investor update - FirstEnergy Capital

INVESTOR UPDATE
www.secure-energy.ca | November 2012 | TSX: SES
COMPANY OVERVIEW
2
PROCESSING, RECOVERY & DISPOSAL
“PRD” DIVISION
DRILLING SERVICES
“DS” DIVISION
Rapid growth of
environmental and
mid-stream
offerings to ensure
all customers have a
complete solution
for oil/gas fluids
and solids
Largest supplier of
drilling fluids and
related services in
Western Canada,
operating under
trade names
Marquis Alliance
and XL Fluid
Systems
GROWTH AND PERFORMANCE
Established March 2007
AGGRESSIVE
$1.0 Billion
Organic growth strategies
700
Year-Over-Year*
57% EBITDA
per share
growth
17
Employees
218%
Enterprise
Value (approx.)
PRD
Facilities
CAGR
2008-2011 Revenue
120%
Year-Over-Year ***
Revenue Growth
Opportunity Rich + Strong Balance Sheet + Right People
3
$uccess
*For 9 months ending September 30, 2012
** Revenue excludes oil purchase and resale
BOARD OF DIRECTORS
Murray Cobbe, Lead Director*
Chairman of Trican Well Service,
Director of Pason Systems, Bellatrix Exploration
Dave Johnson*
Chairman of Progress Energy Resources,
Director of Pinecrest Energy
Brad Munro*
Former CCS Lead Director, Director of Guide
Exploration, 49 North Resource Fund, Winalta
Kevin Nugent, C.A.*
Director of Savanna Energy Services, Trican Well
Service, Former CEO of NQL Energy Services
Rene Amirault, President and CEO
Secure Energy Services
George Wadsworth, President of Marquis Alliance
Drilling Services Division of Secure
4
*Independent Directors
BUSINESS STRATEGY
Organic Growth
in key
underserviced
and capacity
constrained
markets
Expand
Complementary
and Recycling
Services at
Facilities
Exploit the Value Chain from Cradle to Grave,
focusing on Environmental and Midstream Services
Acquire
midstream
assets and
facilities from
producers
5
Acquisitions that
complement
existing network
SECURE VALUE CHAIN
DRILLING
• Drilling fluids
• Solids Control
• Drilling Waste
Management
• Drill cuttings to Landfill
• Spent mud
• Recycling of
hydrocarbon drilling
mud
Exploit the value
chain from cradle to
grave, with a focus on
environmental and
midstream services
COMPLETIONS
•
•
•
•
Completion waste
Waste water
Frac sand
Water, oil, acid fracs
• Recycling of frac water
• Frac water supply and
storage
PRODUCTION
• Treating and
terminalling of crude
oil
• Produced water
• Slop oil and tank
bottoms
• Pipeline spills
• Plant maintenance
WELL
WORKOVER &
PRODUCTION
ENHANCEMENT
•
•
•
•
Swabbing
De-waxing
Acidization
Re-completion
fluids
WELL
ABANDONMENT
& RECLAMATION
• Fluids and cement
• Contaminated soil to
landfill
• Decommission
Facilities
• Environmental and
Project Management
Services
6
PRD DIVISION
Drilling Fluids
Oilfield Waste Processing
Recycling Waste
Oil
Crude Oil
Emulsion
Treatment
Recycling
Oil Based
Muds
Clean Oil
Terminalling
7
Crude Oil
Marketing
Water
Disposal
Oilfield Landfill
Disposal
Recycling Frac Water
Aerial shot of Drayton Valley FST
WILLESDEN GREEN CLASS II OILFIELD
LANDFILL
8
PRD FACILITIES
FULL SERVICE
TERMINALS
1. LA GLACE
2. FOX CREEK
3. DAWSON
4. KOTCHO
5. NOSEHILL
6. OBED
7. SOUTH GP
8. DRAYTON
9. SILVERDALE
10. JUDY CREEK (Q1/13)
11. ROCKY MTN HOUSE
(Q1/13)
STAND ALONE
WATER DISPOSAL
FACILITIES
12. EMERSON
13. BRAZEAU
14. WILD RIVER
15. 13 MILE CORNER
16. WATFORD CITY
LANDFILLS
17. PEMBINA
18. FOX CREEK (Q4/12)
19. SADDLE HILLS (Q3/13)
20. SOUTH GP
21. WILLESDEN GREEN
9
PRD – COMPLETE FRAC WATER SOLUTIONS
SECURE’s Raised Panel Frac Ponds
are the most efficient solution to
Frac Water Management.
Less space required
Quick setup and dismantle time
Insulated panels for increased
heat retention
3000m3 or 4400m3 capacity models are available.
10
Raised
Panel
Frac
Reduced transportation costs
Multiple sizes available
Ponds
SECURE’S “PRD” GROWTH PROFILE
Recent Highlights
• Wild River permanent SWD Facility
online Q2/2012
• Acquisition of two SWD Facilities in North
Dakota
• Expansions at OBED/Dawson/Drayton/Fox
Creek FST’s to be completed by Q3/2012
• Judy Creek and Rocky Mountain House
FST’s under construction
• Fox Creek Landfill to be completed in
Q4/2012
Growth by Facility
20
15
10
5
0
SWD
11
FST
Landfill
DS DIVISION
Drilling Fluids
|
Environmental Services
|
i
i
i
Oil and Water
Based Muds
Drilling Waste Management
Environmental Sciences
Centrifuge and
Tank Rental
Integrated Solutions for Our Customers
12
Solids Control
DS DIVISION
Legend
Drilling Fluids Stock Points
Drilling Fluids Hub
Liquid Stock Points
MA Lab Facilities
Solids Control Rentals
MA Corporate Offices
FST OBM Blending/Storage Facilities
XL Fluids Operations
Marquis Alliance Operations
New Acquisition of Imperial Drilling Fluids Engineering Inc.
Innovative and Patented Technologies
leveraged to serve the expanding
Deep/Horizontal, SAGD Drilling Markets
Acquisition of Imperial Drilling Fluids
Engineering Inc. servicing Niobrara and
Cordell Shale Plays
13
DS DIVISION
Integrated Process for Recycling Oil
Based Mud (“OBM”)
OBM Blended at
Facility
SES facility
processes and
treats waste
OBM waste
delivered to SES
facility
Innovative Recycling of OBMs
through the combined technologies
and resources of Secure and Marquis
Alliance:
OBM used to
drill well
o
Oil can be recovered from
multiple sources:
•
Cuttings sent to landfill
•
‘Spent’ Oil Based Muds
OBM
Waste
Generated
o
OBM blending facilities will be
built at strategic FST locations
South GP
Synergies
14
Recycle Oil
Drayton Valley
Reduce Transportation Costs
Integrated Solutions to Manage
Fluids & Solids
OBED
Fox Creek
BUSINESS DRIVERS
Western Canada Drilling Activity
30,000
90.0%
25,000
75.0%
20,000
60.0%
15,000
45.0%
Resource plays are the
focus of E&P Companies
now more than ever
(Bakken, Cardium, Deep
Basin, Duvernay, Montney,
Viking)
Trend towards
10,000
30.0%
5,000
15.0%
-
Deeper Wells
with longer horizontal
legs means record
meters drilled
0.0%
2001
2002
Total Wells Completed
2003
2004
2005
2006
2007
Total Metres Drilled (000s metres)
2008
2009
2010
2011
Hz/Directional Wells as % of all Wells Drilled
Sources: Daily Oil Bulletin
Greater volumes of
drilling waste and
15
completion fluids
Customers demand very
specialized drilling muds
in greater volumes for technically
challenged wellbores
BUSINESS DRIVERS
Treatment and
Disposal Services
for Oil & Gas
bi-products continue to
be in high demand
Total Producing Wells in Western Canadian
Sedimentary Basin continue to climb
Western Canada Producing Oil & Gas Wells
250,000
215,400
Regulatory
and Environmental
Standards are pushing
Tighter
E&P companies to
outsource waste and
water handling
10 Year Growth Rate 62%
200,000
150,000
133,400
100,000
50,000
0
Crude Oil
Source: Canadian Association of Petroleum Producers (CAPP)
*2011 data estimate: IHS Accumap
16
Natural Gas
BUSINESS DRIVERS
WCSB Oil & Gas Wells
Associated Water Production
3,000,000
Maturing Oil and
Gas Reservoirs with
2,500,000
mounting water-cuts
2,000,000
1,500,000
Produced water
increasing
1,000,000
8% per year
500,000
0
2001
Source: IHS
Accumap
17
2002
2003
2004
2005
2006
2007
2008
2009
Water produced from Gas Wells (cubic metres/month)
Water produced from Oil Wells (cubic metres/day)
2010
2011
2012 REVENUE MARKET SHARE
Producers continue to
Production Bi-Products
outsource their water
continue to grow as the conventional
WCSB matures
and waste handling needs
10%
21%
52%
13%
Secure CCS Other
Source: Internal estimates
18
Newalta
4%
Oil & Gas Producers
2012 Revenue estimated $1.6 Billion/Year
PROFITABLE GROWTH
Track Record of Profitable Growth
218% CAGR of
Revenue
from 2008-2011
$0.80
$0.70
$0.60
CAGR EBITDA/Share 2008-2011 = 241%
$ per Diluted Share
$0.50
$0.40
$0.30
$0.20
$0.10
$0.00
($0.10)
2007
2008
EBITDA per share
2009
2010
2011
Net Earnings per share
*Revenue figures exclude oil purchase and resale
19
FINANCIAL RESULTS
Year-to-Date September 30, 2012
Comparison*
YTD/12
PRD Division Revenue
Drilling Services Division Revenue**
Total Revenue***
EBITDA
EBITDA per Share:
Basic
Diluted
* All amounts in thousands, except per share amounts.
** Includes revenue from acquisition date of June 1, 2011.
*** Revenue excludes oil purchase & resale.
57% YTD
YOY EBITDA
per share growth
20
93,335
190,502
283,836
71,264
YTD/11
56,021
73,031
129,052
37,179
$0.76 $
$0.74 $
0.50
0.47
% Change
67%
161%
120%
92%
52%
57%
BALANCE SHEET STRENGTH
September 30, 2012
Positive Working Capital
77.8
Long Term Debt
89.2
Cash & Available Debt*
220.1
R12 EBITDA
96.0
Consolidated Debt to EBITDA Ratio
1.20
Long Term Debt to Equity
Substantial room on our debt
covenants
19%
* $300 million 3 year term credit facility.
21
($MMs)
Yes
2012 CAPITAL BUDGET
Capital Expenditures by Year
DRILLING DIVISION: $28MM
Growth Capital:
Expansion Capital:
Sustaining Capital:
Acquisitions:
New West Drilling Fluids:
Imperial Drilling Fluids:
$14MM
$2MM
$2MM
Growth Capital:
Expansion Capital:
Sustaining Capital:
Acquisitions:
DRD Saltwater Disposal:
200
$3MM
$7MM
PRD DIVISION: $178MM
•
•
•
•
250
$110MM
$36MM
$2MM
$30MM
$MM
•
•
•
•
300
187
150
100
166
6
50
0
12
59
23
10
2007
2008
2009
Organic
Total Capital Budget: $206MM (est.)
22
40
95
52
2010
2011
2012 (est.)
Acquisitions
SUMMARY
Environmental and Midstream Services
Exploiting the Value Chain from cradle to grave
Facility Expansion
Opportunity rich from organic growth
Strong Balance Sheet
Expand through accretive acquisition opportunities
Employer of Choice
Based on leadership, corporate values and team culture
Entrepreneurial, Fun Culture
“Help the Customer” Attitude
Driven to be Better
Stay Focused and Keep it Simple
23
FORWARD-LOOKING STATEMENTS AND INFORMATION
•
•
•
•
•
•
24
This presentation contains forward-looking statements pertaining to: general market conditions; the oil and natural gas industry; activity levels in the oil and gas sector,
including drilling levels; commodity prices for oil, NGLs and natural gas; demand for the Corporation's services; expansion strategy; the 2012 capital program; the amounts of
the PRD and DS divisions' 2012 capital budgets and the intended use thereof; debt service; capital expenditures; completion of facilities; future capital needs; access to capital;
acquisition strategy; the balance of the Corporation's capital spending on new full service terminals and landfills; and oil purchase and resale revenue.
Forward-looking information concerning expected operating and economic conditions are based upon prior year results as well as assumptions that increases in market activity
and growth will be consistent with industry activity and growth levels in similar phases of previous economic cycles. Forward-looking information concerning the availability of
funding for future operations is based upon assumptions that sources of funding which the Corporation has relied upon in the past will continue to be available to the
Corporation on terms favorable to the Corporation and that future economic and operating conditions will not limit the Corporation's access to debt and equity markets.
Forward-looking information concerning the relative future competitive position of the Corporation is based upon assumptions that economic and operating conditions,
including commodity prices, crude oil and natural gas storage levels, interest rates, the regulatory framework regarding oil and natural gas royalties, environmental matters,
the ability of the Corporation to successfully market its PRD (as defined herein) services in the Western Canadian Sedimentary Basin (“WCSB”) and its DS division (as defined
here) in the Western Canadian Sedimentary Basin, Eastern Canada, the Rocky Mountain region (consisting of Colorado, Wyoming, Montana and Utah), North Dakota and India
will lead to sufficient demand for the Corporation's services, that the current business environment will remain substantially unchanged, and that, present and anticipated
programs and expansion plans of other organizations operating in the energy service industry will result in increased demand for the Corporation's services. Forward-looking
information concerning the nature and timing of growth is based on past factors affecting the growth of the Corporation, past sources of growth and expectations relating to
future economic and operating conditions. Forward-looking information in respect of the costs anticipated to be associated with the acquisition and maintenance of equipment
and property are based upon assumptions that future acquisition and maintenance cost will not significantly increase from past acquisition and maintenance costs. Many of
these factors, expectations and assumptions are based on management's knowledge and experience in the industry and on public disclosure of industry participants and
analysts relating to anticipated exploration and development programs of oil and natural gas producers, the effect of changes to regulatory, taxation and royalty regimes,
expected industry equipment utilization in the WCSB, Eastern Canada, the Rocky Mountain region, North Dakota and India, and other matters. The Corporation believes that
the material factors, expectations and assumptions reflected in the forward-looking statements and information are reasonable; however, no assurances can be given that
these factors, expectations and assumptions will prove to be correct.
Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate
indications of whether such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in these forward-looking
statements, including, but not limited to, those factors discussed below and under the heading "Risk Factors" and those discussed in the Corporation's MD&A of the audited
December 31, 2011 financial statements and the most recent Information Circular and quarterly reports, material change reports and news releases. The Corporation cannot
assure investors that actual results will be consistent with the forward-looking statements and readers are cautioned not to place undue reliance on them.
Although forward-looking statements contained in this presentation are based upon what the Corporation believes are reasonable assumptions, the Corporation cannot assure
investors that actual results will be consistent with these forward-looking statements. The forward-looking statements in this document are expressly qualified by this
cautionary statement. Unless otherwise required by law, Secure does not intend, or assume any obligation, to update these forward-looking statements.
Certain supplementary measures in this presentation do not have any standardized meaning as prescribed under IFRS and, therefore, are considered non-GAAP measures.
These measures are described and presented in order to provide information regarding the Corporation’s financial results, liquidity and its ability to generate funds to finance
its operations. These measures should not be used as an alternative to IFRS measures because they may not be consistent with calculations of other companies. These nonGAAP measures, and certain operational definitions used by the Corporation, are further explained in Corporation's MD&A of the audited December 31, 2011 financial
statements.
Expansion, growth or acquisition capital are capital expenditures with the intent to expand or restructure operations, enter into new locations or emerging markets, or
complete a business acquisition. Sustaining capital refers to capital expenditures in respect of capital asset additions, replacements or improvements required to maintain
ongoing business operations. The determination of what constitutes sustaining capital expenditures versus expansion capital involves judgment by management.