CALGARY, ALBERTA — (Marketwired) — 11/06/14 — Secure Energy Services Inc. (“Secure” or the “Corporation”) (TSX: SES) today announced financial and operational results for the three and nine months ended September 30, 2014. The following should be read in conjunction with the management–s discussion and analysis (“MD&A”), the condensed consolidated financial statements and notes of Secure which are available on SEDAR at .
FINANCIAL AND OPERATIONAL HIGHLIGHTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2014
Oil and gas activity in Western Canada for the quarter remained robust despite the drop in the price of crude oil in the later part of the third quarter. During the third quarter, horizontal wells drilled increased 8% combined with a 6% increase in meters drilled per well supporting the continued trend for drilling deep, complex and more technically challenging wells. In addition, producer capital spending plans have tracked 13% above levels in the prior year comparative period. Overall, these increases and higher customer demand translated into all three divisions generating a significant increase to revenue (excluding oil purchase and resale) and EBITDA for the quarter of 36% and 40% over the prior year comparative period.
During the quarter, the Corporation completed a strategic acquisition for $104.6 million for three operational rail sites to supplement the Rycroft rail site which provides Secure an immediate rail terminal network to expand and complement its existing pipeline connected facilities. In addition to the strategic acquisition, the Corporation also announced an increase to its capital program by $50.0 million to $275.0 million, for additional PRD facilities. Following these announcements, the Corporation strengthened its financial position by increasing the Corporation–s revolving credit facility from $400.0 million to $700.0 million. As a result of the strong performance for the nine months ended September 30, 2014, a strong balance sheet, and stable cashflows, the board of directors have approved an increase to the dividend of $0.04 per share to $0.24 per share on an annualized basis, effective January 1, 2015.
The operating and financial highlights for the three and nine month periods ending September 30, 2014 can be summarized as follows:
REVENUE INCREASES
PRD DIVISION OPERATING HIGHLIGHTS
Highlights for the PRD division included:
DS DIVISION OPERATING HIGHLIGHTS
Highlights for the DS division included:
OS DIVISION OPERATING HIGHLIGHTS
Highlights for the OS division included:
OUTLOOK
The fourth quarter began with a retreat in commodity prices and narrowing of the heavy oil differentials between world and North American pricing. Given the recent volatility in a very short span, producers have had little time to adjust to the current economic outlook. It is expected producer reactions will be cautious for the remainder of the year, refining 2015 capital budgets which potentially includes adjusting capital moderately for 2015 to allow greater flexibility to manage during a period of lower commodity pricing.
During the fourth quarter, the Corporation expects to open its new Tulliby Lake Landfill. In addition, the Corporation plans on commissioning its new Rycroft FSR facility and Tulliby Lake FST by early 2015. These new facilities are located in key underserviced markets and will be well supported by customer demand in the area. The Corporation has currently spent $204.8 million of its recently increased capital program of $275.0 million. It is expected the majority of the capital will be spent by the end of the year with a portion of the capital program carrying over into 2015 for the Rycroft and Kindersley FSR–s, and the Tulliby Lake FST. The current year capital program is funded by Secure–s cashflow from operations and the recent increase to the Credit Facility to $700.0 million. Following this increase, the Corporation has adequate sources of capital available to carry out its capital plan, while maintaining operational growth, and payment of dividends so as to sustain future development of the business. Maintaining a strong balance sheet and managing growth in a prudent manner has always been a priority for the Corporation allowing flexibility to execute on its strategy.
Secure–s acquisition of Predator in the third quarter provides the Corporation–s customers increased market access bypassing pipeline constraints and tapping into the North American rail network. As Secure executes on the Corporation–s largest organic capital program in history, including the addition of two FSRs at Rycroft and Kindersley, these facilities will complement the acquisition providing additional access points to the rail network. The introduction of rail as a service offering will allow Secure to optimize crude oil market access between pipelines and rail, and further increase the value chain of services provided to continue to meet and exceed customer expectations.
Secure is dedicated to investing in research and development projects to provide innovative solutions to its customers in order to reduce waste in the drilling and completions process. The water recycling technology piloted at the South Grande Prairie FST is now in the early stages of being able to produce recycled fluids. Development of the solids processing technology for the recovery of hydrocarbons used in the drilling process has continued through the third quarter and results to date have been positive. Secure will continue developing these key innovative technologies through the remainder of the year.
FINANCIAL STATEMENTS AND MD&A
The condensed consolidated financial statements and MD&A of Secure for the three and nine months ended September 30, 2014 are available immediately on Secure–s website at . The condensed consolidated financial statements and MD&A will be available tomorrow on SEDAR at .
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document constitute “forward-looking statements” and/or “forward-looking information” within the meaning of applicable securities laws (collectively referred to as 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: corporate strategy; goals; general market conditions; the oil and natural gas industry; activity levels in the oil and gas sector, including market fundamentals, drilling levels, commodity prices for oil, natural gas liquids (“NGLs”) and natural gas; industry fundamentals for the second half of 2014; capital forecasts and spending by producers; demand for the Corporation–s services; expansion strategy; the amount of the increased 2014 capital budget; the amounts of the PRD, DS and OS divisions– proposed 2014 capital budgets and the intended use thereof; debt service; capital expenditures; completion of facilities; the impact of new facilities on the Corporation–s financial and operational performance; future capital needs; access to capital; acquisition strategy; anticipated commissioning of the Rycroft and Kindersley FSRs; anticipated commissioning of the water recycling at South Grande Prairie FST; completion of the Stanley and Brazeau FSTs, and the Tulliby Lake FST and Landfill.
Forward-looking statements concerning expected operating and economic conditions are based upon prior year results as well as the assumption that increases in market activity and growth will be consistent with industry activity in Canada and the United States, and growth levels in similar phases of previous economic cycles. Forward-looking statements concerning the availability of funding for future operations are based upon the assumption that the sources of funding which the Corporation has relied upon in the past will continue to be available to the Corporation on terms favourable to the Corporation and that future economic and operating conditions will not limit the Corporation–s access to debt and equity markets. Forward-looking statements concerning the relative future competitive position of the Corporation are based upon the assumption 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 and its subsidiaries– to successfully market their services and drilling and production activity in North America will lead to sufficient demand for the Corporation–s services and its subsidiaries– services including demand for oilfield services for drilling and completion of oil and natural gas wells, 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 and its subsidiary–s services. Forward-looking statements concerning the nature and timing of growth are 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 statements 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. Readers are cautioned 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 “Business Risks” and under the heading “Risk Factors” in the Corporation–s annual information form (“AIF”) for the year ended December 31, 2013. 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.
Non GAAP Measures and Operational Definitions
ABOUT SECURE ENERGY SERVICES INC.
SECURE is a TSX publicly traded energy services company that provides safe and environmentally responsible fluids and solids solutions to the oil and gas industry.
The Corporation operates three divisions:
Processing, Recovery and Disposal Division (“PRD”): The PRD division owns and operates midstream infrastructure that provides processing, storing, shipping and marketing of crude oil, oilfield waste disposal and recycling. Specifically these services are clean oil terminalling and rail transloading, custom treating of crude oil, crude oil marketing, produced and waste water disposal, oilfield waste processing, landfill disposal, and oil purchase/resale service. Secure currently operates a network of facilities throughout western Canada and in North Dakota, providing these services at its full service terminals, landfills, stand-alone water disposal facilities, and rail transloading facilities.
Drilling Services Division (“DS”): The DS division provides equipment and chemicals for building, maintaining, processing and recycling of drilling and completion fluids. The drilling fluids service line comprises the majority of the revenue for the division which includes the design and implementation of drilling fluid systems for producers drilling for oil, bitumen and natural gas. The DS division focuses on providing products and systems that are designed for more complex wells, such as medium to deep wells, horizontal wells and horizontal wells drilled into the oil sands.
On Site Division (“OS”): The operations of the OS division include environmental services which provide pre-drilling assessment planning, drilling waste management, remediation and reclamation assessment services, laboratory services, and “CleanSite” waste container services; integrated fluid solutions which include water management, recycling, pumping and storage solutions; and projects which include pipeline integrity (inspection, excavation, repair, replacement and rehabilitation); demolition and decommissioning and reclamation and remediation of former wellsites, facilities, commercial and industrial properties.
Contacts:
Secure Energy Services Inc.
Rene Amirault
Chairman, President and Chief Executive Officer
(403) 984-6100
(403) 984-6101 (FAX)
Secure Energy Services Inc.
Allen Gransch
Executive Vice President & Chief Financial Officer
(403) 984-6100
(403) 984-6101 (FAX)