CALGARY, ALBERTA — (Marketwire) — 08/13/12 — Secure Energy Services Inc. (“Secure” or the “Corporation”) (TSX: SES) today announced financial and operational results for the three and six months ended June 30, 2012. The following should be read in conjunction with the management–s discussion and analysis (“MD&A”), the condensed consolidated interim financial statements and notes of Secure which are available on SEDAR at .
(1) Certain amounts were reclassified to conform with current period presentation
(2) Refer to “Non GAAP measures and operational definitions”
(1) Certain amounts were reclassified to conform with current period presentation (see note below)
(2) Refer to “Non GAAP measures and operational definitions”
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:
(1) Includes DS division from its acquisition on June 1, 2011.
(2) Refer to “Non GAAP measures and operational definitions”
Highlights for the DS division included:
OUTLOOK
The seasonality created by spring break up, combined with wet weather in May and June, resulted in lower industry activity levels throughout western Canada. Secure is not immune to the impact of these conditions but due to the base of production related revenue, the Corporation performed well during the second quarter. Continuous rain and cool temperatures combined to suppress the typical rebound in activity levels after spring breakup causing a delay in some drilling programs which will likely be pushed into the third quarter. The Corporation closely monitors changes to capital budgets and cash flows of customers and despite the announcement of some reductions in capital budgets of the Corporation–s customers, Secure expects demand to remain relatively strong during the second half of 2012. Driving this demand is an increase in meters drilled as a result of more complex drilling, a move to horizontal wells and greater lengths/depths being pursued by operators. This move to horizontal wells positively impacts drilling and drilling related activities for both of the Corporation–s divisions. The level of drilling activity has a greater impact on the DS division than the PRD division, as the operating activities of the PRD division are more heavily weighted to the production cycle, specifically processing, treating, terminalling and marketing of crude oil.
The Corporation is exploring a number of opportunities to expand Secure through additional service lines, organic growth, and/or through strategic acquisitions in key market areas in both Canada and the United States. On July 2, 2012 Secure expanded its PRD business into North Dakota through the acquisition from DRD Saltwater Disposal, LLC of two recently constructed operating SWD facilities serving the Bakken oil play. The acquisition provides the foundation upon which Secure will look to expand its PRD services at the existing locations and potential future locations. Following this acquisition, Secure announced on July 24, 2012 it was expanding its 2012 organic capital expenditures by $50.0 million to approximately $166.0 million. The expanded capital budget allows Secure to take advantage of additional growth opportunities, including opportunities in North Dakota, some of which are already underway.
In the PRD division, construction continued on the new Rocky FST and the Judy Creek FST. Secure expects these new FSTs to commence operations in early 2013. Secure has commenced construction of a landfill in Fox Creek and is expecting construction to start in late third quarter on a landfill in Saddle Hills, AB to service the Montney production area. During the third quarter, the PRD division will commission an OBM blending facility at its existing Drayton Valley FST to reduce costs associated with logistics, to develop recycling opportunities and to support the ongoing activities in the DS division.
The DS division continues to perform well in Western Canada and is now beginning to gain momentum in the U.S., primarily through its field operations in Williston, North Dakota and marketing office in Denver, Colorado. Complementing this organic growth is the proposed asset acquisition of IDF. The acquisition of IDF, located in Greeley, Colorado, represents Marquis Alliance–s first exposure to the developing Niobrara oil shale market of Northern Colorado.
The accomplishments in the first six months are a direct result of the hard work and dedication of Secure–s employees, consultants and industry partners. The Corporation continues to add employees that have a strong entrepreneurial attitude and the desire to work as a team in assisting the Corporation–s customers.
Based on Secure–s available debt capacity, the announced equity financing and cash flow from operations, the Corporation is well positioned to execute on its newly expanded 2012 capital program and take advantage of additional future growth opportunities.
INTERIM FINANCIAL STATEMENTS AND MD&A
The condensed consolidated interim financial statements and MD&A of Secure for the three and six months ended June 30, 2012 are available immediately on Secure–s website at . The condensed consolidated interim 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”, 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; demand for the Corporation–s services and the factors contributing thereto; expansion strategy; the expanded 2012 capital budget, the allocation between the PRD and DS divisions 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 new Rocky Mountain House and Judy Creek, Alberta full service terminals and the timing of completion thereof; oil purchase and resale revenue; the construction of landfills at Saddle Hills and Fox Creek, Alberta and the timing for completion thereof; the timing for completion of expansion at the Obed and Dawson FSTs; the timing for completion of the Drayton Valley blending plant; the timing of closing of the $75 million bought deal offering and the use of proceeds therefrom; the amount of the Corporation–s asset retirement obligations and the timing thereof; and the closing of the acquisition of Imperial Drilling Fluids Engineering Inc.
Forward-looking statements concerning expected operating and economic conditions are based upon prior year results as well as the assumption that increases in market activity and growth will be consistent with industry activity in Canada, 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 are based upon the assumption 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 services and drilling and production activity in North America will lead to sufficient demand for the Corporation–s services and its subsidiary–s services including demand for oilfield services for drilling and completion of oil and natural gas wells, tha t 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 are 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.
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. Readers are cautioned not to place undue reliance on these statements as 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 those factors referred to and under the heading “Business Risks” and under the heading “Risk Factors” in the Corporation–s annual information form (“AIF”) for the year ended December 31, 2011. 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
(2) The Corporation uses accounting principles that are generally accepted in Canada (the issuer–s “GAAP”), which includes, International Financial Reporting Standards (“IFRS”). These financial measures are Non- GAAP financial measures and do not have any standardized meaning prescribed by IFRS. These non-GAAP measures used by the Corporation may not be comparable to a similar measures presented by other reporting issuers. See the management–s discussion and analysis available at for a reconciliation of the Non-GAAP financial measures and operational definitions. These non-GAAP financial measures and operational definitions are included because management uses the information to analyze operating performance, leverage and liquidity. Therefore, these non-GAAP financial measures and operational definitions should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Contacts:
Secure Energy Services Inc.
Rene Amirault
Chairman, President and Chief Executive Officer
(403) 984-6100
(403) 984-6101 (FAX)
Secure Energy Services Inc.
Nick Wieler
Chief Financial Officer
(403) 984-6100
(403) 984-6101 (FAX)