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Cathedral Energy Services Ltd. reports results for 2012 Q4 and 2013 Q1 dividend

Mar 6, 2013


CALGARY, March 6, 2013 /CNW/ - Cathedral Energy Services Ltd. (the "Company" or "Cathedral" / TSX: CET) announces its consolidated financial results for the three months and year ended December 31, 2012 and 2011. Dollars in 000's except per share amounts.

This news release contains "forward-looking statements" within the meaning of applicable Canadian securities laws.  For a full disclosure of forward-looking statements and the risks to which they are subject, see "Forward-Looking Statements" later in this news release.


  • Operating results were negatively affected by market wide reduction in drilling and completions activity on both a year-over-year and sequential quarter basis
  • U.S. directional drilling operations base is set up in Oklahoma City, Oklahoma
  • U.S. Production Testing division receives request to provide five testing units for deployment in the Eagleford (Texas) resource plan with first two units operational in January 2013 and remaining three in 2013 Q2
  • Cathedral announces initial 2013 capital budget of $22,000 which includes $10,000 of growth capital and $12,000 of maintenance capital


    Three months ended December 31   Year ended December 31
  2012 2011 2012 2011
Revenues  $ 44,836  $ 70,359  $ 203,194  $ 220,363
Adjusted gross margin % (1)   27.8%   35.0%   28.2%   32.5%
EBITDAS (1)  $ 8,296  $ 20,969  $ 42,858  $ 56,085
  Diluted per share  $ 0.22  $ 0.56  $ 1.14  $ 1.47
EBITDAS (1) as % of revenues   18.5%   29.8%   21.1%   25.5%
Funds from continuing operations (1)  $ 6,586  $ 17,814  $ 33,270  $ 50,011
  Diluted per share  $ 0.18  $ 0.47  $ 0.88  $ 1.31
Net earnings  $ 1,578  $ 12,551  $ 14,797  $ 27,634
  Basic per share  $ 0.04  $ 0.34  $ 0.40  $ 0.75
  Diluted per share  $ 0.04  $ 0.33  $ 0.39  $ 0.73
Dividends declared per share  $ 0.075  $ 0.060  $ 0.300  $ 0.240
Property and equipment additions  $ 6,934  $ 7,072  $ 30,650  $ 44,413
Weighted average shares outstanding        
  Basic (000s)   37,209   37,220   37,376   37,062
  Diluted (000s)   37,400   37,631   37,756   38,047
          December 31 December 31
            2012 2011
Working capital          $ 29,173  $ 40,052
Total assets          $ 224,080  $ 231,923
Loans and borrowings excluding current portion          $ 46,151  $ 50,694
Total shareholders' equity         $ 137,932  $ 136,107
(1) Refer to "NON-GAAP MEASUREMENTS"        



The Company completed 2012 Q4 with quarterly revenues of $44,836 compared to 2011 Q4 revenues of $70,359. The 2012 Q4 revenues were comprised of 66% (2011 Q4 - 75%) from the directional drilling division; 29% (2011 Q4 - 25%) from the production testing division; and 5% (2011 Q4 - 0%) from international resale and rentals.

2012 Q4 EBITDAS was $8,296 ($0.22 per share diluted) which represents a $12,673 decrease or 60% decrease from 2011 Q4 EBITDAS of $20,969 ($0.56 per share diluted).  For the three months ended December 31, 2012, the Company's net earnings were $1,578 ($0.04 per share diluted) as compared to $12,551 ($0.33 per share diluted) in 2011.

The decline in revenues and was primarily attributed to slow down of drilling and completions work in the Canadian market as well as more moderate declines in the U.S.


On a year-over-year basis, 2013 overall industry activity levels are expected to remain relatively flat over 2012.  Within the Canadian market, industry experts are projecting the oil price differential to narrow in the second half of 2013 which should lead to more dollars in the hands of producer and this may result in increased funding for drilling and completions programs.  So far in 2013, industry activity levels in Canada are at lower levels than the prior year.  This is expected as the industry did not experience the overall decline in market activity until after the 2012 spring breakup.

The Company continues to see significant opportunities in the U.S. market for both directional drilling and frac flowback services; in particular in the Texas and Oklahoma regions where the Company's market share is minimal.  In late 2012, Cathedral's U.S. Directional Drilling division opened an operations base in Oklahoma City, Oklahoma and for 2013 the Company is expecting to experience an expanding work base from this area.  For 2013 Cathedral is planning for increased activity levels from its Texas and Rocky Mountain regions.  Despite being in a dry gas market, Cathedral's north east U.S. (Marcellus) area is expected to remain flat from an activity level basis.

Commencing in January 2013, our U.S. Production Testing division expanded its operations into the Eagleford (Texas) resource play with two units that were relocated from other area within the U.S.  As well, the Company has three high pressure units being manufactured for this region and these new builds are expected to be operating in 2013 Q2.  As Cathedral pursues and obtains additional work in the U.S. market, it will reallocate equipment where there is demand.

In 2013 Cathedral will continue to convert its mud motor fleet over to its in-house proprietary design.  At the end of 2012 approximately 21% of the fleet had been converted.  As part of the conversion process, parts from the motors being torn down are reused when repairing like mud motors.  This allows Cathedral to obtain value for such parts.  The rate of conversion is dependent on a number of factors including the availability of motor parts manufacturing by third parties and the ability of Cathedral to consume in operations the parts of the mud motors that are being replaced.

On the technology front, Cathedral anticipates commencing its build out of its MWD "at-bit" technology in 2013 Q4.  The "at-bit" technology allows for MWD measurements (inclination and gamma) that are sourced from directly behind the drill bit and this allows for improved geosteering and optimum well placement.  As well, in 2013 Cathedral will expand its rollout of the enhanced Fusion MWD platform electronics.

The Company continues to move forward with the startup of its Venezuela operations.  With the near completion of the final agreements and the movement of equipment into the country, Cathedral continues to focus on being prepared for its first field operations.


Cathedral's 2013 capital budget is $22,000 which includes $10,000 of growth capital and $12,000 of maintenance capital.

The major items within the 2013 of growth capital are for the drilling division are addition of mud motors and drill collars for the expected expansion of Company's Houston and Oklahoma City operation bases and the commencement of the build-out of the Company's "at-bit" technology system.  In addition, the production testing division plans to add 3 frac flowback units and related ancillary equipment.

The maintenance capital is expected to allow for: i) expanded rollout of the Company's enhanced Fusion MWD platform electronics; ii) addition of mud pulse transmitters to the fleet to allow for expanded Fusion MWD platform capabilities; iii) continued conversion to Cathedral's proprietary mud motor bearing section; and iv) expansion of mud motor power section fleet to accommodate extended repair times and new configurations requested by customers.

These capital expenditures are expected to be financed by way of cash flow from operations and the Company's credit facility.

During 2012 the Company invested an additional $31,422 (2011 - $44,413) in property and equipment and intangible assets.  The main 2012 additions were 11 MWD systems, replacement of downhole tools that were lost-in-hole, 7 production testing units, auxiliary production testing equipment and maintenance capital of $7,800.  Maintenance capital includes: i) costs incurred on conversion of the Company's mud motor fleet to its proprietary designed mud motor; ii) upgrading of EM-MWD systems to the Company's Fusion MWD platform; and iii) expansion of mud motor power section fleet to meet customers' requests for specific configuration.

The following is a summary of major equipment owned by the Company:

  December 31 December 31 December 31
  2012 2011 2010
Directional drilling - MWD systems (1) 136 125 102
Production testing units 69 62 56
(1) December 31, 2012 and 2011 MWD systems are net of 10 systems that are removed from service.      



It is the intent of the Company to pay quarterly dividends to shareholders.  The Board of Directors will review the amount of dividends on a quarterly basis with due consideration to current performance, historical and future trends in the business, the expected sustainability of those trends and enacted tax legislation which will affect future taxes payable as well as required long-term debt repayments, maintenance capital expenditures required to sustain performance and future growth capital expenditures.  The Directors have approved a 2013 Q1 dividend in the amount of $0.075 per share which will have a date of record March 31, 2013 and a payment date of April 15, 2013.


The Company's principal source of liquidity is cash generated from operations.  The Company also has the ability to fund liquidity requirements through its credit facility and the issuance of debt and/or equity.  At December 31, 2012, the Company had an operating loan with a major Canadian bank in the amount of $20,000 (December 31, 2011 - $20,000) of which $880 (December 31, 2011 - $12,797) was drawn.  In addition, the Company has a non-reducing revolving term loan facility in the amount of $55,000 (December 31, 2011 - $55,000) of which $45,000 was drawn as at December 31, 2012 (December 31, 2011 - $50,000.)  In addition, at December 31, 2012, the Company had finance lease liabilities of $1,862 (December 31, 2011 - $1,492) and other long-term debt of $nil (December 31, 2011 - $5).


  Three months ended December 31, 2012   Three months ended December 31, 2011
  Directional Production Resale and     Directional Production  
Revenues drilling testing rental Total   drilling testing Total
Canada  $ 16,777  $ 6,791  $ -  $ 23,568    $ 35,890  $ 10,223  $ 46,113
United States   12,682   6,391   -   19,073     16,808   7,438   24,246
International   -   -   2,195   2,195     -   -   -
Total  $ 29,459  $ 13,182  $ 2,195  $ 44,836    $ 52,698  $ 17,661  $ 70,359


Revenues and gross margin      Revenues in Q4 have decreased to $44,836 in 2012 from $70,359 in 2011, a decrease of $25,523 or 36%.  The decrease was primarily attributed to slow down of drilling and completions work in the Canadian market as well as more moderate declines in the U.S.

The directional drilling division revenues have decreased from $52,698 in 2011 Q4 to $29,459 in 2012 Q4; a 44% decrease.  This decrease was the result of: i) a 42% decrease in activity days from 4,656 in 2011 Q4 to 2,691 in 2012 Q4; and ii) a decrease in the average day rate from $11,319 in 2011 Q4 to $10,950 in 2012 Q4, which was driven by market pressures in the Canadian market.  Canadian activity days decreased from 3,014 to 1,425 and U.S. activity days decreased from 1,642 to 1,266.

The Company's production testing division contributed $13,182 in revenues during 2012 Q4 which was a 25% decrease over 2011 revenues of $17,661.  The division ended 2012 Q4 with 39 units (2011 - 38) in Canada and 30 (2011 - 24) in the U.S.  The decline in revenues was due mainly to the decline in completions work in 2012 Q4 compared with the high activity levels in 2011 Q4.

The gross margin for 2011 Q4 was 29.6% compared to 2012 Q4 at 16.3%, a decline of 13.3%; 6.1% of this decline related to increase in non-cash depreciation and share-based compensation.  There was a decline in adjusted gross margin of 7.2%.  There was no single significant increase in operating expenses in the year, but there were several items that had slight increases including increase in non-field wages due to the expansion into new geographic areas, costs for accommodation of field staff and the cost of equipment resold.  Despite Cathedral's highly variable field cost structure, non-field salaries are of a fixed nature and therefore when the Company's revenue declines, such costs become a higher percentage of revenues.  The Company will continue with its on-going review of all operating costs and general and administrative expenditures with the goal of enhancing profitability.

Depreciation allocated to cost of sales increased from $3,712 in 2011 Q4 to $5,071 in 2012 Q4 due to capital additions in the period from 2011 Q4 to 2012 Q4.  Depreciation included in cost of sales as a percentage of revenue was 11% for 2012 Q4 and 5% for 2011 Q4.

For 2012 Q4 the Company had share-based compensation included in cost of sales of $76 compared to $136 recognized in 2011 Q4.  The fair value of the related options is being amortized against income over the three-year vesting periods.

Selling, general and administrative expenses ("SG&A")     SG&A expenses were $5,573 in 2012 Q4; an increase of $397 when compared with $5,176 in 2011 Q4 with $57 of this increase related to non-cash depreciation and share-based compensation.  The remaining increase was primarily related to increases in payroll expenses related to staff positions added to accommodate growth that occurred in 2011 Q4 and 2012 Q1 and wage increases for existing staff net of a decrease in variable compensation and a decline in legal expenses.  As a percentage of revenues, general and administrative expenses were 12% in 2012 Q4 and 7% in 2011 Q4.

Depreciation allocated to SG&A increased from $56 in 2011 Q4 to $164 in 2012 Q4 which has mainly increased due to the depreciation of the new head office location which was not depreciated until it was available-for-use until mid-way through 2011 Q4.

For 2012 Q4 the Company had share-based compensation included in SG&A of $284 compared to $335 recognized in 2011 Q4.  The fair value of the related options is being amortized against income over the three-year vesting periods.

Gain on disposal of property and equipment     During 2012 Q4 the Company had a gain on disposal of property and equipment of $957, compared to $1,944 in 2011 Q4.  The Company's gains are mainly due to recoveries of lost-in-hole equipment costs including previously expensed depreciation on the related assets.  The timing of lost-in-hole recoveries is not in the control of the Company and therefore can fluctuate significantly from quarter-to-quarter.

Foreign exchange gain (loss)     The Company's foreign exchange loss was $335 in 2011 Q4 compared to a $136 in 2012 Q4 due to the fluctuations in the Canadian dollar compared to U.S. dollars and Venezuelan bolivars.  The Company's foreign operations are denominated in a currency other than the Canadian dollar and therefore, upon consolidation gains and losses due to fluctuations in the foreign currency exchange rates are recorded in other comprehensive income ("OCI") on the balance sheet as a component of equity.  However, gains and losses in the Canadian entity on U.S. denominated intercompany balances continue to be recognized in the statement of income.  Included in the 2012 Q4 foreign currency gain are unrealized losses of $156 (2011 Q4 - $515 gain) related to intercompany balances.

Finance costs     Finance costs consist of interest expenses on operating loans, loans and borrowings and bank charges of $464 for 2012 Q4 versus $589 for 2011 Q4.  The net decrease in finance costs mainly relate to a decrease in the outstanding balances for the secured revolving term loan and operating loans as well as a reduction in the interest rate.

Income tax     For 2012 Q4, the Company recorded a tax expense of $456 ($753 current net of $297 deferred recovery) compared to the 2011 Q4 of $4,105 ($1,211 current and $2,894 deferred).  In 2012 Q4, the effective tax rate was 22% as compared to 25% in 2011 Q4.  Most of the Company's current tax expense relates to its U.S. subsidiary.

December 31, 2012 and 2011
Dollars in '000s

     December 31   December 31
     2012    2011
Current assets:         
   Cash and cash equivalents   $ 8,470  $ 2,902
   Trade receivables    36,094   65,568
   Current taxes recoverable   153   -
   Prepaid expenses and deposits    10,419   2,217
   Inventories    13,006   13,278
Total current assets    68,142   83,965
Property and equipment    135,093   129,929
Intangible assets    719   230
Deferred tax assets    9,379   11,951
Investment in associate    4,899   -
Goodwill    5,848   5,848
Total non-current assets    155,938   147,958
Total assets   $ 224,080  $ 231,923
Liabilities and Shareholders' Equity         
Current liabilities:         
   Operating loans   $ 880  $ 12,797
   Trade and other payables    21,773   28,046
   Dividends payable    2,768   2,238
   Loans and borrowings    711   803
   Current taxes payable    -   29
   Deferred revenue    12,837   -
Total current liabilities    38,969   43,913
Loans and borrowings    46,151   50,694
Deferred tax liabilities    1,028   1,209
Total non-current liabilities    47,179   51,903
Total liabilites    86,148   95,816
 Shareholders' equity:         
   Share capital    74,408   74,208
   Contributed surplus    8,863   7,845
   Accumulated other comprehensive loss    (2,679)   (2,141)
   Retained earnings    57,340   56,195
Total shareholders' equity    137,932   136,107
Total liabilities and shareholders' equity   $ 224,080  $ 231,923


Years ended December 31, 2012 and 2011
Dollars in '000s except per share amounts

    Three months ended December 31   Year ended December 31
     2012    2011    2012    2011
Revenues   $ 44,836  $ 70,359  $ 203,194  $ 220,363
Cost of sales:                 
  Direct costs    (32,388)   (45,699)   (145,902)   (148,689)
  Depreciation    (5,071)   (3,712)   (18,479)   (14,884)
  Share-based compensation    (76)   (136)   (322)   (381)
Total cost of sales    (37,535)   (49,547)   (164,703)   (163,954)
Gross margin    7,301   20,812   38,491   56,409
Selling, general and administrative expenses:                 
  Direct costs    (5,125)   (4,785)   (21,012)   (19,724)
  Depreciation    (164)   (56)   (642)   (174)
  Share-based compensation    (284)   (335)   (1,054)   (1,440)
Total selling, general and administrative expenses    (5,573)   (5,176)   (22,708)   (21,338)
    1,728   15,636   15,783   35,071
Gain on disposal of property and equipment    957   1,944   6,421   4,264
Earnings from operating activities    2,685   17,580   22,204   39,335
Foreign exchange gain (loss)    (136)   (335)   269   (356)
Finance costs    (464)   (589)   (2,041)   (1,877)
Share of loss from associate    (51)   -   (51)   -
Earnings from continuing operations before income taxes    2,034   16,656   20,381   37,102
Income tax (expense) recovery:                 
  Current    (753)   (1,211)   (3,167)   (1,362)
  Deferred    297   (2,894)   (2,417)   (8,435)
Total income tax expense    (456)   (4,105)   (5,584)   (9,797)
Net earnings from continuing operations    1,578   12,551   14,797   27,305
Net earnings from discontinued operations    -   -   -   329
Net earnings    1,578   12,551   14,797   27,634
Other comprehensive income (loss):                 
  Foreign currency translation differences for foreign                 
    operations    724   (254)   (538)   673
Total comprehensive income   $ 2,302  $ 12,297  $ 14,259  $ 28,307
Net earnings from continuing operations per share                 
  Basic   $ 0.04  $ 0.34  $ 0.40  $ 0.74
  Diluted   $ 0.06  $ 0.33  $ 0.39  $ 0.72
Net earnings from discontinued operations per share                 
  Basic and diluted   $ -  $ -  $ -  $ 0.01
Net earnings                 
  Basic   $ 0.04  $ 0.34  $ 0.40  $ 0.75
  Diluted   $ 0.04  $ 0.33  $ 0.39  $ 0.73


Year ended December 31, 2012 and 2011
Dollars in '000s

     2012    2011
Cash provided by (used in):         
Operating activities:         
  Net earnings from continuing operations   $ 14,797  $ 27,305
  Items not involving cash:         
    Depreciation    19,121   15,058
    Total income tax expense    5,584   9,797
    Unrealized foreign exchange gain on intercompany balances    (77)   (221)
    Finance costs    2,041   1,877
    Share-based compensation    1,341   1,821
    Gain on disposal of property and equipment    (6,421)   (4,264)
    Share of loss from associate    51   -
  Cash flow from continuing operations    36,437   51,373
  Changes in non-cash operating working capital    27,724   (21,857)
  Income taxes paid    (3,350)   (1,377)
Cash flow from operating activities    60,811   28,139
Investing activities:         
  Property and equipment additions    (30,650)   (44,413)
  Intangible asset additions    (772)   -
  Proceeds on disposal of property and equipment    11,596   6,538
  Proceeds on disposal of assets held for sale    -   3,793
  Investment in equity accounted investee    (3,600)   -
  Changes in non-cash investing working capital    1,809   (3,633)
Cash flow from investing activities    (21,617)   (37,715)
Financing activities:         
  Change in operating loan    (12,108)   4,609
  Interest paid    (2,057)   (2,063)
  Advances of loans and borrowings    -   15,500
  Repayments on loans and borrowings    (5,509)   (598)
  Proceeds on exercise of share options    1,387   2,744
  Repurchase of common shares    (3,962)   -
  Dividends paid    (10,671)   (8,882)
Cash flow from financing activities    (32,920)   11,310
Effect of exchange rate on changes in cash and cash equivalents    (706)   (572)
Change in cash and cash equivalents    5,568   1,162
Cash and cash equivalents, beginning of period    2,902   1,740
Cash and cash equivalents, end of period   $ 8,470  $ 2,902



This news release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws.  All statements other than statements of present or historical fact are forward-looking statements.  Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "achieve", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "outlook", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes.  In particular, this news release contains forward-looking statements relating to, among other things: production testing units expected to be deployed to Eagleford (Texas) resources play and timing thereof; components of expected 2013 capital budget and financing thereof; expected commencement of build-out of "at-bit" technology; areas of expected growth and opportunities; expected activity levels; projected narrowing of oil price "differential" and possible consequences thereof; future expansion; commencement of operations in Venezuela; intent to pay quarterly dividends; and sources to fund liquidity requirements.  The Company believes the expectations reflected in such forward-looking statements are reasonable as of the date hereof but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon.

Various material factors and assumptions are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking statements.  Those material factors and assumptions are based on information currently available to the Company, including information obtained from third party industry analysts and other third party sources.  In some instances, material assumptions and material factors are presented elsewhere in this news release in connection with the forward-looking statements.  You are cautioned that the following list of material factors and assumptions is not exhaustive.  Specific material factors and assumptions include, but are not limited to:

  • the performance of the Company's businesses, including current business and economic trends;
  • oil and natural gas commodity prices and production levels;
  • capital expenditure programs and other expenditures by the Company and its customers;
  • the ability of the Company to retain and hire qualified personnel;
  • the ability of the Company to obtain parts, consumables, equipment, technology, and supplies in a timely manner to carry out its activities;
  • the ability of the Company to maintain good working relationships with key suppliers;
  • the ability of the Company to market its services successfully to existing and new customers;
  • the ability of the Company to obtain timely financing on acceptable terms;
  • currency exchange and interest rates;
  • risks associated with foreign operations including Venezuela;
  • the ability of the Company to realize the benefit of its conversion from an income trust to a corporation;
  • risks associated with finalizing ancillary joint venture agreements that are required prior to the commencement of operations of the Venezuela joint venture;
  • risks associated with Venezuela joint venture company being awarded work by the Venezuela state run oil and natural gas corporation;
  • changes under governmental regulatory regimes and tax, environmental and other laws in Canada, United States ("U.S.") and Venezuela; and
  • a stable competitive environment.

Forward-looking statements are not a guarantee of future performance and involve a number of risks and uncertainties some of which are described herein.  Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause the Company's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements.  These risks and uncertainties include, but are not limited to, the risks identified in this news release and in the Company's Annual Information Form under the heading "Risk Factors".  Any forward-looking statements are made as of the date hereof and, except as required by law, the Company assumes no obligation to publicly update or revise such statements to reflect new information, subsequent or otherwise.

All forward-looking statements contained in this news release are expressly qualified by this cautionary statement. Further information about the factors affecting forward-looking statements is available in the Company's current Annual Information Form and Annual Report which have been filed with Canadian provincial securities commissions and are available on


This news release refers to certain non-GAAP measurements that do not have any standardized meaning within IFRS and therefore may not be comparable to similar measures provided by other companies.  Management utilizes these non-GAAP measurements to evaluate Cathedral's performance.

The specific measures being referred to include the following:

i) "Adjusted gross margin" - calculated as gross margin plus non-cash items (depreciation and share-based compensation); is considered a primary indicator of operating performance (see tabular calculation below);

ii) "Adjusted gross margin %" - calculated as adjusted gross margin divided by revenues; is considered a primary indicator of operating performance (see tabular calculation below);

iii) "EBITDAS" - defined as earnings before finance costs, unrealized foreign exchange on intercompany balances, unrealized foreign exchange due to hyper-inflation accounting, taxes, depreciation and share-based compensation; is considered an indicator of the Company's ability to generate funds flow from operations prior to consideration of how activities are financed, how the results are taxed and measured and non-cash expenses (see tabular calculation below);

iv) "Maintenance capital expenditures" - refers to capital expenditures required to maintain existing levels of service but excludes replacement cost of lost-in-hole equipment to the extent the replacement equipment is financed from the proceeds on disposal of the equipment lost-in-hole; and

v) "Funds from continuing operations" - calculated as cash provided by operating activities before changes in non-cash working capital, cash flow from discontinued operations and income taxes paid less current tax expense; is considered an indicator of the Company's ability to generate funds flow from operations on an after tax basis but excluding changes in non-cash working capital which is financed using the Company's operating loan (see tabular calculation below).

The following tables provide reconciliations from GAAP measurements to non-GAAP measurements referred to in this news release:

Adjusted gross margin

  Three months ended December 31 Year Ended December 31
     2012    2011   2012    2011
Gross margin  $ 7,301  $ 20,812  $ 38,491  $ 56,409
Add non-cash items included in cost of sales:                
  Depreciation   5,071   3,712   18,479   14,884
  Share-based compensation   72   136   287   381
Adjusted gross margin  $ 12,444  $ 24,660  $ 57,257  $ 71,674
Adjusted gross margin %   27.8%   35.0%   28.2%   32.5%



  Three months ended December 31 Year Ended December 31
     2012     2011     2012     2011 
Earnings from continuing operations before income taxes  $ 2,034 $ 16,656  $ 20,381  $ 37,102
Add (deduct):                
  Gain on disposal of property and equipment from discontinued operations   -   -   -   448
  Depreciation included in cost of sales   5,071   3,712   18,479   14,884
  Depreciation included in selling, general and administrative expenses   164   56   642   174
  Share-based compensation included in cost of sales   72   136   287   381
  Share-based compensation included in selling, general                
    and administrative expenses   284   335   1,054   1,440
  Unrealized foreign exchange (gain) loss on intercompany balances   156   (515)   (77)   (221)
  Finance costs   464   589   2,041   1,877
  Share of loss from associate   51   -   51   -
EBITDAS  $ 8,296  $ 20,969  $ 42,858  $ 56,085
Funds from continuing operations                
    Three months ended December 31 Year ended December 31
    2012   2011   2012   2011
Cash flow from operating activities  $ 4,094  $ 9,969  $ 60,811  $ 28,139
Add (deduct):                
  Changes in non-cash operating working capital   2,694   8,870   (27,724)   21,857
  Income taxes paid   551   186   3,350   1,377
  Current tax expense   (753)   (1,211)   (3,167)   (1,362)
Funds from continuing operations $ 6,586  $ 17,814  $ 33,270  $ 50,011

Cathedral Energy Services Ltd. (the "Company" or "Cathedral") is incorporated under the Business Corporations Act (Alberta) (the "Act").  The Company is publicly traded on the Toronto Stock Exchange under the symbol "CET".  The Company together with its wholly owned subsidiary, Cathedral Energy Services Inc., is engaged in the business of providing selected oilfield services to oil and natural gas companies in western Canada and selected oil and natural gas basins in the U.S.  The Company is in the process of establishing operations in Venezuela for providing directional drilling services through a joint venture with Petroleros de Venezuela, S.A. ("PDVSA"), the state owned oil and gas corporation of the Bolivarian Republic of Venezuela.  The Company strives to provide its clients with value added technologies and solutions to meet their drilling and production testing requirements.  For more information, visit






SOURCE: Cathedral Energy Services Ltd.

For further information:

Mark L. Bentsen, President and Chief Executive Officer or P. Scott MacFarlane, Chief Financial Officer

Cathedral Energy Services Ltd., 6030 3 Street S.E., Calgary, Alberta T2H 1K2

Telephone:  403.265.2560 Fax:  403.262.4682

Cathedral opens a 36,000 square foot full service operation facility in Oklahoma City, Oklahoma and Estevan, Saskatchewan operations migrate to Emerald Park, Saskatchewan.