CALGARY, March 3, 2011 /CNW/ - Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX:SES) today announced financial results for the three months and year ended December 31, 2010. The following should be read in conjunction with the management's discussion and analysis, the consolidated financial statements and notes of Secure which are available on SEDAR at www.sedar.com.
SELECTED FINANCIAL HIGHLIGHTS
Three Months Ended December 31,
2010 2009 2008
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($000's except share and per
share data)
(unaudited)
Revenue 32,858 7,520 3,844
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Operating margin (1) 11,643 4,043 2,228
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EBITDA (1) 7,788 2,759 1,063
Per share ($), basic 0.12 0.07 0
Per share ($), diluted 0.12 0.06 0
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Net income (loss) 1,951 (970) (224)
Per share ($), basic 0.03 (0.02) (0)
Per share ($), diluted 0.03 (0.02) (0)
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Funds from operations (1) 9,059 2,704 1,253
Per share ($), basic 0.14 0.06 0
Per share ($), diluted 0.14 0.06 0
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Capital Expenditures 19,894 3,487 24,517
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Common Shares - end of
period 63,754,348 41,631,991 39,962,075
Weighted average common
shares
basic 63,730,396 41,624,234 31,954,775
diluted 66,732,263 42,600,342 32,798,930
Year Ended December 31,
2010 2009 2008
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($000's except share and per
share data)
(unaudited)
Revenue 72,759 22,377 7,437
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Operating margin (1) 32,142 12,295 4,554
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EBITDA (1) 24,012 8,027 566
Per share ($), basic 0.41 0.20 0
Per share ($), diluted 0.41 0.19 0
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Net income (loss) 4,474 (2,758) (1,529)
Per share ($), basic 0.07 (0.07) (0)
Per share ($), diluted 0.07 (0.07) (0)
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Funds from operations (1) 25,214 7,958 1,242
Per share ($), basic 0.43 0.19 0
Per share ($), diluted 0.43 0.19 0
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Capital Expenditures 51,993 22,686 65,078
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Common Shares - end of
period 63,754,348 41,631,991 39,962,075
Weighted average common
shares
basic 58,560,338 40,857,737 29,629,577
diluted 59,163,845 41,788,605 30,252,502
(1) These financial measures are Non-GAAP financial measures and do not have
any standardized meaning prescribed by Canadian generally accepted
accounting principles("GAAP") and are therefore unlikely to be comparable to
measures presented by other reporting issuers. See the management's
discussion and analysis available at www.sedar.com for a reconciliation of
the Non-GAAP financial measures.
OPERATIONAL AND FINANCIAL OVERVIEW
Secure's revenue and EBITDA grew dramatically in 2010 as facilities constructed in prior years started to mature within their respective markets. The growing trend towards horizontal drilling and multi-stage fracturing increased demand for the Corporation's services particularly at facilities located in unconventional oil and liquids rich gas producing areas. During 2010, Secure also added the new Dawson Creek full service terminal ("FST") to provide treatment and disposal options for customer's developing unconventional Montney shale gas and acquired the Pembina Area Landfill ("Pembina Landfill") to provide disposal services related to unconventional Cardium oil development. All of these factors contributed to higher revenue and EBITDA for 2010. Overall, the operating and financial highlights for the fourth quarter and year ended December 31, 2010 may be summarized as follows:
Highlights:
-- Record revenue of $32.9 million and $72.8 million for the three and
twelve months ended December 31, 2010 compared to $7.5 million and $22.4
million in the comparable periods of 2009. The 2010 fourth quarter
proved to be the strongest quarter of the year. The fourth quarter
benefited from the introduction of waste services at Dawson Creek in
early November. As described above, the increase year to date is due to
increased volume, the new Dawson facility and the Pembina Landfill
acquisition in May of 2010 The Corporation's core processing, recovery
and disposal revenue was $18.4 million and $54.2 million for the three
and twelve months ended December 31, 2010 compared to $7.5 million and
$18.5 million in the comparable periods of 2009. The Corporation's oil
purchase/resale service revenue was $14.5 million and $18.5 million for
the three and twelve months ended December 31, 2010 compared to nil in
the comparable periods of 2009;
-- Record EBITDA of $7.8 million and $24.0 million for the three and twelve
months ended December 31, 2010 compared to $2.8 million and $8.0 million
in the same periods of 2009. For both the fourth quarter and year to
date, the increases relate to higher activity levels in 2010 over 2009
and increased market share. The increase is also related to the new
facilities added during the year as described above. Excluding revenue
and expenses from the oil purchase/resale services, the Corporation
achieved an overall operating margin of 59% for the year ending December
31, 2010;
-- Expanded facility network and services in 2010.
-- Expanded Cardium market exposure through the Pembina Landfill
acquisition and the construction of Brazeau water disposal facility;
-- Entered the Montney market with an FST in Dawson Creek, B.C.;
-- Increased unconventional liquids rich gas services by expanding into
waste services at the Corporation's existing Obed and South Grande
Prairie facility;
-- Commenced construction of Drayton Valley FST in the Cardium market;
-- On December 1, 2010, Secure became a single shipper at its Fox Creek
facility. There are three significant changes in the Corporation's
operating and financial results by becoming a single shipper;
-- Oil purchase/resale services increased significantly in the month of
December as all volume entering Fox Creek is purchased by Secure and
sold back to customers in Edmonton;
-- Secure's accounts receivable and accounts payable increased
significantly as commodity contracts are executed over the forecast
period and commodity contracts are fulfilled on physically delivery.
The majority of commodity contracts offset in subsequent payment
month;
-- Secure is required by Pembina Pipeline Corporation ("Pembina") to
hold physical linefill inventory from the Fox Creek terminal to the
Edmonton terminal, based on a percentage of volume shipped by Secure
in the given month; Subsequent to December 31, 2010, Pembina
announced that shippers on its Peace pipeline system would no longer
be required to hold line fill inventory. The announcement will free
up working capital of approximately $2 million entering into 2011;
-- In the fourth quarter of 2010, Secure generated net income after taxes
of $2.0 million, a significant improvement over the net loss after taxes
of $1.0 million in the fourth quarter of 2009. For the year ended
December 31, 2010, net income after taxes was $4.5 million, compared to
the net loss after taxes of $2.8 million in 2009;
-- During the fourth quarter, the Corporation expensed $1.3 million as a
one time charge in business development expenses associated with
Secure's Heritage landfill project. The project was to provide landfill
disposal services to oil and gas customers located south of Dawson
Creek, B.C. The Corporation was unable to obtain the necessary rezoning
permits for the piece of property originally selected for the proposed
landfill. Secure had to incur significant costs on the project prior to
submitting the rezoning application. The Corporation determined in the
fourth quarter of 2010 not to re-apply for zoning as this process would
delay the project for an unreasonable period of time. During the fourth
quarter, the Corporation made significant progress on a new landfill
project in Alberta to service the same market area. Business development
expenses in the fourth quarter of 2010 also include $0.6 million
relating to research and development undertaken by Secure for
environmental recycling process improvements and cost saving initiatives
for customers;
-- Overall, G&A as a percentage of the Corporations core revenue or
processing, recovery and disposal services decreased to 9.1% for the
year ended December 31, 2010 from 19.8% for the year ended December 31,
2009. This decrease continues to reflect the efficiencies gained as the
Corporation expands its network of facilities;
-- Capital expenditures of $18.6 million in the fourth quarter related to
the construction of the new Brazeau stand-alone water disposal "SWD"
facility, waste expansion at the Obed FST and Dawson FST and the start
of construction on the new Drayton Valley FST.
OUTLOOK
As we move forward, we will continue to evaluate our portfolio of opportunities to expand the Corporation through additional service lines, organic growth, and/or through strategic acquisitions. Secure has a total of $25 million related to 2010 carry over capital associated with the construction of the Drayton Valley FST, Brazeau SWD and waste expansion at the existing South Grande Prairie facility. Brazeau SWD and South Grande Prairie waste services are expected to be operational at the beginning of the second quarter. Construction on the Drayton Valley FST is well underway and it is expected to be completed during the third quarter of 2011. In addition, we dedicated approximately $30 million in 2011 for expansion and sustaining capital relating to increasing throughput capacity and the introduction of new services at the Corporation's existing facilities. We will increase capacity through additional disposal wells, pipeline connections, upgraded metering systems and additional truck unload infrastructure. The Corporation's available debt capacity and cash flow from operations moving in to 2011 will allow us the financial flexibility to deploy our capital strategy.
We expect activity levels experienced in the fourth quarter of 2010 in the oil and natural gas sector to continue into 2011. The Petroleum Services Association of Canada (PSAC) forecasts a total of 12,750 wells drilled in Canada for 2011, an increase over the expected 2010 final wells drilled of 12,158. In Alberta, PSAC is forecasting 8,390 wells drilled in 2011, an increase of three percent over 2010. Despite relatively low natural gas prices forecasted for 2011, natural gas producers will continue to realize the value of liquids-rich gas or natural gas liquids ("NGL's") in improving cash flow from natural gas wells. When prices are lower for natural gas, the sale of NGL's provide additional cash flow in determining whether an appropriate netback can be achieved on a specific well. Secure anticipates these NGL plays to continue into 2011, which promotes additional drilling and oilfield waste activity. In addition, higher levels of oilfield waste will also continue to increase as a result of advances in horizontal drilling and completion techniques. Drilling in Western Canada continues to steadily shift towards more horizontal drilling, and the horizontal wells have also become longer in total measured depth. The Daily Oil Bulletin (DOB) shows over 50% of wells drilled in Western Canada in 2009 were horizontal and directionally drilled - rising steadily from 21% in 2004. Total meters drilled in 2010 were 74% higher than 2009. The DOB has also reported that the average well depth has increased more than 35% from 2004-2009. Prices for crude oil have remained strong in 2010 and it is expected that oil wells drilled will outpace natural gas wells again in 2011. Overall, the strength of crude oil and NGL prices will continue to revitalize key market areas for 2011.
In 2011, we will continue to focus on strengthening our market position across all service lines and executing on our business strategy. We believe that our investment in developing a strong market position will continue to provide us with opportunities for growth. We expect the demand for our services to continue to grow based on a trend of greater outsourcing by oil and gas producers, and the increasing volume of byproducts requiring treatment and disposal from producing oil and gas wells. With the increase in volume, Secure is not only focusing on the treatment and disposal aspect in 2011, but also the opportunities for environmental recycling process improvements and cost saving initiatives for customers. Overall, we are excited about the opportunities ahead, and we look forward to the future of Secure.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document constitute "forward-looking statements" within the meaning of securities laws, including the "safe harbor" provisions of Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995. 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, commodity prices for oil, NGLs and natural gas, expansion strategy, debt service, capital expenditures, completion of facilities, future capital needs, access to capital, acquisition strategy, anticipated completion of South Grande Prairie waste expansion, the Brazeau disposal well facility, and anticipated completion of the Drayton Valley full service terminal.
Forward-looking information 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 and growth levels in similar phases of previous economic cycles. Forward-looking information concerning the availability of funding for future operations is based upon assumptions that 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 information concerning the relative future competitive position of the Corporation is based upon 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 to successfully market its services and drilling and production activity in the Western Canadian Sedimentary Basin will lead to sufficient demand for the Corporation's services, 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. Forward- looking information 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 information 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. We caution readers 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 "Risk Factors" in the Corporation's annual information form "AIF" for the year ended December 31, 2010. 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.
