ProSep Reports Second Quarter 2013 Financial Results

ProSep Inc. (TSX:PRP) ("ProSep" or the "Company"), dedicated to providing
process solutions to the oil and gas industry, today announced its financial
results for the three and six-month periods ended June 30, 2013. All amounts are
reported in Canadian dollars unless otherwise stated.


Highlights of the Second Quarter of 2013 and Subsequent Events 

Financial Results



--  Revenues for the second quarter of 2013 were $8.8 million, compared to
    $13.9 million recognized in the equivalent quarter of last year. 
    
--  Gross margin for the quarter stood at $2.1 million, or 24% of revenues,
    compared to $3.0 million, or 22% of revenues for the equivalent period
    of 2012. 
    
--  EBITDA(i) for the quarter was negative $1.6 million compared with a
    negative EBITDA of $0.7 million in the equivalent period of 2012. 
    
--  Net profit for the second quarter amounted to $2.5 million ($0.12 per
    share), compared to a net loss of $1.6 million ($0.08 per share) in the
    corresponding period of last year. The successful completion of the sale
    of the investment held in the South Korean joint venture ProSep Kolon
    Ltd., for a gain of $4.8 million, account for this significant
    improvement. 
    
--  Including recent contract awards, ProSep's backlog stands at
    approximately $18 million at August 1, 2013, compared to $18.6 million
    at the start of the year. At quarter end (June 30, 2013), ProSep's
    backlog stood at $12.8 million. 



Financial Events



--  A Special Committee appointed by the Board of Directors is working with
    KPMG Corporate Finance and is currently reviewing strategic alternatives
    with a number of interested parties. 
    
--  Concluded the sale of the 51% investment in South Korean joint venture
    ProSep Kolon Ltd. for gross proceeds of approximately $5 million.  
    
--  Reimbursed a debenture and accrued interest related to ProSep Kolon Ltd.
    for a total amount of $1.1 million. 
    
--  Initiatives to control costs and streamline operations have contributed
    to generate approximately $1.4 million in cost savings year-to-date. 



Commercial



--  During the second quarter, concluded $9 million in new contracts and $6
    million subsequent to quarter end, for a total of $17.2 million signed
    year-to-date. Most contracts signed since the start of the year are for
    produced water treatment for onshore and offshore installations. 



Operations



--  Continued to maintain exceptional Health, Safety and Environment
    ("HS&E") track record and zero Total Recordable Incident Rate ("TRIR")
    for two years. 

                                                                            
(i)  EBITDA is a non-IFRS measure, see MD&A for details.                    



Selected Financial Highlights (in $ millions except for loss per share)



----------------------------------------------------------------------------
                            Quarter ended June 30  Six-months ended June 30 
----------------------------------------------------------------------------
                                2013         2012         2013         2012 
----------------------------------------------------------------------------
Revenue                         $8.8        $13.9        $17.6        $22.2 
----------------------------------------------------------------------------
Gross margin(i)                 $2.1         $3.0         $5.3         $5.7 
----------------------------------------------------------------------------
Gross margin as a                                                           
 percentage of revenues           24%          22%          30%          26%
----------------------------------------------------------------------------
EBITDA(ii) (loss)              ($1.6)       ($0.7)       ($2.2)       ($2.9)
----------------------------------------------------------------------------
Profit (loss) for the                                                       
 period                         $2.5        ($1.6)        $1.1        ($3.1)
----------------------------------------------------------------------------
Basic and diluted income                                                    
 (loss) per share              $0.12       ($0.00)       $0.05       ($0.01)
----------------------------------------------------------------------------
Weighted average number                                                     
 of shares (basic and                                                       
 diluted)                 21,068,737   20,978,721   21,118,215   20,947,221 
----------------------------------------------------------------------------
As at:                              June 30, 2013         December 31, 2012 
----------------------------------------------------------------------------
Net Invested Working                                                        
 Capital(iii)                                $0.6                     ($0.9)
----------------------------------------------------------------------------
Total Assets                                $23.7                     $29.8 
----------------------------------------------------------------------------
Borrowings                                   $3.8                      $9.3 
----------------------------------------------------------------------------
Equity                                     ($0.04)                    ($1.4)
----------------------------------------------------------------------------
                                                                            
(i)   Gross margin is a non-IFRS financial measure and the Company defines  
      it as margin excluding amortization expense.                          
(ii)  EBITDA is a non-IFRS financial measure and the Company defines it as  
      earnings or loss from operations excluding amortization, financial    
      charges and income taxes.                                             
(iii) Net Invested Working Capital is a non-IFRS financial measure and the  
      Company defines it as follows: (Restricted cash + Trade and other     
      receivables + Inventories + Prepaid expenses) - (Trade and other      
      liabilities + Deferred revenue).                                      



"Since the start of the year, a special committee formed by the Board of
Directors has been reviewing strategic alternatives in order to enhance
shareholder value and develop long term partnerships that would help further the
Company's business plan. We are currently reviewing various alternatives with a
number of interested parties," said Jacques L. Drouin, President & CEO. "With a
more streamlined organization, recent pick-up in orders, and promising short
term prospects, we are in a good position entering the second half of the year."


Financial Results

This announcement reports on consolidated results. For detailed segmented
financial results please see Management Discussion and Analysis and Interim
Condensed Consolidated Statement for the three and six-month period ended June
30, 2013.


During the second quarter of 2013, ProSep reported consolidated revenues of $8.8
million, compared to $13.9 million reported in the equivalent period of 2012, a
37% reduction in revenues. During the first six-months of the year, consolidated
revenues were down 21% to $17.6 million from $22.2 million for the first half of
2012. Revenue growth at the US Operations was not sufficient to offset declines
at the Asia Pacific Operations. As further detailed in the segment comments
below, the Asia Pacific Operations renewed their book of opportunities since the
start of the year and concluded $6 million of new contracts, compared to $4.5
million announced in the first six months of 2012, leading to a stronger backlog
entering the second half of this year.


Overall consolidated gross margin for the second quarter of 2013 stood at $2.1
million (or 24% or revenues) compared to $3.0 million (or 22% of revenues) for
the equivalent period of 2012. For the first six months of 2013, consolidated
gross margins stood at $5.3 million (or 30% of revenues) compared with $5.7
million (or 26% of revenues) for the equivalent period of 2012. Although gross
margins remained low at the Asia Pacific operation, on a consolidated basis,
gross margins as a percentage of revenues improved mainly on increased
contribution from proprietary technologies. 


The success of the new strategy introduced in 2010, which aims to accelerate the
commercialization of the Company's proprietary technologies, is evidenced in the
year-to-date consolidated gross margins. As these systems gain market acceptance
and are deployed at existing and new customer's operations, gross margins should
continue to improve.


EBITDA for the second quarter ended June 30, 2013 was negative $1.6 million
compared to negative $0.7 million during the second quarter of last year.
Non-recurring expenses related to the ongoing strategic review negatively
affected EBITDA by approximately $0.5 million in the second quarter of 2013.
Year-to-date, EBITDA stood at negative $2.2 million, an improvement over last
year's EBITDA of negative $2.9 million. EBITDA further improves, to negative
$1.3 million if non-recurring items related to the strategic review are removed.



Since the start of the year, higher gross margins from proprietary technologies,
higher utilization rate of personnel to projects and implementation of a cost
reduction plan contributed in reducing losses. Year-to-date, these initiatives
provided cost savings of approximately $1.4 million in general and
administrative expenses. 


For the three-month period ended June 30, 2013, the Company reported a net
profit of $2.5 million ($0.12 per share), on the realization of a gain on
disposal of its investment in the South Korean joint venture company ProSep
Kolon. This joint venture was created at the end of 2010 and ProSep sold its
interest in the company during the start of the second quarter of 2013 for gross
proceeds of $5 million. During the second quarter of last year, the Company
reported a net loss of $1.6 million (or $0.08 per share). Year-to-date, net
profit amounts to $1.1 million (or $0.05 per share), compared to a net loss of
$3.1 million (or $0.15 per share) for the first six-months of last year. 


At June 30, 2013, the Company had $1.9 million in cash compared to $2.8 million
in cash at December 31, 2012.


Covenant Waiver

At June 30, 2013 one of the Company's wholly-owned subsidiaries was in breach of
a covenant to maintain financial ratios as well as a "clean-down" obligation,
whereby the facility is to be undrawn for a pre-determined period time. A
conditional covenant waiver wherein the lender confirmed that the breached
covenant is not deemed to constitute an event of default was obtained by the
Company's subsidiary for the six-month period ended June 30, 2013. The Company
also obtained an extension by which the subsidiary has to start a clean-down by
October 1, 2013.


Conference Call and Webcast Details

ProSep will host a conference call and webcast on Thursday August 8th, 2013 at
8:00 a.m. (EST) to review the financial results and highlights of the second
quarter of 2013. To access the conference call by telephone, dial 1-416-981-9000
or 1-800-734-8507. A live audio webcast of the conference call will also be
available through ProSep's website under "Calendar of Events" in the "News and
Investor Center" and on www.marketwire.com. For audio replay, dial
1-416-626-4100 or 1-800-558-5253 with the reservation code # 21669601.


Regulatory Filings

ProSep filed its Interim Condensed Consolidated Financial Statements for the
three and six-month periods ended June 30, 2013 and related Management
Discussion and Analysis with securities regulatory authorities. The material
will be available through SEDAR at www.sedar.com and on the Company's website at
www.prosep.com. 


About ProSep 

ProSep is a technology-focused process solutions provider to the upstream oil
and gas industry. ProSep designs, develops, manufactures and commercializes
technologies to separate oil, water and gas generated by oil and gas production.
For more information, please visit www.prosep.com. 


Caution concerning forward-looking statements

This press release may contain forward-looking statements within the meaning of
Canadian securities laws. Forward-looking statements can generally be identified
by the use of the conditional tense, the words "may", "should", "would",
"believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee",
"objective" or "continue" or the negative of these terms or variations of them
or words and expressions of similar nature. In particular, forward-looking
statements regarding ProSep's plans for its business development strategy,
anticipated customer orders, sales and revenues, financial and operational
projections and anticipated results, anticipated results of field testing with
potential customers and expected benefits of ProSep's proprietary technologies;
and anticipated impact on ProSep of the factors discussed under the heading
"Selected Risks" in the latest management discussion and analysis document
("MD&A"). These forward-looking statements are based on, among other things,
management's assumptions, expectations, estimates, objectives, plans and
intentions as of the date hereof pertaining to, but not limited to demand for
ProSep's solutions, projected revenues and expenses, the economic and industry
environments in which the Company operates or which could affect its activities,
the Company's ability to attract new customers, projected operating costs and
cost of raw materials and energy supply, expected timing and amount of capital
expenditures program of ProSep's potential customers, target market acceptance
of ProSep's solutions, current and future solutions performance, evolving market
conditions for oil & gas producers; and success of commercialization approach
and strategic partnership initiatives. Although ProSep believes that the
expectations and assumptions on which the forward-looking statements are based
are reasonable, undue reliance should not be placed on the forward-looking
statements because ProSep can give no assurance that they will prove to be
correct. Because forward-looking statements address future events and
conditions, by their very nature they involve numerous inherent risks and
uncertainties that contribute to the possibility that the forward-looking
statements may prove to be incorrect. ProSep cannot assure investors that any of
these forward-looking statements will prove to be accurate.

Further, if any of these statements are inaccurate, the inaccuracy may be
material. Actual performance and results could differ materially from those
currently anticipated in the forward-looking statements due to a number of
factors and risks. Some of the factors that could cause such differences
include, but are not limited to uncertainty as to market acceptance of new
solutions and possible technological change, competition, economic environment
and especially conditions in the oil & gas industry, legislative or regulatory
developments, ProSep's ability to penetrate core markets, expand into new
markets and manage future growth, the need for additional financing and
uncertainties as to access to sufficient capital financing a timely basis and on
acceptable terms, uncertainty as to achievement of profitability and ability to
meet cash requirements, availability and retention of management and key
personnel, the long sales and implementation cycles for ProSep's solutions,
reliance on major customers, manufacturing, project execution, product defect
and product liability risks, dependence on third party suppliers, exchange rate
and currency fluctuations, protection of ProSep's intellectual property rights;
and risks related to ProSep's foreign operations and compliance with
anti-corruption and anti-bribery laws. Assumptions, expectations and estimates
made in the preparation of forward-looking statements and risks that could cause
actual results to differ materially from current expectations are further
discussed under "Selected Risks" in the latest MD&A. In light of the significant
risks and uncertainties in these forward-looking statements, investors should
not place undue reliance on or regard these statements as a representation or
warranty by the Company or any other person that the Company will achieve its
objectives, strategies and plans in any specified time frame, if at all. The
forward-looking statements contained or incorporated by reference in this
management discussion and analysis relate only to events as of the date on which
the statements are made. Except as required under applicable securities
legislation, the Company does not undertake to update or revise these
forward-looking statements, whether as a result of new information, future
events or otherwise.


FOR FURTHER INFORMATION PLEASE CONTACT: 
ProSep Inc.
Investor Relations and Media:
Danielle Ste-Marie
VP Marketing & Corporate Development
[phone] ext. 238
[e-mail]