CALGARY, May 12, 2011 /CNW/ -
The Corporation uses accounting principles that are generally accepted in Canada (the issuer's "GAAP"), which includes International Financial Reporting Standards ("IFRS"). In previous periods, the Corporation prepared its consolidated financial statements and consolidated interim financial statements in accordance with Canadian generally accepted accounting principles in effect prior to January 1, 2011 ("Previous GAAP"). Comparative figures presented pertaining to Secure's 2010 results have been restated to be in accordance with IFRS. A reconciliation of comparative figures from Previous GAAP to IFRS is provided in the notes to the unaudited condensed consolidated interim financial statements for the period ended March 31, 2011. The following should be read in conjunction with the management's discussion and analysis, the condensed consolidated interim financial statements and notes of Secure which are available on SEDAR at www.sedar.com.
Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX:SES) today announced the financial results for the three months ended March 31, 2011. Overall, the highlights can be summarized as follows:
Three Months Ended March 31,
2011 2010 % Change
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($000's except share and per share
data)
(unaudited)
Revenue 67,998 12,208 457
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EBITDA (1) 10,702 6,477 65
Per share ($), basic 0.17 0.15 13
Per share ($), diluted 0.16 0.15 7
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Earnings per share 4,230 1,537 175
Per share ($), basic 0.07 0.04 75
Per share ($), diluted 0.06 0.03 100
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Funds from operations (1) 10,656 6,377 67
Per share ($), basic 0.17 0.15 13
Per share ($), diluted 0.16 0.14 14
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Capital Expenditures 16,635 5,143 223
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Common Shares - end of period 63,862,381 60,814,648 5
Weighted average common shares
basic 63,829,714 43,341,202 47
diluted 67,855,436 44,242,584 53
Financial and Operating Highlights
-- Secure reported record revenue of $67.9 million for the three months
ended March 31, 2011 compared to $12.2 million in the comparable period
of 2010; and
-- The trend toward horizontal drilling and multi-stage fracturing
increased demand for the Corporation's core services particularly at
facilities located in unconventional oil and liquids rich gas producing
areas;
-- Growth in core revenue relates to expansion of the Corporation's service
offerings, increased demand, increased activity and the introduction of
waste services at Obed Full Service Terminal ("FST") and the new Brazeau
Stand alone Water Disposal ("SWD") in late February 2011.
Three Months Ended March 31,
2011 2010 % Change
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($000's) (unaudited)
Revenue
Core processing, recovery and disposal
services 21,730 12,208 78
Oil purchase/resale service 46,268 - 100
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Total revenue 67,998 12,208 457
Operating Expenses
Core processing, recovery and disposal
services 8,609 4,518 91
Oil purchase/resale service 46,268 - 100
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54,877 4,518 1,115
Depreciation, depletion, and amortization 4,251 3,440 24
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Total operating expenses 59,128 7,958 643
Operating Margin (1), before depreciation,
depletion and amortization 13,121 7,690 71
Operating Margin as a % of core processing,
recovery and disposal services 60% 63% (5)
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-- Operating margin for Secure's core processing, recovery and disposal
services increased by 71% to $13.1 million for the three month
period ended March 31, 2011. Operating margins remain strong at 60% for
the quarter ended March 31, 2011; and
-- EBITDA grew to $10.7 million for the three months ended March 31, 2011
compared to $6.5 million in the same period of 2010;
-- Total profit and comprehensive income for the period after taxes of $4.2
million represents a significant increase from $1.5 million in the first
quarter of 2010.
Rene Amirault, Secure's President and Chief Executive Officer, stated: "The first quarter results reflect investments made in 2010 and strong demand for our services. The winter drilling and completion season was extended to encompass the entire first quarter of 2011 due to a prolonged period of cold weather. As a result, total metres drilled during the first quarter 2011 was 6.85 million (excluding oilsands evaluation wells), the highest since the first quarter of 2007."
Capital Highlights
-- Capital expenditures of $16.6 million in the first quarter related
to the completion of Brazeau SWD facility, the completion of waste
services at the Obed FST, and the ongoing construction of the waste
facilities at South Grand Praire FST and construction of the Drayton
Valley FST; and
-- Secure exited the first quarter 2011 with working capital of $15.3
million and an undrawn credit facility of $26.5 million. Subsequent
to the first quarter 2011, the Corporation received a commitment to
extend the credit facility until May 2012 and increase the amount
available from $35 million to $55 million.
(1) These financial measures are Non- GAAP financial measures and do not have any standardized meaning prescribed by IFRS. These non-GAAP measures used by the Corporation may not be comparable to a similar 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. These non-GAAP financial measures are included because management uses the information to analyze operating performance, leverage and liquidity. Therefore, these non-GAAP financial measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
OUTLOOK
Recent outlooks by the Petroleum Services Association of Canada ('PSAC') and the Canadian Association of Oilwell Drilling Contractors ("CAODC") support Secure's view of expanding the Corporation through additional service lines, organic growth, and/or strategic acquisitions such as the recently announced purchase of Marquis Alliance Energy Group Inc. ("Marquis Alliance").
-- On April 28, 2011 the Petroleum Services of Canada ('PSAC') released an
update forecasting an increase in Canadian drilling activity for 2011.
PSAC revised the 2011 forecast of 8,390 wells drilled in Alberta upwards
to 8,732 wells drilled, a healthy increase of over 2010 drilling
activity; and
-- Members of the Canadian Association of Oilwell Drilling Contractors
("CAODC") booked 37,332 operating days in the first quarter of 2011, the
busiest winter since 2006 when contractors had 45,438 operating days in
the same comparable period;
-- Average meters drilled per rig jumped to 8,336 meters in the first
quarter of 2011, up from 7,240 meters per rig in the same period last
year;
-- Total meters drilled during the first quarter of 2011 added up to 6.85
million (excluding oilsands evaluation wells), the highest since the
first three months of 2007. Meters drilled in horizontal wells accounted
for 4.65 million (68%) of that total.
Despite the efficiencies gained from modern drilling rigs, the amount of time it takes to drill a well is rising because of more complex drilling, the move to horizontal wells and the greater lengths/depths being pursued by operators. The Corporation expects this increase in drilling activity will drive demand for services at the Corporation's waste processing and disposal facilities and in the Marquis Alliance drilling fluids business.
The strategic acquisition with Marquis Alliance will provide Secure with complimentary services to the Corporation's existing business lines. By integrating Marquis Alliance's product and service offering with Secure's existing network of facilities, the strategic corporate benefits combined include the following:
-- Drilling fluids blending and recycling at Secure's existing facilities;
-- Efficiencies in drilling waste handling and enhanced environmental
stewardship;
-- Integration with Secure's existing network with minimal costs;
-- Accretion to Secure earnings and cash flow per share;
-- Full cycle 'cradle to grave' drilling fluid solutions.
In 2011, the Corporation will continue to focus on strengthening market position across all service lines and executing on the business strategy. The investment in developing a strong market position will continue to provide the Corporation with opportunities for growth. Secure expects the demand for the Corporation's services to continue to increase based on a trend of greater outsourcing by oil and gas producers, and the increasing volume of by products 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.
During the second quarter, the South Grande Prairie facility waste expansion is expected to be operational. The Drayton Valley FST is currently on schedule and it is expected the facility will be completed during the third quarter. In addition, the Corporation continues to work on a variety of projects for 2011 and 2012 relating to expansion and sustaining capital that will increase throughput capacity or will result in the introduction of new services at the Corporation's existing facilities. Secure will increase capacity through additional disposal wells, pipeline connections, upgraded metering systems and additional truck unload infrastructure. Secure's available cash, debt capacity and cash flow from operations will allow the Corporation the financial flexibility to deploy the capital strategy.
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, and anticipated completion of the Drayton Valley full service terminal and anticipated closing of the Corporation's acquisition of Marquis Alliance Energy Group Inc.
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 and the Corporation's short form prospectus filed May 6, 2011. 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.
