CALGARY, June 6, 2011 /CNW/ - Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX:SES) announced today that it has entered into an agreement to acquire the operating assets of XL Fluid Systems Inc. ("XL Fluids") for an aggregate purchase price of $36.95 million, subject to certain customary closing adjustments. The purchase price is payable as to $18.5 million (50%) in cash and by the issuance of 2,297,885 common shares of Secure (50%). Closing is expected to occur on or before July 1, 2011.
Summary of the Acquisition
XL Fluids is an energy services company that specializes in the supply and development of drilling fluids and drilling fluid systems. Founded eight years ago, the company operates in Saskatchewan, Alberta, British Columbia and Manitoba. XL Fluids has a market share of approximately 25% in Saskatchewan combined with significant exposure to horizontal drilling activity associated with the Cardium, Viking, Elkton and Bluesky formations in Alberta. XL Fluids estimates that it will generate year ending April 31, 2011 revenue of $43.0 million and normalized EBITDA of $10.0 million.
The four owners of XL Fluids will enter into non-competition agreements. In addition, the common shares of Secure issued as consideration for the acquisition will be held in escrow pursuant to which 2,233,978 of such shares will be released as to 20% of such shares over five years, and the remaining 63,907 shares will be released as to 40%, 30% and 30% over three years.
The acquisition is being made pursuant to an asset purchase agreement among Secure, Marquis Alliance Energy Group Inc. ("Marquis Alliance") and XL Fluids which provides for the acquisition of all the operating assets and business of XL Fluids. Closing of the acquisition is subject to customary closing conditions including receipt of all necessary regulatory and third party approvals, including the approval of the TSX. Secure will operate the business of XL Fluids through its wholly owned subsidiary, Marquis Alliance.
Strategic Rationale
George Wadsworth, President of Marquis Alliance, explained "The acquisition of XL Fluids significantly expands the geographical presence of Marquis Alliance particularly in Saskatchewan. XL Fluids will continue to operate in Saskatchewan and Manitoba, while their operations in BC and Alberta will be integrated into Marquis Alliance. Overall, there is very little overlap in our respective company's customer base."
Devon Hanson, President of XL Fluids, added "By combining with Marquis Alliance we can offer our customers additional services such as solids control and environmental services. The combination with Secure will provide opportunities for XL Fluids to provide full cycle 'cradle to grave' drilling fluid solutions".
The integration of Marquis Alliance and XL Fluids products and services offerings, combined with Secure's existing network of facilities, will allow the combined company to provide customers with expanded services and products such as:
- Recycled drilling fluids at Secure's Full Service Terminals ("FSTs");
- New drilling fluid blending facilities at Secure's FSTs to reduce transportations costs;
- Efficient drilling waste handling at the well site; and
- Enhanced environmental stewardship for customers.
Rene Amirault, President and CEO, of Secure stated, "The acquisition is a key component to our strategic plan to provide energy services in all western Canadian markets, particularly due to XL Fluid's strong presence in the Bakken, Viking and Cardium. By expanding the geographical footprint of our drilling fluids business, Secure becomes the leading provider of drilling fluid systems in the Western Canadian Sedimentary Basin."
About Secure Energy Services Inc.
Secure is a TSX publicly traded energy services company that focuses on providing specialized services to upstream oil and natural gas companies operating in the Western Canadian Sedimentary Basin. The services provided by Secure assist these companies with the treatment and sale of crude oil and the handling of by-products associated with oil and natural gas development and production. The services provided by Secure include crude oil emulsion treatment, the terminalling, storage and marketing of crude oil, oilfield waste processing, tank washing, landfill disposal and disposal of produced and waste water. The Corporation's services are provided at ten facilities in Alberta and two facilities in British Columbia.
About Marquis Alliance Energy Group
Marquis Alliance is an energy services company that specializes in the supply and development of drilling fluids and drilling fluid systems. Marquis Alliance focuses on providing products and systems designed for more complex wells, such as medium to deep wells, horizontal wells and horizontal SAGD wells. Marquis Alliance provides drilling fluids services in the Western Canadian Sedimentary Basin and in the northern United States with strategic focus on servicing the ongoing major resource plays such as, but not limited to, the Muskwa shales of the Horn River, the Cardium of Central Alberta, the Montney in the Deep Basin of Alberta and British Columbia, the oil sands of Alberta and Saskatchewan, the Bakken of Saskatchewan and North Dakota.
Marquis Alliance also provides environmental services comprised of drilling waste management and environmental sciences in connection with reclamation services. Environmental services involves determining the appropriate processes for disposing of drilling waste such as drill cuttings and fluids and/or the recycling of the fluids produced by drilling operations. In addition, Marquis Alliance provides a reclamation service to assess and determine the most appropriate and cost effective method for reclaiming the land back to its original pre-drilling state. Environmental scientists and chemists, in conjunction with its drilling fluids specialists, work to execute the reclamation and disposal process.
In addition, Marquis Alliance provides solids control and ancillary equipment rentals for drilling operations in both western Canada and the Rocky Mountain States. The majority of the activity for the solids control and equipment rental service line is in central Alberta and the oil sands. Marquis Alliance' current fleet of high speed centrifuges, drying shakers, bead recovery units, tanks and ancillary equipment is offered as a stand alone package or part of an integrated package with the drilling fluids and environmental services.
Non-GAAP measures
This press release contains references to EBITDA. This financial measure is not a measure that has any standardized meaning prescribed by Generally Accepted Accounting Principles ("GAAP") and is therefore referred to as non-GAAP measure. The non-GAAP measure used by the Corporation may not be comparable to a similar measure used by other companies. EBITDA is not a recognized measure under GAAP. Management believes that in addition to net income, EBITDA is a useful supplemental measure as it provides an indication of the results generated by the principal business activities of the relevant company prior to consideration of how those activities are financed or how the results are taxed. EBITDA is calculated as net income excluding depreciation, depletion and accretion, stock-based compensation, interest, and taxes
Cautionary Statement Regarding Forward-Looking Information
Statements in this press release contain forward-looking statements, including statements regarding the anticipated timing and closing of the acquisition and anticipated synergies arising from completion of the acquisition. Readers are cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous unknown risks, uncertainties, and other factors, many of which are beyond the control of Secure. These risks include, but are not limited to the risks identified in Secure's Annual Information Form for the year ended December 31, 2010 under the heading "Risk Factors" and in Secure's Management Discussion and Analysis for the year ended December 31, 2010 under the heading "Business Risks" and also includes the risks associated with failing to satisfy all conditions to closing the acquisition; risks associated with the possible failure to realize the anticipated synergies in integrating the operations of Marquis Alliance and XL Fluids with the operations of Secure; the risks associated with the oil and gas industry, commodity prices and exchange rate changes, regulatory changes, successful exploitation and integration of technology, customer acceptance of technology, changes in drilling activity and general global economic, political and business conditions. Industry related risks could include, but are not limited to: operational risks, delays or changes in plans, health and safety risks and the uncertainty of estimates and projections of costs and expenses and access to capital. The risks outlined above should not be construed as exhaustive. The reader is cautioned not to place undue reliance on this forward-looking information. Secure does not undertake any obligation to update or revise any forward-looking statements except as expressly required by applicable securities laws.
The Toronto Stock Exchange has not reviewed, nor does it accept responsibility for the adequacy or accuracy of this release.
