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Cathedral Energy Services Ltd. reports results for 2013 Q1 and 2013 Q2 dividend

Cathedral Energy Services Ltd. reports results for 2013 Q1 and 2013 Q2 dividend 
/NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA/ 
CALGARY, May 6, 2013 /CNW/ - Cathedral Energy Services Ltd. (the "Company" or 
"Cathedral" / (TSX: CET)) announces its consolidated financial results for the 
three months ended March 31, 2013 and 2012. 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. 
2013 Q1 KEY TAKEAWAYS 


    --  Canadian revenues decreased due to significant reductions in
        work for a couple of existing clients, other client specific
        reductions in activity levels and a competitive marketplace;
    --  For Canadian drilling operations the Company has expanded its
        sales and marketing group and expects to see additional work
        secured.  We are focused on expanding our marketing efforts and
        to bring on specialty technologies to increase revenues once
        the spring break-up season has ended;
    --  U.S. production testing services continue to expand and 2013 Q1
        represents a record level for quarterly revenues; and
    --  U.S. directional drilling services are expected to have
        increased activity levels going forward with additional
        traction in the Oklahoma and Texas markets

2013 Q1 FINANCIAL SUMMARY
                                            
                                          Three months ended March 31
                                              2013               2012

Revenues                                 $  54,074  $          67,829

Adjusted gross margin % ((1))                24.7%              34.0%

EBITDAS ((1))                            $   8,592  $          21,956

  Diluted per share                      $    0.23  $            0.58

EBITDAS ((1) )as % of revenues                 16%                32%

Funds from operations ((1))              $   7,507  $          17,497

  Diluted per share                      $    0.20  $            0.46

Net earnings                             $   2,059  $          12,628

  Basic per share                        $    0.06  $            0.34

  Diluted per share                      $    0.06  $            0.33

Dividends declared per share             $   0.075  $           0.075

Property and equipment additions         $   6,698  $          11,945

Weighted average shares outstanding                                  

  Basic (000s)                              36,765             37,356

  Diluted (000s)                            36,826             38,021
                                                                     
                                          March 31        December 31
                                              2013               2012

Working capital                          $  26,431  $          29,173

Total assets                             $ 237,604  $         224,080

Loans and borrowings excluding         
current portion                          $  46,330  $          46,151

Total shareholders' equity               $ 135,580  $         137,932
                                                                     

((1) Refer to MD&A: see "NON-GAAP MEASUREMENTS")

OVERVIEW

The Company completed 2013 Q1 with quarterly revenues of $54,074 compared to 
2012 Q1 revenues of $67,829. Revenues have decreased 20% from 2012. The 
2013 Q1 revenues were comprised of 70% (2012 Q1 - 71%) from the directional 
drilling division and 30% (2012 Q1 - 29%) from the production testing division.

2013 Q1 EBITDAS were $8,592 ($0.23 per share diluted) which represents a 
$13,364 decrease from 2012 Q1 EBITDAS of $21,956 ($0.58 per share diluted). 
For the three months ended March 31, 2013, the Company's net earnings were 
$2,059 ($0.06 per share diluted) as compared to $12,628 ($0.33 per share 
diluted) in 2012. The decrease in revenues and EBITDAS was primarily 
attributed to declines sales in the Canadian operations as well as more 
moderate declines in the U.S. directional drilling operations, net of 
increases for U.S. production testing.

OUTLOOK

Over the last few quarters Cathedral has continued to invest in the U.S. by 
way of infrastructure and capital equipment. This investment has now put the 
Company in a position to access and exploit all U.S, major plays including the 
Bakken, Niobrara, Marcellus, Eagleford, Permian, Piceance to name a few. The 
Company recently completed the build out of 3 high pressure frac-flowback 
units. These units have begun operations and along with 4 others from the 
U.S. fleet gives the Company 7 units now operating in Texas. The Company 
continues to see opportunities to deploy additional "green completions"/ 
closed loop units and expects to continue to expand its completions activity 
in the U.S.

U.S. drilling services is seeing significant growth in several operating areas 
due to success in the deployment of industry leading technology including our 
"Fusion MWD (EM)" technology and Cathedral's "nDurance" motor. The 
technologies are showing dramatic improvements in operational performance and 
have significantly reduced drilling times for our customers. This is 
resulting in additional work being awarded. With bases now setup in both 
Houston, Texas and Oklahoma City, Oklahoma the Company is able to exploit the 
largest drilling market in the U.S.

A key take away from the quarter is the expected growth in the U.S. market on 
a quarter-over-quarter basis for the remainder of the year in both operating 
divisions.

Although activity was down for Cathedral's Canadian operations, the Company 
has broadened its customer base through the first quarter. In order to build 
on these additions, the Company has expanded its sales and marketing group and 
expects to see additional work secured. We are focused on expanding our 
marketing efforts and to bring on specialty technologies to increase revenues 
once the spring break-up season has ended.

2013 CAPITAL PROGRAM

During 2013 Q1 the Company invested an additional $6,698 (2012 Q1 - $11,945) 
in property and equipment. To March 31, 2013 the main 2013 additions were 
upgrades and replacement of downhole tools, progress payments on 3 production 
testing units and auxiliary production testing equipment. In 2013 Q1, $2,135 
of the additions related to growth capital, with the remaining $4,563 for 
maintenance and replacement capital.

The following is a summary of major equipment owned by the Company:
                                                                      
                                         March 31 December 31 March 31
                                             2013        2012     2012

Directional drilling - MWD systems ((1))      136         136      129

Production testing units                       69          69       65

((1) Net of 10 systems that have been
removed from service.)                                                

Cathedral's 2013 capital budget remains at the previously announced amount of 
$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. Delivery of the 3 frac blowback units 
occurred in April 2013.

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 the nature of oil bores being drilled.

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

NORMAL COURSE ISSUER BID

In 2013 Q1, the Company repurchased an additional 671,562 common shares (of 
which 594,247 were cancelled before quarter end) at a cost of $2,704 or an 
average cost of $4.03 per common share. This along with repurchases in April 
2013 brings the total number of common share repurchased under the Company's 
Normal Course Issuer Bid that expires on June 19, 2013 to 1,824,992 common 
shares at a cost of $8,343 or an average cost of $4.57 per common share. At 
May 6, 2013, the Company has 35,837,960 common shares and 3,419,623 share 
options outstanding.

DIVIDENDS

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 Q2 dividend in the amount of $0.075 per share which will 
have a date of record of June 30, 2013 and a payment date of July 15, 2013.

LIQUIDITY AND CAPITAL RESOURCES

On an annualized basis the Company's principal source of liquidity is cash 
generated from operations.  In addition, the Company has the ability to 
fund liquidity requirements through its credit facility and the issuance of 
debt and/or equity. For the three months ended March 31, 2013, the Company 
had funds from operations of $7,507 (2012 - $17,497). The decline in funds 
from operations is due to the Company's reduced levels of Canadian source 
revenues on a quarter-over-quarter basis.

At March 31, 2013 the Company had a working capital position of $26,431 
(December 31, 2012 - $29,173) and a working capital ratio of 1.48 to 1 
(December 31, 2012 - 1.74 to 1).

The following table outlines the current credit facility:
                                                         
                                               March 31 December 31
                                                   2013        2012

Available credit facility                    $   75,000  $   75,000

Drawings on credit facility:                                       

  Operating loan                                 16,658         880

  Revolving term loan                            45,000      45,000

Total drawn facility                         $   61,658  $   45,880

Borrowing capacity (see NON-GAAP             $   13,342  $   29,120
MEASUREMENTS)  

Net debt (see NON-GAAP MEASUREMENTS):                              

  Loans and borrowings, net of current       $   46,330  $   46,151
  portion  

  Working capital:                                                 
    Current assets                           $   81,124  $   68,142
    Current liabilities                        (54,693)    (38,969)

Working capital                              $   26,431  $   29,173

Net debt                                     $   19,899  $   16,978

As at March 31, 2013, the Company is in compliance with all covenants under 
its credit facility.

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31
                                                                       
             Three months ended March 31,       Three months ended March 31,
                                     2013                               2012
         Directional Production             Directional Production          

Revenues    drilling    testing     Total      drilling    testing     Total

Canada    $   23,594  $   7,766  $ 31,360    $   33,512  $  12,385  $ 45,897

United        14,509      8,205    22,714        14,907      7,025    21,932
States
                                                                            

Total     $   38,103  $  15,971  $ 54,074    $   48,419  $  19,410  $ 67,829

Revenues 2013 Q1 revenues were $54,074 which represented a decrease of 
$13,755 or 20% from 2012 Q1 revenues of $67,829. The decrease was mainly 
attributed to the Canadian operations.

Canadian directional drilling revenues decreased from $33,512 in 2012 Q1 to 
$23,594 in 2013 Q1; a 30% decrease. This decrease was the result of: i) a 
23% decrease in activity days from 2,713 in 2012 Q1 to 2,102 in 2013 Q1; and 
ii) a 9% decrease in the average day rate from $12,352 in 2012 Q1 to $11,224 
in 2013 Q1. The 2013 Q1 day rate is up from the rate in 2012 Q4, but did not 
reach the high levels seen in 2012 Q1. Canadian activity days decreased from 
2,713 to 2,102 due to a number of factors including a decline in work for a 
significant client, other client specific reduction in activity levels 
(including lack of access to equity markets and operating within reduced cash 
flow forecasts) and increased competition in the directional drilling 
market. There were some new clients added, but these were not enough to 
offset the decreased work on existing clients.

U.S. directional drilling revenues decreased from $14,907 in 2012 Q1 to 
$14,509 in 2013 Q1; a 3% decrease. This decrease was the result of: i) a 7% 
decrease in activity days from 1,422 in 2012 Q1 to 1,329 in 2013 Q1; and ii) a 
4% increase in the average day rate from $10,483 in 2012 Q1 to $10,917 in 2013 
Q1(when converted to Canadian dollars). The decrease in U.S. activity days 
were due to reduced drilling in the Rocky Mountain and Pennsylvania areas 
within the existing client base, offset by increased days in the Texas 
market. The increased average day rate is increase was mainly due to 
increases that were achieved in the Rocky Mountain region due to modest 
increases in demand for services.

Canadian production testing revenues decreased from $12,385 in 2012 Q1 to 
$7,766 in 2013 Q1; a 37% decrease. The Canadian operations were affected by 
a decline in work for a significant client and other client specific delays in 
completion work in 2013 Q1 and by comparison the 2012 Q1 revenues were one of 
the highest ever for the division.

U.S. production testing revenues increased from $7,025 in 2012 Q1 to $8,205 in 
2013 Q1; a 17% decrease. This increase is attributable to having 3 
additional units in 2013 Q1 versus 2012 Q1 and expansion into the Eagleford 
(Texas) market.

Gross margin and adjusted gross margin The gross margin for 2013 Q1 
was 15.9% compared to 27.6% in 2012 Q1. Adjusted gross margin for 2013 Q1 
was $13,358 (24.7%) compared to $23,064 (34.0%) for 2012 Q1. The decline in 
adjusted gross margin of 9.3% was due in part to a 3.8% increase in field 
labour as a percentage of revenue.

In the Canadian market, there have been declines in the total per day revenue 
rates, but there were not corresponding decreases in the field labour rates. 
In addition there were increases in costs for accommodation of field staff and 
increases in non-field wages. The increase in non-field wages relates to the 
continued build out of personnel in the Houston, Texas facility and staff for 
the newly established facility in Oklahoma City, Oklahoma. The Company is 
expecting increased levels of activity from the markets covered by these 
facilities. 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.

Depreciation allocated to cost of sales increased from $4,264 in 2012 Q1 to 
$4,665 in 2013 Q1 due to capital additions in the period from 2012 Q1 to 2013 
Q1. Depreciation included in cost of sales as a percentage of revenue was 
8.6% for 2013 Q1 and 6.3% in 2012 Q1.

Selling, general and administrative expenses ("SG&A") SG&A expenses 
were $5,571 in 2013 Q1; an increase of $130 compared with $5,441 in 2012 Q1. 
As a percentage of revenue, these costs were 10% in 2013 Q1 and 8% in 2012 
Q1. Non-cash expenses total $368 for 2013 Q1 and $424 for 2012 Q1. SG&A 
net of these non-cash items were $5,203 in 2013 Q1 and $5,017 in 2012 Q1, an 
increase of $186.

In 2013 Q1, there was a recovery of international SG&A offset by one-time 
costs for severance. The recovery of international SG&A was from the 
Company's joint venture partner in Vencana Servicios Petroleros, S.A. 
("Vencana"), of which Cathedral owns 40%, for amounts previously expended by 
the Company on the start-up of Vencana. These costs had been previously 
expensed by Cathedral. The Company is currently in negotiations with its 
joint venture partner for the re-imbursement of additional costs. If we 
remove these items from SG&A, net of non-cash items, 2013 Q1 adjusted SG&A was 
$5,804 compared to $5,017 in 2012 Q1, an increase of $787.

Wages increased $911; this increase was primarily related to staff additions 
for research and development department and staff positions added to 
accommodate expected U.S. growth; net of decreases in variable compensation. 
The staffing costs included in SG&A relate to executives, sales, accounting, 
human resources, payroll, safety, research and development and related support 
staff. The remaining net decrease of $124 relates to various changes none of 
which are individually significant.

Gain on disposal of property and equipment During 2013 Q1 the Company 
had a gain on disposal of property and equipment of $505, compared to $3,704 
in 2012 Q1. Included in the 2012 Q1 gain of $3,704 was $2,034 related to the 
sale of property and equipment by Cathedral's subsidiaries to Vencana. The 
Vencana related portion of the gain includes the portion of the gain related 
to the joint venture partner's share. The Company's remaining 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 has changed 
from a gain of $261 in 2012 Q1 to a loss of $280 in 2013 Q1 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 2013 Q1 foreign currency loss are unrealized losses of $212 
(2012 Q1 - $56 gains) related to intercompany balances.

Finance costs  Finance costs consist of interest expenses on operating 
loans, loans and borrowings and bank charges of $480 for 2013 Q1 versus $573 
for 2012 Q1. The decrease in finance costs mainly relate to the slight 
decrease in interest rates and a reduction in the outstanding balance for the 
secured revolving term loan in 2013 Q1.

Income tax For 2013 Q1, the Company had an income tax expense of $728 
compared to $4,021 in 2012 Q1. The effective tax rate was 26% for 2013 Q1 
and 24% 2012 Q1.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION March 31, 2013 and 
December 31, 2012
Dollars in '000s
(unaudited)
                                                
                                             March 31   December 31 
                                                 2013          2012 

Assets                                                              

Current assets:                                                     

  Cash and cash equivalents                  $   7,199  $      8,470

  Trade receivables                             47,757        36,094

  Current taxes recoverable                          -           153

  Prepaid expenses                               8,777        10,419

  Inventories                                   17,391        13,006

Total current assets                            81,124        68,142

Property and equipment                         136,325       135,093

Intangible assets                                  642           719

Deferred tax assets                              9,184         9,379

Investment in associate                          4,481         4,899

Goodwill                                         5,848         5,848

Total non-current assets                       156,480       155,938

Total assets                                 $ 237,604  $    224,080
                                                                    

Liabilities and Shareholders' Equity                                

Current liabilities:                                                

  Operating loan                             $  16,658  $        880

  Trade and other payables                      21,184        21,773

  Dividends payable                              2,724         2,768

  Loans and borrowings                             783           711

  Deferred revenue                              13,105        12,837

  Current taxes payable                            239             -

Total current liabilities                       54,693        38,969

Loans and borrowings                            46,330        46,151

Deferred tax liabilities                         1,001         1,028

Total non-current liabilities                   47,331        47,179

Total liabilities                              102,024        86,148
                                                                    

Shareholders' equity:                                               

  Share capital                                 73,084        74,408

  Contributed surplus                            9,145         8,863

  Accumulated other comprehensive loss         (1,974)       (2,679)

  Retained earnings                             55,325        57,340

Total shareholders' equity                     135,580       137,932

Total liabilities and shareholders' equity   $ 237,604  $    224,080



CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Three months ended March 31, 2013 and 2012
Dollars in '000s except per share amounts
(unaudited)
                                                     
                                           Three months ended March 31 
                                               2013                2012
                                                     

Revenues                                 $   54,074  $           67,829

Cost of sales:                                                         

  Direct costs                             (40,716)            (44,765)

  Depreciation                              (4,665)             (4,264)

  Share-based                                  (76)               (102)
  compensation 

Total cost of sales                        (45,457)            (49,131)

Gross margin                                  8,617              18,698

Selling, general and
administrative                                                         
expenses: 

  Direct costs                              (5,203)             (5,017)

  Depreciation                                (157)               (156)

  Share-based                                 (211)               (268)
  compensation 

Total selling, general
and administrative                          (5,571)             (5,441)
expenses 
                                              3,046              13,257

Gain on disposal of
property and                                    505               3,704
equipment 

Earnings from                                 3,551              16,961
operating activities 

Foreign exchange gain                         (280)                 261
(loss) 

 Finance costs                                (480)               (573)

Share of loss of                                (4)                   -
associate 

Earnings before income                        2,787              16,649
taxes 

Income tax expense:                                                    

  Current                                     (580)               (755)

  Deferred                                    (148)             (3,266)

Total income tax                              (728)             (4,021)
expense 

Net earnings                                  2,059              12,628

Other comprehensive                                                    
income (loss): 

  Foreign currency translation                  705               (647)
  differences for foreign operations 

Total comprehensive                      $    2,764  $           11,981
income 
                                                                       

Net earnings per                                                       
share 

  Basic                                  $     0.06  $             0.34

  Diluted                                $     0.06  $             0.33



CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended March 31, 2013 and 2012
Dollars in '000s
(unaudited)
                                                             
                                                       2013        2012

Cash provided by (used in):                                            

Operating activities:                                                  

  Net earnings from continuing operations        $    2,059  $   12,628

  Items not involving cash:                                            
    Depreciation                                      4,822       4,420
    Total income tax expense                            728       4,021
    Unrealized foreign exchange gain on                 212        (56)
    intercompany balances 
    Finance costs                                       480         573
    Share-based compensation                            287         370
    Gain on disposal of property and equipment        (505)     (3,704)
    Share of loss from associate                          4           -

  Cash flow from continuing operations                8,087      18,252

  Changes in non-cash operating working            (12,641)       3,115
  capital 

  Income taxes paid                                   (187)       (318)

Cash flow from operating activities                 (4,741)      21,049

Investing activities:                                                  

  Property and equipment additions                  (6,698)    (11,945)

  Intangible asset additions                              -       (554)

  Proceeds on disposal of property and                  960       6,278
  equipment 

  Investment in associate                             (377)           -

  Changes in non-cash investing working               (354)     (1,643)
  capital 

Cash flow from investing activities                 (6,469)     (7,864)

Financing activities:                                                  

  Change in operating loan                           15,796    (11,016)

  Interest paid                                       (579)       (434)

  Repayments on loans and borrowings                  (133)       (126)

  Proceeds on exercise of share options                  25         631

  Repurchase of common shares                       (2,704)           -

  Dividends paid                                    (2,768)     (2,238)

Cash flow from financing activities                   9,637    (13,183)

Effect of exchange rate on changes in cash and          302         124
cash equivalents 

Change in cash and cash equivalents                 (1,271)         126

Cash and cash equivalents, beginning of period        8,470       2,902

Cash and cash equivalents, end of period         $    7,199  $    3,028



FORWARD-LOOKING STATEMENTS

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: capital expenditures are expected to be financed by way of 
cash flow from operations and the Company's credit facility; development and 
deployment of new technologies; expected growth in the U.S. market on a 
quarter-over-quarter basis for the remainder of the year in both operating 
divisions; opportunities to deploy additional "green completions"/ closed loop 
production testing units and expansion of its completions activity in the U.S; 
components of expected 2013 capital budget and financing thereof; timing of 
payment of purchase commitments; expected activity levels; expected future 
recoveries of international expenditures; future expansion; commencement of 
operations in Venezuela; intent to pay quarterly dividends; sources to fund 
liquidity requirements; and that recent additions to its sales team in 
Cathedral's Canadian market is expected to result in an increase in activity 
levels in this region. 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 www.sedar.com.

NON-GAAP MEASUREMENTS

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.

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);

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

iii)"EBITDAS" - defined as earnings before share of income/loss from 
associate, finance costs, unrealized foreign exchange on intercompany 
balances, unrealized foreign exchange due to hyper-inflation accounting, 
taxes, depreciation and share-based compensation plus dividends from 
associate; 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);

iv)"Funds from operations" - calculated as cash provided by operating 
activities before changes in non-cash working capital 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);

v)"Growth property and equipment additions" or "Growth capital" - is capital 
spending which is intended to result in incremental revenues. Growth capital 
is considered to be a key measure as it represents the total expenditures on 
property and equipment expected to add incremental revenues and funds flow to 
the Company;

vi)"Maintenance property and equipment additions" or "Maintenance capital" - 
is capital spending incurred in order to refurbish or replace previously 
acquired other than "replacement property and equipment additions" described 
below. Such additions do not provide incremental revenues. Maintenance capital 
is a key component in understanding the sustainability of the Company's 
business as cash resources retained within Cathedral must be sufficient to 
meet maintenance capital needs to replenish the assets for future cash 
generation;

vii)"Replacement property and equipment additions" or "Replacement capital" 
- is capital spending incurred in order to replace equipment that is lost 
downhole. Cathedral recovers lost-in-hole costs including previously 
expensed depreciation on the related assets form customers. Such additions 
do not provide incremental revenues. The identification of replacement 
property and equipment additions is considered important as such additions are 
financed by way of proceeds on disposal of property and equipment (see 
discussion within the news release on "gain on disposal of property and 
equipment);

viii)"Net property and equipment additions" - is property and equipment 
additions expenditures less proceeds on the disposal of property and 
equipment. Cathedral uses net property and equipment additions to assess net 
cash flows related to the financing of Cathedral's property and equipment 
additions;

ix)"Borrowing capacity" - is total available credit facility less drawings 
on credit facilities;

xx)"Net debt" - is loans and borrowing less working capital. Management 
uses net debt as a metric to shows the Company's overall debt level.

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

Adjusted gross margin                                    
                                            Three months ended March 31
                                               2013                2012

Gross margin                              $   8,617   $          18,698

Add non-cash items included in cost                                    
of sales:

  Depreciation                                4,665               4,264

  Share-based compensation                       76                 102

Adjusted gross margin                     $  13,358   $          23,064

Adjusted gross margin %                       24.7%               34.0%
                                                         
                                                         

EBITDAS                                    
                                            Three months ended March 31
                                               2013                2012

Earnings before income taxes              $   2,787   $          16,649

Add (deduct):                                                          

  Depreciation included in cost of            4,665               4,264
  sales

  Depreciation included in selling,             157                 156
  general and administrative expenses

  Share-based compensation included              76                 102
  in cost of sales

  Share-based compensation included
  in selling, general and                       211                 268
  administrative expenses

  Unrealized foreign exchange gain on           212                (56)
  intercompany balances

  Finance costs                                 480                 573

  Share of loss from associate                    4                   -

EBITDAS                                   $   8,592   $          21,956
                                                         

Funds from operations                                    
                                            Three months ended March 31
                                               2013                2012

Cash flow from operating activities       $ (4,741)   $          21,049

Add (deduct):                                                          

  Changes in non-cash operating              12,641             (3,115)
  working capital

  Income taxes paid                             187                 318

  Current tax expense                         (580)               (755)

Funds from operations                     $   7,507   $          17,497

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 www.cathedralenergyservices.com.





Requests for further information should be directed to:

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: 403.265.2560Fax: 
403.262.4682www.cathedralenergyservices.com

SOURCE: Cathedral Energy Services Ltd.

To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/May2013/06/c3631.html

CO: Cathedral Energy Services Ltd.
ST: Alberta
NI: OIL ERN DIV 

-0- May/06/2013 20:15 GMT


 
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