Enterprise Group, Inc.

Enterprise Group, Inc.

January 13, 2014 08:00 ET

Enterprise Group Proceeds With Hart Integration and Secures Further T.C. Backhoe Commitments

ST. ALBERT, ALBERTA--(Marketwired - Jan. 13, 2014) - Enterprise Group, Inc. ("Enterprise," or "the Company") (TSX:E) is pleased to provide an update on the integration of Hart Oilfield Rentals Ltd. ("Hart"). The Company acquired Hart, one of Western Canada's most highly regarded oilfield service providers, for a cost of $22.6 million.

Enterprise completed its acquisition of Hart on January 3, 2014, and has already made significant advancements towards the integration of this highly complementary new business unit. Highlights include:

  • Hart's vendors and chief executives, Gordon and Bonnie Hart, have both signed two-year management agreements with Enterprise. Five other Hartexecutives have also signed five-year management agreements, completing the transition of Hart's senior management.
  • Work has begun on a new Enterprise location in Fort St. John, British Columbia. This office is expected to house not only a new Hart office, but also offices for Artic Therm and Calgary Tunnelling& Horizontal Augering Ltd.("CTHA").
  • Logistics are currently being streamlined to allow CTHA and Artic Thermto utilize Hart's six existinglocations - five in Alberta and one in British Columbia - resulting in both increased productivity and reduced transportation costs.
  • Hart has commenced the utilization of inventory from Artic Therm in lieu of third party rentals, resulting in increases in operating margin.
  • Enterprise is finalizing the purchase of new additions to Hart's fleet of modular units. In total, Enterprise expects to deploy a total of$9.4million towards developing this fleet. The Company's work to date has confirmed its original estimate that a full year's deployment of these new units could increase Hart's annual revenue and EBITDA to$29.9 million and $12.0 million, respectively.

Hart is a full service oilfield site infrastructure company, providing its customers both site services and equipment rentals. Hart's equipment fleet consists of approximately 1,500 owned pieces and an additional 500 pieces that have been rented in order to fulfill demand. This fleet provides on-site support for oilfield drilling and completion operations, and includes both traditional well site equipment and Hart's 'combo' equipment, modular designs that have been proven to significantly increase site efficiency. Hart both designs and manufactures this proprietary equipment, and currently possesses 14 pending patents on its industrial modular design assets. During its most recent fiscal year, Hart generated $22.9 million of revenue and $7.2 million of EBITDA, and has grown these metrics at CAGRs of 22% and 37%, respectively, over the past four years.

"We are very excited to have completed the acquisition of Hart, and are eager to rapidly integrate their business into our own," stated Leonard D. Jaroszuk, Enterprise's President and Chief Executive Officer. "During 2013, Enterprise demonstrated its ability to successfully integrate acquisitions without disrupting growth. A key component of our integration strategy is our ability to retain and develop leaders within the businesses we acquire. I'm accordingly thrilled that Gordon and Bonnie Hart, as well as the rest of Hart's executive team, have formally joined the Enterprise family."

"We expect the addition of Hart will be both immediately accretive and create multiple benefits for our business. Most importantly, this acquisition significantly enhances our ability to capitalize on the potential that we believe exists within the equipment rentals market, allows Enterprise to leverage Hart's existing impressive customer base, and provides us with immediate entry to six very strategic locations. The synergy between Hart and Artic Therm is particularly exciting. Both share a very similar customer base. By integrating these divisions, we can combine their sales forces, greatly expand our product offerings, and create a more complete customer experience."

"Hart has witnessed rapid and encouraging returns on its recent investments. Its assets operate for up to 20 years, and offer an average gross payback period of less than 18 months. As a result, new assets have generated an average of more than 60% EBITDAS margin to Hart's bottom line. With the appropriate capital support, we believe we are capable of as much as doubling both Hart's revenue and EBITDAS over the next three years.Our confidence in this potential is bolstered by Hart's innovative offerings. These proprietary modular units are totally unique within the oilfield service industry, and provide Hart with a considerable competitive advantage. We look forward to maximizing the opportunity provided by this competitive advantage over the year ahead."

Enterprise is also pleased to announce that T.C. Backhoe and Directional Drilling ("TC") continues to secure new business opportunities. TC has entered into a Master Service Agreement to provide Hydro-Vac services for a joint venture project between a major oil company and one of North America's largest energy companies. This agreement, which will remain in place until the conclusion of 2016, is expected to generate $1.3 million of annual revenue. TC also has increased the scope of its Master Service Agreement with one of North America's largest pipeline and natural gas companies, which was previously announced on October 25, 2013. This agreement, which was initially expected to generate $3.0 million in total revenue, is now expected to generate $4.2 million in total revenue over the next 20 months. In order to support both these projects and future growth, TC has ordered two additional Hydro-Vac units, over and above the eight units ordered and announced in October, 2013.

"We're pleased to announce the continued growth of TC's project pipeline," concluded Mr. Jaroszuk. "TC, like Hart, is proud of its commitment to exceptional customer service. This commitment is a major factor in TC's success, and we are excited to both execute upon these projects and further grow this division over the course of 2014."

About Enterprise Group, Inc.

Enterprise Group, Inc. is a consolidator of construction services companies operating in the energy, utility and transportation infrastructure industries. The Company's focus is primarily construction services and specialized equipment rental. The Company's strategy is to acquire complementary service companies in Western Canada, consolidating capital, management and human resources to support continued growth. Enterprise became a Western Canadian leader in flameless heat technology in September 2012 with its acquisition of Artic Therm International Ltd., a leader in underground infrastructure construction in June 2013 with the acquisition of Calgary Tunnelling& Horizontal Augering Ltd., and a leader in oilfield service rentals in January 2014 with the acquisition of Hart Oilfield Rentals Ltd.

Forward Looking Information

Certain statements contained in this news release constitute forward-looking information. These statements relate to future events or the Company's future performance. The use of any of the words "could", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on the Company's current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. The Company's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. The Company disclaims any intention or obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

Non-IFRS Measures

The Company uses International Financial Reporting Standards ("IFRS"). EBITDA is not a measure that has any standardized meaning prescribed by IFRS and is therefore referred to as a non-IFRS measure. This news release contains references to EBITDA. This non-IFRS measure used by the Company may not be comparable to a similar measure used by other companies. Management believes that in addition to net income, EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Company's principal business activities prior to consideration of how those activities are financed or how the results are taxed. EBITDA is calculated as net income excluding depreciation, amortization, interest and taxes.

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