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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 | |
---|---|---|---|---|---|---|---|---|---|---|
0.09 | 0.80% | 11.41 | 11.38 | 11.43 | 11.45 | 11.31 | 11.42 | 675,759 | 21:12:39 |
CALGARY, July 27, 2016 /CNW/ - Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX – SES) announced today operational and financial results for the three and six months ended June 30, 2016. The following should be read in conjunction with the management's discussion and analysis ("MD&A") and the interim consolidated financial statements and notes thereto of Secure which are available on SEDAR at www.sedar.com.
Q2 2016 OPERATIONAL AND FINANCIAL HIGHLIGHTS
During the three months ended June 30, 2016, crude oil prices rebounded from the lowest prices in a decade of $36/barrel realized in the first quarter of 2016. However, average crude oil prices during the quarter remained 18% lower than the comparative period in the prior year. The Corporation's second quarter operating and financial results were influenced by these low oil prices, combined with typical seasonal weather conditions limiting producers' ability to drill and service wells. The impact of these factors were partially mitigated by ongoing production related volumes in the PRD division and diversification of services offered across the Corporation. As a result, Secure realized Adjusted EBITDA of $8.5 million, demonstrating continued resilience during a period of reduced oil and gas activity levels.
During the quarter, Secure expanded its market presence and enhanced its service offering for continued midstream growth through the strategic acquisition of the operating assets (excluding working capital) of PetroLama Energy Canada Inc. (the "PetroLama Acquisition"). Following the end of the quarter, Secure also closed an acquisition resulting in an increase in Secure's ownership of the La Glace and Judy Creek full service terminals to 100% (the "JV Acquisition"). Secure is continuing to seek out and evaluate opportunities that will provide meaningful growth for the remainder of 2016, into 2017 and beyond.
During the extended downturn in oil and gas activity and relatively poor price environment, Secure has continued to generate positive funds from operations. This, combined with the Corporation's strong balance sheet, has allowed Secure to maintain a monthly $0.02 dividend, pursue accretive acquisition opportunities, and continue investing in organic capital projects in capacity constrained regions. At June 30, 2016, Secure's net debt was $69.3 million, and the Corporation is operating well within its credit facility covenant restrictions. The Corporation continues its disciplined approach to maintaining a strong balance sheet to effectively manage the business through a period of lower commodity pricing and industry activity.
The operating and financial highlights for the three and six months ended June 30, 2016 and 2015 can be summarized as follows:
Three months ended June 30, |
Six months ended June 30, | |||||||
($000's except share and per share data) |
2016 |
2015 |
% change |
2016 |
2015 |
% change | ||
Revenue (excludes oil purchase and resale) |
66,148 |
112,533 |
(41) |
168,415 |
282,185 |
(40) | ||
Oil purchase and resale |
202,460 |
244,036 |
(17) |
309,325 |
440,931 |
(30) | ||
Total revenue |
268,608 |
356,569 |
(25) |
477,740 |
723,116 |
(34) | ||
Adjusted EBITDA (1) |
8,540 |
19,446 |
(56) |
33,623 |
59,482 |
(43) | ||
Per share ($), basic |
0.05 |
0.14 |
(64) |
0.23 |
0.46 |
(50) | ||
Net loss |
(20,681) |
(16,780) |
23 |
(30,747) |
(20,003) |
54 | ||
Per share ($), basic |
(0.13) |
(0.12) |
8 |
(0.21) |
(0.15) |
40 | ||
Per share ($), diluted |
(0.13) |
(0.12) |
8 |
(0.21) |
(0.15) |
40 | ||
Adjusted net loss(1) |
(20,467) |
(14,809) |
38 |
(29,065) |
(13,953) |
108 | ||
Per share ($), basic |
(0.13) |
(0.11) |
18 |
(0.19) |
(0.11) |
73 | ||
Funds from operations (1) |
7,544 |
17,022 |
(56) |
30,103 |
53,247 |
(43) | ||
Per share ($), basic |
0.05 |
0.12 |
(58) |
0.20 |
0.41 |
(51) | ||
Dividends per common share |
0.06 |
0.06 |
- |
0.12 |
0.12 |
- | ||
Capital expenditures (1) |
74,356 |
18,654 |
299 |
95,845 |
60,738 |
58 | ||
Total assets |
1,374,164 |
1,420,412 |
(3) |
1,374,164 |
1,420,412 |
(3) | ||
Net debt (1) |
69,289 |
137,240 |
(50) |
69,289 |
137,240 |
(50) | ||
Common Shares - end of period |
159,321,292 |
136,440,802 |
17 |
159,321,292 |
136,440,802 |
17 | ||
Weighted average common shares - basic and diluted |
158,437,296 |
136,186,284 |
16 |
149,226,219 |
129,475,350 |
15 |
(1) Refer to "Non-GAAP measures, operational definitions and additional subtotals" for further information. |
PRD DIVISION OPERATING HIGHLIGHTS
Three months ended June 30, |
Six months ended June 30, | ||||||||
($000's) |
2016 |
2015 |
% Change |
2016 |
2015 |
% Change | |||
Revenue |
|||||||||
PRD services (a) |
37,450 |
57,188 |
(35) |
86,156 |
126,682 |
(32) | |||
Oil purchase and resale service |
202,460 |
244,036 |
(17) |
309,325 |
440,931 |
(30) | |||
Total PRD division revenue |
239,910 |
301,224 |
(20) |
395,481 |
567,613 |
(30) | |||
Direct Operating Expenses |
|||||||||
PRD services |
19,670 |
29,902 |
(34) |
42,493 |
63,732 |
(33) | |||
Deduct: non-recurring items |
|||||||||
Severance and related costs |
(44) |
- |
100 |
(579) |
(188) |
208 | |||
PRD services less non-recurring items (b) |
19,626 |
29,902 |
(34) |
41,914 |
63,544 |
(34) | |||
Oil purchase and resale service |
202,460 |
244,036 |
(17) |
309,325 |
440,931 |
(30) | |||
Total PRD division direct operating expenses |
222,130 |
273,938 |
(19) |
351,818 |
504,663 |
(30) | |||
Operating Margin (1) (a-b) |
17,824 |
27,286 |
(35) |
44,242 |
63,138 |
(30) | |||
Operating Margin (1) as a % of revenue (a) |
48% |
48% |
51% |
50% |
(1) Refer to "Non-GAAP measures, operational definitions and additional subtotals" for further information. |
Highlights for the PRD division for the three and six months ended June 30, 2016 included:
DPS DIVISION OPERATING HIGHLIGHTS
Three months ended June 30, |
Six months ended June 30, | ||||||||
($000's) |
2016 |
2015 (1) |
% Change |
2016 |
2015 (1) |
% Change | |||
Revenue |
|||||||||
Drilling and production services (a) |
11,235 |
24,181 |
(54) |
46,442 |
86,278 |
(46) | |||
Direct Operating Expenses |
|||||||||
Drilling and production services |
12,396 |
21,085 |
(41) |
42,123 |
72,054 |
(42) | |||
Deduct: non-recurring items |
|||||||||
Inventory impairment |
- |
- |
- |
- |
(1,970) |
(100) | |||
Severance and related costs |
(142) |
(50) |
184 |
(803) |
(647) |
24 | |||
Drilling and production services less non-recurring items (b) |
12,254 |
21,035 |
(42) |
41,320 |
69,437 |
(40) | |||
Operating Margin (2) (a-b) |
(1,019) |
3,146 |
(132) |
5,122 |
16,841 |
(70) | |||
Operating Margin (2) as a % of revenue (a) |
-9% |
13% |
11% |
20% |
(1) Excludes the results from drilling services operations in the U.S. as these operations were wound down in the latter part of 2015 and are considered non-recurring. |
Highlights for the DPS division for the three and six months ended June 30, 2016 included:
OS DIVISION OPERATING HIGHLIGHTS
Three months ended June 30, |
Six months ended June 30, | ||||||||
($000's) |
2016 |
2015 |
% Change |
2016 |
2015 |
% Change | |||
Revenue |
|||||||||
OnSite services (a) |
17,463 |
26,306 |
(34) |
35,817 |
57,600 |
(38) | |||
Direct Operating Expenses |
|||||||||
OnSite services |
13,437 |
21,333 |
(37) |
27,204 |
43,158 |
(37) | |||
Deduct: non-recurring items |
|||||||||
Severance and related costs |
(100) |
- |
100 |
(177) |
(116) |
53 | |||
OnSite services less non-recurring items (b) |
13,337 |
21,333 |
(37) |
27,027 |
43,042 |
(37) | |||
Operating Margin (1) (a-b) |
4,126 |
4,973 |
(17) |
8,790 |
14,558 |
(40) | |||
Operating Margin (1) as a % of revenue (a) |
24% |
19% |
25% |
25% |
(1) Refer to "Non-GAAP measures, operational definitions and additional subtotals" for further information. |
Highlights for the OS division for the three and six months ended June 30, 2016 included:
OUTLOOK
As expected, activity levels during the second quarter of 2016 were significantly impacted by an extended spring break-up, a weak commodity price environment, and a significant decrease in drilling and completion activity. During the second quarter, oil and gas producers were unwilling to incur additional costs due to weather related issues if the oil and gas activity could be delayed into the third quarter where weather is more predictable. As a result, Secure anticipates that activity levels will ramp up into the second half of the year; however, where actual activity levels will reach in the remainder of 2016 remains difficult to predict as customers revise previous strategies and capital budgets in light of the commodity price environment.
The Corporation remains well positioned in the energy services sector. The equity offering completed during the first quarter further strengthened Secure's balance sheet and has provided the Corporation with significant flexibility to seek out and evaluate opportunities that will provide accretive growth to the Corporation in 2016 and beyond. The PetroLama Acquisition provided Secure with an attractive entry point into the southeast Saskatchewan midstream market. Following that strategic acquisition, Secure acquired the outstanding 50% interest in all of the joint venture assets of the La Glace and Judy Creek facilities, increasing Secure's interest in these facilities to 100%. Secure anticipates both of these acquisitions will result in additional stable cash flows and provide a solid platform for further midstream growth. Secure will continue to evaluate and assess further acquisition opportunities and/or partnership opportunities that provide strategic advantages. Secure remains patient to ensure the right acquisitions are executed to complement existing services and/or expand geographical presence in key operating areas, particularly in the current oil and gas environment.
During the remainder of the year, the Corporation will continue its prudent approach to organic capital spending. In July, Secure opened a second disposal well at the Big Mountain SWD located in the Alberta Deep Basin. During the third quarter, Secure expects to open the new Kakwa FST, also located in the Deep Basin. The Corporation will continue to increase capacity at current facilities by adding additional tanks, disposal wells and expansion landfill cells.
Overall, Secure has a solid balance sheet and is well positioned to respond with solutions and the right people to the market's needs today. Secure continues to work with its customers to support their needs relating to new facilities, disposal wells, landfill expansions and specialized equipment. Secure's key priorities for success in the remainder of 2016 include:
FINANCIAL STATEMENTS AND MD&A
The Corporation's unaudited condensed consolidated financial statements and notes thereto for the three and six months ended June 30, 2016 and 2015 and MD&A for the three months and six months ended June 30, 2016 and 2015 are available immediately on Secure's website at www.secure-energy.com. The unaudited 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 priorities for the Corporation's success; the oil and natural gas industry; activity levels in the oil and gas sector, drilling levels, commodity prices for oil, natural gas liquids and natural gas; industry fundamentals for the third and fourth quarters of 2016; capital forecasts and spending by producers; demand for the Corporation's services and products; expansion strategy; the impact of the reduction in oil and gas activity on 2016 activity levels; the Corporation's proposed 2016 capital expenditure program; debt service; completion of facilities (including the new PRD FST); acquisition strategy and timing of potential acquisitions; the impact of new facilities, potential acquisitions, the PetroLama Acquisition, and JV Acquisition on the Corporation's financial and operational performance and growth opportunities; future capital needs and how the Corporation intends to fund its operations, working capital requirements, dividends and capital program; access to capital; and the Corporation's ability to meet obligations and commitments and operate within the credit facility restrictions.
Forward-looking statements concerning expected operating and economic conditions, including the PetroLama Acquisition and JV Acquisition, 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 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 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 and under the heading "Business Risks" and under the heading "Risk Factors" in the AIF for the year ended December 31, 2015 and also includes the risks associated with the possible failure to realize the anticipated synergies in integrating the assets acquired in the Acquisition 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, OPERATIONAL DEFINITIONS AND ADDITIONAL SUBTOTALS
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 non-GAAP measures, operational definitions and additional subtotals used by the Corporation may not be comparable to similar measures presented by other reporting issuers. These non-GAAP financial measures, operational definitions and additional subtotals are included because management uses the information to analyze operating performance, leverage and liquidity. Therefore, these non-GAAP financial measures, operational definitions and additional subtotals should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. See the management's discussion and analysis available at www.sedar.com for a reconciliation of the Non-GAAP financial measures, operational definitions and additional subtotals.
ABOUT SECURE ENERGY SERVICES INC.
Secure is a TSX publicly traded energy services company that provides safe, innovative, efficient and environmentally responsible fluids and solids solutions to the oil and gas industry. The Corporation owns and operates midstream infrastructure and provides environmental services and innovative products to upstream oil and natural gas companies operating in western Canada and certain regions in the United States ("U.S.").
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. More 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 ("FST"), landfills, stand-alone water disposal facilities ("SWD") and full service rail facilities ("FSR").
Drilling and Production Services Division ("DPS"): The DPS division provides equipment and product solutions for drilling, completion and production operations for oil and gas producers in Western Canada. The drilling 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 drilling service line 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. The production services line focuses on providing equipment and chemical solutions that optimize production, provide flow assurance and maintain the integrity of production assets.
Onsite Services 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, Naturally Occurring Radioactive Material ("NORM") management, waste container services, and emergency response services; Integrated Fluid Solutions ("IFS") 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, and environmental construction projects (landfills, containment ponds, subsurface containment walls, etc.).
SOURCE SECURE Energy Services Inc.
Copyright 2016 Canada NewsWire
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