarter of 2022, an increase of $4.9 million or 57%, as compared to the same period in the prior year.
o As part of the Restructuring Transaction, on May 18, 2022, Western completed a rights offering to holders of its common shares on April 19, 2022 to subscribe for additional common shares (the “Rights Offering”), resulting in the issuance of an aggregate of 1,968,867,475 common shares in the capital of the Company at a price of $0.016 per share for aggregate gross proceeds of approximately $31.5 million. As the Rights Offering was fully subscribed, Western did not utilize a standby commitment whereby G2S2 Capital Inc. (“G2S2”), Armco Alberta Inc. (“Armco”) and MATCO Investments Ltd. (“Matco”), each a significant shareholder of the Company, agreed to acquire any common shares not subscribed for under the Rights Offering.
o $100.0 million of the principal amount owing to Alberta Investment Management Corporation (“AIMCo”), the lender under Western’s second lien term loan facility (the “Second Lien Facility”), was converted into 2 billion common shares at a conversion price of $0.05 per common share (the “Debt Exchange”), resulting in AIMCo holding approximately 49.7% of the common shares following closing of the Restructuring Transaction. In addition, $10.0 million of the proceeds from the Rights Offering was paid by Western to AIMCo to further reduce the principal amount outstanding under the Second Lien Facility, with the remaining $21.5 million of the proceeds, net of expenses of the Restructuring Transaction, being used primarily for upgrades to the Company’s rig fleet, as well as for general corporate purposes.
o Concurrent with the Debt Exchange and the repayment of $10.0 million of the principal amount of the Second Lien Facility, the Second Lien Facility was amended to provide for an extension of the maturity of the remaining principal amount of the Second Lien Facility from January 31, 2023 to May 18, 2026; and an increase in the interest rate from 7.25% to 8.5%.
o In addition, as part of the Restructuring Transaction, the senior secured credit facilities (the “Credit Facilities”) of the Company were amended with effect as of May 18, 2022, including amendments to (a) extend the maturity of the Credit Facilities from July 1, 2022 to May 18, 2025, (b) reduce the amount available under the Credit Facilities from $60.0 million to $45.0 million, and (c) revise certain financial covenants.
Details on the Restructuring Transaction are contained in Western’s short form prospectus dated April 11, 2022 and related documents filed under Western’s SEDAR profile on www.sedar.com.
Year to Date 2022 Operating Results:
o In Canada, drilling rig utilization averaged 21% for the six months ended June 30, 2022, compared to 15% for the six months ended June 30, 2021. The increase in activity in 2022 was mainly attributable to the higher commodity prices resulting from the war in Ukraine, the COVID‐19 vaccination rollouts and the lifting of government restrictions which re‐opened the economy, compared to the first half of 2021 when the COVID‐19 pandemic reduced demand across the industry. The CAOEC industry average utilization of 31%2 for the six months ended June 30, 2022 represented an increase of 1,000 bps compared to the CAOEC industry average of 21% for the six months ended June 30, 2021. Western’s market share, represented by the Company’s Operating Days as a percentage of the CAOEC’s total Operating Days in the WCSB, decreased to 5.4% for the first half of 2022, as compared to 7.5% in first half of 2021, as a result of limited capital spent on rig upgrades during the economic downturn and wet weather in the second quarter of 2022. Revenue per Operating Day averaged $27,172 for the six months ended June 30, 2022, an increase of 29% compared to the same period of the prior year, mainly due to improved market rates, as well as the 2021 CAOEC wage increase that is passed through to the customer;
o In the US, drilling rig utilization averaged 24% for the six months ended June 30, 2022, compared to 13% in the same period of 2021, with Operating Days improving from 189 days in 2021 to 350 days in 2022. Revenue per Operating Day for the six months ended June 30, 2022 averaged US$22,565, a 57% increase compared to US$14,366 for the six months ended June 30, 2021, mainly due to improved market conditions; and
o In Canada, service rig utilization of 40% for the six months ended June 30, 2022 was comparable to 39% for the six months ended June 30, 2021, mainly due to field crew shortages across the industry and very cold weather in the first quarter of 2022. Revenue per Service Hour averaged $902 for the six months ended June 30, 2022 and was 27% higher than the same period of 2021, as a result of improved market conditions which led to higher hourly rates, as well as increased labour and fuel charges passed through to the customer. Higher pricing led to production services revenue totalling $33.1 million for the six months ended June 30, 2022, an increase of $7.7 million or 30%, as compared to the same period in the prior year.
IBF4
108 total views, 2 views today