CALGARY, ALBERTA — (Marketwired) — 05/09/13 — Secure Energy Services Inc. (“Secure” or the “Corporation”) (TSX: SES) today announced financial and operational results for the three months ended March 31, 2013. The following should be read in conjunction with the management–s discussion and analysis (“MD&A”), the condensed consolidated financial statements and notes of Secure which are available on SEDAR at .
Secure–s financial results for the three months ended March 31, 2013 were at all-time highs. Revenue (excluding oil purchase/resale) and earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased 27% and 22% respectively over the previous high established in the first quarter of 2012. Revenue and EBITDA increased on a sequential basis over the fourth quarter of 2012 by 36% and 40% respectively.
The positive results were achieved notwithstanding mixed industry activity in the first quarter of 2013 compared to the first quarter of 2012. The average rig count dropped 8% in Canada and 12% in the United States countered by a 3% increase in total number of meters drilled in the WCSB.
The Corporation continues to develop organic opportunities with 2013 first quarter capital expenditures of $42.3 million in the Processing, Recovery and Disposal (“PRD”) and Drilling Services (“DS”) division for projects in Canada and the United States. Total assets of $828.1 million have grown 33% since March 2012.
Subsequent to the end of the first quarter, Secure announced the acquisition of Frontline Integrated Services Ltd. (“Frontline”) for an aggregate purchase price of $23.1 million. This strategic acquisition brings new business lines that add to the value chain of services by supporting and expanding the DS division–s existing environmental and project management offerings.
Highlights for the PRD division included:
Highlights for the DS division included:
OUTLOOK
Secure posted record first quarter 2013 financial and operating results which increased on a sequential basis over the fourth quarter of 2012 despite a continuation of subdued industry conditions. Producer spending was cautious in the quarter due to weak commodity prices and oil transporting bottlenecks resulting in regional oil price discounts. Lower producer spending is reflected in the 8% decrease in quarter over quarter rig activity in the WCSB. Oil and liquid price weaknesses have recently subsided and natural gas prices have seen improvement of late as a result of higher withdrawals from storage. This continued strength in commodity prices may lead to improved activity as the year unfolds. Alternatives to crude transport such as rail have also positively impacted Canadian crude pricing. Analyst expectations are now that activity will increase in the latter part of the year particularly in the fourth quarter. The longer term fundamentals of the North American oil and gas market are positive which bodes well for customer demand for the services the Corporation offers.
Quarter over quarter, WCSB meters drilled reported by the Canadian Association of Oilwell Drilling Contractors increased 3% to 7.4 million which is positive to the Corporation as meters drilled is more indicative as to volumes of drilling fluid required and produced waters requiring processing and disposal. Higher meters drilled is a result of more complex drilling, a move to horizontal wells and greater lengths and depths being pursued by operators. The Corporation anticipates the number of operating days and meters drilled in 2013 combined with high levels of produced drilling by products will increase demand for services at the Corporation–s waste processing and disposal facilities and in the DS division–s business.
Capital deployed for growth and expansion opportunities in the quarter totaled $41.5 million. Consolidated Capital expenditures for the year are expected to total $155.0 million plus $23.1 million for the acquisition of Frontline. Both the Judy Creek and Rocky FST–s are nearing completion and it is anticipated both will become fully operational in the second quarter. The SWD projects at Edson and Kabob in Canada and Keene and Stanely in North Dakota are progressing and pending customer demand and regulatory approval, will be evaluated for conversion to FST–s. The 2013 capital budget consists of three FST–s two SWD–s and two landfills in Canada and the United States for a total of $115.0 million. Although the capital expenditures will occur in 2013, meaningful cash flow from the new facilities is not expected until 2014. The DS division continues to build out its solids control fleet. The fleet now includes a greater proportion of high capacity centrifuges which are in high demand and generate greater revenue. The DS capital budget is forecast to total $15.0 million and is allocated equally between Canada and the United States.
One of the Corporation–s primary objectives is to maintain and strengthen its market position by consistently providing operational excellence, innovative solutions and cost efficiencies to its customers. The addition of Frontline subsequent to the end of the quarter is an example how Secure continues to enhance its customer value chain. Frontline is an integrated provider servicing the energy, resource and civil construction industries. Their core services are environmental project management and remediation and reclamation which feed volume into Secure–s fixed facilities. Their experienced team has extensive industry experience with values that are consistent to Secure–s. Frontline generated $4.8 million of EBITDA in 2012.
Secure–s strong balance sheet gives the Corporation flexibility to continue growing organically and to execute on strategic acquisition opportunities. The Corporation–s diverse asset base lessens its dependence on drilling related revenue streams in favour of production related services. Secure has a focused strategy to continually add and expand facilities and services in key under-serviced and capacity constrained markets organically and via acquisition. The Corporation recently announced the implementation of a monthly $0.0125 per share dividend. The initiation of the dividend reflects management–s confidence in its ability to generate returns to shareholders while continuing to invest in the Corporation–s organic capital program facilitating future growth.
FINANCIAL STATEMENTS AND MD&A
The condensed consolidated financial statements and MD&A of Secure for the three months ended March 31, 2013 are available immediately on Secure–s website at . The condensed consolidated financial statements and MD&A will be available tomorrow on SEDAR at .
FORWARD-LOOKING STATEMENTS
Certain statements contained in this MD&A 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 MD&A. In particular, this MD&A 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 (“NGLs”) and natural gas; the increase in the first quarter of 2013 operating days; demand for the Corporation–s services; expansion strategy; the amounts of the PRD and DS divisions– 2013 capital budgets 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; capital spending on the Kabob and Edson, Alberta SWD; the construction of landfills at Saddle Hills and Fox Creek, Alberta; capital spending on the Keene and Stanley water disposal facilities in North Dakota; oil purchase and resale revenue; and the completion of the permanent facility.
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, 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 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, 2012. Although forward-looking statements contained in this MD&A 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 MD&A 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)