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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Secure Energy Services Inc | TSX:SES | Toronto | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.11 | -0.93% | 11.66 | 11.60 | 11.67 | 11.78 | 11.57 | 11.78 | 946,607 | 21:12:22 |
CALGARY, April 29, 2019 /CNW/ - Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX – SES) announced today its operational and financial results for the three months ended March 31, 2019, highlighted by Adjusted EBITDAi of $55.1 million, a 15% increase over the comparative period of 2018. Secure is also pleased to announce that it has amended the Corporation's existing First Lien Credit Facility ("the Facility") with a syndicate co-led by ATB Financial and National Bank of Canada of ten financial institutions and Canadian Chartered banks. The amendments increase the total availability under the Facility by $130 million to $600 million and extend the maturity date by two years, from June 30, 2021 to June 30, 2023. The Facility also includes an accordion feature which, if exercised and approved by the syndicate of lenders, would increase the Facility by $100 million.
The Facility substantially retains the terms, conditions and covenants of the original first lien credit facility. In addition, Secure entered into a new $75 million bilateral Letter of Credit Facility with a syndicate of two financial institutions and Chartered banks.
These amendments provide total capacity of $805 million and additional stability to the Corporation's capital structure, offering Secure significant flexibility to continue to grow the business organically and execute on strategic acquisition opportunities that align with the profitable growth strategy of Secure.
Secure is also pleased to announce the appointment of Allen Gransch as Chief Operating Officer ("COO") Midstream. Mr. Gransch joined Secure in September 2007 and most recently served as Executive Vice President, Corporate Development. Prior to this, he held the role of Executive Vice President and Chief Financial Officer since December 2012. In his new role as COO Midstream, Mr. Gransch will oversee the Corporate Development, Midstream Operations, Commercial & Transportation and Corporate Services departments.
"Allen has been instrumental to Secure's success since 2007," said Rene Amirault, Secure's Chairman of the Board, President and Chief Executive Officer. Going forward, Allen will lead the midstream team operationally and guide the continued growth and development of the Corporation's midstream business."
2019 FIRST QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS
The following operational and financial highlights should be read in conjunction with the Corporation's management's discussion and analysis ("MD&A") and the interim consolidated financial statements and notes thereto for the three months ended March 31, 2019 of Secure which are available on SEDAR at www.sedar.com.
During the quarter, Secure remained focused on executing the Corporation's strategy for enhanced fluid management, providing customers with solutions to increase operating netbacks and improve capital efficiency. Secure's dedication to helping the customer has proven to be a competitive advantage to the Corporation and continued to drive Secure's growth and success in the three months ended March 31, 2019. Highlights from the first quarter include:
The operating and financial highlights for the three months ending March 31, 2019 and 2018 can be summarized as follows:
Three months ended March 31, | ||||
($000's except share and per share data) | 2019 | 2018 | % change | |
Revenue (excludes oil purchase and resale) | 177,379 | 181,698 | (2) | |
Oil purchase and resale | 611,503 | 523,747 | 17 | |
Total revenue | 788,882 | 705,445 | 12 | |
Adjusted EBITDA(1) | 55,139 | 47,807 | 15 | |
Per share ($), basic and diluted | 0.34 | 0.29 | 17 | |
Net income (loss) | 1,259 | 6,077 | (79) | |
Per share ($), basic and diluted | 0.01 | 0.04 | (75) | |
Cash flows from operating activities | 57,302 | 32,754 | 75 | |
Per share ($), basic and diluted | 0.36 | 0.20 | 80 | |
Dividends per common share | 0.06750 | 0.06750 | - | |
Capital expenditures(1) | 22,792 | 56,581 | (60) | |
Total assets | 1,648,660 | 1,579,907 | 4 | |
Long-term liabilities | 582,143 | 560,863 | 4 | |
Common shares - end of period | 161,437,474 | 164,547,187 | (2) | |
Weighted average common shares | ||||
basic | 160,440,879 | 164,009,829 | (2) | |
diluted | 163,456,268 | 166,079,649 | (2) | |
(1) Refer to "Non-GAAP Measures and Operational Definitions" for further information. |
Mar 31, 2019 | Threshold | % Variance | ||||
Senior Debt to EBITDA | 1.5 | 3.5 | (57) | |||
Total Debt to EBITDA | 2.1 | 5.0 | (58) |
MIDSTREAM INFRASTRUCTURE DIVISION HIGHLIGHTS
Three months ended Mar 31, | |||
($000's) | 2019 | 2018 | % Change |
Revenue | |||
Midstream Infrastructure (a) | 94,138 | 80,855 | 16 |
Oil purchase and resale | 611,503 | 523,747 | 17 |
Total Midstream Infrastructure division revenue | 705,641 | 604,602 | 17 |
Cost of Sales | |||
Midstream Infrastructure excluding items noted below | 39,237 | 33,451 | 17 |
Depreciation, depletion and amortization | 20,364 | 18,479 | 10 |
Oil purchase and resale | 611,503 | 523,747 | 17 |
Total Midstream Infrastructure division cost of sales | 671,104 | 575,677 | 17 |
Segment Profit Margin(1) | 54,901 | 47,404 | 16 |
Segment Profit Margin (1) as a % of revenue (a) | 58% | 59% |
(1)Calculated as revenue less cost of sales excluding depreciation and amortization. Refer to "Non-GAAP Measures and Operational |
ENVIRONMENTAL SOLUTIONS DIVISION HIGHLIGHTS
Three months ended Mar 31, | |||
($000's) | 2019 | 2018 | % Change |
Revenue | |||
Environmental Solutions | 29,672 | 32,164 | (8) |
Cost of Sales | |||
Environmental Solutions excluding depreciation and amortization | 24,664 | 25,529 | (3) |
Depreciation and amortization | 2,537 | 2,397 | 6 |
Total Environmental Solutions division cost of sales | 27,201 | 27,926 | (3) |
Segment Profit Margin(1) | 5,008 | 6,635 | (25) |
Segment Profit Margin(1) as a % of revenue | 17% | 21% |
(1) Calculated as revenue less cost of sales excluding depreciation and amortization. Refer to "Non-GAAP Measures and Operational Definitions" for further information. |
TECHNICAL SOLUTIONS DIVISION HIGHLIGHTS
Three months ended Mar 31, | |||
($000's) | 2019 | 2018 | % Change |
Revenue | |||
Technical Solutions | 53,569 | 68,679 | (22) |
Cost of Sales | |||
Technical Solutions excluding depreciation and amortization | 43,520 | 55,316 | (21) |
Depreciation and amortization | 5,675 | 5,173 | 10 |
Total Technical Solutions division cost of sales | 49,195 | 60,489 | (19) |
Segment Profit Margin(1) | 10,049 | 13,363 | (25) |
Segment Profit Margin (1) as a % of revenue | 19% | 19% |
(1) Calculated as revenue less cost of sales excluding depreciation and amortization. Refer to "Non-GAAP Measures and Operational Definitions" for further information. |
OUTLOOK
In April, Alberta elected a new Provincial Government which ran on a platform of regulatory and economic reform, sending a message that Alberta is "Open for Business." Among other things, the new government is expected to reduce regulatory red tape to expedite project development, lower corporate taxes, guarantee that the royalty regimes in place at the time of project permitting remain in place into perpetuity, reduce regulatory costs for drilling rigs, repeal the carbon tax, and wind down production curtailments imposed by the previous administration as rail activity ramps up. These changes are expected to improve producer confidence and drive increased investment, activity levels and cash flows for the oil and gas sector in the province.
Narrowing price differentials in the first quarter of 2019 were positive for oil and gas producers, the majority of which also limited drilling and completion expenditures, resulting in higher than expected cash flows and improved balance sheets. These stronger financial positions combined with increased investment confidence in the WCSB is expected to result in increased drilling, completion and production activity in the second half of 2019 and beyond.
Production-related volumes represent the majority of the volumes processed and disposed of at Secure's midstream facilities, providing the Corporation with recurring cash flows that are more consistent during periods of reduced drilling and completion activity. These recurring cash flows, the addition of new infrastructure and expansions during 2018 and 2019, and the anticipation that drilling and completion activity will strengthen in the second half of 2019, are expected to result in increased volumes and cash flows for the Corporation following the second quarter's seasonal slowdown.
Secure's strategy remains focused on what is in the Corporation's control: working with customers to identify opportunities and integrated solutions where the Corporation can add value by increasing customer operating netbacks and improving capital efficiency. The recent Cushing Acquisition supports the continued growth and development of the Corporation's midstream business, providing Secure with a strategic footprint in a key U.S. crude market and the ability to offer customers market access flexibility to optimize pricing and increase operating netbacks. By continuing to focus on new and innovative ways to offer solutions, Secure's customers will be able to gain efficiencies for drilling, completing and producing their hydrocarbon reserves. Helping Secure's customers grow and being their trusted energy solutions partner will ensure that the Corporation continues to create long-term shareholder value.
The industry fundamentals driving the success of Secure's core operations remain unchanged:
These factors are expected to result in the need for additional facilities to meet incremental requirements for processing and disposal capacity. Secure has made significant capital investments to ensure the business is well positioned to capture new demand. By offering exceptional customer service and owning and operating midstream facilities near customer production, Secure expects these trends will drive more volumes to the Corporation's midstream facilities. Additionally, customers continue to seek cost effective transportation solutions for water, oil and condensate volumes. Secure's successful execution of the Kerrobert Light Pipeline System will help the Corporation to take advantage of similar opportunities creating value for both the customer and Secure.
Secure has a solid balance sheet and is well positioned to respond with solutions and the right people to the market's requirements. With the Corporation's amended First Lien Credit Facility and the new Letter of Credit Facility, the Corporation now has total credit capacity of $805 million providing financial flexibility and the incremental borrowing capacity required for Secure to continue to operate efficiently and execute on the Corporation's growth and capital investment strategy. The Corporation expects to incur approximately $115 million of total growth and expansion capital in 2019 (acquisition and organic) depending on the outcome of various opportunities in development, such as regulatory approvals, development permits and other operating agreements. The initial organic growth and expansion capital plan of approximately $100 million includes completing construction of two crude oil storage tanks at the receipt terminal in Kerrobert to be commissioned in May 2019; completing construction of two produced water transfer and injection pipelines from customer processing plants; optimizing capabilities and increasing processing and disposal capacity at various other facilities, including additional disposal wells; and purchasing equipment to support existing services.
REPORTING CHANGES
The Corporation adopted IFRS 16 as at the effective date of January 1, 2019 which replaced IAS 17, Leases ("IAS 17"). The new standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.
The Corporation elected the modified retrospective transition approach, which provides lessees a method for recording existing leases at adoption with no restatement of prior period financial information. Under this approach, a lease liability was recognized at January 1, 2019 in respect of leases previously classified as operating leases, measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate at transition. The associated right-of-use assets were measured at amounts equal to the respective lease liabilities, subject to certain adjustments allowed under IFRS 16.
Adoption of the new standard at January 1, 2019 resulted in the recording of additional right-of-use assets and lease liabilities of $33.4 million and $35.9 million, respectively, related to office space, warehouses, surface land, rail cars and certain heavy equipment. The new standard did not materially impact consolidated net income as the depreciation of right-of-use assets and interest and finance costs related to the lease liabilities recognized under IFRS 16 were mostly offset by reductions in operating lease expense, which were previously recognized in cost of sales and general and administrative expenses. The adoption of IFRS 16 had no impact on cash flows.
FINANCIAL STATEMENTS AND MD&A
The Corporation's condensed consolidated financial statements and notes thereto for the three months ended March 31, 2019 and 2018 and MD&A for the three months ended March 31, 2019 and 2018 are available immediately on Secure's website at www.secure-energy.com. The condensed consolidated financial statements and MD&A will be available tomorrow on SEDAR at www.sedar.com.
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: key factors driving the Corporation's success; the impact of new facilities, new service offerings, potential acquisitions, and prior year acquisitions on the Corporation's future financial results; demand for the Corporation's services and products; growth and expansion strategy; the Corporation's ability to continue to grow the business organically and execute on strategic growth opportunities based on current financial position; the oil and natural gas industry in Canada and the U.S., including 2019 and 2020 activity levels, spending by producers and the impact of this on Secure's activity levels; future pipeline development in Canada; industry fundamentals driving the success of Secure's core operations, including increased outsourcing of midstream work by producers, drilling, completion and production trends, opportunities relating to crude oil logistics, well density and economics for pipeline connecting production volumes to midstream facilities, and global oil and gas demand; the Corporation's proposed 2019 capital expenditure program including growth and expansion and sustaining capital expenditures, and the timing of completion for projects, in particular the additional storage at the Kerrobert terminal; debt service; future capital needs and how the Corporation intends to fund its operations, working capital requirements, dividends and capital program; access to capital; the Corporation's ability to meet obligations and commitments and operate within any credit facility restrictions; and the impact on Adjusted EBITDA in 2019 from the adoption of IFRS 16.
Forward-looking statements concerning expected operating and economic conditions are based upon prior year results as well as the assumption that levels of market activity and growth will be consistent with industry activity in Canada and the U.S. and 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 and foreign exchange 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 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 industry may change the demand for the Corporation's services and its subsidiaries' 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 under the heading "Risk Factors" in the AIF for the year ended December 31, 2018 and also includes the risks associated with the possible failure to realize the anticipated synergies in integrating the assets acquired in prior year acquisitions with the operations of Secure. 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
The Corporation uses accounting principles that are generally accepted in Canada (the issuer's "GAAP"), which includes International Financial Reporting Standards ("IFRS"). Certain supplementary measures in this document do not have any standardized meaning as prescribed by IFRS. These measures are intended as a complement to results provided in accordance with IFRS. The Corporation believes these measures provide additional useful information to analysts, shareholders and other users to understand the Corporation's financial results, profitability, cost management, liquidity and ability to generate funds to finance its operations. However, they should not be used as an alternative to IFRS measures because they do not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. See the management's discussion and analysis available at www.sedar.com for further details, including reconciliations of the Non-GAAP measures and additional GAAP measures to the most directly comparable measures calculated in accordance with IFRS.
ABOUT SECURE ENERGY SERVICES INC.
Secure is a TSX publicly traded integrated energy business with midstream infrastructure, environmental and technical solutions divisions providing industry leading customer solutions to upstream oil and natural gas companies operating in western Canada and certain regions in the United States ("U.S.").
______________________________ |
i Refer to the "Non-GAAP Measures and Operational Definitions" section herein. |
ii Refer to the "Reporting Changes" section herein for more information on Secure's adoption of IFRS 16. Secure anticipates the impact of the new standard to result in an increase of approximately $12 to $14 million to Adjusted EBITDA for the 2019 year following the reassignment of certain lease commitments during the second quarter. |
SOURCE SECURE Energy Services Inc.
Copyright 2019 Canada NewsWire
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