Poseidon Concepts Corp.

Poseidon Concepts Corp.

November 08, 2011 21:20 ET

Poseidon Concepts Corp. Reports Strong Third-Quarter and Continued Growth in Fracturing Fluid Tank Fleet

CALGARY, ALBERTA--(Marketwire - Nov. 8, 2011) - Poseidon Concepts Corp. (TSX:PSN) ("Poseidon" or the "Company") is pleased to release third-quarter 2011 financial and operating highlights plus an operations and guidance update.

Earnings before interest, taxes, depreciation and amortization (EBITDA) nearly tripled from the second quarter of 2011 to $20.2 million in the third quarter. As of this date, Poseidon's tank fleet has increased to a total of 210 tanks deployed across North America, and the Company now expects to enter 2012 with 240 tanks. Minimum long-term commitments to date will provide approximately $115 million in revenues through to the fourth quarter of 2012, and include the Company's first group of extended, multi-year contracts. EBITDA guidance for 2011 is hereby increased from $55 million to $60 million, with 2012 EBITDA guidance remaining at $130 million at this time.

Poseidon's consolidated financial statements and notes thereto as well as a management's discussion and analysis for the three and nine months ended September 30, 2011 (during which periods Poseidon was a business unit of Open Range Energy Corp.) have been filed on SEDAR at www.sedar.com and will be posted to the Company's website at www.poseidonconcepts.com.

(in thousands except percentages) Three months
Sept. 30, 2011
Three months
Sept. 30, 2010(1)
Nine months
Sept. 30, 2011
Nine months
Sept. 30, 2010(1)
Fracturing fluid handling tank
rental revenue
$ 22,329 $ 1,324 $ 41,236 $ 1,658
Operating costs (541 ) (12 ) (1,510 ) (14 )
G&A costs (1,555 ) (29 ) (3,334 ) (54 )
Operating earnings (EBITDA) $ 20,232 $ 1,283 $ 36,392 $ 1,590

(1) Results pertain to periods when Poseidon was a business unit of Open Range Energy Corp. Open Range's transition date to International Financial Reporting Standards (IFRS) was January 1, 2010; therefore, information above including comparative information was calculated in accordance with IFRS.


The management team and Board of Directors of Poseidon are pleased to have commenced independent operations on November 1, 2011 as a pure-play, publicly traded fracturing fluid handling company that will pay a dividend of $0.09 per share monthly. We would like to take this opportunity to welcome all of our shareholders to Poseidon.

Separation from the predecessor company was successfully executed following the vote of shareholders on October 31, 2011, and the independent Poseidon shares began trading on the Toronto Stock Exchange at opening on November 4, 2011. Since then the trading price of our shares confirms the strategic decision to unlock value by transforming Poseidon into an independent company.

Poseidon is a growth-oriented, yield investment. We look forward to distributing our first $0.09 per share cash dividend on December 15, 2011 to holders of record on November 30, 2011, with an ex-dividend trading date of November 28, 2011, as we continue working to further increase the market penetration of Poseidon systems across North America.

Third Quarter Review

The third quarter was a very strong one for Poseidon. The utilization rate in western Canada recovered in late July following the extended wet spring and early summer. Poseidon's innovative, modular fracturing fluid handling system continued to generate new business from exploration and production companies pursuing unconventional oil and liquids-rich gas plays across the Western Canada Sedimentary Basin. We also received our formal Canadian patent in July.

In the United States growth accelerated and Poseidon increased its presence from five to 10 states by the end of the quarter, and to 14 states by the end of October. Success in North Dakota's Bakken oil play was particularly strong and represented a strategic market breakthrough. Poseidon's presence grew from an initial two tanks deployed in January to one-third of the existing fleet deployed with multiple operators by the end of the third quarter.

Our largest tank model, the 41,000-barrel-capacity Atlantis, has proved well-suited to the largest U.S. fracturing operations. Its operational and environmental advantages over other fluid handling alternatives, particularly lined pits, became increasingly clear to operators and regulators. Some operators began using the large tanks as hubs for repeated re-use of fluids on multi-well projects.

Tank rental revenue increased from $8.9 million in the second quarter to $22.3 million in the third quarter, while EBITDA grew from $7.2 million to $20.2 million in the same period, a gain of 181 percent.

Management Team, Corporate Infrastructure and Appointment of New Director

Poseidon launches independent operations with a strong, experienced management team. Key personnel have decades of prior experience in the North American oil and natural gas service and supply sector. The Company's senior management team comprises:

  • Chief Executive Officer Lyle Michaluk
  • President and Chief Operating Officer Cliff Wiebe
  • Chief Financial Officer Matt MacKenzie
  • Sr. Vice President, U.S. Division Joe Kostelecky
  • Sr. Vice President, Global Development Brad Wanchulak
  • Vice President, Finance David Belcher

Poseidon's operational strategy of renting modular, insulated fracturing fluid tanks that can be stored and transported on flatbed trucks results in a highly efficient business model, also among the sources of our strong margins. With our growth and geographical diversification into multiple producing regions, we have added necessary infrastructure. Exiting the third quarter, in addition to the Calgary head office Poseidon had opened a regional management centre in Denver, Colorado, plus a field office in North Dakota and an equipment yard in Edson, Alberta. Tank manufacturing continues to be performed by proven partners located in Alberta and the southern United States.

Poseidon is also pleased to announce the appointment of Neil Richardson to its Board of Directors, effective immediately. Mr. Richardson is the CEO and founder of a privately held company focusing on advancing water management solutions for the energy sector. Poseidon considers Mr. Richardson's appointment to be of strategic value as he will bring industry experience and expertise within the fluid handling space.


Poseidon has commenced independent operations with a strong balance sheet, including opening net debt of approximately $25 million and bank lines totalling $75 million with a syndicate of two Canadian banks. Fleet expansion is continuing with current manufacturing capacity able to deliver seven to nine new tanks per week, depending on the particular mix of models being manufactured.

Following the recent introduction of Poseidon tanks into several southern states, Poseidon has gained traction in important new unconventional plays, including several in Texas. The pattern appears to be replicating our earlier experience in North Dakota, in which a modest initial deployment on a customer-test basis was followed by ramp-up of activity as the initial customers increased their commitment and new customers became engaged through word-of-mouth and the Company's business development.

Poseidon is highly confident in delivering its 2012 dividend. We have calculated that the Company would generate sufficient EBITDA to cover the current annual dividend through full utilization of approximately two-thirds of the current tank fleet. With 210 tanks at present enjoying utilization of over 90 percent, and with a planned tank fleet of 240 as of January 1, 2012, we are confident in our ability to generate EBITDA sufficient to fund the dividend.

Poseidon's combined 2012 dividend of approximately $80 million represents less than 65 percent of our 2012 guidance EBITDA of $130 million. To date we have secured minimum commitment contracts covering more than 120 tanks through to the fourth quarter of 2012, or approximately 60 percent of the current fleet, which represent firm revenues of approximately $115 million. These customer commitments include several new multi-year contracts recently signed with large independent producers. We consider this development to be of strategic significance as it strengthens the sustainability of the Company's revenue and dividend.

While we are not revising 2012 EBITDA guidance at this time, we are highly encouraged by the producing sector's continued acceptance of the Poseidon system at more and more plays across North America. We intend to maintain a strong balance sheet and a sustainable payout ratio based on conservative forecasting. As a new company, a key priority is establishing a positive track record on every level.

Reader Advisory

This news release contains certain forward-looking statements, which include assumptions with respect to (i) future capital expenditures and operating activities and how they will be financed; (ii) cash flow from operations and EBITDA; (iii) sustainability of the dividend; (iv) demand for tank systems; and (v) general oil and gas industry activity. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Such risks and uncertainties include, without limitation, risks associated with volatility of commodity prices, currency fluctuations, environmental risks, inability to retain third-party services, dependence on manufacturers of the tank systems, operating risk liability, demand for tank systems, levels of competition in the fracturing fluid storage industry, the ability to attract and retain clientele, the ability to fund its ongoing capital requirements, Poseidon Concepts' limited operating history, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada and the United States, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Poseidon's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits, including the amount of proceeds, Poseidon will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to Poseidon or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional information on the foregoing risks and other factors that could affect Poseidon's operations and financial results are on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Poseidon does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Contact Information

  • Poseidon Concepts Corp.
    Lyle D. Michaluk, CA
    Chief Executive Officer