Enseco Energy Services Corp.
TSX VENTURE : ENS

Enseco Energy Services Corp.

November 29, 2010 09:00 ET

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

CALGARY, ALBERTA--(Marketwire - Nov. 29, 2010) - Enseco Energy Services Corp. ("Enseco" or the "Company") (TSX VENTURE:ENS) announces its financial results for the three months ended September Q3, 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.

TURNAROUND CONTINUES AND GATHERS MOMENTUM

Enseco continues its rapid growth and profitability in the North American resource plays. The Company repositioned itself in early 2010 as a directional drilling led company focusing on oil and liquid resource plays. Activity and fundamentals in oil related resource plays continue to improve and with 5 acquisitions and an aggressive capital expenditure program Enseco expects to continue to significantly expand its business into 2011. Larger fleet, stronger utilizations and improved pricing are expected to contribute to the upcoming fall and winter quarters.

  • Strong focused growth continuing in Saskatchewan, Alberta, North Dakota and Wyoming

  • Quarterly revenue increased 209% from last year to $16.7 million

  • Quarterly gross margin increased 796% from last year to $6.0 million

  • Quarterly EBITDA increased to $3.0 million from ($0.6 million) last year

  • Quarterly cash flow increased to $2.5 million from ($0.8 million) last year

  • All banking covenants met and the Company obtained an increase in its revolving line of credit to $15.0 million from $8.5 million in the previous quarter

  • Completion of a $6.0 million private placement

  • Divestiture of the swabbing division for gross proceeds of $3.0 million

  • Acquisition of all of the assets of a private directional drilling services company with operations in North Dakota and Wyoming for US$2.3 million

  • Acquisition of resource play specific testing assets for $1.2 million bringing the Company's total resource play Canadian testing kits to 30 and North Dakota testing kits to 10.

  Three months ended September 30,  
($000's except per share data) 2010   2009  
Revenue from continuing operations $ 16,748   $ 5,417  
Gross margin from continuing operations (1)   5,992     745  
EBITDA from continuing operations (1)   2,973     (570 )
Net income (loss) from continuing operations   1,099     (1,636 )
  Per common share – basic and diluted   0.01     (0.07 )
Net income (loss) from discontinued operations   (177 )   (460 )
  Per common share – basic and diluted   0     (0.01 )
Total net income (loss)   922     (2,096 )
  Per common share – basic and diluted   0.01     (0.05 )
Cash flow from/(used in) continuing operations, before changes in non-cash working capital items (1)   2,521     (750 )
Cash flow from/(used in) continuing operations, after changes in non-cash working capital items (1)   (2,679 )   (1,889 )
Cash flow from/(used in) discontinued operations (1)   (74 )   (193 )
Note: 
(1) See Non-GAAP Measures below.

OUTLOOK

In the last 12 months Enseco has moved from operating 5 varied business lines down to two business lines, concentrated in the North American directional drilling resource play basins. Significant growth both organically and by acquisition has allowed the Company to take advantage of the increasing demand for services required in these 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 have increased their drilling programs through 2010. As a result, Enseco expects to see continued higher utilization rates through the upcoming quarters.

Despite slow September activity due to very wet weather, the Company posted record activities and profits. With continued strong activity and the ongoing growth in the Company's two business lines, it is expected that both revenues and profits will show additional significant growth in the Company's fiscal third quarter. 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 October 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 Enseco's plans to continue to significantly expand its business into 2011; expectations regarding the impact of the Company's larger fleet and anticipated pricing on the Company's future financial results; expectations regarding industry conditions, including continued growth in oil and liquid resource plays and 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; expectations regarding future revenues, costs, 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.

NON-GAAP MEASURES

This press release refers to earnings before interest, taxes, depreciation and amortization (EBITDA), cash flow and gross margin which are measures used by the Company that are not a standard measure under Canadian generally accepted accounting principles ("GAAP"). EBITDA is equal to earnings before income taxes from continuing operations plus interest on debt, other interest expense, depreciation and amortization, and loss on sale of equipment. Cash flow means cash flows provided by continuing operations before changes in non-cash working capital items. Gross margin is calculated as revenues less operating expenses. Management believes that in addition to net losses, EBITDA, cash flow, and gross margin are useful supplemental measures as they provide an indication of the results generated by the Company'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 the Company'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 income 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, EBITDA, cash flow and gross margin may not be comparable to measures used by other organizations.

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