Enseco Energy Services Corp.
TSX VENTURE : ENS

Enseco Energy Services Corp.

August 30, 2010 19:33 ET

Enseco Energy Services Corp. Announces Results for the Three Months Ended June 30, 2010

CALGARY, ALBERTA--(Marketwire - Aug. 30, 2010) - 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  
Revenue from continuing operations $ 8,703   $ 3,149  
Gross margin from continuing operations (1)   3,159     745  
EBITDA from continuing operations (1)   (906 )   (1,872 )
Net loss from continuing operations   (2,761 )   (3,158 )
  Per common share – basic and diluted   (0.02 )   (0.07 )
Net loss from discontinued operations   -     (221 )
  Per common share – basic and diluted   -     (0.01 )
Total net loss   (2,761 )   (3,379 )
  Per common share – basic and diluted   (0.02 )   (0.08 )
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 )

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.

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