Enseco Energy Services Corp.
TSX VENTURE : ENS

Enseco Energy Services Corp.

July 29, 2009 20:41 ET

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

CALGARY, ALBERTA--(Marketwire - July 29, 2009) - Enseco Energy Services Corp. ("Enseco" or "the Company") (TSX VENTURE:ENS) announces its consolidated financial results for the three months and year ended March 31, 2009.



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


Three Months Three Months
Ended Ended Year Ended Year Ended
Mar 31, Mar 31, Mar 31, Mar 31,
2009 2008 % 2009 2008 %
(audited) (audited) change (audited) (audited) change
----------------------------------------------------------------
Revenue from
continuing
ops(1) $ 8,939 $ 7,148 25% $ 28,681 $18,299 57%

Operating loss
from continuing
ops(1) (1,424) (612) (133%) (6,323) (10,418) 39%

EBITDA(1) (249) 446 (156%) (2,112) (5,645) 63%
Cashflow(1) (439) 252 (274%) (2,666) (6,077) 56%

Net loss from
continuing
ops(1) (1,464) (599) (344%) (6,633) (23,952) 73%

Per Share Data
EBITDA(1) $ (0.01) $ 0.02 (150%) $ (0.05) $ (0.19) 82%
Cashflow(1) $ (0.01) $ 0.01 (200%) $ (0.06) $ (0.21) 79%
Net loss $ (0.03) $ (0.02) (50%) $ (0.15) $ (0.81) 86%



March 31 March 31
2009 2008
(audited) (audited) % change
-----------------------------------------------
Financial Position
Total assets $ 48,059 $ 56,514 (15%)
Long-term debt (excluding
current portion) - 11,371 (100%)
Working capital(2) (16,112) (1,144) (1,308%)
Shareholders' equity 23,668 25,090 (6%)


(1) Operating loss is loss before impairment loss on intangible assets,
impairment loss on goodwill, 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. 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.


In North America, 2009 commenced with the 2008 carry over impact of a weak and declining global economy and low commodity prices. While oil pricing has shown a significant recovery in very short period of time, there remains considerable demand uncertainty for both oil and natural gas and this has triggered low customer demand for Enseco's oilfield services. Accordingly, these factors have eroded oilfield services for a second consecutive quarter as evidenced by minimal spot market opportunities, pricing declines and low winter equipment utilization. At the end of the fiscal year these conditions persist as the fundamentals for natural gas continue to show weakness through high storage and growth in domestic United States natural gas supply. The supply increase resulted from elevated drilling activity in many regions within the United States, including unconventional resource plays in Texas and Louisiana. A good portion of the production gains are subject to higher depletion rates and the recent steep decline in drilling is expected to eventually restore supply and demand balance.

The lower activity levels industry wide and the onset of spring breakup have had a significant negative impact on Enseco's operating cash flow and liquidity. The availability of Enseco's operating line of credit is based on its accounts receivable balance at the end of a given month. At July 20, 2009, Enseco had approved access to $16.0 million of its total $20.0 million credit facility, but had drawn $19.1 million as of that date and has not been able to pay all of its accounts payable when due. The Company's working capital ratio is less than 1.25:1 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 current working capital deficiency, maintaining the existing credit facility through its lender, raising additional equity through a financing, and beginning to generate sufficient cash flow to cover operating costs. The Company has taken steps to generate cash flow including selectively disposing of assets that no longer fit with the Company's strategic direction and business plan, reducing general and administrative costs including layoffs and terminations of employees and wage reductions, entering into operating lease agreements for fixed asset purchases in order to increase working capital flexibility, and sought alternative sources of financing.

The working capital deficit increased to $16.1 million at March 31, 2009 as compared to a deficit of $1.1 million at March 31, 2008. As well, Shareholders' Equity decreased to $23.1 million at March 31, 2009 as compared to $25.1 million at March 31, 2008. The Company has experienced losses and negative cash flow over the last two years. Due to the breaches in the credit facility and working capital ratio, the lender has the right to demand immediate repayment of all outstanding obligations owed to it under the existing credit facilities. As of July 20, 2009 the Company has not received any correspondence from its lender demanding repayment of the outstanding obligations. The Company requires the ongoing financial support of its lender in order to continue as a going concern.

Enseco has filed its audited financial statements for the year ended March 31, 2009 and the accompanying Management's Discussion and Analysis. These filings are available under Enseco's SEDAR profile at www.sedar.com.

OUTLOOK

The global economic recession reduced liquidity in the capital markets and low oil and natural gas prices continue to have a negative impact on the oilfield service industry. The drilling sector in both Canada and the United States is experiencing a period of significant decline in utilization. According to industry sources, as at July 3, 2009, the United States active land drilling rig count was down by approximately 54% from the same period in the prior year while the Canadian drilling rig count was down by approximately 60%. With decreasing utilization, the competitive pressure on all of Enseco's service offerings intensifies resulting in lower rates for services. Enseco has seen this trend continue into the second quarter of 2009 and expects that it may potentially last longer depending on commodity prices. With the recession negatively impacting energy demand, the United States natural gas storage levels are currently 16% above the five-year average and 19% higher than storage volumes a year ago. Canada exports over half its natural gas production to the United States and Enseco's oilfield service businesses are highly dependent on associated customer economics. The view that North America has an oversupply of natural gas has driven gas prices lower. The recent increase in United States natural gas production, concerns over the declines in industrial gas consumption and the prospect of higher liquefied natural gas ("LNG") imports has overshadowed lower Canadian imports and the drop in active North American drilling rig count. Subject to demand clarity and LNG imports, Enseco anticipates the supply decline from reduced drilling may begin to outpace demand reductions in late 2009, providing the catalyst for improved fundamentals to support a recovery in drilling activity. Enseco is dealing with the near term negative outlook by revisiting its cost structure and eliminating as much of the fixed component of costs as possible and proactively reducing staffing levels to appropriately reflect current and anticipated activity levels. Enseco continues to focus its marketing and operational efforts on the United States marketplace with a view towards growing its presence geographically as well as by diversifying its service line offering.

Enseco is an emerging 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 swabbing, production testing, open hole logging, and directional drilling services 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 expectations regarding industry conditions including utilization rates and 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 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. 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.

The TSX Venture Exchange has neither approved nor disapproved the contents of this press release.

Contact Information

  • Enseco Energy Services Corp.
    David A. Hawkins
    President and CEO
    (403) 806-0088
    or
    Enseco Energy Services Corp.
    Aly Khan Musani
    Senior Vice President and CFO
    (403) 806-0088