CALGARY, April 30, 2018 /CNW/ - Secure Energy
Services Inc. ("Secure" or the "Corporation") (TSX – SES) today
announced operational and financial results for the three months
ended March 31, 2018. The following
should be read in conjunction with the management's discussion and
analysis ("MD&A") and the annual audited consolidated financial
statements and notes thereto of Secure which are available on SEDAR
at www.sedar.com.
FIRST QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS
Higher activity levels and growth initiatives over the last
several years were key factors leading to a 29% increase in revenue
from services, which drove a 13% increase in Adjusted
EBITDA1 of $47.8 million during the three months ended
March 31, 2018 over the same period in 2017. Highlights
from the first quarter include:
- The Corporation's PRD division continued to lead the
Corporation's financial results, generating record revenue from
services of $80.9 million, a 20%
increase over the same period in 2017. Increased revenue is driven
by higher processing and disposal volumes at the Corporation's PRD
facilities, which experienced a 14% and 23% increase, respectively,
over the first quarter of 2017. The increase in volumes can be
attributed to higher activity levels, the continued trend of higher
fluid volumes pumped per well while fracing in the Corporation's
key service areas, the acquisition of new facilities and increases
in disposal capacity at existing facilities;
- Revenue generated from the Corporation's facilities in
North Dakota increased by 47% over
the first quarter of 2017 as volumes continue to increase due to
higher average crude oil prices and better market access which
improved drilling and completion activity levels and positively
impacted recovered oil revenues;
- The DPS division's drilling services generated average revenue
per operating day of $7,791, an
increase of 34% over the three months ended March 31, 2017, demonstrating the Corporation's
expertise for dealing with more complex wells requiring specialized
fluids and equipment;
- Revenue from the DPS division's production services increased
for the fourth straight quarter following the acquisition of a
production chemicals business in April
2017. During the three months ended March 31, 2018, production services contributed a
higher percentage of the DPS division's total revenue as the
Corporation continues to grow market share in western Canada leveraging off Secure's infrastructure,
key relationships and proprietary patents. Diversified services
lines and integrated service offerings are expected to mitigate the
impact to the Corporation during periods of reduced oil and gas
activity;
- The Corporation's OS division continued to experience strong
results from all three service lines driven primarily by positive
activity levels in the oil and gas sector. Integrated Fluid
Solutions more than doubled its contribution to the Corporation's
Adjusted EBITDA in the three months ended March 31, 2018 over the 2017 comparative period
as a result of increased demand for water pumping services and
rentals for fracing. Increased Project work, new customer and
service additions, and geographic expansion also contributed to the
OS division's success in the quarter;
- Secure invested growth and expansion capital of $54.8 million, advancing construction on several
projects, including the Corporation's light oil feeder pipeline
system and receipt terminal in the Kindersley-Kerrobert region of Saskatchewan and the Gold Creek SWD facility
in the Montney region of
Alberta. The Corporation also
completed facility upgrades at the Big Mountain SWD which was
commissioned and turned over to operations in April. A third well
at Big Mountain was also drilled and completed, and is now taking
disposal volumes. Additional growth and expansion capital in the
quarter was incurred for long lead items and well additions related
to two new SWD facilities in the Montney/Duvernay regions.
The operating and financial highlights for the three month
periods ending March 31, 2018 and
2017 can be summarized as follows:
|
|
Three months ended
Mar 31,
|
($000's except
share and per share data)
|
|
2018
|
2017
|
%
change
|
Revenue (excludes oil
purchase and resale)
|
|
181,698
|
140,713
|
29
|
Oil purchase and
resale
|
|
523,747
|
309,876
|
69
|
Total
revenue
|
|
705,445
|
450,589
|
57
|
Adjusted EBITDA
(1)
|
|
47,807
|
42,170
|
13
|
|
Per share ($),
basic
|
|
0.29
|
0.26
|
12
|
|
Per share ($),
diluted
|
|
0.29
|
0.25
|
16
|
Net
earnings
|
|
6,077
|
3,440
|
77
|
|
Per share ($), basic
and diluted
|
|
0.04
|
0.02
|
100
|
Adjusted net earnings
(1)
|
|
5,970
|
3,502
|
70
|
|
Per share ($), basic
and diluted
|
|
0.04
|
0.02
|
100
|
Cash flows from
operating activities
|
|
32,754
|
43,028
|
(24)
|
|
Per share ($),
basic
|
|
0.20
|
0.27
|
(26)
|
|
Per share ($),
diluted
|
|
0.20
|
0.26
|
(23)
|
Funds flow
(1)
|
|
42,043
|
40,052
|
5
|
|
Per share ($),
basic
|
|
0.26
|
0.25
|
4
|
|
Per share ($),
diluted
|
|
0.25
|
0.24
|
4
|
Dividends per common
share
|
|
0.07
|
0.06
|
17
|
Capital expenditures
(1)
|
|
56,581
|
12,096
|
368
|
Total
assets
|
|
1,579,907
|
1,403,328
|
13
|
Net debt
(1)
|
|
193,058
|
54,237
|
256
|
Common shares - end
of period
|
|
164,547,187
|
162,580,599
|
1
|
Weighted average
common shares
|
|
|
|
|
|
basic
|
|
164,009,829
|
162,049,821
|
1
|
|
diluted
|
|
166,079,649
|
165,944,906
|
-
|
(1)
Refer to "Non-GAAP measures and operational definitions" for
further information.
|
- REVENUE OF $705.4 MILLION FOR THE THREE MONTHS ENDED
MARCH 31, 2018
-
- Total processing, recovery and disposal volumes at PRD
facilities for the three months ended March
31, 2018 increased from the 2017 comparative period due to
higher activity levels in the Corporation's core service areas and
the U.S., ongoing and moderately increasing production related
volumes, and the contribution of volumes from facility acquisitions
and expansions in 2017. Overall, this resulted in the PRD division
achieving revenue (excluding oil purchase and resale) of
$80.9 million in the three months
ended March 31, 2018, an increase of
20% from 2017;
- Oil purchase and resale revenue in the PRD division for the
three months ended March 31, 2018
increased to $523.7 million due to
higher volumes resulting from increased industry activity and
higher takeaway capacity at certain of the Corporation's pipeline
connected full service terminals, and a 16% increase in average
crude oil prices over the comparative period of 2017;
- DPS division revenue increased by 36% to $68.7 million in the three months ended
March 31, 2018 compared to the three
months ended March 31, 2017,
primarily due to higher contributions from the Corporation's
production services line resulting from the production chemicals
business acquisition completed in April
2017 and organic growth in the service line;
- Drilling services revenue increased slightly in the three
months ended March 31, 2018 over the
2017 comparative period. Producers continue to drill longer and
more complex wells, which require more sophisticated drilling fluid
systems and expertise, resulting in a 34% increase in revenue per
operating day, which more than offset the impact from a 13% decline
in Secure's active rigs during the quarter compared to 2017;
- OS division revenue increased 41% to $32.2 million in the three months ended
March 31, 2018 primarily due to
higher activity levels in the oil and gas sector over the prior
year resulting in increased demand for oilfield services such as
water pumping and storage, as well as increased Project work.
Additionally, good weather conditions conducive to project
execution, new customer additions, and geographic expansion all
contributed to higher revenue in the quarter.
- ADJUSTED EBITDA OF $47.8
MILLION FOR THE THREE MONTHS ENDED MARCH 31, 2018
-
- Adjusted EBITDA of $47.8 million,
a 13% increase from the three months ended March 31, 2017, resulted primarily from a
$5.7 million increase in the PRD
division as a result of increased oil and gas sector activity and
additional volumes from acquisitions and facility expansions in
2017 which drove both PRD revenues and operating
margins1. The DPS division's Adjusted EBITDA decreased
slightly in the quarter over the three months ended March 31, 2017 as the impact of higher revenue
from production services was offset by increased general and
administrative expenses in the division to support the expanded
production chemicals business. Adjusted EBITDA generated from the
OS division increased 36% in the three months ended March 31, 2018 over the comparative period in
2017 primarily due to increased water pumping and storage
activity.
- NET EARNINGS OF $6.1 MILLION
FOR THE THREE MONTHS ENDED MARCH 31,
2018
-
- Net earnings for the three months ended March 31, 2018 were $6.1
million, an increase of $2.6
million over the comparative period of 2017. The variance is
primarily due to a $5.6 million
increase to Adjusted EBITDA resulting from the factors described
above, partially offset by higher interest expense and depreciation
and amortization expense resulting from organic development and
acquisitions in the past year, as well as increased tax expense
resulting from higher net earnings before non-deductible
expenses.
- FINANCIAL FLEXIBILITY
-
- The total amount drawn on Secure's credit facilities as at
March 31, 2018 increased by 15% to
$344.0 million compared to
$300.0 million at December 31, 2017. The amount drawn on Secure's
credit facilities increased in the quarter in order to fund the
Corporation's organic capital program, partially offset by cash
flows from operating activities.
- As at March 31, 2018, the
Corporation had $194.7 million
available under its credit facilities, subject to covenant
restrictions. The Corporation is well positioned, based on this
availability and expected cash flows from operating activities, to
pursue further accretive acquisition opportunities and execute on
the 2018 capital program.
- Secure is in compliance with all covenants related to its
credit facilities at March 31, 2018.
The following table outlines Secure's senior and total debt to
trailing twelve month EBITDA ratios at March
31, 2018 and December 31,
2017.
|
|
|
|
Mar 31,
2018
|
Dec. 31,
2017
|
Threshold
|
Senior debt to
EBITDA
|
|
|
|
1.4
|
1.1
|
3.5
|
Total debt to
EBITDA
|
|
|
|
2.2
|
1.9
|
5.0
|
-
- Senior debt is equal to amounts drawn on the Corporation's
first lien facility plus financial leases less any cash balances
exceeding $5 million. Total debt
includes senior debt plus the $130
million borrowed under the Corporation's second lien
facility. EBITDA is defined in the lending agreement as earnings
before interest, taxes, depreciation, depletion and amortization,
and is adjusted for non-recurring losses, any non-cash impairment
charges and any other non-cash charges, and acquisitions on a
pro-forma basis.
- CAPITAL EXPENDITURES OF $56.6
MILLION FOR THE THREE MONTHS ENDED MARCH 31, 2018
-
- Total capital expenditures for the three months ended
March 31, 2018 of $56.6 million were comprised of $54.8 million related to growth and expansion
projects, as described above, and $1.8
million of sustaining capital. There were no acquisitions
completed during the quarter.
PRD DIVISION OPERATING HIGHLIGHTS
|
|
Three months ended
Mar 31,
|
($000's)
|
|
2018
|
2017
|
%
Change
|
Revenue
|
|
|
|
|
|
PRD services
(a)
|
|
80,855
|
67,470
|
20
|
|
Oil purchase and
resale service
|
|
523,747
|
309,876
|
69
|
Total PRD division
revenue
|
|
604,602
|
377,346
|
60
|
|
|
|
|
|
Direct
expenses
|
|
|
|
|
|
PRD services
(b)
|
|
33,451
|
27,653
|
21
|
|
Oil purchase and
resale service
|
|
523,747
|
309,876
|
69
|
Total PRD division
direct expenses
|
|
557,198
|
337,529
|
65
|
|
|
|
|
|
Operating Margin
(1) (a-b)
|
|
47,404
|
39,817
|
19
|
|
|
|
|
|
Operating Margin
(1) as a % of revenue (a)
|
|
59%
|
59%
|
|
(1)
Refer to "Non-GAAP measures and operational definitions" for
further information.
|
Highlights for the PRD division for the three months ended
March 31, 2018 included:
- Processing, recovery and disposal services revenue of
$80.9 million for the three months
ended March 31, 2018 increased by 20%
from the 2017 comparative period, driven by higher existing
facility throughput, new facilities additions and expansions at
certain of the Corporation's existing facilities in 2017, and
higher recovered oil revenues resulting from increased average
crude oil prices;
- The majority of the Corporation's facilities are located in
high impact resource plays, such as the Montney and Duvernay regions, where producers have been
most active in the Western Canadian Sedimentary Basin ("WCSB").
Fluids pumped from wells in these regions are also significantly
higher than other regions of the WCSB, driving incremental volumes
at Secure's facilities;
- Processing volumes increased 14% in the three months ended
March 31, 2018 from the comparative
period due to higher waste processing, emulsion and completions
processing volumes. Increased waste processing revenue generated
from the Corporation's facilities in North Dakota accounted for roughly a quarter
of the overall PRD services revenue variance in the three months
ended March 31, 2018 over the
comparative 2017 period. Higher volumes in North Dakota were a result of improved
activity levels, including new drilling and frac completions as
evidenced by a 32% increase in rig count, driven by higher average
crude oil prices over the prior period, and the commissioning of
the Dakota Access Pipeline in June
2017 which has improved economics for delivering producers'
product to market;
- Recovery revenues increased 44% in the three months ended
March 31, 2018 from the comparative
period, driven by higher volumes resulting from increased activity
levels and a 16% increase in average crude oil prices over the 2017
comparative period;
- Disposal volumes increased by 23% in the three months ended
March 31, 2018 from the comparative
period. Increased disposal of solid waste resulting from higher
drilling activity levels and remediation work nearby Secure
landfills resulted in a 20% increase in landfill revenues in the
three months ended March 31, 2018
over the three months ended March 31,
2017. Further driving the increase in disposal volumes is
increased produced, flowback, and waste water volumes across
Secure's facilities from the comparative periods resulting from
expansions at existing facilities to increase disposal capacity,
increasing water production as wells mature and improved industry
activity;
- The addition of new facilities, all of which were acquired from
Ceiba Energy Services Inc. ("Ceiba") in August 2017, accounted for $2.1 million of the PRD services revenue in the
three months ended March 31, 2018, an
impact of 3% when comparing to the same period of 2017;
- Oil purchase and resale revenue in the PRD division for the
three months ended March 31, 2018
increased to $523.7 million due to
higher volumes resulting from increased industry activity and
higher takeaway capacity at certain of the Corporation's pipeline
connected full service terminals, and a 16% increase in average
crude oil prices over the comparative period of 2017;
- Operating margin as a percentage of PRD services revenue for
the three months ended March 31, 2018
remained consistent at 59% compared to the three months ended
March 31, 2017. The impact of higher
revenues was offset by increased variable costs related to
personnel, and higher facility repair and maintenance expenditures
in the quarter over the three months ended March 31, 2017;
- General and administrative ("G&A") expenses of $5.9 million for the three months ended
March 31, 2018 increased by 50% from
the comparative period of 2017. Although the Corporation continues
to minimize G&A costs by streamlining operations where
possible, PRD G&A expenses have increased primarily due to
overhead requirements to support new facilities and expansions. As
a percentage of PRD revenue, G&A costs are 7% for the three
months ended March 31, 2018 compared
to 6% for the comparative period in 2017.
DPS DIVISION OPERATING HIGHLIGHTS
|
|
Three months ended
Mar 31,
|
($000's)
|
|
2018
|
2017
|
%
Change
|
Revenue
|
|
|
|
|
|
Drilling and
production services (a)
|
|
68,679
|
50,468
|
36
|
|
|
|
|
|
Direct
expenses
|
|
|
|
|
|
Drilling and
production services (b)
|
|
55,316
|
38,867
|
42
|
Operating Margin
(1) (a-b)
|
|
13,363
|
11,601
|
15
|
|
|
|
|
|
Operating Margin
(1) as a % of revenue (a)
|
|
19%
|
23%
|
|
(1)
Refer to "Non-GAAP measures and operational definitions" for
further information.
|
Highlights for the DPS division for the three months ended
March 31, 2018 included:
- Secure continues diversification efforts in the DPS division to
become less dependent on drilling activity through expansion of
production services. Strategic relationships with key suppliers and
ongoing product development has resulted in a significant expansion
to Secure's product offering, leading to multiple commercial
projects in 2017 and the first three months of 2018. The
acquisition of a production chemicals business completed in
April 2017 has strengthened Secure's
position in the market by adding over 100 fully formulated
proprietary products, as well as key infrastructure related to the
product offering and an experienced and dedicated employee base.
The production chemicals service line now has over 350
commercialized products and continues to win new bids and
customers. As a result of increased contributions from production
related services, revenue from the DPS division for the three
months ended March 31, 2018 increased
36% to $68.7 million from the
comparative period of 2017;
- The majority of the DPS division's revenue comes from drilling
services, which correlates with oil and gas drilling activity in
the WCSB, most notably active rig counts and metres drilled.
Commodity pricing and weather conditions both have a significant
impact on the activity levels from oil and gas producers. For the
three months ended March 31, 2018,
industry rig counts in the WCSB decreased 5% and metres drilled
increased 5% from the 2017 comparative period. As a result of these
mixed activity levels, revenue from drilling services remained
relatively stable in the three months ended March 31, 2018 from the comparative period;
- Secure has focused on servicing more complex wells which
require specialized fluids, equipment and expertise. During the
quarter, the average depth per well drilled by Secure was 3,197
metres, up 20% from the 2017 comparative period, and 12% higher
than the industry average. As a result, revenue per operating day
increased 34% from $5,803 to
$7,792 during the three months ended
March 31, 2018. Revenue per operating
day is dependent on the proportion of type of rigs serviced and
location of wells which impacts the type of fluid used and depth of
well. The incremental revenue generated on a per operating day was
partially offset by the lower industry rig count, and a 3% decline
in market share to 26% in the three months ended March 31, 2018 from the 2017 comparative
period;
- The DPS division's operating margin for the three and twelve
months ended December 31, 2017
improved by 15% from the 2017 comparative period to $13.4 million. Operating margin as a percentage
of revenue declined to 19% in the three months ended March 31, 2018 from 23% in the comparative
period. The decrease is primarily a result of a higher proportion
of operating margin from production services, which currently
generates a lower margin as a percentage of revenue than drilling
services as we continue to develop the potential of the service
line;
- G&A expense for the three months ended March 31, 2018 increased by 64% from the
comparative period of 2017. Although the Corporation continues to
manage costs efficiently and proactively while still responding to
customer demands and activity levels, G&A expenses have
increased as a result of expanding the production chemicals service
line, including as a result of the production chemicals acquisition
in April 2017. Additionally, the
prior year figure excludes all research and development costs
associated with the Corporation's research lab as they were
previously reported with the Corporation's business development
expense. Secure continues to focus on research and development
projects to expand the value chain of services offered to
customers, and to provide innovative and cost-effective solutions
to reduce waste in the drilling and production processes. As a
percentage of DPS revenue, G&A expenses have increased to 8%
from 7% in the three months ended March 31,
2018.
OS DIVISION OPERATING HIGHLIGHTS
|
|
Three months ended
Mar 31,
|
($000's)
|
|
2018
|
2017
|
%
Change
|
Revenue
|
|
|
|
|
|
OnSite services
(a)
|
|
32,164
|
22,775
|
41
|
|
|
|
|
|
Direct
expenses
|
|
|
|
|
|
OnSite services
(b)
|
|
25,529
|
17,186
|
49
|
Operating Margin
(1) (a-b)
|
|
6,635
|
5,589
|
19
|
|
|
|
|
|
Operating Margin
(1) as a % of revenue (a)
|
|
21%
|
25%
|
|
(1)
Refer to "Non-GAAP measures and operational definitions" for
further information.
|
Highlights for the OS division for the three months ended
March 31, 2018 included:
- OS division revenue increased 41% to $32.2 million for the three months ended
March 31, 2018 as improved commodity
prices have led to increased customer activity, resulting in more
Projects work and higher pumping and fluid storage rental activity.
Geographic expansion into Manitoba
and Ontario, new service
offerings, and customer additions also contributed to increased
revenue;
- Projects revenue during the three months ended March 31, 2018 increased 57% from the 2017
comparative period. Projects revenue is dependent on the type and
size of jobs as well as weather conditions which can vary quarter
to quarter. For the three months ended March
31, 2018, Projects revenue increased primarily because of
larger scale jobs awarded resulting from the division's expertise
and management of pipeline integrity, remediation and
decommissioning jobs. Projects revenue also increased due to new
customer additions, geographic expansion and from the introduction
of new service offerings such as the asset recovery long-term
service agreement entered in the fourth quarter of 2017 to manage a
scrap metal recycling program for a major oil sands producer.
Projects continues to seek opportunities like this contract as they
provide a steady stream of revenue over the life of the
agreement;
- Integrated Fluids Solutions revenue for the three months ended
March 31, 2018 increased 78% from the
2017 comparative period. Pumping services and fluid storage rentals
had increased job volumes and higher equipment utilization over the
2017 comparative period. Additionally, incremental revenue was
generated from the rental of two water injection skids constructed
by the OS division in late 2017;
- Environmental Services revenue for the three months ended
March 31, 2018 remained relatively
consistent with the 2017 comparative period as higher drilling
waste and bin revenue resulting from increased market share and
higher customer activity was offset by decreased reclamation and
remediation revenue as many customers have deferred this type of
spending;
- Operating margin for the three months ended March 31, 2018 improved by 19% to $6.6 million over the prior year comparative
period due primarily to increased revenue. The OS division
operating margin as a percentage of revenue for the three months
ended March 31, 2018 was 21%, which
decreased from 25% for the prior year three month comparative
period. The OS division's operating margin as a percentage of
revenue can fluctuate depending on the volume and type of projects
undertaken and from the blend of business between remediation and
reclamation projects, demolition projects, pipeline integrity
projects, site clean-up, and other services provided in any given
period. Additionally, margins in the quarter were negatively
impacted by competitive pricing which decreased equipment and
labour rates charged to customers for certain Project work, and
from the impact of fixed costs associated with reclamation and
remediation services due to reduced job volumes;
- G&A expenses for the three months ended March 31, 2018 decreased by 10% from the 2017
comparative period to $1.9 million as
certain personnel and office costs included in the comparative
figure were transferred to the PRD division at the start of this
year. The impact of this change is partially offset by additional
business development expenses resulting from the OS division's
growth initiatives. As a percentage of OS revenue, G&A expenses
have decreased to 6% in the three months ended March 31, 2018 from 9% in the three months ended
March 31, 2017, primarily due to the
increase in revenue.
OUTLOOK
During the second quarter, results are typically impacted by
seasonality as wet weather and road bans can significantly affect
activity in certain areas. Secure anticipates that the typical
spring break-up will be extended this year as winter conditions in
Canada have stretched well into
April as snow packs are well above normal across western
Canada and the depth to which the
ground froze was deeper than usual.
Overall, Secure expects 2018 Adjusted EBITDA to improve from
2017 as a result of additional revenue contributions from facility
expansions and additions, including the addition of the Gold Creek
SWD in the third quarter, and expanded service offerings, such as
the Kindersley-Kerrobert pipeline system which is expected to
be operational in the fourth quarter. Secure's strategy remains
focused on working with customers to identify opportunities and
integrated solutions where the Corporation can add value and lower
customers' costs. By combining multiple services and focusing on
new and innovative ways to offer solutions, Secure's customers will
be able to gain capital efficiencies for drilling, completing and
producing their reserves.
The fundamental drivers of Secure's business are expected to
continue to provide meaningful avenues of growth during the
remainder of 2018 and beyond:
- Produced water volumes continue to increase based on maturing
basins and new shale completion techniques that result in increased
water volumes per well. Disposal volumes for Secure are increasing
and Secure expects the trend for more produced water volumes and
disposal capacity to continue;
- Completion waters and processing volumes are also increasing as
high intensity fracs continue to be applied in liquids rich natural
gas shale reservoirs like the Montney and Duvernay formations. The increased use of
proppants, the number of completion stages and length of the
horizontal wells are expected to continue to drive more volumes to
Secure's PRD facilities;
- Oil and condensate treatment volumes are increasing as
producers bring on new production and are looking for incremental
treating capacity while minimizing transportation costs. Secure's
construction of the Kindersley-Kerrobert light oil feeder pipeline system to
the Corporation's existing Kindersley FST, and further on to
Kerrobert, is a growing trend
where producers seek to reduce truck traffic and lower transport
costs;
- Moving oil volumes on rail cars remains a viable option for oil
supply to be transported out of western Canada, once rail service is enhanced. Secure
could see activity materially increase as supply growth driven by
large oil sands expansions has tightened pipeline takeaway
capacity. Moreover, wide WTI – Brent oil differentials influence
certain U.S. refiners to look for feedstock accessible by rail that
is otherwise delivered by oil tanker;
- Innovative drilling fluid programs can be used to address
technical challenges related to developing unconventional
resources, such as deep shale reservoirs in Alberta, and improve producer economics by
reducing the number of days to drill a well. This trend will
continue throughout 2018 as Secure brings innovative products and
drilling fluid systems to market from the Corporation's research
lab;
- Demand for production chemicals is also increasing as producers
bring on new oil, condensate and natural gas liquids ("NGLs").
Production chemicals optimize production, provide flow assurance
and maintain the integrity of their production assets. The
Corporation continues to grow market share in western Canada leveraging off Secure's infrastructure,
key relationships and proprietary patents;
- As described above, completions in the oil and gas industry are
growing more geographically concentrated and even more penetrating
given the length of wells and amount of proppants used. As part of
this growing trend, there is a significant need from Secure's
customers for sourcing water, water logistics, storing water and
overall water re-use where it is cost effective. Secure's business
model provides the complete offering and is assisting customers
with large completion programs where significant amounts of water
are required to be managed at various stages; and
- Increased environmental regulations in all of our market areas
have created opportunities to help our customers operate in a
sustainable way with a focus on protecting the environment.
Secure's OS division has seen increased proactive environmental
projects that strive to prevent spills and reduce their future
environmental liabilities.
All of these growth trends provide Secure with significant
opportunities to grow and expand its business throughout the
remainder of 2018 and beyond. Secure has made significant capital
investments over the past few years to ensure the business is well
positioned to capture new customer demand, and based on customer
feedback there are more opportunities to continue to deploy capital
in western Canada. The Corporation
expects to incur up to $150 million of growth and expansion
capital in 2018. The capital plan includes the completion of the
Kerrobert-Kindersley pipeline system and receipt
terminal and Gold Creek SWD, construction of an additional SWD
facility in the Duvernay region,
expansions at various existing facilities to increase disposal
capacity (additional wells, four landfill cells), and equipment to
support existing services. The amount of capital spending is
dependent on the outcome of various opportunities in development,
such as timing of obtaining regulatory approvals, development
permits and other operating agreements.
Secure's strong balance sheet provides the Corporation the
flexibility to grow organically and execute on strategic
acquisition opportunities that align with the profitable growth
strategy of Secure. Helping Secure's customers grow and being their
trusted energy solutions partner will ensure that the Corporation
continues to create long-term shareholder value.
Secure's operations and reliable cash flow continue to improve
from already strong levels, and the Corporation's Board of
Directors believes at times Secure's share price does not
accurately reflect the underlying value of the Corporation. As a
result, the Corporation intends to implement a normal course issuer
bid ("NCIB") through the Toronto Stock Exchange and alternative
Canadian trading platforms, pursuant to which the Corporation would
have an option to repurchase its common shares for cancellation,
which is expected to enhance shareholder value.
FINANCIAL STATEMENTS AND MD&A
The Corporation's unaudited condensed consolidated financial
statements and notes thereto for the three months ended
March 31, 2018 and 2017 and MD&A for the three months
ended March 31, 2018 and 2017 are available immediately
on Secure's website at www.secure-energy.com. The audited
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, including
drilling and production trends; activity levels in the oil and gas
sector, drilling levels, commodity prices for oil, natural gas
liquids and natural gas; industry fundamentals for 2018; capital
forecasts and spending by producers; demand for the Corporation's
services and products; expansion strategy; the impact of oil and
gas activity on 2018 activity levels; the Corporation's proposed
2018 capital expenditure program including expansion, growth and
sustaining capital expenditures, and the timing of completion for
projects, in particular the Kindersley-Kerrobert light oil feeder pipeline system and
Gold Creek SWD; debt service; acquisition strategy and timing of
potential acquisitions; the impact of new facilities, new service
offerings, potential acquisitions, and prior year acquisitions on
the Corporation's financial and operational performance and growth
opportunities; 2018 Adjusted EBITDA; growth opportunities; future
capital needs and how the Corporation intends to fund its
operations, working capital requirements, dividends and capital
program; access to capital; implementation of a NCIB to repurchase
common shares and the impact of a NCIB on shareholder value; and
the Corporation's ability to meet obligations and commitments and
operate within any credit facility restrictions.
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 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 under the
heading "Risk Factors" in the AIF for the year ended
December 31, 2017 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
non-GAAP measures and operational definitions used by the
Corporation may not be comparable to similar measures presented by
other reporting issuers. 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. See the management's discussion and analysis available
at www.sedar.com for a reconciliation of the Non-GAAP
financial measures and operational definitions.
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 solutions 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, pipelines, shipping and marketing of crude
oil, oilfield waste disposal and recycling. The PRD division
services include clean oil terminalling, rail transloading,
pipelines, crude oil marketing, custom treating of crude oil,
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"), full service rail facilities ("FSR")
and crude oil terminalling facilities.
Drilling and Production Services Division ("DPS"): The DPS
division provides equipment, product solutions and chemicals for
drilling, completion and production operations for oil and gas
producers in western Canada. The
drilling service line currently 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 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.); Integrated Fluid
Solutions ("IFS") which include water management, recycling,
pumping and storage solutions; and 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.
_____________________________
1 Refer to the "Non-GAAP measures and operational
definitions" section herein.
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SOURCE SECURE Energy Services Inc.