Canada Dividend Investor: WRG - <span class="din">Western Energy Services Corp. Releases Second Quarter 2012 Financial Results and Declares Initial Dividend</span> (CAD 0.30)

Company: Western Energy Services Corp
Stock Name: WRG
Amount: CAD 0.30
Announcement Date: 08/08/2012
Record Date: 26/09/2012

Dividend Detail:

CALGARY, Aug. 8, 2012 /CNW/ - Western Energy Services Corp. ("Western"
or the "Company") (TSX: WRG) is pleased to release its second quarter
2012 financial and operating results.�� Additional information relating
to the Company, including the Company's financial statements and
management's discussion and analysis as at and for the three and six
months ended June 30, 2012 and 2011 will be available on SEDAR at www.sedar.com.�� All amounts are denominated in Canadian dollars (CDN$) unless
otherwise identified.

Highlights:

Revenue totalled $44.8 million in the second quarter of 2012, a $14.5
million increase (or 48%) over the same period in the prior year due to
an increased drilling rig fleet and improved day rates in Canada which
was partially offset by lower activity in Canada;

Second quarter EBITDA increased by $0.9 million (or 10%) to $9.4 million
in 2012 (21% of consolidated revenues), as compared to $8.5 million in
2011 (28% of consolidated revenues).�� The increase in EBITDA is due to
Western's growth in the contract drilling segment, however the decrease
as a percentage of revenue is mainly due to higher overhead costs
required to support the Company's growth and maintenance costs, for
items such as budgeted recertifications and discretionary rig painting,
that were planned for the second quarter to take advantage of downtime
during spring breakup to help minimize revenue downtime in the future.��
EBITDA as a percentage of revenue, after normalizing for $2.3 million
in discretionary rig painting that was incurred in the period, would
have been approximately 26%;

Net income totalled $0.8 million ($0.01 per share) in the second quarter
of 2012, a decrease of $3.4 million as compared to net income of $4.2
million ($0.08 per share) in the same period of the prior year.�� The
decrease in net income is mainly due to increased finance costs of $2.7
million, as a result of Western's senior unsecured notes issuance in
January 2012; increased depreciation expense of $2.1 million, as a
result of an increase in drilling rig operating days; and increased
income taxes of $2.4 million due to a recovery in the prior year
relating to tax planning associated with the acquisition of Stoneham
Drilling Trust.�� These factors were partially offset by reduced
acquisition costs as $2.6 million was incurred in the prior year
relating to the acquisition of Stoneham Drilling Trust;

In Canada, utilization per operating day in the contract drilling
segment averaged 27% in the second quarter as compared to the CAODC
industry average of 21%;

In the United States, utilization per operating day in the contract
drilling segment averaged 71% in the second quarter;

The Company's well servicing segment worked a total of 844 service hours
in the second quarter of 2012, for an average utilization of 22%;

During the second quarter of 2012, the Company extended the maturity on
its $125.0 million revolving credit facility by one year to June 7,
2015.

Selected Financial Information

��

(stated in thousands, except share and per share amounts)

��

Three months ended June 30

��

Six months ended June 30

Financial Highlights

��

�� 2012

��

�� 2011

��

Change

��

�� 2012

��

�� 2011

��

Change

Revenue

��

44,819

��

30,340

��

�� 48%

��

155,706

��

80,433

��

�� 94%

Gross Margin⁽¹⁾

��

14,108

��

11,274

��

�� 25%

��

64,321

��

32,662

��

�� 97%

Gross Margin as a percentage of revenue

��

31%

��

37%

��

�� (16%)

��

41%

��

41%

��

�� 0%

EBITDA⁽¹⁾

��

9,364

��

8,533

��

�� 10%

��

53,606

��

27,459

��

�� 95%

EBITDA as a percentage of revenue

��

21%

��

28%

��

(25%)

��

34%

��

34%

��

�� 0%

Cash flow from operating activities

��

58,930

��

21,026

��

180%

��

84,647

��

30,641

��

�� 176%

Capital expenditures

��

39,602

��

14,667

��

170%

��

76,005

��

29,606

��

�� 157%

Net income

��

827

��

4,193

��

(80%)

��

23,835

��

15,537

��

�� 53%

��- basic net income per share⁽²⁾

��

0.01

��

0.08

��

(88%)

��

0.41

��

0.35

��

�� 17%

��- diluted net income per share⁽²⁾

��

0.01

��

0.08

��

(88%)

��

0.39

��

0.33

��

�� 18%

Weighted average number of shares

��

��- basic⁽²⁾

��

58,533,287

��

51,010,095

��

�� 15%

��

58,533,287

��

44,541,870

��

�� 31%

��- diluted⁽²⁾

��

60,429,663

��

53,028,369

��

�� 14%

��

60,612,851

��

46,533,545

��

�� 30%

Outstanding common shares as at period end

��

58,533,287

��

58,533,287

��

�� 0%

��

58,533,287

��

58,533,287

��

�� 0%

(1)��	See financial measures reconciliations.
(2)��	Prior year amounts adjusted to reflect the 20:1 share consolidation completed on June 22, 2011.
��	��

��

Financial Position at (stated in thousands)

��

June 30, 2012

��

June 30, 2011

��

Change

��

Dec 31, 2011

��

Change

Working capital

��

65,582

��

23,384

��

180%

��

39,874

��

64%

Property and equipment

��

536,579

��

432,980

��

24%

��

473,930

��

13%

Total assets

��

699,356

��

543,117

��

29%

��

619,645

��

13%

Long term debt

��

171,764

��

116,186

��

48%

��

108,039

��

59%

��

Three months ended June 30

��

Six months ended June 30

Operating Highlights

��

�� 2012

��

�� 2011

��

Change

��

�� 2012

��

2011

��

Change

Contract Drilling

��

Canadian Operations: ��

��

Contract drilling rig fleet:

��

��- Average

��

46%

��

54%

��- End of period

��

Drilling revenue per operating day (CDN$)

��

33,507

��

29,124

��

15%

��

34,117

��

28,678

��

19%

Drilling rig operating days⁽¹⁾

��

998

��

1,011

��

(1%)

��

3,873

��

2,774

��

40%

Drilling rig utilization per revenue day⁽²⁾

��

30%

��

44%

��

(32%)

��

60%

��

67%

��

(10%)

Drilling rig utilization rate per operating day⁽¹⁾

��

27%

��

40%

��

�� (33%)

��

54%

��

60%

��

(10%)

CAODC industry average utilization rate⁽¹⁾

��

21%

��

24%

��

�� (13%)

��

43%

��

46%

��

(7%)

��

United States Operations:

��

Contract drilling rig fleet:

��

��- Average

��

⁽³⁾

��

�� 67%

��

⁽³⁾

��

67%

��- End of period

��

�� 67%

��

67%

Drilling revenue per operating day (US$)

��

33,560

��

39,970

��

(16%)

��

33,566

��

39,970

��

(16%)

Drilling rig operating days⁽¹⁾

��

322

��

�� 1,300%

��

677

��

2,843%

Drilling rig utilization per revenue day⁽²⁾

��

89%

��

66%

⁽³⁾

��

35%

��

94%

��

66%

⁽³⁾

��

42%

Drilling rig utilization per operating day⁽¹⁾

��

71%

��

36%

⁽³⁾

��

�� 97%

��

74%

��

36%

⁽³⁾

��

106%

��

Well Servicing

��

Well servicing rig fleet:

��

��- Average

��

100%

��

100%

��- End of period

��

100%

��

100%

Revenue per service hour (CDN$)

��

579

��

100%

��

580

��

100%

Total service hours

��

844

��

100%

��

1,274

��

100%

Service rig utilization rate⁽⁴⁾

��

�� 22%

��

100%

��

23%

��

100%

(1)��	��	Drilling rig utilization rate per operating day and drilling rig operating days are calculated on a spud to rig release basis.
(2)��	��	Drilling rig utilization rate per revenue day is calculated based on operating and move days.
(3)��	��	Calculated from the date of acquisition of the United States operations (June 10, 2011).
(4)��	��	Service rig utilization rate calculated based on full utilization being 10 hour days, 365 days per year.
��	��	��

Outlook

Western currently has a drilling rig fleet of 47 rigs, with an
additional 3 telescopic ELR double drilling rigs under construction.��
Western is the sixth largest drilling contractor in Canada with a fleet
of 42 rigs.�� Currently, Western has five drilling rigs deployed in the
United States.�� Additionally, Western currently has five well servicing
rigs operating in the Lloydminster area, with an additional five under
construction.

Western's drilling rig fleet is specifically suited for the current
market which is focused on drilling wells of increased complexity.�� In
total, approximately 96% of Western's fleet are ELR rigs with depth
ratings greater than 3,000 meters and all of Western's rigs are capable
of drilling resource base horizontal wells.�� Approximately 50% of
Western's fleet is currently under long term take-or-pay contracts with
an average remaining contract life of approximately 1.5 years, which
provide a base level of revenue.�� These contracts typically generate
250 operating days per year in Canada, as the annual spring breakup
restricts activity during the second quarter, while in the United
States these contracts typically range from 330 to 365 revenue
generating days per year.

Western's 2012 capital spending is expected to total approximately $140
million, which includes approximately $80 million in expansion capital
and $60 million in maintenance capital.�� Expansion capital in the
contract drilling segment aggregates to approximately $65 million and
mainly relates to Western's drilling rig build program which includes
the completion of seven telescopic ELR double drilling rigs in 2012,
four of which have already been commissioned.�� Of the remaining three
drilling rigs currently under construction, one is expected to be
completed in each of the next three quarters.�� Expansion capital in the
well servicing segment relates to the construction of five new
internally guyed single service rigs, which are anticipated to be
completed in the latter part of the fourth quarter of 2012 and early in
the first quarter of 2013.�� Maintenance capital relates to various
items such as rotational equipment, drill pipe, replacement parts and
infrastructure upgrades.

In 2012, the price for natural gas has remained soft, with the AECO
30-day spot rate on average decreasing by approximately 42%.�� While the
year over year average WTI crude oil price has remained constant,
pricing differentials in Canada have increased and as such the year
over year average Edmonton Par price has decreased by approximately
7%.�� The lower commodity price environment for crude oil and natural
gas, coupled with the uncertain economic environment, due in part to
the European debt crisis, is expected to result in a modest decrease in
drilling activity in the second half of 2012 as compared to the same
period of the prior year.�� As such, the Company expects lower
utilization in 2012 as compared to the prior year, when industry
utilization reached a five-year high.�� However, the Company does not
expect significant pricing pressure on day rates on the deeper rigs in
the industry's fleet.�� Notwithstanding the softening commodity price
environment, Western continues to believe that additional rig build
opportunities in both the contract drilling and well servicing segments
will be available.�� Currently, the largest challenges facing the
drilling industry are pricing differentials on Canadian crude oil, low
natural gas prices, and the challenge to attract and retain skilled
labour.�� The Company believes Western's modern drilling rig fleet,
which has an average life of less than six years, and corporate culture
will provide a distinct advantage in attracting qualified individuals.��
Western is of the view, that its modern ELR rig fleet, strong customer
base and solid reputation will provide a competitive advantage which
will enable the Company to maintain its growth strategy and above
industry average utilization through a period of lower commodity prices
and drilling activity.

Initial Dividend

Western is pleased to announce the Board of Directors' intention to
implement a dividend policy that provides for an annual cash dividend
of $0.30 per share.�� As such, the Board of Directors has declared an
initial quarterly cash dividend of 7.5 cents per share, payable on
October 12, 2012, to shareholders of record at the close of business on
September 28, 2012. The dividends will be eligible dividends for
Canadian income tax purposes.��

Based on Western's strong operating and financial results to date, our
expectations for continued demand over the next 12-24 months and given
our balance sheet strength, the Board of Directors felt it was
appropriate to implement a quarterly dividend at this time. On a
prospective basis, the declaration of dividends will be determined on a
quarter-by-quarter basis by the Board of Directors. We believe that
this sustainable dividend balances rewarding our shareholders with a
significant dividend payment and the ability to continue to execute our
aggressive growth plans.

Financial Measures Reconciliations

Western uses certain measures in this press release which do not have
any standardized meaning as prescribed by International Financial
Reporting Standards ("IFRS").�� These measures may not be comparable to
similar measures presented by other reporting issuers.�� These measures
have been described and presented in this press release in order to
provide shareholders and potential investors with additional
information regarding the Company.

Gross Margin

Management believes that in addition to net income, Gross Margin is a
useful supplemental measure as it provides an indication of the results
generated by Western's principal operating activities prior to
considering administrative expenses, how those activities are financed,
the impact of foreign exchange, how the results are taxed, how funds
are invested, and how non-cash charges and one-time gains or losses
affect results.

EBITDA

Management believes that in addition to net income, earnings from
continuing operations before interest and finance costs, taxes,
depreciation and amortization, other non-cash items and one-time gains
and losses ("EBITDA") as derived from information reported in the
condensed consolidated statements of operations and comprehensive
income is a useful supplemental measure as it provides an indication of
the results generated by the Company's principal operating segments
similar to Gross Margin but also factors in the cash administrative
expenses incurred in the period.

Operating Earnings

Management believes that in addition to net income, Operating Earnings
is a useful supplemental measure as it provides an indication of the
results generated by the Company's principal operating segments similar
to EBITDA but also factors in the depreciation expense charged in the
period.

The following table provides a reconciliation of net income under IFRS
as disclosed in the condensed consolidated statements of operations and
comprehensive income (loss) to Gross Margin, EBITDA and Operating
Earnings:

��

�� Three months ended June 30

��

Six months ended June 30

(stated in thousands)

��

2012

��

2011

��

2012

��

2011

��

Gross Margin

��

14,108

��

11,274

��

64,321

��

32,662

Add (subtract):

��

�� Administrative expenses

��

(5,286)

��

(2,992)

��

(11,872)

��

(5,634)

�� Depreciation - administrative

��

178

��

372

��

136

�� Stock based compensation-administrative

��

364

��

169

��

785

��

295

EBITDA

��

9,364

��

8,533

��

53,606

��

27,459

�� Depreciation - operating

��

(4,941)

��

(2,954)

��

(14,605)

��

(7,737)

�� Depreciation - administrative

��

(178)

��

(82)

��

(372)

��

(136)

Operating Earnings

��

4,245

��

5,497

��

38,629

��

19,586

�� Stock based compensation - operating

��

(116)

��

(67)

��

(258)

��

(116)

�� Stock based compensation-administrative

��

(364)

��

(169)

��

(785)

��

(295)

�� Finance costs

��

(3,250)

��

(509)

��

(6,031)

��

(1,071)

�� Other items

��

335

��

(2,335)

��

304

��

(1,372)

�� Income taxes

��

(23)

��

2,333

��

(8,024)

��

(1,664)

�� (Loss) income from discontinued operations

��

(557)

��

469

Net income

��

827

��

4,193

��

23,835

��

15,537

��

2012 Second Quarter Results Conference Call and Webcast

Western has scheduled a conference call and webcast to begin promptly at
12:00 p.m. MST (2:00 p.m. EST) on August 9, 2012.

The conference call dial-in number is 1-888-231-8191.

A live webcast of the conference call will be accessible on Western's
website at www.wesc.ca by selecting "Investor Relations", then "Webcasts".�� Shortly after the live webcast, an archived version will be
available for approximately 14 days.

An archived recording of the conference call will also be available
approximately one hour after the completion of the call until August
23, 2012 by dialing 1-855-859-2056 or 1-416-849-0833, passcode
12671917.

Forward-Looking Statements and Information:

This Press Release contains forward-looking statements and
forward-looking information within the meaning of applicable securities
laws.�� All statements other than statements of historical fact
contained in this Press Release may be forward-looking statements and
forward-looking information.�� In particular, forward-looking
information in this Press Release include, but are not limited to under
the heading "Outlook" the statements "Western's 2012 capital spending
is expected to total approximately $140 million, which includes
approximately $80 million in expansion capital and $60 million in
maintenance capital.�� Expansion capital in the contract drilling
segment aggregates to approximately $65 million and mainly relates to
Western's drilling rig build program which includes the completion of
seven telescopic ELR double drilling rigs in 2012, four of which have
already been commissioned.�� Of the remaining three drilling rigs
currently under construction, one is expected to be completed in each
of the next three years.�� Expansion capital in the well servicing
segment relates to the construction of five new internally guyed single
service rigs, which are anticipated to be completed in the latter part
of the fourth quarter of 2012 and early in the first quarter of 2013."
and the statements "The lower commodity price environment for crude oil
and natural gas, coupled with the uncertain economic environment, due
in part to the European debt crisis, is expected to result in a modest
decrease in drilling activity in the second half of 2012 as compared to
the same period of the prior year.�� As such, the Company expects lower
utilization in 2012 as compared to the prior year, when industry
utilization reached a five year high.�� However, the Company does not
expect significant pricing pressure on day rates on the deeper rigs in
the industry's fleet.�� Notwithstanding the softening commodity price
environment, Western continues to believe that additional rig build
opportunities in both the contract drilling and well servicing segments
will be available." and in addition, under the heading "Initial
Dividend" Western announced the "intention to implement a dividend
policy that provides for an annual cash dividend of $0.30 per share."��
These forward-looking statements and information are based on certain
key expectations and assumptions made by Western, including the
assumption that notwithstanding an expectation of lower utilization for
its services such lowered expectations will not be severe enough to
affect Western's ability to complete its currently planned expansion
capital program and to sustain an annual dividend of $0.30 per share.��
Although Western believes that the expectations and assumptions on
which such forward-looking statements and information are based are
reasonable, undue reliance should not be placed on the forward-looking
statements and information as Western cannot give any assurance that
they will prove to be correct.�� Since forward-looking statements and
information address future events and conditions, by their very nature
they involve 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, general
economic, market and business conditions.�� Readers are cautioned that
the foregoing list of risks and uncertainties is not exhaustive.��
Additional information on these and other risk factors that could
affect Western's operations and financial results are included in
Western's annual information form and the other disclosure documents
filed by Western with securities regulatory authorities which may be
accessed through the SEDAR website at www.sedar.com.�� 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 and forward-looking
statements and information, whether as a result of new information,
future events or otherwise, unless so required by applicable securities
laws.��

SOURCE: Western Energy Services Corp.

For further information:

Dale E. Tremblay��
Chief Executive Officer
403.984.5929
dtremblay@wesc.ca

Alex MacAusland��
President and COO
403.984.5932
amacausland@wesc.ca

Jeffrey K. Bowers
VP Finance and CFO
403.984.5933
jbowers@wesc.ca

Canada Dividend Investor

Wednesday, August 8, 2012

WRG - <span class="din">Western Energy Services Corp. Releases Second Quarter 2012 Financial Results and Declares Initial Dividend</span> (CAD 0.30)

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