Trican Well Service's update on operations for the fourth quarter of 2007, 2008 capital budget and the outlook for major operating areas appears promising, though 2007 was a disappointment.
Based on our preliminary review of the fourth quarter, results for the quarter fell below our expectations. Comments relating to each of our areas of operations are provided below.
Fourth quarter results benefited from a revaluation of our future tax liability as a result of future income tax rate reductions substantially enacted during the quarter. The impact of these reductions increased fourth quarter earnings by approximately $0.05 per share.
We expect to release our complete financial results for the fourth quarter and 2007 in late February, 2008. The aforementioned estimates are subject to completion of final review by management and of the 2007 external audit.
Revenue for the quarter fell marginally compared with the third quarter as a result of normal seasonal slow downs at the end of the year and the completion of CBM programs midway through the quarter which impacted results for our CBM and deep coil service lines. These programs recommenced early in 2008. Also impacting operating performance for the quarter was a sharp increase in sales discounts. During our third quarter conference call, we noted that discounts had increased sharply at the end of Q3. Discounts for the fourth quarter continued at these higher levels and are expected to continue at these levels until overall demand for services increases relative to available equipment capacity.
Revenue for the quarter fell marginally compared with the third quarter due to a slow down primarily in our Nefteugansk operations relating to onset of winter conditions and the completion of some of the 2007 work programs.
Operations for the quarter were significantly impacted by a shortage of high quality fracturing proppant first reported with our third quarter results. This shortage forced the cancellation of jobs and increased the cost of sand purchased. Management continues to work to secure stable supplies of sand and expects to have sufficient volumes available to support ongoing operations early in the first quarter of 2008.
The Board of Directors met in December and approved Trican's 2008 Capital Budget. The Budget for 2008 has been set at $109.7 million.Canadian Operations
$5.5 million in expansion capital will be primarily directed to our Industrial Services group. Much of the remaining expenditures will be directed toward maintaining the Canadian operating fleet and infrastructure.
Activity has increased sharply with the onset of the winter drilling season and is expected to continue at high levels until the completion of the winter programs. The outlook for the balance of the year is unclear at this point and will likely depend upon natural gas inventory levels at the end of the winter heating season and the resultant natural gas commodity prices for the balance of the year. Expectations for activity levels for 2008 are varied, however, most industry watchers expect activity to decrease relative to 2007.
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