CALGARY, ALBERTA — (Marketwire) — 03/04/13 — Secure Energy Services Inc. (“Secure” or the “Corporation”) (TSX: SES) today announced financial and operational results for the three months and year ended December 31, 2012. The following should be read in conjunction with the management–s discussion and analysis (“MD&A”), the consolidated financial statements and notes of Secure which are available on SEDAR at .
Secure–s financial performance for 2012 increased significantly over 2011 resulting in a record year. For the year ended December 31, 2012, revenue (excluding oil purchase and resale) increased 70% to $392.2 million and net earnings improved 48% to $33.1 million while total assets increased 27% to total $767.9 million when compared to the year ended December 31, 2011. The Corporation executed on its organic growth and expansion initiatives adding $167.8 million of new facilities and equipment, and completing $36.6 million of acquisitions. Secure–s results reflect increased demand at existing processing, recovery and disposal (“PRD”) facilities and increased market share in the drilling services (“DS”) division despite slower oil and natural gas industry activity in the second half of 2012. The PRD division 2012 operating margin of $79.6 million increased 63% from 2011 as a result of new facilities and expansions as well as greater demand for the Corporation–s services. The DS division added operating margin of $63.0 million and increased its year over year market share in the Western Canadian Sedimentary Basin (“WCSB”) to 29% from 26%.
Note: In the prior year, the Corporation completed the acquisition of Marquis Alliance Energy Group Inc. and its wholly owned subsidiaries (“Marquis Alliance”) and XL Fluids Systems Inc. (“XL Fluids”), creating the DS division. In 2012, Secure has reclassified certain costs previously included in the PRD division, including segregating out costs associated with Corporate overhead. Accordingly, any reclassifications in 2012 were adjusted in the prior year to conform to current period presentation.
Highlights for the PRD division included:
Highlights for the DS division included:
OUTLOOK
Secure had a successful and rewarding year in 2012. The Corporation achieved significant growth while creating value for our shareholders over the past year. Concerns over crude oil differentials, natural gas liquid pricing and natural gas fundamentals in North America are leading to cautious producer spending plans for 2013. There is optimism that producer capital programs will be revised upwards in the latter half of 2013 predicated on continued foreign investment, improved access to capital for producers, stability in crude oil pricing and a narrowing of differentials and further clarity on future liquid natural gas (“LNG”) export facility developments. There have been a number of recent positive developments for oilfield activity in the Western Canadian Sedimentary Basin (“WCSB”) including the approval of the Nexen/CNOOC and Progress/PETRONAS transactions and the Encana/PetroChina Joint Venture in the Duvernay play. The Canadian Association of Oilwell Drilling Contractors is forecasting a 6% year over year decrease in well counts and drilling operating days in the WCSB. Despite the flat well count, average well depth is expected to continue to increase and the total of metres drilled in the WCSB is expecting to climb from 2012. In the United States, drilling activity peaked in the first quarter of 2012 and weakened over the course of the year as producers high graded development programs, in general shifting from natural gas drilling to crude oil plays. Expectations are for the U.S. land rig count to trough at some point in early 2013 with improvement in subsequent quarters.
Secure–s continued investment in new facilities in Canada and the United States in 2012 provides a basis for continued growth into 2013. Secure recently announced a 2013 capital expenditure program of $155.0 million. $15.0 million is carry over capital from 2012 projects related to the Judy Creek and Rocky FSTs. The Rocky FST and the Judy Creek FST are expected to be completed in the second quarter of 2013. $115.0 million is allocated to PRD growth initiatives including three FSTs, two SWDs and one landfill. The Corporation has started development of new Alberta SWDs at Edson and Kabob in the fourth quarter of 2012 and is in the planning stages of initiating new SWD projects at Keene and Stanley in North Dakota. All of these SWDs will be assessed for conversion to FST facilities pending regulatory approval and customer demand. It is expected that the majority of other PRD capital initiatives for 2013 will not have any material cash flow impact until 2014, which is typical considering the approval and construction timelines for these types of facilities. The DS division–s growth initiatives include adding $15.0 million of solids control equipment allocated evenly between Canada and the United States. Secure–s strong balance sheet has sufficient capacity to fund its capital program. The Corporation plans to fund the 2013 capital program through operating cash flow and available credit facilities. In addition to growth through capital projects, Secure expects market expansion attributed to increased demand for the Corporation–s integrated service offerings through all stages of the value chain. Due to tighter regulatory and environmental standards, it is expected that producers will increasingly outsource their waste and water disposal needs as oil and gas by-products continue to increase. Secure–s full-suite of services will continue to serve an existing and growing network of customers seeking end-to-end solutions for their waste handling needs.
The Corporation–s focus on organic growth opportunities is complemented by strategic acquisitions as a way to expedite market presence in key areas. The IDF and DRD acquisitions in the third quarter of 2012 demonstrate how the Corporation capitalized on opportunities to gain an immediate presence in new market areas in the United States. The Corporation–s primary goal is to exceed expectations of oil and gas producers by providing innovative, efficient and environmentally responsible fluid and solid solutions. In 2013, the Corporation will continue to look to expand through accretive acquisition opportunities that align with Corporation–s value chain.
The organic growth and expansion capital budget detailed above will enhance our competitive positioning and expands our service offering in both Canada and the US. The diversity of Secure–s asset base lessens the impact of drilling related revenue streams in favour of production related services. Secure has a focused strategy of constructing and expanding facilities and services in key under-serviced and capacity constrained markets. A solid balance sheet provides the leverage and flexibility to execute this strategy.
FINANCIAL STATEMENTS AND MD&A
The consolidated financial statements and MD&A of Secure for the three and twelve months ended December 31, 2012 are available immediately on Secure–s website at . The consolidated financial statements and MD&A will be available tomorrow on SEDAR at .
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document constitute “forward-looking statements” and/or “forward- looking information” within the meaning of applicable securities laws (collectively referred to as forward-looking statements). When used in this document, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect”, “continues”, “maintains”, “target” and similar expressions, as they relate to Secure, or its management, are intended to identify forward-looking statements. Such statements reflect the current views of Secure with respect to future events and operating performance and speak only as of the date of this document. In particular, this document contains forward-looking statements pertaining to: general market conditions; the oil and natural gas industry; activity levels in the oil and gas sector, including drilling levels; commodity prices for oil, natural gas liquids and natural gas; demand for the Corporation–s services and the factors contributing thereto; expansion strategy; the 2013 capital budget, the allocation between the PRD and DS divisions and the factors contributing thereto and the intended use thereof; debt service; capital expenditures; completion of facilities; future capital needs; access to capital; acquisition strategy; the Corporation–s capital spending on the Rocky Mountain House and Judy Creek, Alberta full service terminals and the timing of completion thereof; the capital spending on the at Saddle Hills, Alberta and the timing for completion thereof; the capital spending on the stand alone water disposal facilities at Kabob and Edson, Alberta and the timing of the completion thereof; the capital spending on the stand alone water disposal facilities at Keene and Stanley, North Dakota and the timing of the completion thereof; the amount of the Corporation–s asset retirement obligations and the timing thereof; and oil purchase and resale revenue.
Forward-looking statements concerning expected operating and economic conditions are based upon prior year results as well as assumptions that increases in market activity and growth will be consistent with industry activity in Canada, the United States, and internationally and growth levels in similar phases of previous economic cycles. Forward-looking statements concerning the availability of funding for future operations are based upon the assumption that the sources of funding which the Corporation has relied upon in the past will continue to be available to the Corporation on terms favorable to the Corporation and that future economic and operating conditions will not limit the Corporation–s access to debt and equity markets. Forward-looking statements concerning the relative future competitive position of the Corporation is based upon the assumptions that economic and operating conditions, including commodity prices, crude oil and natural gas storage levels, interest rates, the regulatory framework regarding oil and natural gas royalties, environmental regulatory matters, the ability of the Corporation and its subsidiary to successfully market their PRD (as defined herein) services in the Western Canadian Sedimentary Basin (“WCSB”) and North Dakota and their DS division (as defined herein) in the Western Canadian Sedimentary Basin, the Rocky Mountain region (consisting of Colorado, Wyoming, Montana and Utah) and North Dakota will lead to sufficient demand for the Corporation and its subsidiaries– services including demand for oilfield services for drilling and completion of oil and natural gas wells, that the current business environment will remain substantially unchanged, and that present and anticipated programs and expansion plans of other organizations operating in the energy service industry will result in increased demand for the Corporation–s services and its subsidiary–s services.
Forward- looking statements concerning the nature and timing of growth is based on past factors affecting the growth of the Corporation, past sources of growth and expectations relating to future economic and operating conditions. Forward-looking statements in respect of the costs anticipated to be associated with the acquisition and maintenance of equipment and property are based upon assumptions that future acquisition and maintenance costs will not significantly increase from past acquisition and maintenance costs. Many of these factors, expectations and assumptions are based on management–s knowledge and experience in the industry and on public disclosure of industry participants and analysts relating to anticipated exploration and development programs of oil and natural gas producers, the effect of changes to regulatory, taxation and royalty regimes, expected industry equipment utilization in the WCSB, the Rocky Mountain region, North Dakota, and other matters. The Corporation believes that the material factors, expectations and assumptions reflected in the forward-looking statements and information are reasonable; however, no assurances can be given that these factors, expectations and assumptions will prove to be correct.
Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in these forward-looking statements, including, but not limited to factors referred to under the heading “Risk Factors” in the Corporation–s annual information form (“AIF”) f or the year ended December 31, 2012 and the most recent Information Circular and quarterly reports, material change reports and news releases. The Corporation cannot assure investors that actual results will be consistent with the forward-looking statements and readers are cautioned not to place undue reliance on them.
The Corporation–s actual results could differ materially from those anticipated in such forward-looking statements as a result of the risk factors set forth below and elsewhere in this document: general economic conditions in Canada and the United States; changes in the level of capital expenditures made by oil and natural gas producers and the resultant effect on demand for oilfield services during drilling and completion of oil and natural gas wells; volatility in market prices for oil and natural gas and the effect of this volatility on the demand for oilfield service generally; risks inherent in the Corporation–s ability to generate sufficient cash flow from operations to meet its current and future obligations; increases in debt service charges; the Corporation–s ability to access external sources of debt and equity capital; changes in legislation and the regulatory environment, including uncertainties with respect to implementing binding targets for reductions of emissions and the regulation of hydraulic fracturing services; uncertainties in weather and temperature affecting the duration of the oilfield service periods and the activities that can be completed; competition; sourcing, pricing and availability of raw materials, consumables, component parts, equipment, suppliers, facilities, and skilled management, technical and field personnel; liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations; ability to integrate technological advances and match advances of completion; credit risk to which the Corporation is exposed in the conduct of its business; and changes to the royalty regimes applicable to entities operating in the WCSB, the Rocky Mountain region or North Dakota. Many of these factors are discussed in further detail through this document.
Although forward-looking statements contained in this document are based upon what the Corporation believes are reasonable assumptions, the Corporation cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements in this document are expressly qualified by this cautionary statement. Unless otherwise required by law, Secure does not intend, or assume any obligation, to update these forward-looking statements.
Non GAAP Measures and Operational Definitions
Contacts:
Secure Energy Services Inc.
Rene Amirault
Chairman, President and Chief Executive Officer
(403) 984-6100
(403) 984-6101 (FAX)
Secure Energy Services Inc.
Allen Gransch
Chief Financial Officer
(403) 984-6100
(403) 984-6101 (FAX)