CALGARY, Aug. 11, 2010 /CNW/ -
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.
Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX:SES) announced its results for the three and six months ended June 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 June 30,
2010 2009 % Change
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($000's except share and per share data)
(unaudited)
Revenue 11,176 3,534 216
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Operating margin (1) 5,117 1,672 206
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EBITDA (1) 3,399 740 359
EBITDA (1) % of revenue 30% 21% 43
Per share ($), basic 0.05 0.02 150
Per share ($), diluted 0.05 0.02 150
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Net income (loss) (148) (956) (85)
Per share ($), basic 0.00 (0.02) (100)
Per share ($), diluted 0.00 (0.02) (100)
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Funds from operations (1) 3,469 745 366
Per share ($), basic 0.05 0.02 150
Per share ($), diluted 0.05 0.02 150
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Capital Expenditures 22,622 9,265 144
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Common Shares - end of period 63,695,648 41,620,292 53
Weighted average common shares
basic 63,187,252 39,962,075 58
diluted 64,716,438 40,839,554 58
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SELECTED FINANCIAL HIGHLIGHTS
Six Months Ended June 30,
2010 2009 % Change
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($000's except share and per share data)
(unaudited)
Revenue 23,377 9,902 136
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Operating margin (1) 12,751 5,804 120
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EBITDA (1) 9,828 3,808 158
EBITDA (1) % of revenue 42% 38% 11
Per share ($), basic 0.18 0.10 80
Per share ($), diluted 0.18 0.09 100
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Net income (loss) 1,291 (445) (390)
Per share ($), basic 0.02 (0.01) (300)
Per share ($), diluted 0.02 (0.01) (300)
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Funds from operations (1) 9,854 3,863 155
Per share ($), basic 0.18 0.10 80
Per share ($), diluted 0.18 0.09 100
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Capital Expenditures 27,765 16,816 65
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Common Shares - end of period 63,695,648 41,620,292 53
Weighted average common shares
basic 53,319,051 39,858,323 34
diluted 54,536,068 40,757,443 34
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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 SECOND QUARTER FINANCIAL SUMMARY
Secure continued to demonstrate a strong financial performance in the second quarter of 2010. The Corporation's results are attributable to increased demand for the Corporation's services, increased utilization and expansion of the Corporation's facilities, and the strategic acquisition of Pembina Area Landfill ('Pembina Landfill'). As a result of these factors, revenue and EBITDA in the second quarter 2010 were significantly up from the same period in 2009, increasing by 216% and 359%, respectively. On May 1, 2010, Secure completed the Pembina Landfill acquisition for $11.8 million, adding a Class I and Class II disposal facility to its already existing South Grand Prairie and Willesden Green Class II landfills. The significant increase in financial results from Q2 2010 to Q2 2009 is also due to both the Fox Creek full service terminal ('FST') and the Obed stand-alone water disposal ('SWD') facilities becoming operational in mid 2009. In addition to these facilities, increased demand at Secure's facilities and higher activity levels in the energy services sector both contributed to the exceptional results.
Some key financial highlights for the three and six months ended June 30, 2010, are as follows:
- revenue of $11.2 million and $23.4 million for the three and six months of 2010 compared to $3.5 million and $9.9 million in the comparable periods of 2009. Total revenue includes revenue from core processing, recovery and disposal services and oil purchase/resale services. The Corporation recently began offering this new oil purchase/resale service at its Nose Hill SWD facility. Although this new service has no operating margin, the purpose of providing the service is to increase the overall volumes received, thereby increasing revenues derived from core business of produced water disposal, crude oil emulsion treating, terminalling and marketing;
- operating margin of $5.1 million and $12.8 million for the three and six months of 2010 compared to $1.7 million and $5.8 million in the same periods of 2009. The increase in operating margin is a result of increasing utilization at the Corporation's existing facilities, continuing to expand the Corporation's customer base, the successful completion of both the Corporation's Fox Creek FST and Obed SWD facilities in mid 2009, and the Pembina Landfill acquisition;
- EBITDA of $3.4 million and $9.8 million for the three and six months of 2010 compared to $1.0 million and $3.8 million in the same periods of 2009. The most significant factor to the increase was operational growth and the addition of three facilities, however operating efficiencies achieved subsequent to the start up phase at each new facility and cost controls over general and administrative have also contributed to the increase;
- funds from operations of $3.5 million or $0.05 per share (basic) in the second quarter and $9.9 million or $0.18 per share (basic) for the six months ended June 30, 2010;
- capital expenditures of $23.0 million in the second quarter primarily related to the acquisition of the Pembina Landfill and the construction of our new Dawson Creek SWD facility; and
- exited the quarter with working capital of $41.9 million and an undrawn credit facility of $26.5 million.
OUTLOOK
In the first half of 2010, commodity prices remained relatively stable and as a result, oil and natural gas activity increased. On April 29, 2010 the Petroleum Services of Canada ('PSAC') released a second quarter update forecasting an increase in Canadian drilling activity for 2010. PSAC revised the 2010 forecast upwards to 7,590 wells drilled in Alberta, a 31% increase over 2009 drilling activity. The Corporation expects this increase in drilling activity will drive demand for our services at our waste processing and disposal facilities. Most of the Secure facilities are situated in either liquids-rich natural gas producing areas or mature oilfields. The increased volumes continue to be driven by advances in horizontal drilling and completion techniques. The strength of crude oil and natural gas liquids prices has revitalized key markets as new wells are drilled and old wells are worked over to enhance production. The use of multistage fracturing in both mature fields and new fields is expected to increase demand for all of the corporation's services.
In mid-July, Secure completed its 11th facility in the Dawson Creek market area. Secure's Dawson Creek Disposal Well Facility is located in the centre of the Montney unconventional shale natural gas play where the development of horizontal drilling and multi-stage frac technology have made the production of natural gas economic despite relatively low natural gas prices. 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 facility was commissioned and operational at the end of July 2010. Secure's 2010 capital program will continue with the Brazeau Disposal Well Facility which has commenced construction in late Q2 2010 and is expected to be operational toward early Q4 2010. Obed's Disposal Well facility is currently being expanded to offer waste services for the Edson-Hinton market area. The Corporation expects the waste facility to be operational by Q4 2010. Secure's Drayton Valley FST is currently in the regulatory approval stage.
Overall, the first six months of the year have produced strong financial results for Secure. Demand for the Corporation's services continues to grow as does Secures' network of facilities. Overall, demand for the corporation's services is expected 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. In the second half of 2010, Secure will continue to execute its growth plans and business strategy while maintaining a strong balance sheet. Most importantly, Secure will continue to provide customers with excellent service as the Corporation continues to expand its business.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document constitute "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, commodity prices for oil and natural gas, future capital needs, access to capital, acquisition strategy and income tax considerations.
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 cost 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. 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 herein under "Risk Factors" 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 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.
