OREANDA-NEWS. On 28 August 2008 Integra Group (LSE:INTE), a leading Russian oilfield service provider and manufacturer of oilfield services equipment, released its Unaudited Interim Condensed Consolidated Financial Statements, prepared in accordance with IAS 34 Interim Financial Reporting, for the six month period ended 30 June 2008. Reported financial results demonstrate a strong, predominately organic, growth of the business and improvement in operating profitability. Amongst the key factors driving this performance are: growth of our seismic operations, new product rollouts in technology services, strengthening of customer relationships, positive restructuring progress in the drilling business, expansion of the order book in oilfield equipment manufacturing and consolidation of our recent acquisitions in the workover business

1H 2008 Financial Highlights

Sales increased 61.0% to USD  785.5 million (vs. USD 487.9 million in 1H 2007)

Adjusted EBITDA  rose by 70.4% to USD 128.8 million (vs. USD 75.6 million in 1H 2007)     Adjusted EBITDA margin was 16.4% (vs. 15.5 % in 1H 2007)

Adjusted EBITDA margin by segment was: 

Drilling, workover, IPM and technology services segment: 17.1% in 1H 2008 (vs. 21.3% in 1H 2007)

Formation evaluation segment: 30.7% in 1H 2008 (vs. 25.9% in 1H 2007)

Equipment manufacturing segment: 16.2% in 1H 2008 (vs. 12.9% in 1H 2007)  

Net loss for the period (excluding minorities) amounted to USD 4.5 million (vs. net loss of USD 51.5 million in 1H 2007)  

Operating cash flow after income tax and interest paid and before working capital changes was USD 74.7 million (vs. USD 34.5 million in 1H 2007)  

Net cash flow provided by operating activities was USD 2.7 million (vs. net cash flow of USD 70.7 million in 1H 2007)  

Capital expenditures incurred during 1H 2008 amounted to USD 114.0 million (vs. USD 70.4 million in 1H 2007)  

Net cash used in investing activities during 1H 2008 amounted to USD 125.8 million (vs. USD 121.3 million in 1H 2007)

Gearing was 35.4 % at the end of 1H 2008 (vs. 31.7% as at December 31, 2007)

1H 2008 Operating Highlights    

202,846 meters drilled (vs. 216,300 meters in 1H 2007)   

90 wells were completed (vs. 101 wells in 1H 2007)   

1,420 workover operations conducted (vs. 477 workover operations in 1H 2007)   

331 thousand workover crew hours billed (vs. 121 thousand crew hours billed in 1H 2007)

14,055   km of two-dimensional (2D) seismic surveys carried out (vs. 11,011 km of 2D 1H 2007)   

6,627   sq. km of three-dimensional (3D) seismic surveys carried out (vs. 5,111 sq. km of 3D seismic surveys in 1H 2007)   

603 thousand seismic shot points made in 1H 2008 (vs. 506 thousand seismic shot points made in 1H 2007)  

489 downhole motors and 28 turbines produced in 1H 2008 (vs. 382 downhole motors and 12 turbines produced in 1H 2007)  

11 cementing units produced in 1H 2008  (vs.  3 in 1H 2007 )  

Number of heavy drilling rigs in production at the end of 1H 2008 was 23 rigs (vs. 22 in production at the end of 1H 2007), while 6 new rigs were commissioned (vs. nil in 1H 2007)

Felix Lubashevsky, Integra’s Chief Executive Officer, commented,

“During the first six months of 2008, Integra managed to demonstrate strong revenue and operating profitability growth across almost all the business. The reported results clearly demonstrate the benefits of our product depth and diversity that we laid in the foundation of Integra. We believe this balanced platform has provided us with solid growth which is now almost entirely organic.

Demand for our key services remains strong and we continue to grow much faster than the market. Our adjusted EBITDA for 1H 2008 alone had already exceeded our full year EBITDA for 2006, highlighting a more than twofold organic increase within 18 months. More specifically, we see robust growth in our seismic and technology services  businesses, while in equipment manufacturing, although growth is evident as well, we see competition increasing.

The performance of our drilling subsegment in 1H 2008 was disappointing. We had the biggest optimization effort in progress and yet still undershot our margin expectations. However, I can say that we are close to a turning point as an encouraging profitability trend emerged in the second quarter. I anticipate that our strategy of consistent application of new business processes and further efficiency focus should yield improved margins in land drilling during the second half of 2008.

This year on top of new business development and capacity expansion we have launched extensive cost reduction and working capital efficiency programs. We kept our corporate overheads flat which had resulted in the share of SG&A expenses as a proportion of revenue declining from 19.6% to 16.3%.

Our adjusted EBITDA margins for 1H 2008 have materially improved relative to the first quarter of 2008. We remain confident that continued overall strong market conditions, leadership position in the seismic markets, our know-how in technology services, valuable human capital and overall seasonal trends will lead us to higher profitability this year.”