Secure Announces Results for the First Quarter Ended March 31, 2015
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 05/07/15 -- Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX: SES) today announced financial and operational results for the three months ended March 31, 2015. 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 FIRST QUARTER ENDED MARCH 31, 2015
During the first quarter of 2015, oil and gas producers continued to reduce capital spending and budgets in response to the decline in crude oil and natural gas prices. First quarter drilling activity peaked in January with the active rig count continually declining throughout the quarter. In addition, spring break-up conditions occurred in early March, significantly shortening the typical length of the winter drilling season. Overall, these factors led to meters drilled declining by 38% from the first quarter of 2014, which significantly impacted results in the DS division. Accordingly, revenue in the DS division was down 42% as the division faced reduced activity and pricing pressure. However, Secure's overall revenue was only down 17%, as both the PRD and OS division revenue increased over the 2014 comparative period, offsetting the reduced revenue in DS. In the PRD division, approximately 70% of the revenue relates to production activities and are not as directly impacted by the decline in meters drilled. In the OS division, the majority of the revenue relates to project based activities that are also not directly correlated to drilling activities.
Throughout the first quarter Secure was very proactive in working with customers in order to find more efficient ways to manage their fluids and solids through more integrated offerings, volume-based contracts and reducing costs where possible. In conjunction with this process, Secure was also able to reduce the impact on margins across divisions through proactive cost management, streamlining of internal processes and cost savings initiatives where it did not impact safety, operations and environmental performance. This included incurring severance costs associated with reducing the Corporation's workforce by approximately 11% in an effort to eliminate redundant positions or positions significantly impacted by the sharp decline in activity. Secure remains focused on controlling costs while maintaining exceptional customer service.
In March, Secure strengthened its financial position by completing a bought deal equity financing raising gross proceeds of $198.0 million. Secure has consistently applied a disciplined approach to maintaining a strong balance sheet to effectively manage the business through a period of lower commodity pricing and industry activity. The Corporation is well positioned to take advantage of opportunities that may arise as a result of the downturn in the market. Secure is continuing to seek out and evaluate opportunities that will provide meaningful growth for the remainder of 2015, into 2016 and beyond.
The operating and financial highlights for the three month period ending March 31, 2015 can be summarized as follows:
(1) Refer to "Non GAAP measures and operational definitions" and "Additional GAAP measures" for further information
REVENUE OF $169.7 MILLION FOR THE THREE MONTHS ENDED MARCH 31, 2015
The increase in revenues in the PRD and OS divisions for the three months ended March 31, 2015 were offset by the following:
(1) Refer to "Non GAAP measures and operational definitions" and "Additional GAAP measures" for further information
Highlights for the PRD division included:
DS DIVISION OPERATING HIGHLIGHTS
(1) Refer to "Non GAAP measures and operational definitions" and "Additional GAAP measures" for further information
Highlights for the DS division included:
OS DIVISION OPERATING HIGHLIGHTS
(1) Refer to "Non GAAP measures and operational definitions" and "Additional GAAP measures" for further information
Highlights for the OS division included:
OUTLOOK
The significant decline in oil and gas prices affected drilling and completions activity in the first quarter and it is expected that it will continue to influence activity levels for the remainder of the year. Adjustments were made by the Corporation in the first quarter in order to react to the anticipated activity levels for the year, which included working with customers in order to find more efficient ways to manage their fluids and solids through more integrated offerings, volume-based contracts and reducing costs where possible. In the second quarter, Secure expects that the typical spring break up period where oil and gas activity is affected by road bans will be extended for a longer period as customers who slowed down during the winter drilling season are less likely to ramp back up with drilling and completion activities in this current commodity environment. There is a potential that some of the drilling and completion activity that typically begins in June depending on weather, gets deferred to either the third or fourth quarter. As a result, the second quarter will likely be impacted by both the uncertainty of weather conditions and the potential for producers not to ramp up drilling and completion activities.
Overall, Secure continues to estimate a reduction in annual consolidated revenues of 15-20% over the 2014 comparative period, including some operating margin impact. In the PRD division, Secure continues to anticipate revenue to be consistent with 2014, with the potential to be above 2014 levels by 5-10%. Secure expects reduced drilling and completion activities, and the decline in recovered oil sales due to lower crude oil prices, will be offset by additional revenue contribution from facilities commissioned in 2014 and early 2015. The OS division anticipates environmental services, water management, pumping and storage solutions revenue to be reduced by approximately 10-15% from 2014. Finally, revenue in the DS division is expected to decline proportionally to the reduction in meters drilled, therefore the Corporation expects revenue to be down approximately 45- 50% from 2014. The long-term trend of increased meters drilled per well should help the DS division when activity ramps up again. In addition, all divisions will likely have an approximate 5% impact to operating margins based on activity levels, customer price discounts, and commodity pricing.
Following the bought deal offering completed in the first quarter, the Corporation is well positioned in the current commodity environment. Maintaining a strong balance sheet has always been a priority of Secure as this allows Secure to effectively manage the business through a period of lower commodity pricing and industry activity, and provides Secure with the ability to take advantage of opportunities that may arise as a result of the downturn in the market. Secure is continuing to seek out and evaluate opportunities that will provide accretive growth to the Corporation in 2015 and beyond. The 2015 organic capital program has been revised to a range of $100.0 million to $150.0 million committed capital for 2015. The strong balance sheet not only enables Secure to continue with its organic capital program, it also enables Secure to pursue acquisitions of producer and third party facilities that complement Secure's network. Acquisition of complementary services that help the customer with integrated solutions will be part of Secure's capital plans for 2015.
Secure's strategy remains focused on lowering the customer's costs by providing them integrated solutions that achieve cost reductions. By combining multiple services and focusing on new and innovative ways to offer solutions, Secure's customers will be able to gain capital efficiencies drilling, completing and producing their reserves.
Secure is committed to investing in research and development projects and initiatives to continually expand the value chain of services offered to customers and to provide innovative solutions to reduce waste in the drilling and production processes. Both the water recycling technology that allows producers to recycle and reuse flowback water, and the solids processing technology for the recovery of hydrocarbons are in the final stages of economic feasibility. The results to date are positive and Secure is looking forward to evaluating how these new technologies will help Secure's customers reduce costs and gain environmental benefits in the future.
FINANCIAL STATEMENTS AND MD&A
The condensed consolidated financial statements and MD&A of Secure for the three and months ended March 31, 2015 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 or implies 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 and the impact to each division on revenue and operating margins, drilling levels, commodity prices for oil, natural gas liquids ("NGLs") and natural gas; industry fundamentals for the second, third and fourth quarters of 2015; capital forecasts and spending by producers; demand for the Corporation's services; expansion strategy; the impact of the reduction in oil and gas activity on 2015 activity levels; revenue and operating margin for the PRD, DS and OS divisions; the amount of the revised 2015 capital program; the amounts of the PRD, DS and OS divisions' proposed 2015 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 water recycling at South Grande Prairie FST, and the recovery of hydrocarbons technology.
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 U.S. 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 AIF for the year ended December 31, 2014. 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.
OnSite 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 and Chief Financial Officer
(403) 984-6100
(403) 984-6101 (FAX)
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Datum: 07.05.2015 - 21:17 Uhr
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