Enseco Energy Services Corp.

Enseco Energy Services Corp.

March 01, 2010 18:54 ET

Enseco Energy Services Corp. Announces Results for the Three and Nine Months Ended December 31, 2009

CALGARY, ALBERTA--(Marketwire - March 1, 2010) - Enseco Energy Services Corp. ("Enseco" or "the Company") (TSX VENTURE:ENS) announces its consolidated financial results for the three and nine months December 31, 2009.


- Successfully repositioned the Company for future growth in directional drilling services by appointing a new CEO and completing the acquisition of Focus Directional Services Inc. in November 2009.

- Streamlined Enseco's business lines through the disposition of the Company's Open Hole wireline assets for proceeds of $1.15 million.

- Further strengthened and solidified Enseco's presence in directional drilling through the acquisition of the assets of a private directional services company in February.

- Raised $8 million through a private placement completed in February 2010.

Successfully repositioned Enseco for future growth in Directional Drilling Services

In November 2009 the Company repositioned itself with a bold new strategy to aggressively consolidate the directional drilling services business in North America. This strategy was initiated with the appointment of Mr. Lane Roberts as Enseco's new President and CEO. Mr. Roberts' numerous years of industry experience in downhole drilling technologies and his extensive international contact base will prove to be a significant asset to the Company as it moves forward with its growth initiatives. The Company also closed the acquisition of Focus Directional Services Inc. which increased Enseco's directional drilling job capability from 6 to 24 (currently at 34). Focus had a strong operational track record and a consistent history of profitable results, which immediately positioned Enseco with cash flow positive operating results and a solid foundation for future growth. In addition, the founders of Focus agreed to join Enseco in various capacities to provide the Company with sufficient management depth to execute its strategic plan.

Divested the Company's Open Hole Wireline assets for proceeds of $1.15 million

In January 2010, the Company entered into an agreement to sell the remaining assets of its Open Hole wireline division for proceeds of $1.15 million. This division was deemed to be a noncore business line in Enseco's strategic plan as it was unable to achieve the utilization and operating results necessary to justify its expansion in the current operating environment. This transaction is expected to close in early March with the proceeds used to reduce Enseco's operating facility.

Acquisition of Directional Drilling Assets

In February 2010, the Company closed its previously announced acquisition of the assets of a private directional services company with operations primarily in the United States. The assets purchased consist of 10 directional drilling kits and 70 motors, as well as other related equipment. This acquisition provides Enseco with a strategic presence in key geographic resource plays within the United States and an entry point into a customer base that includes some of the most active land drillers in North America.

Raised $8 million through a private placement completed in February 2010

In February 2010, the Company closed a private placement of 40,000,000 units. Each unit consists of one common share and one half of a common share purchase warrant, with each full common share purchase warrant exercisable for one common share at a price of $0.25 per share until February 11, 2011. Each common share was issued at a price of $0.20 per common share, resulting in aggregate gross proceeds of $8.0 million. The Company received net proceeds of approximately $7.5 million after agent's fees and closing costs.

Financial Highlights
($000's except per share data)

Three Months Three Months
Ended Ended
Dec 31, 2009 Dec 31, 2008
(unaudited) (unaudited) % change
Revenue from continuing ops (1) $ 7,739 $ 8,516 (9%)

Operating loss from continuing
ops (1) (4,453) (1,437) (210%)
Operating loss from discontinued
ops (1) - (854) 100%
Total (4,453) (2,291) (94%)

EBITDA (1) from continuing ops (1,581) (388) (307%)
EBITDA (1) from discontinued ops - (575) 100%
Total (1,581) (963) (64%)

Cashflow (1) from continuing ops (3,075) (455) (576%)
Cashflow (1) from discontinued ops - (553) 100%
Total (3,075) (1,008) (205%)

Net loss from continuing ops(1) (5,328) (1,348) (65%)
Net loss from discontinued ops (1) - (854) 100%
Total (5,328) (2,202) (142%)

Per Share Data
EBITDA (1) $ (0.05) $ (0.01) (400%)
Cashflow (1) $ (0.06) $ (0.01) (500%)
Net loss $ (0.09) $ (0.05) (80%)

Nine Months Nine Months
Ended Ended
Dec 31, 2009 Dec 31, 2008
(unaudited) (unaudited) % change
Revenue from continuing ops (1) $ 16,843 $ 19,742 (15%)

Operating loss from continuing
ops (1) (9,874) (4,899) (102%)
Operating loss from discontinued
ops (1) - (2,492) 100%
Total (9,874) (7,391) (34%)

EBITDA (1) from continuing ops (4,388) (1,863) (136%)
EBITDA (1) from discontinued ops - (1,618) 100%
Total (4,388) (3,481) (26%)

Cashflow (1) from continuing ops (6,187) (2,227) (178%)
Cashflow (1) from discontinued ops - (1,552) 100%
Total (6,187) (3,779) (64%)

Net loss from continuing ops(1) (10,803) (5,169) (109%)
Net loss from discontinued ops (1) - (2,492) 100%
Total (10,803) (7,661) (41%)

Per Share Data
EBITDA (1) $ (0.11) $ (0.04) (175%)
Cashflow (1) $ (0.12) $ (0.05) (140%)
Net loss $ (0.21) $ (0.18) (17%)

December 31 March 31
2009 2009
(audited) % change
Financial Position
Total assets $ 64,721 $ 48,059 35%
Working capital (2) (28,125) (16,112) (82%)
Shareholders' equity 19,561 23,671 (17)%

(1) Operating loss is loss before impairment loss on intangible assets,
impairment loss on goodwill, impairment loss on fixed assets, gain
(loss) on sale of equipment and income taxes. 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 amortization plus (gain)/loss
on disposal of assets minus foreign exchange gain plus impairment loss
on intangible assets, plus impairment loss on goodwill, plus impairment
loss on fixed assets. Cashflow means cash flows provided by operations
before changes in non-cash working capital items. Operating loss,
EBITDA and cashflow are not recognized measures under Canadian
generally accepted accounting principles ("GAAP"). Management believes
that in addition to net earnings, operating loss, EBITDA and cashflow
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 operating loss, EBITDA and cashflow 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 operating loss, EBITDA and cashflow 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.

Enseco's results for the three and nine months ended December 31, 2009 continue to reflect the protracted downturn that has heavily impacted the oilfield services industry in Western Canada. Enseco had significant cost and revenue challenges during the quarter which were further impacted by a new strategic plan and direction that resulted in the recognition of $1.2 million in restructuring charges relating to severance costs for staffing reductions, as well as lease and contract termination fees on facilities and business lines that were exited during the quarter or shortly thereafter. It is anticipated that the difficult measures taken during the quarter will properly position Enseco to execute on its new strategic direction going forward.

Uncertain capital markets, a weak United States currency and uncertainty about future natural gas commodity prices continue to have a negative impact on the North American oilfield service industry. These factors have improved in 2010 and according to industry sources, as at February 5, 2010, the United States active land drilling rig count was down about 4% from the same period in the prior year while the Canadian drilling rig count was up about 28%.

As a result of lower activity levels industry wide, Enseco has experienced significant losses and negative cashflow, and as at December 31, 2009 has a working capital deficit of $28.1 million. As at February 19, 2009 Enseco had approved access to $32.5 million of the total $35.2 million credit facility, but has drawn $32.8 million as of that date. The Company's working capital ratio is less than 1.10:1 as required by the bank pursuant to the terms of the credit facility. The Company's ability to continue its operations is dependent upon curing the breach in the credit facility, curing the current working capital deficiency, curing the breach of the working capital covenant with its lender, generating sufficient cash flow to cover its operating costs, renegotiating the credit facility with the lender, and the continued financial support of its lender. Subsequent to quarter end, the Company has taken steps to increase its liquidity including the completion of an $8.0 million private placement completed in February 2010 and the disposal of its open hole wireline assets for proceeds of $1.15 million which is expected to be completed in early March 2010. The Company currently has $1.5 million of the $8 million private placement financing held in escrow pending regulatory approval. Following the release of these funds from escrow and the closing of the previously mentioned asset disposition, Enseco expects to be within the margin requirements outlined in its credit facility and will have the additional liquidity necessary to meet its obligations when due.

Enseco has filed its unaudited financial statements as at and for the three and nine months ended December 31, 2009, and the accompanying Management's Discussion and Analysis. These filings are available under Enseco's SEDAR profile at www.sedar.com.


Enseco is optimistic about its future and that of the Industry as a whole. Horizontal drilling and completion technology has fundamentally changed the nature of onshore oil and gas exploration and development activities in North America. Resources that were previously deemed uneconomic or incapable of production are being revisited with a view towards the application of new drilling and completion techniques to produce a markedly different outcome. Over fifty percent of new wells drilled in North America are non-vertical and it is expected that this percentage will continue to rise as exploration and production companies continue to dedicate an ever increasing percentage of their capital budgets to opportunity types and resource plays that require horizontal well technology. In Canada, it appears that the Industry is slowly emerging from one of the most difficult operating environments on record, and the number of new wells drilled in Western Canada is expected to rise to between 11,000 and 13,000 from approximately 8,500 in 2009.

Despite the recently challenging macro level environment facing the oilfield services industry, Enseco has continued to use this uncertain landscape to move aggressively to grow its directional drilling business and further solidify its financial position. Enseco's near term strategy is to significantly expand its presence in the directional services market in the United States. This is being accomplished through the setup of a sales office located in Houston, Texas and the acquisition of the directional drilling assets of a private directional services company, as detailed above. Enseco also expects to realize significant cost savings from its acquisition of Focus Directional Services by better utilizing its existing fleet of assets, streamlining operational and senior management roles and responsibilities, and rationalizing its existing geographic footprint by reducing the number of operating facilities that the Company works out of. Enseco's strategic direction is now clearly focused on Resource Play environments, the majority of which require non-vertical wells in order to access the potential resource, as well as higher pressure tanks and testing vessels in order to handle the ever increasing pressures and volumes associated with new fracturing techniques.

Enseco is a premier supplier of energy related services operating throughout the Western Canadian Sedimentary Basin and select markets in the United States, with operational centres in Red Deer, Whitecourt, Edmonton, Beaverlodge, Grande Prairie, Fort St. John, Midale, Saskatchewan and Minot, North Dakota, as well as a corporate and sales office located in Calgary. Enseco is led by an experienced management team currently offering well directional drilling, production testing and swabbing services with a focus on continued value creation through accretive acquisitions and organic growth.


Certain information and statements contained in this press release constitute forward-looking information, including expectations regarding industry conditions conditions including drilling activity levels and expectations regarding use of horizontal well technology; expectations regarding the impact of the Focus acquisition, including the effect on Enseco's cash flow, cost savings and future growth opportunities and the impact of the additions to Enseco's management team as a result of the acquisition; expectations regarding the anticipated benefits to be obtained from the acquisition of the private directional services company; expectations regarding the closing of the sale of Enseco's Open Hole wireline assets, the timing thereof and the use of proceeds therefrom; expectations regarding Enseco's credit facility and ability to meet its obligations when due; and Enseco's ongoing focus, strategy, and business plans, including demand for oilfield services and, statements as to future economic and operating conditions, 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.

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Enseco Energy Services Corp.
    Lane Roberts
    President and CEO
    (403) 806-0088
    Enseco Energy Services Corp.
    Aly Khan Musani
    Senior Vice President and CFO
    (403) 806-0088