petrowest energy services trust announces $94.2 million of ... - BMIR

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Petrowest Energy Services TrustNotes to Interim Unaudited Consolidated Financial Statements1 Nature of the OrganizationPetrowest Energy Services Trust (“Petrowest” or the “Trust”) is an open-ended unincorporatedmutual fund trust established under and governed by the laws of the Province of Alberta pursuantto the Deed of Trust dated July 6, 2006. Commercial operations of the Trust commenced onSeptember 7, 2006 and Petrowest began publicly trading on the Toronto Stock Exchange on thatsame day under the trading symbol PRW.UN. As such, since the trust was formed on July 6,2006, there is no comparable quarter included in these financial statements.2 Accounting PoliciesThese consolidated interim financial statements are stated in Canadian dollars and have beenprepared by management in accordance with Canadian Generally Accepted AccountingPrinciples (“GAAP”). They follow the same accounting policies as the audited consolidatedfinancial statements for the year ended December 31, 2006, except as discussed below, andshould be read in conjunction with these statements.On January 1, 2007, the Trust adopted the new CICA Handbook sections 3855 - FinancialInstruments – Recognition and Measurement, 1530 – Comprehensive Income, and 3865 –Hedges. The financial instruments standard establishes the recognition and measurementcriteria of financial assets, financial liabilities and derivatives. All financial instruments arerequired to be measured at fair value on initial recognition of the instrument, except for certainrelated party transactions. Measurement in subsequent periods depends on whether the financialinstrument has been classified as held-for-trading, available-for-sale, held-to-maturity, loans andreceivables, or other financial liabilities as defined by the standard.Financial assets and financial liabilities held-for-trading are measured at fair value with changesin those fair values recognized in net earnings (loss). Financial assets available-for-sale ismeasured at fair value, with changes in those fair values recognized in other comprehensiveincome (loss). Financial assets held-to-maturity, loans and receivables and other financialliabilities are measured at amortized cost using the effective interest method of amortization. Themethods used by the Trust in determining the fair value of financial instruments are unchanged asa result of implementing the new standard.The Trust has no financial instruments or activities that give rise to other comprehensive income(loss). The Trust’s cash and cash equivalents are designated as held-for-trading and aremeasured at carrying value, which approximates fair value due to the short-term nature of theseinstruments. Accounts receivable are designated as loans and receivables. Accounts payableand accrued liabilities, distribution payable, and the credit facility are designated as otherliabilities and are recorded at cost.3 SeasonalityPetrowest’s operations are in northern Alberta and northeast British Columbia. Accordingly, theoperations are susceptible to the impacts of the seasons. Quarter one is in the winter monthsand is subject to frozen conditions, periods of extreme cold and snow. This is typically a busyquarter for oil and gas exploration and development as drilling activity focuses on areas located inmuskeg and swamp type conditions not normally accessible in a non-frozen state. Quarter two isgenerally the slowest period for Petrowest’s operations. Spring time melt conditions result in soft,wet ground generally referred to as spring breakup, and the implementation of road bans whichprevent heavy load transportation on roadways. Quarter three encompasses the summermonths, and Petrowest’s activity is average with work relating to oil and gas projects in areas thatdo not entail access through muskeg. Quarter four starts out similar to the summer activity andramps up as the ground freezes and access is permitted.- 26 -
Petrowest Energy Services TrustNotes to Interim Unaudited Consolidated Financial Statements4 AcquisitionsPursuant to a prospectus dated August 28, 2006, Petrowest issued Units of the Trust and usedthe proceeds, through its subsidiaries, to acquire 100% of the outstanding shares of SafetymasterRentals Corporation, R Bee Crushing Ltd., Wales Contractors Ltd., Roy Larson Construction Ltd.,Gordon Bros. Construction Ltd., 404434 Alberta Corporation, Murtron Hauling Ltd., NeuwestEquipment Rentals Inc, Northern Tractor Sales and Rentals Co. Ltd., and their affiliates(“Acquired Companies”). The estimated purchase price of the Acquired Companies calculated asthe base purchase price plus working capital less debt was $230,934,992, subject to post closingadjustments for actual working capital and debt and the sale of redundant assets.The Acquisitions have been accounted for using the purchase method with the assets acquiredand liabilities assumed recorded at their estimates of fair value. An allocation of the considerationis as follows:Net assets acquired$000’sCash acquired on acquisition 6,115Accounts receivable 37,648Prepaid expenses 680Inventories 4,158Accounts payable and accrued liabilities (27,257)Income taxes payable (215)Property and equipment 82,699Intangibles 56,223Goodwill 97,949Total 258,000Consideration given for value of shares and shareholder loans of acquired companiesNet cash to vendors 103,284Cash repayment of working capital adjustments (2,055)Purchase price adjustment 6,422Retirement of long-term debt and capital lease obligations 22,698130,349Trust Units (12,765,094 units issued) 127,651Total 258,0005 Property and Equipment- 27 -$000’s March 31, December 31,2007 2006NetBookValueNetBookValueAccumulatedCost AmortizationBuildings,portable buildings and fencing 3,774 234 3,540 3,284Heavy equipment 81,230 8,629 72,601 75,087Equipment under capital lease 969 43 926 247Vehicles 2,548 471 2,077 2,281Trailers 7,784 596 7,188 7,427Equipment 2,337 578 1,759 1,941Office furniture and equipment 194 43 151 148Communications, computer hardwareand software 716 168 548 420Leasehold improvements 47 1 46 46Subtotal 99,599 10,763 88,836 90,881Assets under construction 469 - 469 417100,068 10,763 89,305 91,298
Page 1 and 2: PETROWEST ENERGY SERVICES TRUST ANN
Page 3 and 4: STRATEGIC ALLIANCEPetrowest has ent
Page 5 and 6: for the period ended December 31, 2
Page 7 and 8: DESCRIPTION OF BUSINESSPetrowest is
Page 9 and 10: or negotiations on work tied to a n
Page 11 and 12: SUMMARY OF RESULTS- QUARTERLY ANALY
Page 13 and 14: The Transportation segment costs in
Page 15 and 16: RECONCILIATION OF NET EARNINGS TO E
Page 17 and 18: PROPERTY AND EQUIPMENT EXPENDITURES
Page 19 and 20: The Trust has no financial instrume
Page 21 and 22: Management and the Board of Directo
Page 23 and 24: Petrowest Energy Services TrustCons
Page 25: Petrowest Energy Services TrustCons
Page 29 and 30: Petrowest Energy Services TrustNote
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petrowest energy services trust announces $94.2 million of ... - BMIR

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