Calfrac Well Services Ltd. (TSX-CFW) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2008.
PRESIDENT'S MESSAGE
I am pleased to present Calfrac's operating and financial highlights for the three and nine months ended September 30, 2008 and discuss our prospects for the remainder of the year. During the third quarter, our Company:
- enhanced the terms of a long-term fracturing contract with a major U.S. natural gas producer to include the provision of a second fracturing spread in Arkansas;
- increased the scale of cementing operations in the United States in order to meet increasing demand for the Company's services;
- expanded the Company's fracturing and coiled tubing customer base in Khanty-Mansiysk, Russia; and
- secured additional sources of supply for proppant, diesel fuel, nitrogen and carbon dioxide to support the Company's growing operations in the deeper, unconventional reservoirs of western Canada and the United States.
Financial Highlights
For the three months ended September 30, 2008, the Company:
- realized revenue of $149.5 million, an increase of 15 percent from the comparable period in 2007;
- earned net income of $11.2 million or $0.30 per share (basic) compared to $16.4 million or $0.45 per share (basic) in the same period in 2007; and
- exited the quarter in strong financial condition with working capital of $104.7 million.
For the nine months ended September 30, 2008, Calfrac:
- increased revenue by 11 percent from the first nine months of 2007 to $384.8 million;
- recorded net income of $10.0 million or $0.27 per share (basic);
- generated cash flow from operations before changes in non-cash working capital of $55.9 million or $1.48 per share (basic) compared to $68.1 million or $1.87 per share (basic) in the same period of 2007; and
- achieved EBITDA of $57.2 million or $1.52 per share (basic).
Operational Highlights
Canada
Activity levels for the Company's fracturing and coiled tubing operations located in the deeper basins of northern Alberta and northeastern British Columbia were very strong during the third quarter of 2008. Natural gas drilling activity in western Canada continues to be focused on emerging unconventional resource plays such as the Montney and Horn River plays. Large, multiple-stage fractures are used to enhance natural gas production from these tight gas sand and shale reservoirs, which typically require significant hydraulic horsepower and technological capabilities - and are precisely the areas in which Calfrac excels. During the quarter, equipment and personnel from central and southern Alberta were temporarily redeployed to support Calfrac's operations in the deeper regions of the Western Canada Sedimentary Basin. Calfrac now generates the majority of its revenues from activities in the higher-growth portions of the Basin, a trend that is reflected in the growth of our average revenue per fracturing job, which was approximately $69,000 in the third quarter of 2008 compared to approximately $48,000 in the third quarter of 2007.
United States
During the third quarter of 2008, Calfrac's fracturing and cementing operations in the United States reached record levels primarily due to strong demand for the Company's services in western Colorado and Arkansas. Calfrac's fracturing operations based in Grand Junction continue to benefit from the commissioning of the Rocky Mountain Express Pipeline earlier in the year, which assisted in alleviating the natural gas take-away limitations in western Colorado. Fracturing equipment and personnel from the Denver Julesberg Basin were reallocated to the Piceance Basin in order to assist with meeting the strong demand for our fracturing services in that region.
Activity levels in the Fayetteville shale play located in Arkansas increased to record levels during the third quarter as a result of the industry trend towards completing larger, high-rate, multi-stage fracturing jobs. Stronger demand from new and existing cementing customers in this region also resulted in record activity levels and improved financial results for Calfrac's U.S. cementing operations. In September, the Company's existing commitment with a major U.S. oil and natural gas company was enhanced to include the provision of a second fracturing spread.
Industry pricing pressures in the United States have started to subside during the third quarter. The Company expects to realize improved pricing in the fourth quarter and, combined with high activity levels, this region will remain an important driver of the Company's overall financial performance into the future.
Russia
The Russian equipment fleet currently consists of three fracturing spreads and five coiled tubing units. This fleet recorded reasonably strong utilization throughout the Company's operating districts in Western Siberia during the third quarter. Calfrac is currently preparing tenders for the 2009 annual contract bid process and is optimistic about the Company's prospects for maintaining high equipment utilization in this geographic market.
Mexico
During the third quarter, Calfrac's fracturing operations in Mexico continued to progress through the start-up phase. From its district base in Reynosa, the Company currently operates two fracturing spreads servicing the Burgos field in northern Mexico. While activity to date has been lower than anticipated, we believe that this larger operating scale will provide the foundation for higher activity levels throughout the remainder of the year and improved financial performance in the future.
Argentina
In Argentina, the Company began cementing operations during the second quarter under the terms of a negotiated arrangement with a local oil and natural gas company. The Company's investment in Argentina is relatively small and we continue to monitor the local economic and political environment. Calfrac intends to grow these international operations as the oil and natural gas market expands into the future. -- www.cnxmarketlink.com
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