Enseco Energy Services Corp. Announces Results for the Three Months Ended June 30, 2010
August 30 2010 - 7:33PM
Marketwired Canada
Enseco Energy Services Corp. ("Enseco" or the "Company") (TSX VENTURE:ENS)
announces its financial results for the three months ended June 30, 2010. The
unuadited financial statements and notes, as well as management's discussion and
analysis are available on Enseco's profile on SEDAR at www.sedar.com.
FINANCIAL AND OPERATING HIGHLIGHTS
-- Throughout the quarter, Enseco continued its strategy to focus and grow
in the North American resource play environment particularly in
directional drilling services and has grown job capability from 6 in the
comparative period last year to 47 today.
-- Revenues and gross margins from continuing operations for the first
quarter increased approximately 276% and 456% respectively from the same
period in the prior year and second quarter revenues and gross margins
are expected to increase by approximately 300% in the second quarter
from the same period in the prior year.
-- Oil focused business - customers in oil-based plays such as the Bakken,
Cardium and Eagle Ford account for approximately 70% of Enseco's
revenues.
-- The Company's decision to expense its entire fleet rebuild in April
rather than gradually throughout the summer resulted in greater expenses
incurred through the low revenue months of April and May and is
reflected in the negative EBITDA for the quarter. However, this decision
has placed the Company in a position to be ready for anticipated
activity levels in the upcoming quarters, which are expected to exceed
earlier strong winter levels.
-- During the quarter, Enseco acquired 3 positive pulse directional kits
and acquired an additional 3 positive pulse directional kits subsequent
to the first quarter. As a result of these purchases, rental costs are
expected to decrease throughout the remainder of the fiscal year.
-- Subsequent to the end of the quarter, Enseco closed its previously
announced acquisition of 7 directional drilling kits and related
equipment from a private directional services company with operations in
North Dakota and Wyoming for US$2.3 million. The acquisition brings the
Company's total directional drilling kits to 47.
-- Subsequent to the end of quarter, Enseco announced a bought deal private
placement of 30 million special warrants for proceeds of $6.0 million.
Each special warrant consists of one common share and one half share
purchase warrant exercisable at $0.27 per full warrant for a period of
12 months from the closing date. Net proceeds of the issue will be used
to reduce bank indebtedness and for general corporate purposes.
Three months ended June 30,
($000's except per share data) 2010 2009
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Revenue from continuing operations $ 8,703 $ 3,149
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Gross margin from continuing operations (1) 3,159 745
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EBITDA from continuing operations (1) (906) (1,872)
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Net loss from continuing operations (2,761) (3,158)
Per common share - basic and diluted (0.02) (0.07)
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Net loss from discontinued operations - (221)
Per common share - basic and diluted - (0.01)
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Total net loss (2,761) (3,379)
Per common share - basic and diluted (0.02) (0.08)
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Cash flow from/(used in) continuing
operations, before changes in non-cash
working capital items (2) (1,383) (2,002)
Cash flow from/(used in) continuing
operations, after changes in non-cash working
capital items (2) 5,300 (394)
Cash flow from/(used in) discontinued
operations (1) - (167)
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Notes:
(1) Gross margin is calculated as revenues less direct operating costs.
EBITDA means earnings before interest, taxes, depreciation and
amortization and is equal to earnings before income taxes plus interest
on long-term debt plus other interest expense, plus depreciation, plus
(gain)/loss on disposal of assets, plus foreign exchange loss, plus
impairment loss on fixed assets, plus accretion expense, less foreign
exchange gain. Cash flow means cash flows provided by operations before
changes in non-cash working capital items. EBITDA, cash flow and gross
margin are not recognized measures under Canadian generally accepted
accounting principles ("GAAP"). Management believes that in addition to
net earnings, EBITDA, cash flow and gross margin are useful supplemental
measures as they provide an indication of the results generated by
Enseco's primary business activities prior to consideration of how those
activities are financed, amortized or how the results are taxed in
various jurisdictions as well as the cash generated by Enseco's primary
business activities. Readers should be cautioned, however, that EBITDA,
cash flow and gross margin should not be construed as an alternative to
net earnings determined in accordance with GAAP as an indicator of
Enseco's performance. Enseco's method of calculating EBITDA, cash flow
and gross margin may differ from other organizations and, accordingly,
these figures may not be comparable to those disclosed by other
organizations.
(2) Working capital equals current assets minus current liabilities.
OUTLOOK
Enseco has positioned its business toward services that will increase in demand
in the North American resource play environments. Current higher resource play
drilling levels in both Canada and the United States have led to record levels
of horizontal drilling activity. Many of Enseco's North American clients are
increasing their drilling programs through 2010. As a result, Enseco expects to
see continued higher utilization rates through the upcoming quarters.
Results for July and early August have confirmed management's decision to
overhaul its entire directional drilling fleet over spring break up. Revenues
are expected to be over 300% higher in the summer quarter compared to a year ago
and EBITDA's are expected to be in the range of 20% of revenues. A clear focus
on resource play activity and its rapid recent growth leaves the Company in a
stronger position going forward into the new fiscal year. The gradual
elimination of the use of rental equipment and the high grading of the types of
equipment acquired in the Company's recent acquisitions have led to continually
improving margins on both its directional drilling and testing businesses.
Both Enseco's testing division and its directional drilling division experienced
their highest revenue month in the Company's history during July with
expectations that the high utilization rates and increased profit margins will
continue throughout 2010 and into 2011.
We are pleased with the results of our efforts to refocus the Company and look
forward to reporting increasingly stronger financial results in the upcoming
quarters.
ABOUT ENSECO
Enseco is a premier supplier of directional drilling and production testing
services operating throughout the Western Canadian Sedimentary Basin and select
markets in the United States, with operations in the Montney, Cardium, Viking,
Bakken, Green River and Eagle Ford resource plays as well as a corporate and
sales office located in Calgary. Enseco is led by an experienced management team
with a focus on continued value creation through accretive acquisitions and
organic growth.
FORWARD-LOOKING STATEMENTS
Certain information and statements contained in this press release constitute
forward-looking information, including, without limitation, expectations
regarding industry conditions including anticipated resource play drilling
activity levels and drilling programs; expectations regarding future higher
utilization rates and demand for the Company's services; anticipated declines in
rental costs; closing of and the use of proceeds of the Company's equity
financing; expectations regarding future revenues, EBITDA, profit margins and
financial results and Enseco's ongoing focus, strategy, and business plans,
which are provided by management to enable investors to better understand our
business, and such information may not be appropriate for other purposes. These
forward-looking statements are based upon the opinions, expectations and
estimates of management as at the date the statements are made including the
Company's current budget (which is subject to change), expectations regarding
the Company's ability to continue its operations, the continued support of the
Company's lender and the Company's ability to raise additional equity,
expectations relating to future economic and operating conditions and statements
relating to Enseco's marketing, operational and business plans, the competitive
environment and opinions of third-party analysts respecting anticipated economic
and operating conditions. These forward-looking statements are subject to a
variety of risks and uncertainties and other factors that could cause actual
events or outcomes to differ materially from those anticipated or implied by
such forward-looking statements. Such factors include, but are not limited to,
fluctuations in the market for oil and gas and related products and services,
political and economic conditions, the demand for services provided by Enseco,
industry competition and Enseco's ability to attract and retain both customers
and key personnel and the Company's ability to continue its operations, the
continued support of the Company's lender and Enseco's ability to raise
additional equity. Enseco has made assumptions regarding, but not limited to,
commodity prices, foreign exchange rates, interest rates, the availability of
skilled labour, and the timing and amount of capital expenditures. Readers are
cautioned that the assumptions used in the preparation of such information,
although considered reasonable at the time of preparation, may prove to be
imprecise and, as such, undue reliance should not be placed on forward-looking
statements. Enseco's actual results, performance or achievement could differ
materially from those expressed in, or implied by, these forward-looking
statements, or if any of them do so, what benefits that Enseco will derive
therefrom. Enseco disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law.