Wenzel Downhole reports big Q4 loss; cites $18.5M litigation settlement

CALGARY – Wenzel Downhole Tools Ltd.’s (TSX:WZL) says an $18.5-million litigation settlement is behind its big loss in the fourth quarter.

The oilfield drilling equipment maker said Wednesday its net loss for the three months ended Dec. 31 was more than $11.9 million or 39 cents per diluted share compared with a profit of $2.2 million or six cents in the same 2011 period.

Without this settlement, the company would have recorded earnings before income tax of $1.9 million compared with earnings before income tax of $2.5 million in the fourth quarter of 2011.

Meanwhile, revenues in the quarter shrank to $19 million from $26.5 million as customers cut spending amid a general slowdown in the oilpatch.

The legal charge arose out of an arbitration award announced in January in favour of Dreco Energy Services ULC and Vector Oil Tools ULC, ending a 10-year dispute.

Dreco Energy Services ULC and Vector Oil Tools ULC had accused Wenzel of inducing the former owner of Vector to violate a non-competition agreement he had with that company. In January an arbitrator ordered Wenzel to pay $14.7 million in damages plus interest to the two companies.

The fourth-quarter loss also impacted full-year results, with Wenzel reporting a net loss of $5.5 million or 18 cents per diluted share on revenue of $87.3 million. That compared with a net profit of $10.3 million or 29 cents on revenue of $90.7 million.

Annual revenues in Canada were up six per cent at $30.2 million, while U.S. rentals were up seven per cent at $45.9 million. However, international sales fell to $11.2 million from $19.2 million in 2011.

“2012 was an important year of transition for Wenzel Downhole Tools,” president and CEO Ron Patterson said in the company’s earnings release.

“I am pleased that the great uncertainty related to the legal action the company has faced over the last decade is now behind us. While 2013 may present us with new challenges, it will certainly also present us with opportunities.”