CALGARY, Nov. 4, 2010 /CNW/ - Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX:SES) announced its results for the three and nine months ended September 30, 2010. The following should be read in conjunction with the management's discussion and analysis, the interim consolidated financial statements and notes of Secure which are available on SEDAR at www.sedar.com.
SELECTED FINANCIAL HIGHLIGHTS
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Three Months Ended September 30,
2010 2009 % Change
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($000's except share and per share data)
(unaudited)
Revenue 16,524 4,954 234
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Operating margin (1) 7,748 2,446 217
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EBITDA (1) 6,173 1,444 327
Per share ($), basic 0.10 0.03 233
Per share ($), diluted 0.09 0.03 200
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Net income (loss) 1,231 (1,342) 192
Per share ($), basic 0.02 (0.03) 167
Per share ($), diluted 0.02 (0.03) 167
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Funds from operations (1) 6,253 1,405 345
Per share ($), basic 0.10 0.03 233
Per share ($), diluted 0.09 0.03 200
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Capital Expenditures 16,084 2,530 536
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Common Shares - end of period 63,703,148 41,620,292 53
Weighted average common shares
basic 63,701,941 41,620,292 53
diluted 65,859,648 42,568,727 55
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Nine Months Ended September 30,
2010 2009 % Change
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($000's except share and per share data)
(unaudited)
Revenue 39,901 14,856 169
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Operating margin (1) 20,499 8,251 148
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EBITDA (1) 16,001 5,252 205
Per share ($), basic 0.28 0.13 115
Per share ($), diluted 0.27 0.13 108
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Net income (loss) 2,522 (1,787) 241
Per share ($), basic 0.05 (0.04) 225
Per share ($), diluted 0.05 (0.04) 225
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Funds from operations (1) 16,107 5,267 206
Per share ($), basic 0.28 0.13 115
Per share ($), diluted 0.28 0.13 115
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Capital Expenditures 43,849 19,409 126
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Common Shares - end of period 63,703,148 41,620,292 53
Weighted average common shares
basic 56,818,047 40,449,933 40
diluted 58,352,073 41,365,612 41
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(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.
2010 THIRD QUARTER FINANCIAL SUMMARY
During the three month period ended September 30, 2010, the Corporation generated EBITDA of $6.2 million, which is an increase of 327% over the same period of 2009. Activity at the Corporation's facilities remained strong in the third quarter despite wet weather conditions for the majority of September. Overall, processing and disposal volumes are up significantly as demand for the Corporation's services continued to increase. The success of the third quarter has further strengthened the Corporation's cash flow, working capital and overall financial position. During the quarter, the Corporation continued its organic growth plan by opening its eleventh facility in Dawson Creek, British Columbia. The new stand-alone water disposal ('SWD') facility is located in the centre of the Montney unconventional shale natural gas play. The new facility performed exceptionally well in its first three months of operations, providing a cost effective solution for processing and disposal in the Dawson Creek area market. Some key financial highlights for the three and nine months ended September 30, 2010, are as follows:
- total revenue of $16.5 million and $39.9 million for the three and nine months of 2010 compared to $5.0 million and $14.9 million in the comparable periods of 2009. Total revenue is split into the following two streams:
-- Core processing, recovery and disposal revenue: $13.8 million and $35.9 million for the three and nine months of 2010 compared to $5.0 million and $14.9 million in the comparable periods of 2009. The 2010 third quarter results include the new Dawson facility and the Pembina Area Landfill ("Pembina Landfill") acquisition in May of 2010.
-- Oil purchase/resale service: $2.7 million and $4.0 million for the three and nine months of 2010 compared to nil in the comparable periods of 2009. The Corporation began offering this new oil purchase and resale service during 2010 at its Nose Hill SWD facility and recently at its new Dawson Creek SWD facility. Although this service has no operating margin, the purpose of providing the service is to increase the overall volumes received, thereby increasing revenues derived from the Corporation's core business of produced water disposal, crude oil emulsion treating, terminalling and marketing. The price of crude oil received by the Corporation is the same paid to the customer following the production month in which it is sold;
- EBITDA of $6.2 million and $16.0 million for the three and nine months of 2010 compared to $1.4 million and $5.3 million in the same periods of 2009. Increases in activity levels in 2010 over 2009 and increased demand have contributed in the significant increase in EBITDA levels. The increase is also related to the new facilities described above and the Fox Creek FST and Obed SWD facilities moving out of the start up phase in 2009 and establishing a presence within their respective markets in 2010;
- capital expenditures of $16.1 million in the third quarter related to the construction of expansion cells at the Corporation's Willesden Green landfill and the South Grand Prairie landfill, the construction of the new Brazeau SWD facility, expansion of the Obed SWD and Dawson SWD and the new Drayton Valley full service terminal ("FST");
- exited the third quarter 2010 with working capital of $31.9 million and an undrawn credit facility of $26.5 million.
OUTLOOK
Secure expects activity levels experienced in the third quarter in the oil and natural gas sector to continue for the remainder of 2010, despite relatively low natural gas prices. Natural gas producers are discovering the value of liquids-rich gas or natural gas liquids ("NGL's") in improving cash flow from natural gas wells. Because of the added NGL content in the form of Ethane, Propane, Butane or Condensate, producers can obtain higher value through the sale of NGL's when prices are lower for natural gas. Therefore, any NGL plays will continue to attract attention among natural gas producers. 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 markets as old wells are worked over to enhance production and new wells are drilled. Secure expects crude oil and natural gas activity will strengthen demand for the Corporation's services in the fourth quarter of 2010 and into 2011.
In the fourth quarter of 2010, Secure will continue to execute its business strategy and growth plans. Completion of the Corporation's 12th facility is expected in the fourth quarter. The Brazeau Disposal Well facility is located south west of Drayton Valley, AB and is well positioned to service the Pembina oil field, one of the largest and most prolific oil fields in the Western Canadian Sedimentary Basin. This area presents an excellent opportunity for Secure as it has both a long history of stable oil and natural gas production, and a significant amount of current drilling activity driven by the success of modern horizontal drilling technology. The new facility is approved to accept third party sweet and sour produced and waste waters (Class Ib) for deep well injection into a disposal well. The Corporation has also secured the future site of the Drayton Valley FST with construction expected to commence in the fourth quarter of 2010 after receiving treating and disposal regulatory approval. In addition, the Obed and Dawson Creek SWD facilities are both being expanded to include waste treatment and disposal services. The Corporation expects that both waste facilities will also be operational in the fourth quarter of 2010. An equivalent expansion of the South Grande Prairie facility began at the end of the third quarter. Finally, incremental disposal capacity has also been added to the Willesden Green and the South Grand Prairie landfills.
On December 1, 2010 Secure intends to become a shipper of crude oil on the Peace Pipeline system at the Corporation's Fox Creek FST. Currently, Secure engages a third party contractor to act as shipper. Originally setup to facilitate the initial startup of the FST, recent levels of activity has resulted in Secure evaluating to undertake this function and thereby expand its service offering. The outcome will be to improve customer service and gain operational efficiencies. By integrating this function with the Fox Creek operation, Secure will be purchasing incremental volumes of crude oil for resale in Edmonton. The purchase and sale of crude oil will substantially increase both the Corporation's revenue and operating expenses beginning in December 2010.
Overall, Secure has had an exceptional nine months of activity as facilities constructed in 2009 have started to fully penetrate their respective markets, which in turn has strengthened the Corporation's financial position heading into the fourth quarter of 2010. Entering 2011, Secure's cash flow from operations and available debt capacity position the Corporation well to execute its growth strategy.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this MD&A 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 MD&A, 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, commodity prices for oil, NGLs and natural gas, debt service, capital expenditures, completion of facilities, future capital needs, access to capital, acquisition strategy, anticipated completion of the Brazeau Disposal Well Facility, anticipated construction of the Drayton Valley FST, anticipated completion of the OBED and Dawson Creek SWDs and Secure becoming a shipper of crude oil at the Fox Creek FST.
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 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 AIF for the year ended December 31, 2009. 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 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. statements.
