Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX:SES) today
announced financial and operational results for the three months and year ended
December 31, 2011. The following should be read in conjunction with the
management's discussion and analysis, the consolidated financial statements and
notes of Secure which are available on SEDAR at www.sedar.com.
2011 FINANCIAL AND OPERATIONAL HIGHLIGHTS
Three Months Ended December 31,
2011 2010 2009 (2)
----------------------------------------------------------------------------
($000's except share and per share
data)
(unaudited)
Revenue (excludes oil purchase and
resale) 104,288 18,445 7,520
Oil purchase and resale 126,973 14,486 -
----------------------------------------------------------------------------
Total revenue 231,261 32,931 7,520
----------------------------------------------------------------------------
EBITDA (1) 24,785 8,037 2,759
Per share ($), basic 0.28 0.13 0.07
Per share ($), diluted 0.26 0.12 0.06
----------------------------------------------------------------------------
Profit for the period 10,290 2,291 (970)
Per share ($), basic 0.12 0.04 (0.02)
Per share ($), diluted 0.11 0.03 (0.02)
----------------------------------------------------------------------------
Capital Expenditures (1) 29,330 19,866 3,487
Total assets 603,083 198,464 96,979
Long term borrowings 119,070 - 4,788
----------------------------------------------------------------------------
Common Shares - end of period 90,156,688 63,754,348 41,631,991
Weighted average common shares
basic 89,481,219 63,730,396 41,624,234
diluted 93,718,121 66,732,263 42,600,342
Year Ended December 31,
2011 2010 2009 (2)
----------------------------------------------------------------------------
($000's except share and per share
data)
(unaudited)
Revenue (excludes oil purchase and
resale) 239,094 54,458 22,377
Oil purchase and resale 312,105 18,535 -
----------------------------------------------------------------------------
Total revenue 551,199 72,993 22,377
----------------------------------------------------------------------------
EBITDA (1) 61,964 24,601 8,027
Per share ($), basic 0.79 0.42 0.20
Per share ($), diluted 0.75 0.41 0.19
----------------------------------------------------------------------------
Profit for the period 22,383 5,368 (2,758)
Per share ($), basic 0.28 0.09 (0.07)
Per share ($), diluted 0.27 0.09 (0.07)
----------------------------------------------------------------------------
Capital Expenditures (1) 202,053 63,710 22,686
Total assets 603,083 198,464 96,979
Long term borrowings 119,070 - 4,788
----------------------------------------------------------------------------
Common Shares - end of period 90,156,688 63,754,348 41,631,991
Weighted average common shares
basic 78,540,224 58,560,338 40,857,737
diluted 82,944,975 60,464,341 41,788,605
(1) Refer to "Non GAAP measures and operational definitions"
Prepared under Canadian Generally Accepted Accounting Principles
(2) (Previous GAAP)
----------------------------------------------------------------------------
Secure had significant growth in 2011, increasing revenue (excluding oil
purchase/resale) by 339% over 2010 and increasing earnings before interest,
taxes, depreciation and amortization ("EBITDA") by 152% compared to the prior
year. The Corporation's ability to execute on a strategy of organic growth
combined with strategic acquisitions resulted in the creation of the drilling
services "DS" division and the Corporation significantly expanding services
available at its full service terminals ("FST"). The vertical integration into
drilling services is a complementary fit with Secure's processing, recovery and
disposal "PRD" division creating opportunities for the Corporation to leverage
its existing facility infrastructure and provide a broad integrated drilling
fluid service.
With the continued weakness in natural gas prices, drilling has been directed
toward oil or liquids rich natural gas producing areas. The wells currently
drilled in these resource plays commonly utilize horizontal drilling and
multi-stage fracturing techniques which were positive drivers of the
Corporation's financial and operating results in 2011. The corresponding
increase in meters drilled and operating days required to drill a well has
resulted in more demand for drilling, processing, and disposal services in both
the PRD division and the DS division.
Corporate highlights:
-- EBITDA per share (basic) more than doubled to $0.28 for the three months
ended December 31, 2011 and grew 88% to $0.79 for the year ended
December 31, 2011 over the comparative period of 2010;
-- Reported record revenue (excluding oil purchase and resale) of $104.3
million and $239.1 million for the three and twelve months ended
December 31, 2011 compared to $18.4 million and $54.5 million in the
comparable periods of 2010. The record revenue for the 2011 year was a
result of the new DS division added on June 1, 2011, the Dawson FST
operating for the entire year, the addition of the Brazeau stand alone
water disposal ("SWD") facility, Obed and South Grande Prairie FST
expansion, the addition of the Drayton Valley FST in the fourth quarter
and overall increased demand for the Corporation's service offerings in
both divisions. For the year ended December 31, 2011, the DS division
(from June 1, 2011) had a total of 24,870 operating days in Canada and
revenue per operating day of $4,995, both of which were positively
impacted by increased industry activity;
-- Reported higher oil purchase and resale revenue in the twelve months of
2011 compared to same period of 2010 as a result of the Corporation
becoming a single shipper at the Fox Creek FST in December 2010, at the
La Glace FST in October 2011, and increasing throughput at these
facilities. Secure also became a single shipper at the Drayton Valley
FST in January 2012 and as a result the Corporation expects oil purchase
and resale service revenue to increase in the first quarter of 2012;
-- Reported record EBITDA of $24.8 million and $62.0 million for the three
and twelve months ended December 31, 2011 compared to $8.0 million and
$24.6 million in the same period of 2010. EBITDA has grown significantly
as a result of the new DS division, the new facilities and the added
expansion services in the PRD division and an overall increase in energy
sector activity in both the fourth quarter and the year;
-- Completed three significant strategic acquisitions;
-- On June 1, 2011 the Corporation closed the $131.4 million
acquisition of Marquis Alliance which formed the new DS division;
-- On July 1, 2011 the acquisition of the operating assets (excluding
working capital) of XL Fluids was closed for $39.4 million which was
integrated into the DS division;
-- On October 1, 2011, Secure purchased Silverdale processing facility
from Emerge Oil & Gas Inc. ("Emerge") for an aggregate cash purchase
price of $18.0 million which was integrated into the PRD division;
-- Completed $96.5 million of capital spending relating to organic growth
which included $38.6 million related to projects that started in 2010,
$31.7 million for expansion/new services at existing facilities,
equipment totaling $26.2 million for long lead items for new 2012
facilities and for rental equipment used in the DS division;
-- Closed a $150.0 million credit facility with a syndicate of lenders,
with an option to expand to $200.0 million through the exercise of an
additional $50.0 million accordion feature. The committed three year
revolving facility is to be used for working capital, to refinance
existing debt, for capital expenditures including permitted
acquisitions, and for general corporate purposes; and
-- Announced in December 2011 a capital budget for the 2012 year of $116.0
million. $98.0 million was allocated to the PRD division for the
construction of two FST's, a landfill in Fox Creek, a landfill in Saddle
Hills and the permanent Wild River SWD. The construction on the Wild
River SWD is well underway and it is expected to be completed during the
second quarter of 2012. The DS divisions' 2012 capital budget totals
$18.0 million consisting of $14.0 million for growth capital allocated
evenly between Canadian and U.S. operations and is largely comprised of
onsite solid's control equipment.
Subsequent to December 31, 2011, the Corporation:
-- Closed the exercise of the accordion feature and extended the credit
facility to $200.0 million with its lenders. Secure's current available
debt capacity and cash flow from operations provides sufficient funding
to execute on the Corporation's 2012 capital strategy; and
-- During January 2012, the Corporation announced it was acquiring the
operating assets (excluding working capital) of New West Drilling Fluids
Inc. ("NWDF") for an aggregate cash purchase price of $3.4 million. NWDF
is a Canadian based drilling fluids company specializing in providing
drilling fluid systems and products for the heavy oil and oil sands
segment. NWDF is most well known for its patented SAGD system,
"BITUDRIL", the first bitumen encapsulating polymer based system on the
market. Adding NWDF's assets, including BITUDRIL, to Marquis Alliance's
existing patented and proprietary SAGD product line will increase
Marquis Alliance's ability to provide the most cost effective drilling
fluid solutions in the SAGD market.
PRD DIVISION OPERATING HIGHLIGHTS
Three Months Ended December 31,
2011 2010 % Change
----------------------------------------------------------------------------
($000's) (unaudited)
Revenue
Processing, recovery and
disposal services 29,612 18,445 61
Oil purchase and resale service 126,973 14,486 777
-------------------------------------------
Total PRD division revenue 156,585 32,931 375
-------------------------------------------
Operating Expenses
Processing, recovery and
disposal services 13,045 6,581 98
Oil purchase and resale service 126,973 14,486 777
-------------------------------------------
140,018 21,067 565
Depreciation, depletion, and
amortization 6,274 4,073 54
-------------------------------------------
Total PRD division operating
expenses 146,292 25,140 482
-------------------------------------------
General and administrative 4,326 2,448 77
Business development - 1,855 (100)
-------------------------------------------
5,967 3,488 71
-------------------------------------------
-------------------------------------------
Operating Margin (1) 16,567 11,864 40
Operating Margin (1)(excluding
oil purchase/resale)
as a % of revenue 56% 64% (13)
Year Ended December 31,
2011 2010 % Change
----------------------------------------------------------------------------
($000's) (unaudited)
Revenue
Processing, recovery and
disposal services 91,388 54,458 68
Oil purchase and resale service 312,105 18,535 1,584
-------------------------------------------
Total PRD division revenue 403,493 72,993 453
-------------------------------------------
Operating Expenses
Processing, recovery and
disposal services 42,624 21,713 96
Oil purchase and resale service 312,105 18,535 1,584
-------------------------------------------
354,729 40,248 781
Depreciation, depletion, and
amortization 19,453 13,846 40
-------------------------------------------
Total PRD division operating
expenses 374,182 54,094 592
-------------------------------------------
General and administrative 13,136 7,473 76
Business development 1,590 2,297 (31)
-------------------------------------------
14,585 9,129 60
-------------------------------------------
-------------------------------------------
Operating Margin (1) 48,764 32,745 49
Operating Margin (1)(excluding
oil purchase/resale)
as a % of revenue 53% 60% (12)
(1) Refer to "Non GAAP measures and operational definitions"
----------------------------------------------------------------------------
Highlights for the PRD division included:
-- Revenue from processing, recovery and disposal increased significantly
for the three months and the year ended December 31, 2011 to $29.6
million and $91.4 million from $18.4 million and $54.5 million in the
comparative periods in 2010. The substantial increase is a result of the
Dawson FST operating for the entire year, Obed and South Grande Prairie
FST expansion, the addition of the Drayton Valley FST in the fourth
quarter and overall increased demand for the PRD divisions service
offerings;
-- Operating expenses increased for the three months and the year ended
December 31, 2011 to $13.0 million and $42.6 million from $6.6 million
and $21.7 million in the comparative periods in 2010. Operating costs
were higher as a result of the addition of the new facilities and
expansion services during the year and increasing variable costs
associated with higher demand for services. Operating costs were also
impacted during the year by extremely wet weather conditions experienced
in the second quarter and third quarter that caused an increase in
leachate disposal costs, road maintenance costs and site costs;
-- Operating margin was 56% in the fourth quarter of 2011, up from 52% in
the third quarter of 2011, but down from 64% in the fourth quarter of
2010. The Corporation had higher costs in the fourth quarter of 2011
associated with the start up of the Drayton Valley FST. An incremental
$1.0 million of trucking expense to a third party crude oil terminal was
experienced as a result of a delay in the completion of the facility's
crude oil pipeline connection. Ultimately, the Corporation recovered
these costs directly from the customer. The overall impact of $1.0
million incremental revenue and expense resulted in a reduction in
operating margin of 2% for the quarter. The change in operating margin
may fluctuate as a result of changes in volumes affected by seasonality,
as new facilities come online and activity levels change, as the
Corporation's sales mix or type of services received varies, changes in
input costs incurred to maximize differentials on various streams and as
commodity prices rise and fall; and
-- Over the past three years the PRD division has averaged a 56% operating
margin through years of high growth compared to 53% in 2011. The
decrease in operating margin for the year ended December 31, 2011 is
attributed to the extremely wet weather conditions experienced during
the spring and summer months. The heavy rains caused an increase in
leachate disposal costs of $1.1 million, road maintenance/site costs of
$0.5 million and repairs and maintenance costs of $1.2 million. As a
result of the expansions and new facilities described above, the
Corporation incurred higher training costs associated with the start up
phase.
DS DIVISION OPERATING HIGHLIGHTS
Three Months Ended December
31, Year Ended December 31,
2011 2010 % Change 2011 2010 % Change
----------------------------------------------------------------------------
($000's)
(unaudited)
((i))
Revenue
Drilling
Services
division 74,676 - 100 147,706 - 100
------------------------------------------------------------
Operating
expenses
Drilling
services 57,088 - 100 109,919 - 100
Depreciation
and
amortization 2,642 - 100 5,777 - 100
------------------------------------------------------------
Total Drilling
Services
division
operating
expenses 59,730 - 100 115,696 - 100
General and
administrative 5,791 - 100 12,316 - 100
Business
development 202 - 100 424 - 100
------------------------------------------------------------
8,953 - 100 19,270 - 100
------------------------------------------------------------
Operating Margin
(1) 17,588 - 100 37,787 - 100
Operating Margin
(1)% 24% - 100 26% - 100
(i) Includes drilling services division from its acquisition on June 1, 2011.
(1) Refer to "Non GAAP measures and operational definitions "
Highlights for the DS division included:
-- Revenue for the three months and the year ended December 31, 2011
increased to $74.7 million and $147.7 million (from June 1, 2011) from
nil in the comparative periods in 2010. In Canada and the United States,
the drilling fluids service line contributed $64.4 million or 86% of the
total revenue in the fourth quarter. Total revenue for the year ended
December 31, 2011 in Canada and the United States is comprised of $129.1
million or 87% from the drilling fluids service line and $18.6 million
or 13% from the environmental and solids control service lines. Demand
for the environmental and solids control service lines remains strong,
with high utilization and newly delivered equipment fully booked to the
end of the winter drilling season;
-- The drilling fluids service line's estimated Canadian market share for
the year ended December 31, 2011 was 26% based on the Canadian
Association of Oilwell Drilling Contractors ("CAODC") average monthly
rig count for Western Canada of 438 rigs (June to December 2011). This
compares to 340 rigs for the same period in 2010 (refer to "Non GAAP
measures and Operational Definitions"). For the year ending December 31,
2011, the DS division (from June 1, 2011) in Canada had a total of
24,870 operating days and total revenue per operating day of $4,995.
Fourth quarter revenue per operating day in Canada was $5,563 compared
to $4,334 in the third quarter - an increase of 28%; and
-- Operating margins for the three months and the year ended December 31,
2011 were 24% and 26%, respectively. Operating costs were impacted as a
result of a changing product mix as more oil and gas producers moved
from water based drilling fluids to oil based drilling fluids in the
fourth quarter. Increased horizontal drilling combined with increasing
technical drilling programs is driving demand for oil based drilling
fluids. Oil base stock is an expensive, low margin and high volume
commodity. Therefore, in periods of rising oil prices or increased
activity in oil based drilling fluids, revenue and product costs will
increase accordingly, resulting in decreasing margins on a percentage
basis. Operating margins are in line with management expectations.
CAPITAL EXPENDITURE HIGHLIGHTS
For the year ended December 31, 2011, Secure incurred $286.3 million in capital
expenditures. Of the $286.3 million, $188.8 million related to strategic
acquisitions ($104.4 million cash portion), $96.5 million in equipment
purchases, expansion, and new facilities and $1.0 million in sustaining capital.
The capital expenditure highlights (excluding acquisitions) for the year ended
December 31, 2011 are summarized as follows:
-- Obed FST facility (waste expansion) - commissioned in February 2011;
-- Brazeau SWD facility - commissioned in February 2011;
-- South Grande Prairie FST facility (waste expansion) - commissioned in
July 2011;
-- Wild River SWD temporary facility - commissioned in July 2011;
-- Drayton Valley FST facility - commissioned in September 2011;
-- Fox Creek FST facility - (expansion services-additional risers and
tanks) completed in the third quarter 2011;
-- Dawson FST facility - (expansion services - expanded waste receiving pad
and upgraded processing equipment) completed in the third quarter 2011;
-- Kotcho FST facility - (expansion and upgrades to waste receiving bins,
processing equipment and tank farm) ongoing construction as at December
31, 2011;
-- Pembina Landfill - (cell expansion in the fourth quarter); and
-- Rental equipment (centrifuges, tanks, etc.) and long lead items for 2012
capital projects.
OUTLOOK
Activity levels in the oil and gas sector remained strong throughout the fourth
quarter of 2011. The strength in oil and natural gas liquids ("NGL's ") prices
continue to drive drilling activity. However, further weakening of natural gas
prices have caused the Petroleum Services Association of Canada ('PSAC') to
lower its drilling forecast in 2012. Overall, PSAC is still forecasting growth
in the number of wells drilled in 2012 over 2011. The Corporation's view is that
despite the falling price of natural gas, the strong price of oil and NGL's will
keep activity levels strong in 2012. In addition, Secure views operating days
and meters drilled over the number of wells drilled as a better indicator of
future macro trends impacting the Corporation's results. The Canadian
Association of Oilwell Drilling Contractors ("CAODC") forecasts that in 2012 the
number of operating days will continue to increase over 2011 levels. The
increase continues to be a result of more complex drilling, a move to horizontal
wells and greater lengths/depths being pursued by operators. The Corporation
expects the increase in the number of operating days will drive demand for
services at the Corporation's waste processing and disposal facilities and in
the DS division's business.
There are a number of opportunities in 2012 to expand the Corporation through
additional service lines, organic growth, and/or through strategic acquisitions
in key market areas. Secure recently announced the Corporation's capital program
for 2012 of $116.0 million. The PRD divisions' 2012 capital budget of $98.0
million includes the construction of two FST's, a landfill in Fox Creek, a
landfill in Saddle Hills and the permanent Wild River SWD. The construction on
the Wild River SWD is well underway and it is expected to be completed during
the second quarter of 2012. The DS divisions' 2012 capital budget totals $18.0
million comprising $14.0 million for growth capital allocated evenly between
Canadian and U.S. operations and is largely comprised of on-site solid's control
equipment. Secure's available debt capacity and cash flow from operations
provides sufficient funding that allows the Corporation to maintain a strong
balance sheet throughout the execution of its capital strategy.
In 2012, we will focus on complementary services, recycling services, organic
growth and acquisitions that complement the existing business. The Corporation's
business development team will continue to evaluate and execute opportunities
for new facilities including drilling fluid blending and storage facilities at
the PRD division's FST's to better serve the Corporation's customers.
We have a strong team and entrepreneurial culture among all employees. It is
this drive and leadership from all levels of the organization that makes us and
industry leader. The commitment to providing innovative products and services
ensures that we find new ways to help our customers every day.
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: general market conditions;
the oil and natural gas industry; activity levels in the oil and gas sector,
including drilling levels; commodity prices for oil, NGLs and natural gas; the
increase in 2012 operating days; demand for the Corporation's services;
expansion strategy; the amounts of the PRD and DS divisions' 2012 capital
budgets and the intended use thereof; debt service; capital expenditures;
completion of facilities; future capital needs; access to capital; acquisition
strategy; the balance of the Corporation's capital spending on new full service
terminals and landfills; oil purchase and resale revenue; completion of the
permanent facility construction at Wild River and the construction of landfills
at Saddle Hills and Fox Creek, Alberta.
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,
United States, and internationally 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 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 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 subsidiary 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 subsidiary's 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, 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.
Non GAAP Measures and Operational Definitions
1. The Corporation uses accounting principles that are generally accepted
in Canada (the issuer's "GAAP"), which includes, International Financial
Reporting Standards ("IFRS"). These financial measures are Non-GAAP fi
nancial 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 and operational
definitions. These non-GAAP financial measures and operational
definitions are included because management uses the information to
analyze operating performance, leverage and liquidity. Therefore, these
non-GAAP financial measures and operational definitions should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP.
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 consolidated financial statements for the
year ended December 31, 2011. The following should be read in conjunction with
the management's discussion and analysis, the consolidated financial statements
and notes of Secure which are available on SEDAR at www.sedar.com.
Altus (TSX:AIF)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Altus (TSX:AIF)
Historical Stock Chart
Von Jul 2023 bis Jul 2024
