Ridgeline Energy Services Inc.

Ridgeline Energy Services Inc.

August 29, 2011 12:14 ET

Ridgeline Reports 24.8% Increase in Revenue and 117% Increase in Gross Profit for Fiscal 2011

Provides update on successful commercialization of breakthrough frac flowback water treatment technology

CALGARY, ALBERTA--(Marketwire - Aug. 29, 2011) - Ridgeline Energy Services Inc. ("Ridgeline") (TSX VENTURE:RLE) announces that it has filed its Audited Financial Statements for the fiscal year ending March 31, 2011. The Company also provided an update on the progress of its acquisition of Danzik Hydrological Sciences, LLC ("DHS") as well as the commercial rollout of its new technology for onsite treatment of produced water and hydraulic fracturing ("frac" or "fracking") flowback water for major oil and gas producers.

Fiscal 2011 Financial Highlights:

  • Revenue increased 24.8% to $11.2 million from $9.0 million in 2010
  • Gross profit increased 117.0% to $3.9 million from $1.8 million in 2010
  • Gross margin increased to 34.8% from 20.0% in 2010
  • Operating loss declined by 48.3% to $0.6 million from $1.2 million in 2010
  • Net loss improved to $0.7 million, or $0.01 per share, compared to a loss of $1.1 million, or $0.04 per share in 2010

Tony Ker, CEO of Ridgeline Energy Services, commented, "Fiscal 2011 was a transformational and successful year for Ridgeline Energy. Most notably, we signed our first commercial agreement to treat frac flowback water in December 2010 with a prominent oil and gas company, progressing from initial bench tests to a commercial design in less than a year. Since signing this agreement, we have re-designed our unit to achieve throughput of over 12,000 barrels per day, a 400% increase in volume over our original design. Our technology has withstood the harsh winter in NE British Columbia and has demonstrated we can operate our technology under the toughest environmental conditions."

"We believe we now operate the most cost-effective system for treating frac flowback water, and we are developing additional uses for the technology including the pre-treatment of water not currently suitable for fracking, so as to provide a water supply from non-surface sources. We believe our technology will be equally effective within the sizable oil sands industry for tailings pond water treatment or SAGD (Steam Assisted Gravity Drainage) to re-use and recycle wastewater. We are close to completing the acquisition of DHS, which will solidify our ownership of the intellectual property, and we expect this transaction to be completed by the end of September or early October."

"We are very pleased with our solid financial performance in fiscal 2011 with revenue increasing 25% and gross profit improving 117%. In fact, we achieved over $3.8 million in sales during the fiscal fourth quarter alone, making it one of our strongest quarters in the Company's history. Excluding $681 thousand of startup research expenses related to our new water treatment technology, as well as $244 thousand of expenses related to discontinued operations within our water division we would have achieved positive income from operations. Looking ahead we expect to see our sales growth continue as we accelerate the roll-out of our water treatment technology, and believe we can maintain and improve margins as water treatment and Ridgeline GreenFill become a larger percentage of our overall revenue."

Ridgeline Water Inc. (RWI)

In May of 2010 the Company signed a General Partnership Agreement ("GPA") with Danzik Applied Sciences LLC ("DAS") to work on developing a technology to service frack flowback water. By December of 2010 the Company had signed its first Commercial agreement to treat frack flowback water. The Company achieved full commissioning of the unit in May 2011, and is now operating its first commercial facility in the Horn River basin of northeast British Columbia. Since commissioning, the initial target rate of 3,000 barrels per day has improved significantly to over 12,000 barrels per day with other operating costs also declining. Energy consumption and other consumables all declined to drive the unit cost of production down without any significant change in total capital costs required. The Company is now in active and proposed beta and pilot tests with over a dozen major oil and gas companies.

The Company will post on its website a video of a water treatment unit in operation along with analytical results of the water being treated.

Ridgeline Environment Inc. (REI)

REI, which provides environmental consulting, project management and soil remediation services had a turnaround year with revenue increasing 18.5% to $10.15 million from $8.56 million in 2010. Operating profit for the subsidiary improved to $2.57 million from $794 thousand in 2010. The improvement was the result of several key factors including improvement in market demand as well new cost controls and more efficient utilization of staff resources. As a result, gross margins for REI improved to 34.6% from 20.0% in 2010.

The mid- to long-term growth potential for REI's environmental services remains compelling. Many oil and gas producers have a backlog of worksites requiring environmental assessment and/or remediation of contaminated soils in order to comply with current environmental laws and standards. Over the next several years the number of upstream and midstream worksites and facilities requiring environmental assessment and/or remediation prior to abandonment will continue to increase, as the Western Canadian basin matures.

Ridgeline GreenFill (RGI)

RGI, which is engaged in the provision of treatment for hydrocarbon contaminated soils at GreenFill Treatment Site facilities, was launched in January 2009, and in its first year of commercial operations generated revenue of $1.07 million and a pre-tax profit of $281,000.

RGI has strategically located its first facilities in Alberta through partnerships with local government bodies. In exchange for a percentage of the tipping fees and provision of daily cover and capping material, municipal or town owned landfills provide the land for the construction of treatment facilities and scale service.

Most recently, in June 2011, the Company received an amended permit to construct a centralized soil management and treatment facility at Lloydminster, Saskatchewan, the first approval of its kind issued by the Saskatchewan Ministry of Environment. This approval opens the door for additional soil treatment facilities in Saskatchewan which will complement the Company's Alberta approvals and facilities at Drumheller. Ridgeline has agreements with four other municipalities in Alberta to build and construct GreenFill facilities within the footprint of the municipal landfill.

The Company plans to continue building and operating additional soil treatment sites throughout western Canada.

Financial Reporting

The Company announced that its next financial report will include a conversion to the new IFRS accounting standards. Issues related to the delay in reporting 2011 year end financials were a combination of installing a new accounting system, a new controller, a new CFO, the new General Partnership Agreement and a complex agreement with a client for Ridgeline's new water treatment services (capital and operating). The Company is further enhancing its reporting procedures to minimize the likelihood of delays in future periods.

About Ridgeline Energy Services Inc.

Ridgeline Energy Services Inc. (TSX VENTURE:RLE) is an environmental technology and consulting company focused on waste management in the oil and gas industry. Through its subsidiary Ridgeline Water Inc., the Company is developing proprietary technology capable of efficiently treating large volumes of contaminated water generated by oil and gas producers. The Company is working with energy majors in the application of proprietary technology for effective treatment of water for hydraulic fracturing, oil sands process water (SAGD and tailings ponds) and to recycle the water used in these oil and gas industry applications. Through its environmental consulting and remediation subsidiaries, Ridgeline Environment Inc. and Ridgeline GreenFill Inc., the Company has built a reputation as an established player in the provision of environmental services to Western Canada's large and growing oil and gas industry. The Company trades on the TSX Venture Exchange under the symbol "RLE". Additional information is available on the Company's website at: http://www.ridgelinecanada.com.

"This news release may contain forward-looking statements. Forward-looking statements address future events and conditions and therefore, involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. Such information is subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward-looking information. Readers are cautioned not to place undue reliance on forward-looking information, as no assurances can be given as to future results, levels of activity or achievements."

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