WESTERN ENERGY SERVICES CORP. RELEASES THIRD QUARTER 2018 FINANCIAL AND OPERATING RESULTS FOR IMMEDIATE RELEASE: Octber 24, 2018 CALGARY, ALBERTA Western Energy Services Crp. ( Western r the Cmpany ) (TSX: WRG) annunces the release f its third quarter 2018 financial and perating results. Additinal infrmatin relating t the Cmpany, including the Cmpany s financial statements and management s discussin and analysis as at and fr the three and nine mnths ended September 30, 2018 and 2017 will be available n SEDAR at www.sedar.cm. Nn-Internatinal Financial Reprting Standards ( Nn-IFRS ) measures and abbreviatins fr standard industry terms are included in this press release. All amunts are denminated in Canadian dllars (CDN$) unless therwise identified. Third Quarter 2018 Operating Results: Third quarter Operating Revenue imprved by $3.0 millin t $54.1 millin in 2018 as cmpared t $51.1 millin in 2017. In the cntract drilling segment, Operating Revenue ttalled $42.0 millin in the third quarter f 2018, an increase f $3.3 millin (r 9%) as cmpared t $38.7 millin in the third quarter f 2017. In the prductin services segment, Operating Revenue ttalled $12.1 millin fr the three mnths ended September 30, 2018, as cmpared t $12.4 millin in the three mnths ended September 30, 2017, a decrease f $0.3 millin (r 3%). While activity was lwer in the prductin services segment, imprved pricing in Canada, as well as higher activity in the cntract drilling segment impacted Operating Revenue as described belw: While Canadian crude il differentials have increased, abslute prices fr Canadian crude il have imprved. As such, drilling rig utilizatin Operating Days ( Drilling Rig Utilizatin ) in Canada averaged 38% in the third quarter f 2018 cmpared t an average f 36% in the third quarter f 2017, reflecting a 200 basis pints ( bps ) increase. The increase in activity is attributable t imprved demand fr Western s Cardium and Duvernay class rigs, in additin t Western s already well utilized Mntney class rigs. As a result, third quarter 2018 Drilling Rig Utilizatin f 38% represented a premium f 800 bps t the Canadian Assciatin f Oilwell Drilling Cntractrs ( CAODC ) industry average f 30%, an increase as cmpared t the third quarter f 2017 when Drilling Rig Utilizatin f 36% represented a premium f 700 bps t the industry average. Pricing cntinued t increase and resulted in a 7% imprvement in Operating Revenue per Billable Day in the third quarter f 2018, as cmpared t the same perid in the prir year. The increase in pricing is a result f the Cmpany being successful in steadily raising rates ver the last twelve mnths as the energy industry cntinues t recver frm a multi-year dwnturn; In the United States, imprved West Texas Intermediate ( WTI ) prices led t five f the Cmpany s six drilling rigs perating during the quarter, three f which were wrking n lng term cntracts. As a result, Operating Days increased by 2% in the third quarter f 2018 as cmpared t the same perid in the prir year. While activity increased, Drilling Rig Utilizatin decreased t 50% in the third quarter f 2018, cmpared t 59% in the same perid f the prir year, due t an increased rig fleet as ne Cardium class drilling rig frm the Canadian fleet was transferred t the United States fleet in late 2017. Operating Revenue per Billable Day was relatively cnsistent during the third quarter f 2018, decreasing by 1% as cmpared t the third quarter f 2017, as day rate increases n cntracted rigs ffset changes in the average rig mix; and Service rig utilizatin was 25% in the third quarter f 2018 cmpared t 27% in the same perid f the prir year. The decrease is due t lwer demand in a number f areas where the Cmpany perates as custmers deferred wrk amid widening crude il differentials, lack f available crews, and wet weather in the latter part f the quarter which impacted custmer prgrams. Hurly rates imprved during the third quarter f 2018, increasing by 4% as cmpared t the same perid in the prir year, due t the Cmpany actively increasing hurly rates and changes in the average rig mix. Lwer utilizatin, ffset partially by imprved pricing, led t a $0.5 millin (r 5%) decrease in well servicing Operating Revenue in the perid. Third quarter Adjusted EBITDA increased by $0.8 millin (r 12%) t $7.7 millin in the third quarter f 2018 as cmpared t $6.9 millin in the third quarter f 2017. The year ver year change in Adjusted EBITDA is due t imprved pricing in Canada, as well as higher activity in the cntract drilling segment, which was partially ffset by lwer activity in the prductin services segment. Administrative expenses, excluding depreciatin and stck based cmpensatin, decreased by $1.1 millin (r 20%) t $4.3 millin, as cmpared t $5.4 millin in the third quarter f 2017, mainly due t lwer emplyee related csts. The Cmpany incurred a net lss f $10.1 millin in the third quarter f 2018 ($0.11 per basic cmmn share) as cmpared t a net lss f $11.5 millin in the same perid in 2017 ($0.16 per basic cmmn share). The change can be attributed t the fllwing: A $0.9 millin decrease in finance csts, due t lwer ttal debt levels; A $0.8 millin increase in Adjusted EBITDA, mainly due t imprved pricing in Canada and increased activity in the cntract drilling segment; and A $0.1 millin decrease in ther items, which include gains and lsses n freign exchange and asset sales. Offsetting the abve mentined items was a $0.5 millin decrease in incme tax recvery due t imprved earnings befre taxes.
Third quarter 2018 capital expenditures f $3.8 millin included $1.6 millin f expansin capital and $2.2 millin f maintenance capital. In ttal, capital spending in the third quarter f 2018 decreased by $2.5 millin frm the $6.3 millin incurred in the third quarter f 2017. The Cmpany incurred expansin capital mainly related t drilling rig upgrades, as well as required maintenance capital, in the third quarter f 2018. Year t Date 2018 Operating Results: Operating Revenue fr the nine mnth perid ended September 30, 2018 decreased by $1.7 millin (r 1%) t $158.0 millin as cmpared t $159.7 millin fr the nine mnth perid ended September 30, 2017. Hwever, after nrmalizing fr $6.4 millin f shrtfall cmmitment revenue recgnized in the first quarter f 2017, Operating Revenue fr the nine mnths ended September 30, 2018 imprved by $4.7 millin (r 3%). In the cntract drilling segment, Operating Revenue ttalled $121.2 millin fr the nine mnths ended September 30, 2018, which after nrmalizing fr $6.4 millin f shrtfall cmmitment revenue recgnized in 2017, resulted in Operating Revenue imprving by $6.8 millin (r 6%). In the prductin services segment, Operating Revenue ttalled $37.1 millin fr the nine mnths ended September 30, 2018, as cmpared t $39.1 millin in the same perid f the prir year, a decrease f $2.0 millin (r 5%). While n a year t date basis activity was lwer in Canada, pricing in all divisins imprved which impacted Operating Revenue as described belw: Drilling Rig Utilizatin in Canada fr the nine mnth perid ended September 30, 2018 averaged 35%, cmpared t an average f 36% fr the nine mnth perid ended September 30, 2017, reflecting a 100 bps decrease. The decrease in activity is due t sme f Western s custmers deferring their drilling plans amid high differentials n Canadian crude il and lw natural gas prices. Drilling Rig Utilizatin f 35% in 2018 represented a premium f 600 bps t the CAODC industry average f 29%, whereas fr the nine mnths ended September 30, 2017, Drilling Rig Utilizatin f 36% represented a 700 bps premium t the industry average. The decrease in the Cmpany s utilizatin premium t the industry average in 2018 is a functin f a smaller industry rig fleet, as rigs cntinue t be decmmissined r mved ut f the Western Canadian Sedimentary Basin ( WCSB ). Western s market share, represented by the Cmpany s Operating Days as a percentage f the CAODC s ttal Operating Days in the WCSB, remained relatively cnsistent at 9.9% in the nine mnths ended September 30, 2018, as cmpared t 10.4% in the same perid f 2017. While utilizatin decreased during the nine mnths ended September 30, 2018, pricing cntinued t increase and resulted in a 9% imprvement in Operating Revenue per Billable Day in 2018, as cmpared t the same perid in the prir year. The increase in pricing is due t the Cmpany steadily raising rates ver the last twelve mnths, as the energy industry cntinues t recver frm a multi-year dwnturn; In the United States, imprved WTI prices led t five f the Cmpany s six drilling rigs perating during the perid. As a result, Operating Days increased by 9% fr the nine mnths ended September 30, 2018, as cmpared t the same perid in the prir year. While activity increased, Drilling Rig Utilizatin decreased t 44% fr the nine mnths ended September 30, 2018, as cmpared t 48% in the same perid f the prir year, due t an increased rig fleet as ne Cardium class drilling rig frm the Canadian fleet was transferred t the United States fleet in late 2017. Operating Revenue per Billable Day in the United States imprved by 4% in the nine mnths ended September 30, 2018, as cmpared t the same perid f the prir year, as the Cmpany has been able t raise day rates as cmmdity prices imprve in the United States; and Service rig utilizatin f 24% fr the nine mnths ended September 30, 2018 cmpared t 26% in the same perid f the prir year. The decrease is due t custmers deferring wrk amid widening crude il differentials, lack f available crews, and wet weather in the latter part f the third quarter f 2018. Hurly rates imprved fr the nine mnths ended September 30, 2018, increasing by 4% as cmpared t the same perid in the prir year, due t changes in the average rig mix and the Cmpany wrking t increase rates acrss all areas. Lwer utilizatin, partially ffset by imprved pricing, led t a $1.6 millin (r 5%) decrease in well servicing Operating Revenue in 2018. Adjusted EBITDA fr the nine mnths ended September 30, 2018 decreased by $1.9 millin (r 8%) t $23.7 millin as cmpared t $25.6 millin fr the nine mnths ended September 30, 2017. Hwever, after nrmalizing fr the $6.4 millin in shrtfall cmmitment revenue recgnized in the first quarter f 2017, Adjusted EBITDA imprved by $4.5 millin (r 23%), as cmpared t the same perid in the prir year. The year ver year decrease in Adjusted EBITDA is due t lwer activity and shrtfall cmmitment revenue in Canada, ffset by imprved pricing in all divisins and increased activity in the United States. Administrative expenses, excluding depreciatin and stck based cmpensatin, fr the nine mnth perid ended September 30, 2018 decreased by $2.6 millin (r 16%) t $14.2 millin, as cmpared t $16.8 millin in the same perid f the prir year, mainly due t lwer emplyee related csts. The Cmpany incurred a net lss f $31.5 millin fr the nine mnths ended September 30, 2018 ($0.34 per basic cmmn share) as cmpared t a net lss f $32.5 millin in the same perid in 2017 ($0.44 per basic cmmn share). The change can be attributed t the fllwing: A $1.9 millin decrease in Adjusted EBITDA, mainly due t lwer shrtfall cmmitment revenue; and A $1.7 millin decrease in incme tax recvery due t imprved earnings befre taxes. Offsetting the abve mentined items was: A $2.1 millin psitive change in ther items, f which $1.6 millin related t transactin csts incurred in the prir perid, cupled with gains and lsses n freign exchange and asset sales; A $1.9 decrease in finance csts, due t lwer ttal debt levels; and A $0.5 millin decrease in stck based cmpensatin expense.
Year t date capital expenditures f $13.9 millin included $7.3 millin f expansin capital and $6.6 millin f maintenance capital. In ttal, capital spending fr the nine mnths ended September 30, 2018 increased by $1.7 millin frm the $12.2 millin incurred in the same perid f the prir year. The Cmpany incurred expansin capital mainly related t drilling rig upgrades, as well as required maintenance capital, in 2018. On January 31, 2018, the Cmpany cmpleted the ne time draw f $215.0 millin n its 7.25% secnd lien secured term lan facility (the Secnd Lien Facility ). The prceeds frm the Secnd Lien Facility draw, alng with cash n hand and funds available under the $70.0 millin syndicated revlving credit facility (the Revlving Facility ) and the $10.0 millin cmmitted perating facility (the Operating Facility and tgether the Credit Facilities ) were used t redeem the $265.0 millin 7⅞% senir unsecured ntes (the Senir Ntes ) at their par value f $265.0 millin n February 1, 2018.
Selected Financial Infrmatin (stated in thusands, except share and per share amunts) Financial Highlights 2018 2017 Change 2018 2017 Change Revenue 58,879 54,131 9% 173,277 171,660 1% Operating Revenue (1) 54,071 51,111 6% 158,012 159,733 (1%) Grss Margin (1) 12,025 12,299 (2%) 37,858 42,424 (11%) Grss Margin as a percentage f Operating Revenue 22% 24% (8%) 24% 27% (11%) Adjusted EBITDA (1) 7,691 6,882 12% 23,700 25,628 (8%) Adjusted EBITDA as a percentage f Operating Revenue 14% 13% 8% 15% 16% (6%) Cash flw frm perating activities (1,968) 1,609 (222%) 28,209 25,441 11% Capital expenditures 3,776 6,349 (41%) 13,858 12,220 13% Net lss (10,108) (11,478) (12%) (31,530) (32,471) (3%) -basic net lss per share (0.11) (0.16) (31%) (0.34) (0.44) (23%) -diluted net lss per share (0.11) (0.16) (31%) (0.34) (0.44) (23%) Weighted average number f shares -basic 92,236,159 73,877,203 25% 92,197,414 73,823,970 25% -diluted 92,236,159 73,877,203 25% 92,197,414 73,823,970 25% Outstanding cmmn shares as at perid end 92,304,538 73,974,594 25% 92,304,538 73,974,594 25% (1) See Nn-IFRS measures included in this press release. Operating Highlights (1) 2018 2017 Change 2018 2017 Change Cntract Drilling Canadian Operatins: Cntract drilling rig fleet: -Average active rig cunt 20.6 20.2 2% 19.6 20.3 (3%) -End f perid 50 51 (2%) 50 51 (2%) Operating Revenue per Billable Day 17,961 16,825 7% 18,704 17,109 (3) 9% Operating Revenue per Operating Day 19,712 18,604 6% 20,680 18,862 (3) 10% Operating Days 1,729 1,681 3% 4,841 5,027 (4%) Drilling rig utilizatin - Billable Days 41% 40% 2% 39% 40% (3%) Drilling rig utilizatin - Operating Days 38% 36% 6% 35% 36% (3%) CAODC industry average utilizatin Operating Days (2) 30% 29% 3% 29% 29% - United States Operatins: Cntract drilling rig fleet: -Average active rig cunt 3.4 3.3 3% 2.9 2.8 4% -End f perid 6 5 20% 6 5 20% Operating Revenue per Billable Day (US$) 19,634 19,801 (1%) 20,493 19,763 4% Operating Revenue per Operating Day (US$) 21,951 21,832 1% 22,812 22,850 - Operating Days 278 272 2% 718 656 9% Drilling rig utilizatin - Billable Days 56% 65% (14%) 49% 56% (13%) Drilling rig utilizatin - Operating Days 50% 59% (15%) 44% 48% (8%) Prductin Services Well servicing rig fleet: -Average active rig cunt 16.3 17.7 (8%) 15.8 17.3 (9%) -End f perid 66 66-66 66 - Service rig Operating Revenue per Service Hur 653 629 4% 690 661 4% Service Hurs 15,026 16,328 (8%) 43,090 47,296 (9%) Service rig utilizatin 25% 27% (7%) 24% 26% (8%) (1) See Nn-IFRS measures included in this press release. (2) Surce: The Canadian Assciatin f Oilwell Drilling Cntractrs ( CAODC ). The CAODC industry average is based n Operating Days divided by ttal available days. (3) Excludes shrtfall cmmitment revenue frm take r pay cntracts f $6.4 millin fr the nine mnths ended September 30, 2017.
Financial Psitin at (stated in thusands) September 30, 2018 December 31, 2017 September 30, 2017 Wrking capital 18,694 62,866 46,184 Prperty and equipment 620,169 652,828 663,542 Ttal assets 669,079 760,504 737,385 Lng term debt 222,564 265,219 264,958 Western is an ilfield service cmpany fcused n three cre business lines: cntract drilling, well servicing and ilfield rental equipment services. Western prvides cntract drilling services thrugh its divisin, Hrizn Drilling ( Hrizn ) in Canada, and its whlly wned subsidiary, Stneham Drilling Crpratin ( Stneham ) in the United States ( US ). Western prvides well servicing and ilfield rental equipment services in Canada thrugh its whlly wned subsidiary Western Prductin Services Crp. ( Western Prductin Services ). Western Prductin Services divisin, Eagle Well Servicing ( Eagle ) prvides well servicing peratins, while its divisin, Aer Rental Services ( Aer ) prvides ilfield rental equipment services. Financial and perating results fr Hrizn and Stneham are included in Western s cntract drilling segment, while financial and perating results fr Eagle and Aer are included in Western s prductin services segment. Western has a drilling rig fleet f 56 rigs specifically suited fr drilling cmplex hrizntal wells. Western is currently the fifth largest drilling cntractr in Canada, based n the CAODC registered rigs, with a fleet f 50 rigs perating thrugh Hrizn. Of the Canadian fleet, 23 are classified as Cardium class rigs, 19 as Mntney class rigs and eight as Duvernay class rigs. As cmpared t the Cardium class rigs, the Mntney class rigs have a larger hklad, while the Duvernay class rigs have the largest hklad allwing the rig t supprt mre drill pipe dwnhle. Additinally, Western has six drilling rigs perating thrugh Stneham, including five Duvernay class triple drilling rigs. Western is als the fifth largest well servicing cmpany in Canada with a fleet f 66 rigs perating thrugh Eagle. Western s ilfield rental equipment divisin, which perates thrugh Aer, prvides ilfield rental equipment fr hydraulic fracturing services, well cmpletins and prductin wrk, cil tubing and drilling services. Crude il and natural gas prices impact the cash flw f Western s custmers, which in turn impacts the demand fr Western s services. The fllwing table summarizes average crude il and natural gas prices, as well as average freign exchange rates fr the three and nine mnths ended September 30, 2018 and 2017. Average crude il and natural gas prices (1)(2) 2018 2017 Change 2018 2017 Change Crude Oil West Texas Intermediate (US$/bbl) 69.61 48.16 45% 67.05 49.32 36% Western Canadian Select (CDN$/bbl) 54.33 47.27 15% 55.06 49.62 11% Natural Gas 30 day Spt AECO (CDN$/mcf) 1.26 1.65 (24%) 1.51 2.40 (37%) Average freign exchange rates (2) US dllar t Canadian dllar 1.31 1.25 5% 1.29 1.31 (2%) (1) See Abbreviatins included in this press release. (2) Surce: Blmberg WTI n average imprved in the third quarter f 2018 as cmpared t the secnd quarter f 2018, increasing by 2%, and was 45% higher cmpared t the same perid in the prir year. Similarly, WTI n average imprved in the nine mnths ended September 30, 2018 by 36% as cmpared t the same perid in the prir year. Fr Western s Canadian custmers, the impact f the US dllar when translating WTI int the Canadian dllar equivalent, resulted in a 51% and 34% increase respectively, fr the three and nine mnths ended September 30, 2018, as cmpared t the same perids in the prir year. Canadian heavy crude pricing weakened in the third quarter f 2018, as Western Canadian Select ( WCS ) n average decreased by 16% as cmpared t the secnd quarter f 2018, hwever imprved by 15% as cmpared t the same perid f the prir year. Similarly, WCS imprved by 11% in the nine mnths ended September 30, 2018, as cmpared t the nine mnths ended September 30, 2017. Natural gas prices declined in the three and nine mnths ended September 30, 2018, as the 30 day spt AECO price decreased by 24% and 37% respectively, ver the same perids f the prir year, hwever third quarter 2018 average AECO prices imprved marginally by 3% as cmpared t the secnd quarter f 2018. Imprved market cnditins in 2018 have led t a crrespnding increase in the demand fr ilfield services in the United States. As reprted by Baker Hughes, a GE Cmpany, the average number f active drilling rigs in the United States increased apprximately 11% and 18% respectively, fr the three and nine mnths ended September 30, 2018 as cmpared t the same perids in the prir year. Market cnditins in Canada have nt imprved t the same extent. Higher WTI prices have been largely ffset by increased differentials n Canadian crude il and lwer natural gas prices, cmbined with cntinued industry cncerns ver market access, increased regulatin, and the prevailing custmer preference t return cash t sharehlders, r pay dwn debt, rather than grw prductin. These factrs have resulted in a decrease in industry
activity in Canada. The CAODC reprted that fr drilling in Canada, the ttal number f Operating Days in the WCSB increased by apprximately 12% and 1% respectively, fr the three and nine mnths ended September 30, 2018, as cmpared t the same perids in the prir year. Outlk Currently, 31 f Western s drilling rigs are perating. Six f Western s 56 drilling rigs (r 11%) are under lng term take r pay cntracts, with ne expected t expire in 2018, tw expected t expire in 2019, tw expected t expire in 2020 and ne expected t expire in 2021. These cntracts each typically generate between 250 and 350 Billable Days per year. Western s capital budget fr 2018 remains unchanged and is expected t ttal $20 millin with $8 millin allcated fr expansin capital and $12 millin fr maintenance capital. Western believes the 2018 capital budget prvides a prudent use f cash resurces and will allw it t maintain its premier drilling and well servicing rig fleets, while remaining respnsive t custmer requirements. Western will cntinue t manage its peratins in a disciplined manner and make required adjustments t its capital prgram as custmer demand changes. Weak natural gas prices in Canada are expected t persist thrugh 2018. While WTI prices are much imprved, increased differentials n Canadian crude il and lwer natural gas prices have resulted in the capital budgets fr Western s Canadian custmers remaining relatively unchanged in 2018 cmpared t 2017. As such, year ver year activity levels fr the remainder f 2018 are expected t remain relatively cnsistent with 2017. Imprving grss margin cntinues t be a pririty fr the Cmpany and, as has been demnstrated ver the last six quarters, Western is wrking t implement higher rates with each rig that is awarded wrk. Prices fr Western s services remain belw histrical levels and will cntinue t impact Adjusted EBITDA and cash flw frm perating activities in the near term. Hwever, Western s variable cst structure and a prudent capital budget will aid in preserving balance sheet strength. As at September 30, 2018, Western had $12.0 millin drawn n its $80.0 millin Credit Facilities, which mature n December 17, 2020 and currently has $213.9 millin utstanding n its Secnd Lien Facility, which matures n January 31, 2023. Oilfield service activity in Canada will be affected by the develpment f resurce plays in Alberta and nrtheast British Clumbia which will be impacted by pipeline cnstructin, envirnmental regulatins including the implementatin f a price n carbn emissins in Alberta, and the level f investment in Canada. Currently, the largest challenges facing the ilfield service industry are limited take away capacity, cntinued custmer spending cnstraints relative t histrical levels, as a result f lw natural gas prices and differentials n Canadian crude il, and the increasing challenge f staffing field crews, particularly in the well servicing divisin. Western s rig fleet is well psitined t benefit frm the prpsed liquefied natural gas expansin in British Clumbia. It is als Western s view that its mdern drilling and well servicing rig fleets, reputatin, and disciplined cash management prvide a cmpetitive advantage which will enable the Cmpany t manage thrugh the current ilfield service envirnment. 2018 Third Quarter Financial and Operating Results Cnference Call and Webcast Western has scheduled a cnference call and webcast t begin prmptly at 9:00 a.m. MT (11:00 a.m. ET) n Thursday, Octber 25, 2018. The cnference call dial-in number is 1-888-390-0546. A live webcast f the cnference call will be accessible n Western s website at www.wesc.ca by selecting Investrs, then Webcasts. Shrtly after the live webcast, an archived versin will be available fr apprximately 14 days. An archived recrding f the cnference call will als be available apprximately tw hurs after the cmpletin f the call until Nvember 8, 2018 by dialing 1-888-390-0541, passcde 314867. Nn-IFRS Measures Western uses certain measures in this press release which d nt have any standardized meaning as prescribed by Internatinal Financial Reprting Standards ( IFRS ). These measures, which are derived frm infrmatin reprted in the cndensed cnslidated financial statements, may nt be cmparable t similar measures presented by ther reprting issuers. These measures have been described and presented in this press release in rder t prvide sharehlders and ptential investrs with additinal infrmatin regarding the Cmpany. These Nn-IFRS measures are identified and defined as fllws: Operating Revenue Management believes that in additin t revenue, Operating Revenue is a useful supplemental measure as it prvides an indicatin f the revenue generated by Western s principal perating activities, excluding flw thrugh third party charges such as rig fuel, which at the custmer s request may be paid fr initially by Western, then recharged in its entirety t Western s custmers. Grss Margin Management believes that in additin t net incme, Grss Margin is a useful supplemental measure as it prvides an indicatin f the results generated by Western s principal perating activities prir t cnsidering administrative expenses, depreciatin and amrtizatin, stck based cmpensatin, hw thse activities are financed, the impact f freign exchange, hw the results are taxed, hw funds are invested, and hw nncash items and ne-time gains and lsses affect results.
The fllwing table prvides a recnciliatin f revenue under IFRS, as disclsed in the cndensed cnslidated statements f peratins and cmprehensive incme, t Operating Revenue and Grss Margin: (stated in thusands) 2018 2017 2018 2017 Operating Revenue Drilling 42,045 38,711 121,186 120,754 Prductin services 12,100 12,411 37,062 39,094 Less: inter-cmpany eliminatins (74) (11) (236) (115) 54,071 51,111 158,012 159,733 Third party charges 4,808 3,020 15,265 11,927 Revenue 58,879 54,131 173,277 171,660 Less: perating expenses (63,137) (58,049) (184,703) (178,419) Add: Depreciatin perating 16,232 16,196 48,936 48,989 Stck based cmpensatin perating 51 21 348 194 Grss Margin 12,025 12,299 37,858 42,424 Adjusted EBITDA Management believes that in additin t net incme, earnings befre interest and finance csts, taxes, depreciatin and amrtizatin, ther nncash items and ne-time gains and lsses ( Adjusted EBITDA ) is a useful supplemental measure as it prvides an indicatin f the results generated by the Cmpany s principal perating segments similar t Grss Margin but als factrs in the cash administrative expenses incurred in the perid. Operating Earnings (Lss) Management believes that in additin t net incme, Operating Earnings (Lss) is a useful supplemental measure as it prvides an indicatin f the results generated by the Cmpany s principal perating segments similar t Adjusted EBITDA but als factrs in the depreciatin expense incurred in the perid. The fllwing table prvides a recnciliatin f net lss under IFRS, as disclsed in the cndensed cnslidated statements f peratins and cmprehensive incme, t earnings befre interest and finance csts, taxes, depreciatin and amrtizatin ( EBITDA ), Adjusted EBITDA and Operating Lss: (stated in thusands) 2018 2017 2018 2017 Net lss (10,108) (11,478) (31,530) (32,471) Add: Finance csts 4,574 5,521 14,447 16,352 Incme tax recvery (3,598) (4,071) (9,993) (11,713) Depreciatin perating 16,232 16,196 48,936 48,989 Depreciatin administrative 269 300 814 929 EBITDA 7,369 6,468 22,674 22,086 Add: Stck based cmpensatin perating 51 21 348 194 Stck based cmpensatin administrative 172 158 676 1,292 Other items 99 235 2 2,056 Adjusted EBITDA 7,691 6,882 23,700 25,628 Subtract: Depreciatin perating (16,232) (16,196) (48,936) (48,989) Depreciatin administrative (269) (300) (814) (929) Operating Lss (8,810) (9,614) (26,050) (24,290)
Net Debt The fllwing table prvides a recnciliatin f lng term debt under IFRS, as disclsed in the cndensed cnslidated balance sheets t Net Debt: (stated in thusands) September 30, 2018 December 31, 2017 Lng term debt 222,564 265,219 Current prtin f lng term debt 1,755 475 Less: cash and cash equivalents (4,778) (48,825) Net Debt 219,541 216,869 Defined Terms: Average active rig cunt (cntract drilling): Calculated as drilling rig utilizatin Billable Days multiplied by the average number f drilling rigs in the Cmpany s fleet fr the perid. Average active rig cunt (prductin services): Calculated as service rig utilizatin multiplied by the average number f service rigs in the Cmpany s fleet fr the perid. Billable Days: Defined as Operating Days plus rig mbilizatin days. Drilling rig utilizatin Operating Days (r Drilling Rig Utilizatin ): Calculated based n Operating Days divided by ttal available days. Drilling rig utilizatin Billable Days: Calculated based n Billable Days divided by ttal available days. Operating Days: Defined as cntract drilling days, calculated n a spud t rig release basis. Service Hurs: Defined as well servicing hurs cmpleted. Service rig utilizatin: Calculated based n Service Hurs divided by available hurs, being 10 hurs per day, per well servicing rig, 365 days per year. Cntract Drilling Rig Classificatins: Cardium class rig: Defined as any cntract drilling rig which has a ttal hklad less than r equal t 399,999 lbs (r 177,999 dan). Mntney class rig: Defined as any cntract drilling rig which has a ttal hklad between 400,000 lbs (r 178,000 dan) and 499,999 lbs (r 221,999 dan). Duvernay class rig: Defined as any cntract drilling rig which has a ttal hklad equal t r greater than 500,000 lbs (r 222,000 dan). Abbreviatins: Barrel ( bbl ); Basis pint ( bps ): A 1% change equals 100 basis pints and a 0.01% change is equal t ne basis pint; Canadian Assciatin f Oilwell Drilling Cntractrs ( CAODC ); DecaNewtn ( dan ); Internatinal Financial Reprting Standards ( IFRS ); Natural Gas Liquids ( NGL ); Punds ( lbs ); Thusand cubic feet ( mcf ); Western Canadian Sedimentary Basin ( WCSB ); Western Canadian Select ( WCS ); and West Texas Intermediate ( WTI ).
Frward-Lking Statements and Infrmatin This press release cntains certain statements r disclsures relating t Western that are based n the expectatins f Western as well as assumptins made by and infrmatin currently available t Western which may cnstitute frward-lking infrmatin under applicable securities laws. All infrmatin and statements cntained herein that are nt clearly histrical in nature cnstitute frward-lking infrmatin, and wrds and phrases such as may, will, shuld, culd, expect, intend, prpse, anticipate, believe, estimate, plan, ptential, cntinue, wrking t, r the negative f these terms r ther cmparable terminlgy are generally intended t identify frward-lking infrmatin. Such infrmatin represents the Cmpany s internal prjectins, estimates r beliefs cncerning, amng ther things, an utlk n the estimated amunts and timing f capital expenditures, anticipated future debt levels and revenues r ther expectatins, beliefs, plans, bjectives, assumptins, intentins r statements abut future events r perfrmance. This infrmatin invlves knwn and unknwn risks, uncertainties and ther factrs that may cause actual results r events t differ materially frm thse anticipated in such frward-lking infrmatin. In particular, frward-lking infrmatin in this press release includes, but is nt limited t, statements relating t cmmdity pricing; the future demand fr and utilizatin f the Cmpany s services and equipment; the pricing fr the Cmpany s services and equipment; the terms f existing and future drilling cntracts in Canada and the US and the revenue resulting therefrm (including the number f Operating Days typically generated frm the Cmpany s cntracts); the Cmpany s expansin and maintenance capital plans fr 2018; the Cmpany s liquidity needs including the ability f current capital resurces t cver Western s financial bligatins and the 2018 capital budget; the use and availability f the Cmpany s Credit Facilities; pricing fr Western s services and impact n Adjusted EBITDA; the Cmpany s ability t maintain certain cvenants under its Credit Facilities; expectatins as t the increase in crude il transprtatin capacity thrugh pipeline develpment; expectatins as t the benefits f the prpsed liquefied natural gas expansin in British Clumbia; the ptential impact f changes t envirnmental laws and regulatins and the implementatin f a price n carbn emissins in Alberta; the expectatin f cntinued investment in the Canadian crude il and natural gas industry; expectatins relating t prducer spending and activity levels fr ilfield services, and the Cmpany s ability t find and maintain enugh field crew members. The material assumptins in making the frward-lking statements in this press release include, but are nt limited t, assumptins relating t: demand levels and pricing fr ilfield services; demand fr crude il and natural gas and the price and vlatility f crude il and natural gas; pressures n cmmdity pricing; the cntinued business relatinships between the Cmpany and its significant custmers; crude il transprt and pipeline apprval and develpment; the Cmpany s ability t finance its peratins; the effects f seasnal and weather cnditins n peratins and facilities; the cmpetitive envirnment t which the varius business segments are, r may be, expsed in all aspects f their business; the ability f the Cmpany s varius business segments t access equipment (including spare parts and new technlgies); changes in laws r regulatins; currency exchange fluctuatins; the ability f the Cmpany t attract and retain skilled labur and qualified management; the ability t retain and attract significant custmers; the ability t maintain a satisfactry safety recrd; and general business, ecnmic and market cnditins. Althugh Western believes that the expectatins and assumptins n which such frward-lking statements and infrmatin are based n are reasnable, undue reliance shuld nt be placed n the frward-lking statements and infrmatin as Western cannt give any assurance that they will prve t be crrect. Since frward-lking statements and infrmatin address future events and cnditins, by their very nature they invlve inherent risks and uncertainties. Actual results culd differ materially frm thse currently anticipated due t a number f factrs and risks. These include, but are nt limited t, the risk that recent imprvements in cmmdity pricing may nt cntinue, and ther general industry, ecnmic, market and business cnditins. Readers are cautined that the freging list f risks, uncertainties and assumptins are nt exhaustive. Additinal infrmatin n these and ther risk factrs that culd affect Western s peratins and financial results are included in Western s annual infrmatin frm which may be accessed thrugh the SEDAR website at www.sedar.cm. The frward-lking statements and infrmatin cntained in this press release are made as f the date heref and Western des nt undertake any bligatin t update publicly r revise any frward-lking statements and infrmatin, whether as a result f new infrmatin, future events r therwise, unless s required by applicable securities laws. Fr mre infrmatin, please cntact: Alex R.N. MacAusland, President and CEO, r Jeffrey K. Bwers, Senir VP Finance and CFO at 403.984.5916