Ridgeline Energy Services Inc.

Ridgeline Energy Services Inc.

September 29, 2011 13:52 ET

Ridgeline Reports 74.2% Increase in Revenue for the First Quarter of Fiscal 2012 due to Strong Water Division Revenues

Provides Update on Signing of Three New Development Agreements in Canada and the United States

CALGARY, ALBERTA--(Marketwire - Sept. 29, 2011) - Ridgeline Energy Services Inc. (TSX VENTURE:RLE) ("Ridgeline"), an energy services technology company focused on the treatment of wastewater in the oil and gas, commercial and industrial wastewater sectors, announces that it has filed its first quarter fiscal 2012 financial results for the three months ending June 30, 2011. The company has also provided an update on the commercial progress of its proprietary water treatment system.

Q1 2012 Financial Highlights:

  • Revenue increased 74.2% to $3.52 million from $2.02 million in Q1 2011 due to strong water division sales
  • Gross profit increased to $1.54 million from $0.64 million in Q1 2011
  • Operating income increased to $0.74 million from a loss of $0.21 million for the same period last year
  • Net income increased to $0.54 million from a loss of $0.27 million in Q1 2011
  • Net loss attributable to Ridgeline Energy Services was $0.47 million, or $0.01 per share, versus a loss of $0.13 million, or $0.00 per share, for the same period last year; net loss attributable to Ridgeline Energy Services included a non-cash allocation of $1.0 million to non-controlling interests, which will no longer be recorded upon completion of the planned acquisition of Danzik Hydrological Sciences, LLC

Tony Ker, CEO of Ridgeline Energy Services, commented, "Ridgeline's water treatment technology is gaining broad recognition as a commercially effective solution for treating produced and flowback water from oil & gas shale hydraulic fracturing ("fracking") operations. Ridgeline has signed two more development agreements with major North American oil and gas companies to test and treat frack and produced water. These are important steps in Ridgeline's growth strategy, as research shows that the wastewater market opportunity is quite sizable and underserved. Initially, Ridgeline will focus on the frack and produced water markets as there is strong demand and a shorter sales cycle than some of the other potential markets. However, as the company progresses, Ridgeline will apply the technology to substantial opportunities in the oil sands, chemical flood situations and industrial wastewater opportunities such as the current project in Los Angeles California."

Mr. Ker continued, "Establishing Ridgeline's initial commercial project on the gas shale fracking operation in the harsh climate of Northern BC was a true test of our system's ability. After successfully launching this project over six months ago we are confident our technology can adapt to nearly any environment. Operational goals for this project have exceeded our initial specifications, particularly in regard to energy consumption, flow rates and operating specifications. Our success on the first project with this client has led to the installation of a different type of system, the Single Train Commercial Installation, for treating produced water in the Leonard Shale area of New Mexico. This latest agreement marks another major milestone and illustrates our ability to meet the specific needs of the client. We look forward to rolling out our technology on similar projects with this client in the near future."

Ridgeline Energy Services Inc. (Amalgamated Companies)

For the first quarter of fiscal 2012 ended June 30, 2011, Ridgeline recorded its first significant revenue of $2,231,945 from the Water division ("RWI"), with the installation and connection of a water treatment unit in N.E. British Columbia. Total revenue for the first quarter of fiscal 2012 was $3,518,396, 74% higher than the comparable quarter in fiscal 2011 due primarily to the contribution from RWI. The increase in revenue was partially offset by lower revenues from the Environment division ("REI") due to significant weather restraints during the quarter, which prevented staff from being able to complete field work. Heading into the second quarter of fiscal 2012, weather conditions have improved and field work has returned to more normal levels.

Gross profit for the quarter was $1,541,643 compared to $638,035 for the same period last year. The increase in gross profit and gross margin was largely attributable to the increase in sales related to the installation and connection of a water treatment unit in N.E. British Columbia.

Total operating expenses declined to $797,868 compared to $848,817 in the first quarter of fiscal 2011, primarily due to research expenses for the Water division that are now being classified as capitalized development expenditures. However, in the future, when the company applies the technology to other markets, research expenses could be incurred. The research cost savings were partially off-set by higher staffing costs as the Company established an infrastructure that will enable the Water division to expand.

Net income increased to $547,775 versus a loss of $273,864 in the first quarter of fiscal 2011. Net loss attributable to Ridgeline Energy Services was $471,705, or $0.01 per share, versus a loss of $133,042, or $0.00 per share, for the same period last year; net loss attributable to Ridgeline Energy Services included a non-cash allocation of $1.0 million to non-controlling interests, which will no longer be recorded upon completion of the planned acquisition of Danzik Hydrological Sciences, LLC.

On June 18, 2011 the company entered into a lease for a building in Scottsdale, Arizona. The building will be used to manufacture water treatment units, laboratory work, research and development. The company also incorporated a wholly owned subsidiary, Ridgeline Energy Services (USA) Inc., on June 24, 2011 to facilitate manufacturing and development of services to the oil and gas industry in the United States.

Ridgeline Water Inc. (RWI), subsidiary

In 2010 the Company embarked on an ambitious business development project to advance technology for treating frack flowback and produced water generated in the hydraulic fracturing of wells drilled to produce natural gas and oil from shale formations. On December 1, 2010, Ridgeline entered into an agreement with a customer to construct a wastewater treatment unit for their specific use (the "Unit"). The customer paid an initial fee of $2,321,000 for access to the Unit and the company's propriety technologies. Although funding for the construction of the Unit was provided by the customer, title and operation of the Unit remains with Ridgeline in order to protect the intellectual property and proprietary technology. Gains in throughput and operating efficiencies have enabled the Company to develop additional uses for the technology, such as the pre-treatment of water not suitable for fracking, so as to provide a water source from non-surface reservoirs. The Company has also identified and is pursuing opportunities for application of the technology within the oil sands industry for tailings pond water treatment or SAGD (Steam Assisted Gravity Drainage) to re-use and recycle the wastewater.

RWI has completed construction of one Mobile Development Laboratory (MDL) for field work that is currently in operation in Los Angeles CA. Two additional MDLs are nearing completion for work in western Canada. The goal of the MDLs is to do in-the-field analytical work to characterize the water and determine the treatment prescription for many different types of water situations in the oil and gas industry. From this information, RWI will be able to determine cost models for each situation so that contracts can be negotiated with the client.

Market indications for RWI services are very positive and management's main focus will be to complete the field trials, convert the field trail to a commercial agreement, construct the facilities and continue to build the business.

Ridgeline Environment Inc. (REI), subsidiary

REI's revenue for the first quarter of fiscal 2012 was $1,282,173 compared to $1,961,873 for the same period last year. The decline in revenue was due entirely to an abnormal extended period of inclement weather preventing REI professionals from doing the extensive field work required. Heading into the second quarter of fiscal 2012, seasonal conditions have improved and work has resumed to normal levels. The demand for the balance of 2012 remains strong and very positive for REI.

Ridgeline GreenFill (RGI), subsidiary

June 20, 2011, Ridgeline announced that it had received an amended permit to construct a centralized soil management and treatment facility at Lloydminster, Saskatchewan. This is the first approval of its kind issued by the Saskatchewan Ministry of Environment and follows similar approvals the Company has received in Alberta. The new facility will be used to categorize, treat and reuse impacted soils for landfill cover and other uses. Ridgeline's proprietary technology utilizes biological, mechanical and chemical means to safely break down hydrocarbons into CO2 and water, enabling once contaminated soil to be reused in landfill operations or other applications.

RGI, although poised for a growth year, has faced the same delays as REI as a result of extended wet weather. The division was scheduled to initiate the construction phase on four facilities this fiscal period. The first facility, Lloydminster, is scheduled to be completed and in operation by October 2011 and the second facility is scheduled to be in operation by December 2011. The remaining two facilities will be delayed for construction until next year. The delays are a direct result of weather related issues with heavy wet ground conditions in the spring / early summer and subsequent heavy rainfall events in July and early August. Weather has also delayed revenues for the current facilities of (Drumheller and Tilley) as client field work could not be carried out that would provide material for processing at the facility. Demand for RGI's services remains strong and the Company looks forward to continued growth in this area.

Financial Reporting

The financial statements for Ridgelines Q1 2011 period and all comparative periods are the first the Company has prepared in accordance with International Financial Reporting Standards ("IFRS"). For periods up to and including the year ended March 31, 2011, the Company prepared its financial statements in accordance with Canadian generally accepted accounting principles. Going forward, all current and comparative financial reporting will be pursuant to IFRS.

About Ridgeline Energy Services Inc.

Ridgeline Energy Services Inc. 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 its 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: www.ridgelinecanada.com.

For a video on hydraulic fracturing and our proprietary water treatment technology please follow this link: Ridgeline Video Presentation.

The preceding discussion and analysis, prepared as of September 29, 2011, should be read in conjunction with the interim financial statements for the quarter ended June 30, 2011, and related notes attached thereto (the "Financial Statements") and MD&A for the same period, which are prepared in accordance with International Financial Reporting Standards. All amounts are stated in Canadian dollars unless otherwise indicated. Statements in this release that are not historical facts but are forward-looking involve known and unknown risks and uncertainties that could cause actual results to vary considerably from these statements.

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.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

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