Cathedral Energy Services Ltd. reports results for 2013 Q3 and a 10% increase in 2013 Q4 dividend

Cathedral Energy Services Ltd. reports results for 2013 Q3 and a 10% increase 
in 2013 Q4 dividend 
/NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA/ 
CALGARY, Nov. 5, 2013 /CNW/ - Cathedral Energy Services Ltd. (the "Company" or 
"Cathedral" / TSX: CET) announces its consolidated financial results for the 
three and nine months ended September 30, 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 Q3 KEY TAKEAWAYS 


    --  2013 Q3 set records for U.S. directional drilling revenues and
        U.S. production testing revenues;
    --  Continued growth in U.S. activity levels for both divisions -
        25% increase in year-to-date revenues;
    --  Cathedral continues to "win" incremental work due to success of
        its proprietary Fusion EM/MWD platform;
    --  Sale/leaseback of Nisku and Calgary, Alberta facilities is
        completed with net proceeds of $22,260 and gain of $5,354 - net
        proceeds used to reduce bank debt; and
    --  Continued operational success, confident outlook and balance
        sheet flexibility have provided a sound basis for a 10%
        dividend increase to $0.0825 per share.

2013 Q3 FINANCIAL SUMMARY
                                                          
                     Three months ended     Nine months ended September
                           September 30                              30
                       2013        2012           2013             2012

Revenues         $   59,734 $    49,830 $      159,447 $        158,358

Adjusted gross        25.1%       28.0%          24.1%            28.3%
margin % ((1))

EBITDAS ((1))    $   10,757 $    10,538 $       24,691 $         32,528

  Diluted per    $     0.30 $      0.28 $         0.68 $           0.86
  share

EBITDAS ((1) )as      18.0%       21.1%          15.5%            20.5%
% of revenues

Funds from       $    7,876 $     8,039 $       18,959 $         26,684
operations ((1))

  Diluted per    $     0.22 $      0.21 $         0.52 $           0.70
  share

Net earnings     $    7,956 $     3,813 $        9,706 $         13,219

  Basic per      $     0.22 $      0.10 $         0.27 $           0.35
  share

  Diluted per    $     0.22 $      0.10 $         0.27 $           0.35
  share

Dividends
declared per     $    0.075 $     0.075 $        0.225 $          0.225
share

Property and
equipment        $    8,373 $     5,229 $       21,547 $         23,716
additions (cash)

Weighted average
shares                                                                 
outstanding

  Basic (000s)       35,915      37,455         36,175           37,432

  Diluted (000s)     36,013      37,721         36,238           37,861
                                                                       
                                          September 30      December 31
                                                  2013             2012

Working capital                         $       30,055 $         29,173

Total assets                            $      225,938 $        224,080

Loans and
borrowings                              $       38,253 $         46,151
excluding
current portion

Total
shareholders'                           $      138,240 $        137,932
equity
                                                                       

((1) see
"NON-GAAP                                                              
MEASUREMENTS")



OVERVIEW

The Company completed 2013 Q3 with quarterly revenues of $59,734 and 
year-to-date revenues of $159,447 compared to 2012 Q3 revenues of $49,830 and 
2012 year-to-date revenues of $158,358. Year-to-date revenues have increased 
1% from 2012 and Q3 revenues have increased 20% from 2012. The 2013 Q3 
revenues were comprised of 71% (2012 Q3 - 72%) from the directional drilling 
division, 29% (2012 Q3 - 24%) from the production testing division and nil% 
(2012 Q3 - 4%) from international operations.

2013 Q3 EBITDAS were $10,757 ($0.30 per share diluted) which represents a $219 
increase from 2012 Q3 EBITDAS of $10,538 ($0.28 per share diluted). For the 
three months ended September 30, 2013, the Company's net earnings were $7,956 
($0.22 per share diluted) as compared to a $3,813 ($0.10 per share diluted) in 
2012. The quarter-over-quarter increase in EBITDAS is due to increases in 
U.S. operating results. 2013 year-to-date EBITDAS was $24,691 ($0.68 per share 
diluted) which represents a $7,837 or 29% decrease from $32,528 ($0.86 per 
share diluted) in 2012. On a 2013 year-to-date basis, the Company's net 
income was $9,706 ($0.27 per share diluted) as compared to a $13,219 ($0.35 
per share diluted) in 2012.

OUTLOOK

Cathedral continues its focus on the build out of its U.S. services. On the 
directional drilling side of the business we expect continued expansion in 
Oklahoma and Texas markets. Additional technical sales representatives have 
been added and the Company continues to "win" work based upon the success of 
Cathedral's Fusion MWD platform and "nDurance" mud motors and performance 
based work. The Company's U.S. production testing division has completed 3 
consecutive quarters of record revenues, but the Company expects 2013 Q4 
activity levels to decline from 2013 Q3 levels due to a client deferring work 
into 2014 and the fact one customer has provided the Company notice that they 
will be moving work to another service provider as current work is 
completed. The Company has increased its marketing efforts for U.S. 
production testing service line by hiring additional technical sales 
representatives as well as utilizing U.S. directional drilling sales team to 
market production testing services.

The Company's Canadian directional drilling division continues to focus its 
marketing efforts on targeting clients in the Deep Basin reservoirs where 
reduction in drilling times resulting from equipment and technology 
improvements allow the Company to compete on a performance basis rather than 
onlowest cost for services. For 2013 Q4 both Canadian divisions are 
expecting to see increased activity over Q3 which was affected negatively by 
weather and customers that deferred work to later in the year. 2013 Q4 
should also benefit from the addition of new customers as a result of ongoing 
marketing efforts.

Prior to the end of 2013 Q3, Cathedral completed the sale and leaseback of its 
Alberta operating facilities with net proceeds of $22,260 which was used to 
reduce bank debt. This debt repayment will provide the Company with 
additional financial flexibility as it moves forward.

In 2013 Q4, the Company's Directional Plus International Ltd. subsidiary is 
expected to ship all of the remaining production testing and wireline 
equipment which it has committed to sell to its international joint venture.

In mid-October, the Company's President and Chief Executive Officer, Mark 
Bentsen, left the employment of Cathedral. Until a replacement is secured, 
Mr. Bentsen's functions will be assumed by P. Scott MacFarlane as Interim 
Chief Executive Officer and Randy Pustanyk as President and Chief Operating 
Officer. Messrs. MacFarlane and Pustanyk will maintain their current roles 
with Cathedral as Chief Financial Officer and Vice President, Operations, 
respectively. Cathedral has an excellent team of executives in place on a 
companywide basis, and the Board of Directors are confident that we have the 
key people necessary to advance our strategy and guide our directional 
drilling and production testing businesses successfully forward.

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 an increase of 10% for 2013 Q4 dividend. The 2013 Q4 dividend 
will be in the amount of $0.0825 per share which will have a date of record of 
December 31, 2013 and a payment date of January 15, 2014.

2013 CAPITAL PROGRAM

For the nine months ended September 30, 2013 the Company has invested an 
additional $21,547 (2012 - $23,716) in property and equipment, excluding 
non-cash capital lease additions. The main 2013 capital additions were 
upgrades and replacement of downhole tools, the addition of 4 retrievable 
positive pulse systems, 3 high pressure production testing units and auxiliary 
production testing equipment. In 2013, $9,835 of the additions related to 
growth capital, with the remaining $11,712 for maintenance, upgrade and 
replacement capital. The net property and equipment additions (additions net 
of proceeds on the disposal of property and equipment) to date in 2013 were 
$16,683 (2012 - $13,758).

The following is a summary of major equipment owned by the Company:
                                                     
                           September 30 December 31 September 30
                                   2013        2012         2012

Directional drilling - MWD          135         136          132
systems ((1))

Production testing units             72          69           69

(1) The Company has 15 Geolink MWD systems that have been
excluded from the Septermber 30, 2013 figures as they are held
for sale. 

As at September 30 and December 31, 2012 there were 10 Geolink
MWD systems that were excluded.



In 2013 Q3 Cathedral's 2013 capital budget has increased from the previously 
announced amount of $27,000 to $30,000 for an increase of $3,000 for 
production testing ancillary equipment in Canada and U.S., as well as for land 
and building in Oklahoma City.

The maintenance capital for 2013 has increased to $16,000 with additional 
upgrades to existing production testing equipment and maintenance of downhole 
tools.

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.

RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30
                                                                             
               Three months ended September 30, 2013        Three months ended September 30,
                                                                                        2012
              Directional Production Resale          Directional Production  Resale         

Revenues         drilling    testing    and    Total    drilling    testing     and    Total
                                     Rental                                  Rental

Canada        $    19,571 $    7,572 $    - $        $    21,621 $    5,272 $     - $       
                                              27,143                                  26,893

United States      22,836      9,755      -   32,591      13,926      6,793       -   20,719

International           -          -      -        -           -          -   2,218    2,218

Total         $    42,407 $   17,327 $    - $        $    35,547 $   12,065 $       $       
                                              59,734                          2,218   49,830



Revenues 2013 Q3 revenues were $59,734 which represented an increase 
of $9,904 or 20% from 2012 Q3 revenues of $49,830. All areas, except for 
Canadian directional drilling were up on a year-over-year basis.

Canadian directional drilling revenues decreased from $21,621 in 2012 Q3 to 
$19,571 in 2013 Q3; a 9% decrease. This decrease was the result of: i) a 6% 
decrease in activity days from 1,885 in 2012 Q3 to 1,771 in 2013 Q3; and ii) a 
4% decrease in the average day rate from $11,470 in 2012 Q3 to $11,051 in 2013 
Q3. Canadian activity days decreased due to a number of factors including a 
decline in work for a significant client and clients delaying work until 
future quarters. These declines were partially offset by increases in work 
for existing clients and addition of new clients.

U.S. directional drilling revenues increased from $13,926 in 2012 Q3 to 
$22,836 in 2013 Q3; a 64% increase. This increase was the result of: i) a 
46% increase in activity days from 1,371 in 2012 Q3 to 1,996 in 2013 Q3; and 
ii) a 13% increase in the average day rate from $10,158 in 2012 Q3 to $11,441 
in 2013 Q3 (when converted to Canadian dollars). The increase in U.S. 
activity days were due to further expansion in the Texas and Oklahoma markets, 
increases in the Rocky Mountain region, offset by reduced drilling in the 
Pennsylvania areas within the existing client base. The increased average 
day rate was mainly due to higher rates that were achieved in the Rocky 
Mountain and Texas regions on certain jobs where the pricing was tied to 
performance.

Canadian production testing revenues increased from $5,272 in 2012 Q3 to 
$7,572 in 2013 Q3; a 44% increase. The Canadian operating days were up in 
each month of the quarter compared to 2012. Both 2013 and 2012 Q3 activity 
levels were negatively affected by customers deferring work.

U.S. production testing revenues increased from $6,793 in 2012 Q3 to $9,755 in 
2013 Q3; a 44% increase. This increase is attributable to having 3 
additional units in 2013 Q3 versus 2012 Q3 and expansion into the Eagleford 
(Texas) market and an increased utilization of units.

Gross margin and adjusted gross marginThe gross margin for 2013 Q3 was 16.9% 
compared to 18.7% in 2012 Q3. Adjusted gross margin for 2013 Q3 was $14,972 
(25.1%) compared to $13,957 (28.0%) for 2012 Q3. The decrease in adjusted 
gross margin of 2.9% was primarily due to increased field labour costs in the 
directional drilling divisions.

Depreciation allocated to cost of sales increased from $4,614 in 2012 Q3 to 
$4,860 in 2013 Q3 due to capital additions in the period from 2012 Q3 to 2013 
Q3. Depreciation included in cost of sales as a percentage of revenue was 
8.1% for 2013 Q3 and 9.3% in 2012 Q3.

Selling, general and administrative expenses ("SG&A") SG&A expenses 
were $6,228 in 2013 Q3; an increase of $577 compared with $5,651 in 2012 Q3. 
As a percentage of revenue, these costs were 10% in 2013 Q3 and 11% in 2012 
Q3. Non-cash expenses total $288 for 2013 Q3 and $419 for 2012 Q3. SG&A 
net of these non-cash items were $5,940 in 2013 Q3 and $5,232 in 2012 Q3, an 
increase of $708.

Wages increased $438; this increase was primarily related to staff additions 
for research and development department and staff positions added to 
accommodate current and future 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 increase of $270 relates to 
various changes none of which are individually significant.

Gain on disposal of property and equipment During 2013 Q3 the Company 
had a gain on disposal of property and equipment of $1,760 compared to $1,732 
in 2012 Q3. 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. 
In addition, in 2013 Q3 the Company had a gain on sale of land and buildings 
of $5,354 and has entered into a 15 year lease on the related assets.

Foreign exchange loss  The Company had foreign exchange gain of $173 in 
2013 Q3 compared to $459 in 2012 Q3 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 
Q3 foreign currency gain are unrealized gains of $208 (2012 Q3 - $378) related 
to intercompany balances.

Finance costs  Finance costs consist of interest expenses on operating 
loans, loans and borrowings and bank charges of $727 for 2013 Q3 versus $491 
for 2012 Q3. The increase in finance costs relate mainly to an increased 
utilization of the Company's operating loan and to a lesser extent increases 
in interest rates.

Income tax For 2013 Q3, the Company had an income tax expense of 
$2,446 compared to $1,535 in 2012 Q3. The effective tax rate was 24% for 
2013 Q3 and 29% for 2012 Q3. Income tax expense is booked based upon 
expected annualized effective rates.

RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30
                                                                                    
                  Nine months ended September 30, 2013        Nine months ended September 30, 2012
              Directional Production  Resale              Directional Production  Resale          

Revenues         drilling    testing     and     Total       drilling    testing     and     Total
                                      Rental                                      Rental

Canada        $    51,815 $   19,403 $     - $         $       65,655 $   24,025 $     - $        
                                                71,218                                      89,680

United States      56,181     26,874       -    83,055         44,821     21,639       -    66,460

International           -          -   5,174     5,174              -          -   2,218     2,218

Total         $   107,996 $   46,277 $       $         $      110,476 $   45,664 $       $        
                                       5,174   159,447                             2,218   158,358



Revenues 2013 revenues were $159,447 which represented an increase of 
$1,089 or 1% from 2012 revenues of $158,358. The increase was attributed to 
international and U.S. operations which were offset by declines in Canada 
operations.

Canadian directional drilling revenues decreased from $65,655 in 2012 to 
$51,815 in 2013; a 21% decrease. This decrease was the result of: i) a 847 
decrease in activity days from 5,399 in 2012 to 4,552 in 2013; and ii) a 6% 
decrease in the average day rate from $12,161 in 2012 to $11,383 in 2013. 
Canadian activity days decreased due to a number of factors including: i) a 
decline in industry activity due to oil take away restrictions, marginal 
natural gas prices and a general lack of access to equity markets; ii) a 
decline in work for a significant client; and iii) a slow start after the 
spring break-up and further delays due to weather in June that pushed start 
dates for certain jobs into 2013 Q3 and Q4. There were new clients added, 
but these were not enough to offset the decreased work on existing clients.

U.S. directional drilling revenues increased from $44,821 in 2012 to $56,181 
in 2013; a 25% increase. This increase was the result of: i) a 15% increase 
in activity days from 4,286 in 2012 to 4,927 in 2013; and ii) a 9% increase in 
the average day rate from $10,458 in 2012 to $11,402 in 2013 (when converted 
to Canadian dollars). The increase in U.S. activity days were due to 
increased traction in the Texas and Oklahoma markets, offset by reduced 
drilling in the Rocky Mountain and Pennsylvania areas within the existing 
client base. The increased average day rate was due to increases that were 
achieved in the Rocky Mountain and Texas regions, net of declines in the 
northeast.

Canadian production testing revenues decreased from $24,025 in 2012 to $19,403 
in 2013; a 19% decrease. The Canadian operations were affected by a general 
industry wide decline in wells completed and client specific delays in 
completion work that has resulted in such work being delayed until later in 
2013.

U.S. production testing revenues increased from $21,639 in 2012 to $26,874 in 
2013; a 24% increase. This increase is attributable to having 3 additional 
units in 2013 versus 2012 and expansion into the Eagleford (Texas) market and 
an increased utilization of units.

Gross margin and adjusted gross marginThe gross margin for 2013 was 15.0% 
compared to 19.7% in 2012. Adjusted gross margin for 2013 was $38,348 
(24.1%) compared to $44,813 (28.3%) for 2012.

In the Canadian and U.S. drilling markets, there have been increases in the 
per day field labour rates, while the combined per day revenue rate has fallen 
slightly. These increases were offset by the Canadian and U.S. production 
testing divisions where field labour rates have declined as 2012 saw a 
shortage of junior field staff. These staff were replaced with senior staff 
who have higher day rates. These net increases in field labour were 
partially offset by declines in repairs and maintenance for all divisions 
other than U.S. directional drilling where certain districts were drilling in 
difficult environments.

Depreciation allocated to cost of sales increased from $13,408 in 2012 to 
$14,234 in 2013 due to capital additions in the period from October 2012 to 
September 2013. Depreciation included in cost of sales as a percentage of 
revenue was 8.9% for 2013 and 8.5% in 2012.

Selling, general and administrative expenses ("SG&A") SG&A expenses 
were $17,950 in 2013; an increase of $815 compared with $17,135 in 2012. As 
a percentage of revenue, these costs were 11% for both 2013 and 2012. 
Non-cash expenses total $949 for 2013 and $1,248 for 2012. SG&A net of these 
non-cash items were $17,001 in 2013 and $15,887 in 2012, an increase of $1,114.

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, adjusted SG&A was $17,604 
in 2013 compared to $15,887 in 2012, an increase of $1,717.

Wages, excluding severance, increased $1,691; this increase was primarily 
related to staff additions for research and development department and staff 
positions added to accommodate current and future 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 
increase of $26 relates to various changes none of which are individually 
significant.

Gain on disposal of property and equipment During 2013 the Company had 
a gain on disposal of property and equipment of $3,390, compared to $5,464 in 
2012. Included in the 2012 gain 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. In addition, in 2013 Q3 the company had a gain on 
sale of land and buildings of $5,354. The Company has entered into a 15 year 
lease on the related assets.

Foreign exchange loss  The Company had foreign exchange loss of $380 in 
2013 compared to a gain of $405 in 2012 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 foreign currency loss are unrealized losses of $334 (2012 
- $233 gain) related to intercompany balances.

Finance costs  Finance costs consist of interest expenses on operating 
loans, loans and borrowings and bank charges of $1,855 for 2013 versus $1,577 
for 2012. The increase in finance costs relate mainly to an increased 
utilization of the Company's operating loan and to a lesser extent increases 
in interest rates.

Income tax For 2013, the Company had an income tax expense of $2,802 
compared to $5,128 in 2012. The effective tax rate was 22% for 2013 and 28% 
2012. Income tax expense is booked based upon expected annualized effective 
rates.

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 nine months ended September 30, 2013, the Company had 
funds from operations of $18,959 (2012 - $26,684). The decline in funds from 
operations is due to the Company's reduced levels of Canadian source revenues 
on a year-over-year basis.

At September 30, 2013 the Company had a working capital position of $30,055 
(December 31, 2012 - $29,173) and a working capital ratio of 1.62 to 1 
(December 31, 2012 - 1.75 to 1).

The following table outlines the current credit facility:
                                                            
                                            September 30   December 31
                                                    2013          2012

Available credit facility                $        75,000 $      75,000

Drawings on credit facility:                                          

  Operating loan                                  10,005           880

  Revolving term loan                             37,000        45,000

  Letter of credit                                   700             -

Total drawn facility                     $        47,705 $      45,880

Borrowing capacity (see NON-GAAP         $        27,295 $      29,120
MEASUREMENTS)

Net debt (see NON-GAAP MEASUREMENTS):                                 

  Loans and borrowings, net of current    $       38,253 $      46,151
  portion

  Working capital:                                                    
    Current assets                       $        78,598 $      68,142
    Current liabilities                         (48,543)      (38,969)

  Working capital                        $        30,055 $      29,173

Net debt                                 $         8,198 $      16,978



The Company's credit facility includes a $35,000 accordion feature which is 
subject to approval of the Company's bank. As at September 30, 2013, the 
Company is in compliance with all covenants under its credit facility.

NORMAL COURSE ISSUER BID

The Normal Course Issuer Bid was renewed on July 8, 2013 and has an expiry 
date of July 7, 2014. For the three months ended September 30, 2013, the 
Company did not repurchase and cancel common shares. For the year-to-date at 
September 30, 2013, the Company has repurchased 1,088,083 of common shares at 
a cost of $4,434 or an average cost of $4.07 per common share. A total of 
1,838,075 of common share at a cost of $8,395 or an average cost of $4.57 per 
common share were repurchased under the Company's Normal Course Issuer Bid 
that expired on June 19, 2013. At November 5, 2013, the Company has 
36,163,380 common shares and 2,678,198 share options outstanding.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION September 30, 2013 and 
December 31, 2012
Dollars in '000s
(unaudited)
                                                           
                                          September 30     December 31 
                                                  2013            2012 

 Assets                                                                
                                                                       

 Current assets:                                                       

  Cash and cash equivalents            $          4,441 $         8,470

  Trade receivables                              50,270          36,094

  Current taxes recoverable                         826             153

  Prepaid expenses                                6,396          10,419

  Inventories                                    16,665          13,006

 Total current assets                            78,598          68,142

 Property and equipment                         123,367         135,093

 Intangible assets                                1,254             719

 Deferred tax assets                              8,759           9,379

 Investment in associate                          8,112           4,899

 Goodwill                                         5,848           5,848

 Total non-current assets                       147,340         155,938

 Total assets                          $        225,938 $       224,080
                                                                       

 Liabilities and Shareholders' Equity                                  

 Current liabilities:                                                  

  Operating loan                       $         10,005 $           880

  Trade and other payables                       27,057          21,773

  Dividends payable                               2,705           2,768

  Loans and borrowings                              689             711

  Deferred revenue                                8,087          12,837

 Total current liabilities                       48,543          38,969

 Loans and borrowings                            38,253          46,151

 Deferred tax liabilities                           902           1,028

 Total non-current liabilities                   39,155          47,179

 Total liabilities                               87,698          86,148
                                                                       

 Shareholders' equity:                                                 

  Share capital                                  73,405          74,408

  Contributed surplus                             9,270           8,863

  Accumulated other comprehensive               (1,125)         (2,679)
  loss 

  Retained earnings                              56,690          57,340

 Total shareholders' equity                     138,240         137,932

 Total liabilities and shareholders'   $        225,938 $       224,080
equity 



CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Three and nine months ended September 30, 2013 and 2012
Dollars in '000s except per share amounts
(unaudited)
                                                           
                         Three months ended       Nine months ended
                              September 30            September 30 
                          2013         2012        2013        2012

 Revenues           $   59,734 $     49,830 $   159,447 $   158,358

 Cost of sales:                                                    

  Direct costs        (44,762)     (35,842)   (121,099)   (113,514)

  Depreciation         (4,860)      (4,614)    (14,234)    (13,408)

  Share-based             (42)         (75)       (161)       (246)
  compensation 

 Total cost of        (49,664)     (40,531)   (135,494)   (127,168)
sales 

 Gross margin           10,070        9,299      23,953      31,190

 Selling, general
and administrative                                                 
expenses: 

  Direct costs         (5,940)      (5,232)    (17,001)    (15,887)

  Depreciation           (171)        (163)       (487)       (478)

  Share-based            (117)        (256)       (462)       (770)
  compensation 

 Total selling,
general and            (6,228)      (5,651)    (17,950)    (17,135)
administrative
expenses 
                         3,842        3,648       6,003      14,055

 Gain on disposal
of property and          1,760        1,732       3,390       5,464
equipment 

 Gain on sale of         5,354            -       5,354           -
land and buildings 

 Earnings from
operating               10,956        5,380      14,747      19,519
activities 

 Foreign exchange          173          459       (380)         405
gain (loss) 

 Finance costs           (727)        (491)     (1,855)     (1,577)

 Share of loss from          -            -         (4)           -
associate 

 Earnings before        10,402        5,348      12,508      18,347
income taxes 

 Income tax                                                        
expense: 

  Current expense      (1,121)        (767)     (2,342)     (2,414)

  Deferred expense     (1,325)        (768)       (460)     (2,714)

 Total income tax      (2,446)      (1,535)     (2,802)     (5,128)
expense 

 Net earnings            7,956        3,813       9,706      13,219

 Other
comprehensive                                                      
income (loss): 

  Foreign currency
  translation
  differences for        (584)      (1,555)       1,554     (1,262)
  foreign
  operations 

 Total
comprehensive       $    7,372 $      2,258 $    11,260 $    11,957
income 
                                                                   

 Net earnings per                                                  
share 

  Basic             $     0.22 $       0.10 $      0.27 $      0.35

  Diluted           $     0.22 $       0.10 $      0.27 $      0.35



CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended September 30, 2013 and 2012
Dollars in '000s
(unaudited)
                                                          
                                         September 30     September 30 
                                                 2013             2012 

 Cash provided by (used in):                                           

 Operating activities:                                                 

  Net earnings from continuing        $          9,706 $         13,219
  operations 
    Items not involving cash:                                           
    Depreciation                                14,721           13,886
    Total income tax expense                     2,802            5,128
    Unrealized foreign exchange gain               334            (233)
    (loss) on intercompany balances 
    Finance costs                                1,855            1,577
    Share-based compensation                       623              985
    Gain on disposal of property and           (3,390)          (5,464)
    equipment 
    Gain on sale of land and                   (5,354)                -
    buildings 
    Share of loss from associate                     4                -

  Cash flow from continuing                     21,301           29,098
  operations 

  Changes in non-cash operating               (10,343)           30,419
  working capital 

  Income taxes paid                            (3,009)          (2,799)

 Cash flow from operating activities             7,949           56,718

 Investing activities:                                                 

  Property and equipment additions            (21,547)         (23,716)

  Intangible asset additions                     (717)            (677)

  Proceeds on disposal of property               4,864            9,958
  and equipment 

  Proceeds on disposal of land and              22,260                -
  buildings 

  Investment in associate                      (3,011)          (2,472)

  Changes in non-cash investing                (1,555)              217
  working capital 

 Cash flow from (used in) investing                294         (16,690)
activities 

 Financing activities:                                                 

  Change in operating loan                       9,144         (12,128)

  Interest paid                                (1,837)          (1,601)

  Advances of loans and borrowings               8,000                -

  Repayments on loans and borrowings          (16,416)          (5,376)

  Proceeds on exercise of share                    975            1,074
  options 

  Repurchase of common shares                  (4,434)            (585)

  Dividends paid                               (8,179)          (7,861)

 Cash flow used in financing                  (12,747)         (26,477)
activities 

 Effect of exchange rate on changes                475            (165)
in cash and cash equivalents 

 Change in cash and cash equivalents           (4,029)           13,386

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

 Cash and cash equivalents, end of    $          4,441 $         16,288
period 



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; success of new 
technologies will lead to additional work; expected growth in the Texas and 
Oklahoma markets for directional drilling in 2013 Q4; the expectation that 
U.S. production testing activity will decline in 2013 Q4; increased activity 
for 2013 Q4 for both Canadian divisions; components of expected 2013 capital 
budget and financing thereof; timing of payment of purchase commitments; 
expected activity levels; future expansion; that all remaining product will be 
shipped to Venezuela in 2013 Q4; 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 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.

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);

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, non-recurring gains and losses on disposal of property and equipment 
(see non-GAAP measurement), 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 from 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)"Non-recurring gains and losses on disposal of property and equipment" 
- are disposals of property and equipment that do not occur on a regular or 
periodic basis. Unlike the lost-in-hole recoveries the proceeds from these 
gains are not used on equivalent replacement property. These are often on 
non-field equipment such as land and buildings;

ix)"Net property and equipment additions" - is property and equipment 
additions expenditures less proceeds on the regular disposal of property and 
equipment (the proceeds on sale of land and buildings have been excluded). 
Cathedral uses net property and equipment additions to assess net cash flows 
related to the financing of Cathedral's property and equipment additions;

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

xi)"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     Nine months ended
                              September 30          September 30
                          2013        2012       2013       2012

Gross margin        $   10,070 $     9,299 $   23,953 $   31,190

Add non-cash items
included in cost of                                             
sales:

  Depreciation           4,860       4,614     14,234     13,408

  Share-based               42          44        161        215
  compensation

Adjusted gross      $   14,972 $    13,957 $   38,348 $   44,813
margin

Adjusted gross           25.1%       28.0%      24.1%      28.3%
margin %



EBITDAS
                                        
                    Three months ended   Nine months ended September
                          September 30                            30
                        2013      2012       2013               2012

Earnings before    $  10,402  $  5,348  $  12,508  $          18,347
income taxes

Add (deduct):                                                       

  Depreciation
  included in          4,860     4,614     14,234             13,408
  cost of sales

  Depreciation
  included in
  selling,               171       163        487                478
  general and
  administrative
  expenses

  Share-based
  compensation            42        44        161                215
  included in
  cost of sales

  Share-based
  compensation
  included in
  selling,               117       256        462                770
  general and
  administrative
  expenses

  Non-recurring
  gains on
  disposal of        (5,354)         -    (5,354)            (2,034)
  property and
  equipment

  Unrealized
  foreign
  exchange (gain)      (208)     (378)        334              (233)
  loss on
  intercompany
  balances

  Finance costs          727       491      1,855              1,577

  Share of loss            -         -          4                  -
  from associate

EBITDAS            $  10,757  $ 10,538  $  24,691  $          32,528



Funds from operations
                                         Nine months ended September 30
                                          2013                  2012

Cash flow from operating activities  $   7,949  $             56,718

Add (deduct):                                                       

  Changes in non-cash operating         10,343              (30,419)
  working capital

  Income taxes paid                      3,009                 2,799

  Current tax expense                  (2,342)               (2,414)

Funds from operations                $  18,959  $             26,684



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.







SOURCE  Cathedral Energy Services Ltd. 
P. Scott MacFarlane, Interim Chief Executive Officer and Chief Financial  
Officer or Randy Pustanyk, Interim President and COO 
Cathedral Energy Services Ltd., 6030 3 Street S.E., Calgary, Alberta T2H  1K2 
Telephone: 403.265.2560Fax: 
403.262.4682www.cathedralenergyservices.com 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/November2013/05/c9831.html 
CO: Cathedral Energy Services Ltd.
ST: Alberta
NI: OIL ERN DIV  
-0- Nov/05/2013 21:15 GMT
 
 
Press spacebar to pause and continue. Press esc to stop.