Western Energy Releases Q2 Update

Western Energy Services (TSX:WRG) announced the release of its second quarter 2018 financial and operating results.

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 in Canada, and its wholly owned subsidiary, Stoneham Drilling Corporation in the United States.

As quoted in the press release:

Second Quarter 2018 Operating Results:

• Second quarter operating revenue improved by C$0.5 million to C$31.0 million in 2018 as compared to C$30.5 million in 2017. In the contract drilling segment, operating revenue totaled C$21.8 million in the second quarter of 2018, a decrease of C$1.0 million (or 4 percent) as compared to $22.8 million in the second quarter of 2017, while in the production services segment, operating revenue totaled C$9.2 million for the three months ended June 30, 2018, as compared to C$7.7 million in the three months ended June 30, 2017, an increase of C$1.5 million (or 20 percent). While activity was lower in the contract drilling segment, improved pricing in all divisions, as well as higher utilization in the production services segment impacted Operating Revenue as described below:

  • Drilling rig utilization – Operating days in Canada averaged 17 percent in the second quarter of 2018 compared to an average of 19 percent in the second quarter of 2017, reflecting a 200 basis points (“bps”) decrease. The decrease in activity is attributable to some of Western’s customers deferring their drilling programs in the second quarter of 2018 to the latter half of 2018. Second quarter 2018 drilling rig utilization of 17 percent was consistent with the Canadian Association of Oilwell Drilling Contractors (“CAODC”) industry average of 17 percent, whereas in the second quarter of 2017, drilling rig utilization of 19 percent represented a premium of 100 bps to the industry average. The decrease in the company’s utilization premium to the industry average in the second quarter of 2018 is a function of a smaller industry rig fleet, as rigs continue to be decommissioned or moved out of the Western Canadian Sedimentary Basin (“WCSB”). Western’s market share, represented by the company’s operating days as a percentage of the CAODC’s total operating days in the WCSB, remained relatively consistent at 8.0 percent in the second quarter of 2018, as compared to 8.4 percent in the second quarter of 2017. While utilization decreased during the quarter, pricing continued to increase and resulted in a 12 percent improvement in operating revenue per billable day in the second quarter of 2018, as compared to the same period in the prior year. The increase in pricing is a result of the company being successful in steadily raising rates over the last twelve months as the energy industry continues to recover from a multi-year downturn.

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