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SECURE Energy Services Announces Operational Highlights and Third Quarter 2018 Adjusted EBITDA of $53.7 million

CALGARY, Oct. 30, 2018 /CNW/ - Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX – SES) announced today its operational and financial results for the three and nine months ended September 30, 2018. These results should be read in conjunction with the management's discussion and analysis ("MD&A") and the interim consolidated financial statements and notes thereto for the three and nine months ended September 30, 2018 of Secure which are available on SEDAR at www.sedar.com.

2018 THIRD QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS

In the third quarter, the Corporation continued to execute a disciplined growth strategy, focused on the PRD division which achieved a 36% increase in Adjusted EBITDA1 over the 2017 comparative period resulting from new and expanded facilities, recurring cash flows generated from oil production processing and disposal, and higher terminalling and crude oil marketing revenue. Additionally, higher crude oil and liquids prices resulted in increased industry activity in the Corporation's core operating regions and increased recovered oil pricing. This, combined with strong contributions from the Corporation's OS and DPS divisions, resulted in an overall Adjusted EBITDA of $53.7 million for the three months ended September 30, 2018. The Corporation achieved net income during the quarter of $6.8 million, resulting in income of $0.04 per weighted average common share.

Secure continues to identify and develop midstream infrastructure to expand capacity and optimize capabilities at existing facilities. These efforts help Secure's customers by increasing their operating netbacks and improving their capital efficiency. The Corporation's Gold Creek and Tony Creek water disposal facilities commenced operations in July 2018 and expand Secure's footprint in the liquids-rich Montney region in Alberta. In total, over half of the Corporation's 51 facilities are now located in the Montney and Duvernay regions where production growth and water disposal requirements are higher than the rest of the Western Canadian Sedimentary Basin ("WCSB"). With a significant presence in areas where customers have been most active in the WCSB, Secure has been able to grow volumes despite overall WCSB activity being relatively flat in the quarter and year to date. Additionally, Secure's footprint of facilities in North Dakota generated a 58% increase in revenue from the U.S. during the three months ended September 30, 2018 over the same period last year as higher oil prices and improved market access continue to attract investment in the Bakken.

During the third quarter, the Corporation completed construction and commissioning of the light oil feeder pipeline system and receipt terminal in the Kindersley-Kerrobert region of Saskatchewan ("Kerrobert Light Pipeline System") at the estimated in-service date of October 1, 2018. The Kerrobert Light Pipeline System provides a capital efficient transportation solution for Secure's customers operating in the region and has operational flexibility to accommodate production growth. The $75 million project is supported by long-term commitments, providing Secure with recurring fee-for-service cash flows. The project is expected to contribute to Adjusted EBITDA during the fourth quarter. The Corporation has also commenced construction of two additional storage tanks at the receipt terminal in Kerrobert, which are expected to be commissioned in the second quarter of 2019 and offer a solution during periods of apportionment resulting from egress challenges.

Secure continues to take a disciplined approach to maintaining a strong balance sheet. This provides the Corporation with considerable flexibility to continue to grow the business organically and execute on strategic acquisition opportunities that align with the profitable growth strategy of Secure. Additionally, during the third quarter, the Corporation returned $11.0 million of cash flow to shareholders through the monthly dividend, and purchased and cancelled 1,613,400 common shares of the Corporation ("shares") at a weighted average price per share of $7.52 for a total of $12.1 million under the normal course issuer bid ("NCIB") approved at the end of May 2018.

The operating and financial highlights for the three and nine month periods ending September 30, 2018 and 2017 can be summarized as follows:


Three months ended September 30,

Nine months ended September 30,

($000's except share and per share data)

2018

2017

% change

2018

2017

% change

Revenue (excludes oil purchase and resale) 

182,469

162,596

12

505,416

418,681

21

Oil purchase and resale 

646,565

451,143

43

1,748,986

1,229,971

42

Total revenue

829,034

613,739

35

2,254,402

1,648,652

37

Adjusted EBITDA (1)

53,746

43,820

23

132,711

106,034

25

Per share ($), basic

0.33

0.27

22

0.81

0.65

25

Per share ($), diluted

0.33

0.27

22

0.80

0.64

25

Net income (loss)

6,809

(179)

3,904

5,985

(10,268)

158

Per share ($), basic and diluted

0.04

-

100

0.04

(0.06)

167

Cash flows from operating activities

19,879

2,864

594

127,205

85,947

48

Per share ($), basic 

0.12

0.02

500

0.78

0.53

47

Per share ($), diluted

0.12

0.02

500

0.77

0.52

48

Funds flow from operations (1)

48,407

54,326

(11)

117,597

111,235

6

Per share ($), basic 

0.30

0.33

(9)

0.72

0.68

6

Per share ($), diluted 

0.29

0.33

(12)

0.71

0.67

6

Dividends per common share

0.06750

0.06375

6

0.2025

0.1850

9

Capital expenditures (1)

43,478

78,238

(44)

136,322

140,022

(3)

Total assets

1,591,913

1,488,328

7

1,591,913

1,488,328

7

Long-term liabilities

522,304

379,443

38

522,304

379,443

38

Net debt (1)

250,061

151,697

65

250,061

151,697

65

Common shares - end of period 

161,945,330

163,285,511

(1)

161,945,330

163,285,511

(1)

Weighted average common shares







basic 

162,286,387

163,128,460

(1)

163,600,546

162,659,701

1

diluted

164,911,044

164,661,749

-

165,779,889

164,980,327

-

(1)Refer to "Non-GAAP Measures, Additional GAAP Measures and Operational Definitions" for further information.


 

  • REVENUE OF $829.0 MILLION AND $2.3 BILLION FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018
  • ADJUSTED EBITDA OF $53.7 MILLION AND $132.7 MILLION FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018
  • NET INCOME OF $6.8 MILLION AND $6.0 MILLION FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018
  • FINANCIAL FLEXIBILITY



Sept 30, 2018

Dec. 31, 2017

Threshold

Senior debt to EBITDA

1.5

1.1

3.5

Total debt to EBITDA

2.2

1.9

5.0

 

  • CAPITAL EXPENDITURES OF $43.5 MILLION AND $136.3 MILLION FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018


PRD DIVISION OPERATING HIGHLIGHTS


Three months ended Sept 30,

Nine months ended Sept 30,

($000's)

2018

2017

% Change

2018

2017

% Change

Revenue 







PRD services (a)

89,579

66,013

36

250,930

193,761

30

Oil purchase and resale service

646,565

451,143

43

1,748,986

1,229,971

42

Total PRD division revenue

736,144

517,156

42

1,999,916

1,423,732

40








Direct expenses 







PRD services (b)

35,913

27,416

31

107,160

83,778

28

Oil purchase and resale service 

646,565

451,143

43

1,748,986

1,229,971

42

Total PRD division direct expenses

682,478

478,559

43

1,856,146

1,313,749

41








Segment Profit Margin (1)  (a-b)

53,666

38,597

39

143,770

109,983

31








Segment Profit Margin (1)  as a % of revenue (a)

60%

58%


57%

57%









(1)Refer to "Non-GAAP Measures, Additional GAAP Measures and Operational Definitions" for further information.

 

Highlights for the PRD division for the three and nine months ended September 30, 2018 included:

  • Record revenue generated from PRD services of $89.6 million for the three months ended September 30, 2018, and $250.9 million in the year to date, increased by 36% and 30% from the 2017 comparative periods. The increase in revenue was primarily driven by higher facility volumes resulting from new facility additions and expansions at certain of the Corporation's existing facilities in 2017 and 2018 to date, and increased activity levels in response to higher average crude oil prices at the Corporation's facilities in North Dakota, which also resulted in higher recovered oil revenues;
  • The majority of the Corporation's facilities are located in high impact resource plays, such as the Montney and Duvernay regions, where producers have been most active in the WCSB. Fluids pumped from wells in these regions are also significantly higher than other regions of the WCSB, driving incremental volumes at Secure's facilities. In the past year, Secure has strategically added new facilities, including the Gold Creek and Tony Creek water disposal facilities in July 2018, and increased capacity for water disposal at various other facilities in these regions, including at the Dawson Creek and Fox Creek FSTs, Rycroft FSR and Big Mountain water disposal facility, in response to customer demand. Additionally, Secure completed the acquisition of Ceiba on August 1, 2017 which added ten facilities to Secure's footprint in the WCSB. These additions and expansions were the driving force behind a 42% and 35% increase in water disposal volumes in Canada during the three and nine months ended September 30, 2018 over the comparative periods of 2017;
  • Waste processing and solids disposal volumes at the Corporation's facilities in North Dakota increased significantly in the three and nine months ended September 30, 2018 contributing to a 58% and 54% increase in revenue generated from the U.S. from the 2017 comparative periods. Higher volumes at Secure's North Dakota facilities were a result of improved activity levels, including new drilling and frac completions as customers remain active in the Bakken. Higher drilling and completion activity has been driven by an increase in average crude oil prices over the prior period, and the commissioning of the Dakota Access Pipeline in June 2017 which has improved economics for delivering producers' product to market;
  • Recovered oil revenues increased 33% and 39% in the three and nine months ended September 30, 2018 from the 2017 comparative periods, driven by higher volumes as discussed above, and a marked increase in Canadian Light Sweet oil prices of 32% and 23% over the 2017 comparative periods;
  • Overall, disposal volumes increased by 25% and 22% in the three and nine months ended September 30, 2018 from the comparative periods in 2017 due primarily to increased produced and flowback water resulting from new facilities and increased capacity at existing facilities, as well as increasing water production as wells mature and improved industry activity;
  • Overall, processing volumes increased 1% and 9% in the three and nine months ended September 30, 2018 from the comparative periods in 2017 due primarily to higher waste processing volumes at the Corporation's North Dakota facilities. Drilling and completion activity in Canada has been relatively flat in the quarter and year to date as producers are taking a cautious approach to capital spending in light of wide crude oil pricing differentials, low gas prices and uncertainty with respect to the addition of pipeline capacity out of the WCSB;
  • During the three months and nine months ended September 30, 2018, refinery outages and a shortage of pipeline takeaway capacity resulted in large heavy oil differentials, reaching over $30 per barrel in the quarter and year to date, nearly double the 2017 levels. The volatility in the differential wide crude oil differentials provided Secure with an opportunity to work with customers at the Corporation's ten pipeline connected FSTs to improve their operating netbacks through higher realized pricing and lower transportation costs which also lead to higher revenue generated from this service line;
  • Oil purchase and resale revenue in the PRD division for the three and nine months ended September 30, 2018 increased to $646.6 million and $1.7 billion due to higher volumes resulting from increased industry activity and higher takeaway capacity at certain of the Corporation's pipeline connected full service terminals, and higher benchmark crude oil prices in the three and nine months ended September 30, 2018 over the comparative periods of 2017;
  • The PRD's segment profit margin as a percentage of revenue from PRD services for the three and nine months ended September 30, 2018 increased to 60% in the three months ended September 30, 2018 from 58% in the three months ended September 30, 2017. Segment profit margin as a percentage of PRD services revenue was 57% in both the nine months ended September 30, 2018 and 2017. As a percentage of PRD services revenue, segment profit margin increased over 2017 as a result of overall increased revenues while minimizing fixed and related costs, and higher recovered oil revenues and crude oil marketing revenues which carry high margins. These positive impacts were partially offset by increased variable costs related to personnel and higher facility repair and maintenance expenditures in the 2018 periods over 2017;
  • General and administrative ("G&A") expenses of $6.7 million and $18.9 million for the three and nine months ended September 30, 2018 increased from the comparative period balances of $4.3 million and $12.7 million. Although the Corporation continues to minimize G&A costs by streamlining operations where possible, PRD G&A expenses have increased primarily due to overhead requirements to support new service lines, facilities and expansions. As a percentage of revenue from PRD services, G&A expenses were consistent at 7% for the three months ended September 30, 2018 and 2017, and up slightly to 8% in the nine months ended September 30, 2018 from 7% in the 2017 comparative period.


OS DIVISION OPERATING HIGHLIGHTS


Three months ended Sept 30,

Nine months ended Sept 30,

($000's)

2018

2017

% Change

2018

2017

% Change

Revenue 







OnSite services (a)

29,617

36,542

(19)

87,824

80,490

9








Direct expenses







OnSite services (b)

23,149

28,151

(18)

69,778

62,290

12

Segment Profit Margin (1)  (a-b)

6,468

8,391

(23)

18,046

18,200

(1)








Segment Profit Margin (1)  as a % of revenue (a)

22%

23%


21%

23%









(1)Refer to "Non-GAAP Measures, Additional GAAP Measures and Operational Definitions" for further information.

 

Highlights for the OS division for the three and nine months ended September 30, 2018 included:

  • OS division revenue decreased by 19% to $29.6 million for the three months ended September 30, 2018 primarily as a result of lower revenue generated from project work and onsite water management and pumping services due to wet weather conditions in September 2018 resulting in project delays, and two large customer jobs in the third quarter of 2017 which were not repeated in the third quarter of 2018. The resulting decrease to revenue was partially offset by project work generated from new customers, including the completion of a large infrastructure demolition job for a government agency, and the introduction of new service offerings in the past year, including the management of scrap metal recycling programs for two major oil sands producers. Secure continues to seek opportunities of this nature as they provide Secure with a more stable stream of revenue over the life of the agreement;
  • OS division revenue increased 9% to $87.8 million in the nine months ended September 30, 2018 from the 2017 comparative period primarily due to higher activity levels in the oil and gas sector in the first half of the year as a result of improved commodity prices which led to increased customer activity, resulting in more project work and higher pumping and fluid storage rental activity;
  • Segment profit margin for the three and nine months ended September 30, 2018 of $6.5 million and $18.0 million decreased by 23% and 1% from the prior year comparative periods. As a percentage of revenue, segment profit margin was 22% and 21% for the three and nine months ended September 30, 2018, down slightly from 23% in both the comparative 2017 periods. The OS division's segment profit margin as a percentage of revenue can fluctuate depending on the volume and type of projects undertaken and the blend of business between remediation and reclamation projects, demolition projects, pipeline integrity projects, site clean-up, and other services in any given period. As a percentage of revenue, the segment profit margin in the three and nine months ended September 30, 2018 decreased primarily due to the nature of the project work, as well as increased competition on project bids which resulted in lower rates charged for labour and equipment;
  • G&A expenses for the three and nine months ended September 30, 2018 decreased marginally by $0.2 million and $0.5 million from the 2017 comparative periods to $1.8 million and $5.8 million as certain personnel and office costs included in the comparative figure were transferred to the PRD division at the start of this year. The impact of this change is partially offset by additional business development expenses resulting from the OS division's growth initiatives. As a percentage of OS revenue, G&A expenses are 6% and 7% in the three and nine months ended September 30, 2018 compared to 5% and 8% in the 2017 comparative periods, primarily due to the change in revenue.


DPS DIVISION OPERATING HIGHLIGHTS


Three months ended Sept 30,

Nine months ended Sept 30,

($000's)

2018

2017

% Change

2018

2017

% Change

Revenue 







Drilling and production services (a)

63,273

60,041

5

166,662

144,430

15








Direct expenses







Drilling and production services (b)

50,191

46,895

7

137,495

117,640

17

Segment Profit Margin (1)  (a-b)

13,082

13,146

-

29,167

26,790

9








Segment Profit Margin (1)  as a % of revenue (a)

21%

22%


18%

19%









(1) Refer to "Non-GAAP Measures, Additional GAAP Measures and Operational Definitions" for further information.

 

Highlights for the DPS division for the three and nine months ended September 30, 2018 included:

  • The DPS division's drilling services revenue correlates with oil and gas drilling activity in the WCSB. The strength in oil prices has resulted in steady or improved activity levels from oil and liquids focused producers, but this was offset by declines in dry gas drilling activity as a result of low AECO gas prices. Additionally, rig activity was impacted by unseasonably wet weather in September 2018. As a result, overall activity in the WCSB is relatively flat compared to last year, and the division's market share declined by 4% and 3% in the three and nine months ended September 30, 2018 from the comparative periods of 2017. However, the Corporation continued to focus on more complex wells which require specialized fluids, equipment and expertise, and resulted in a higher revenue per operating day. Overall, revenue from drilling services was relatively flat in the three and nine months ended September 30, 2018 from the 2017 comparative period;
  • Secure continues diversification efforts in the DPS division to become less dependent on drilling activity through expansion of production services. Strategic relationships with key suppliers and ongoing product development has resulted in a significant expansion to Secure's product offering, leading to multiple commercial projects in 2017 and the first half of 2018. The acquisition of a production chemicals business completed in April 2017 has strengthened Secure's position in the market by adding over 100 fully formulated proprietary products, as well as key infrastructure related to the product offering and an experienced and dedicated employee base. The production chemicals service line now has over 350 commercialized products and continues to win new bids and customers and gain market share. As a result of increased contributions from production related services, total revenue from the DPS division for the three and nine months ended September 30, 2018 increased 5% and 15% from the comparative periods of 2017 to $63.3 million and $166.7 million.
  • The DPS division's segment profit margin for the three and nine months ended September 30, 2018 was flat and improved by 9%, respectively, from the comparative periods to $13.1 million and $29.2 million. Segment profit margin as a percentage of revenue was 21% and 18% in the three and nine months ended September 30, 2018, down slightly from 22% and 19% in the comparative periods. Segment profit margin as a percentage of revenue were positively impacted by the increased revenues while minimizing fixed costs resulting in achieving economies of scale from increased activity. This impact was partially offset by the continued cost inflation associated with drilling and production chemicals which have outpaced the DPS division's ability to realize meaningful price increases during the period;
  • G&A expense for the three and nine months ended September 30, 2018 decreased by 5% and increased by 27% from the comparative periods of 2017. The Corporation continues to proactively manage costs while still responding to customer demands and activity levels. In the year to date, G&A expenses have increased as a result of expanding the production chemicals service line, and includes additional costs resulting from the production chemicals acquisition in April 2017. Additionally, all research and development costs associated with the Corporation's research lab have been included in DPS G&A expense since the third quarter of 2017. Previous to that, they were reported with the Corporation's business development expense. Secure continues to focus on research and development projects to expand the value chain of services offered to customers, and to provide innovative and cost-effective solutions to reduce waste in the drilling and production processes. As a percentage of DPS revenue, G&A expenses are 8% and 10% in the three and nine months ended September 30, 2018 compared to 9% in both the prior year comparative periods.


OUTLOOK

Secure's strategy remains focused on working with customers to identify opportunities and integrated solutions where the Corporation can add value and lower customers' costs. By focusing on new and innovative ways to offer solutions, Secure's customers will be able to gain efficiencies for drilling, completing and producing their hydrocarbon reserves. Helping Secure's customers grow and being their trusted energy solutions partner will ensure that the Corporation continues to create long-term shareholder value.

The fundamental drivers that are expected to provide meaningful avenues of growth during 2019 and beyond include:

Increasing Volumes: Supporting Growth of Midstream Infrastructure and Services
Production-related volumes represent the majority of the volumes processed and disposed at Secure's midstream facilities, providing the Corporation with recurring cash flows. The majority of Secure's facilities are located in high impact resource plays which have experienced higher production growth than the remainder of the WCSB over the past several years. Produced water, which accounts for over 85% of total production fluids in the WCSB, continues to increase at a disproportionate rate relative to aggregate production as a result of aging wells and maturing basins.

Flowback waters and processing volumes are also increasing as high intensity fracs continue to be applied in liquids rich natural gas shale reservoirs like the Montney and Duvernay formations. The increased use of proppants, the number of completion stages and length of the horizontal wells are expected to continue as producers use innovative means to develop unconventional resources. As a result, there is a significant need from Secure's customers for sourcing water, water logistics, storing water and overall water re-use where it is cost effective. Secure's integrated business model provides full-cycle service offerings to assist customers with large completion programs where significant amounts of water are required to be managed at various stages.

As oil sands projects have come on stream over the past few years, bitumen production has increased along with demand for condensate that is used as a diluent in order to transport the final product to market. Condensate production levels have increased in response; however, Canada currently remains a net importer of condensate and, as a result, drilling activity in the Montney and Duvernay regions is expected to increase to try to meet demand. As new production comes on, demand for production chemicals is expected to increase. In addition to continuing to provide customers with technical solutions for drilling and completion, the Corporation's DPS division is developing chemistry to optimize fluid production, provide flow assurance and maintain the integrity of assets, both for producers as well as Secure's own midstream assets.

These trends are all expected to result in increased demand for incremental treating, processing and disposal capacity. It is also expected that additional terminals and storage will be required to meet this increased demand. Secure has made significant capital investments over the past few years to ensure the business is well positioned to capture new demand. By offering exceptional customer service and owning and operating midstream facilities near customer production, Secure expects these trends will drive more volumes to Secure's midstream facilities.

Additionally, customers continue to seek cost effective transportation solutions for water, oil and condensate volumes. Secure's successful execution of the Kerrobert Light Pipeline System from the planning phase to final completion positions the Corporation to take advantage of similar opportunities creating value for both the customer and Secure.

Pipeline Constraints and Wide Differentials: Driving Higher Crude by Rail Activity
Rail offers an alternative mode of transportation that is becoming increasingly relied upon by the industry to transport crude oil as new pipeline projects in Canada continue to face challenges and delays. With a loading capacity of over 50,000 barrels per day across the Corporation's four full service rail terminals, Secure has meaningful exposure to the growing market for Canadian crude shipped by rail. Given the recent widening of WCSB crude oil pricing differentials, Secure expects more producers will agree to long-term commitments to make transporting crude by rail a more recurring cash flow stream. As rail operations normalize, Secure should see increased activity during 2019 and beyond. Moreover, wide WCS/WTI to Brent oil differentials influence certain U.S. refiners to look for feedstock accessible by rail that is otherwise delivered by oil tanker.

As crude oil price differentials have widened even further during October, and are expected to remain so headed into 2019, the Corporation remains attentive to opportunities at both pipeline-connected FSTs and with respect to transporting crude by rail. Secure continues to strive to position itself to offer producers egress solutions with better pricing for their products in western Canada.

The potential impact of wider crude oil differentials on producer capital budgets and drilling activity is expected to be more than offset by increased crude by rail shipments and ongoing and increasing production related volumes at Secure's midstream facilities, as described above.

U.S. Macroeconomic Environment: Increasing Activity Levels in North Dakota
Higher average crude oil prices, improved market access, a favourable regulatory environment and recent tax reform has driven capital investment into North Dakota in recent years. Record production levels were reached during the third quarter and are expected to continue to increase along with drilling and completion activity. The Corporation has meaningful exposure through Secure's six midstream facilities located in key resource plays in North Dakota to capture incremental production, drilling and completion related volumes. The continuing strength of oil prices in the region along with additional takeaway capacity from the Dakota Access Pipeline expansion under construction is expected to continue to facilitate advantageous project economics for Secure's customers operating in the region.

Environmental Regulations: Creating Demand for Secure's Environmental Solutions
Increased environmental regulations in all of Secure's market areas have created opportunities to help customers operate in a sustainable way with a focus on protecting the environment. Secure's OS division has seen increased proactive efforts by customers to prevent spills and reduce their future environmental liabilities. Recent changes to remediation regulations in Alberta through the Alberta Energy Regulator's Area-Based Closure program could initiate increased abandonment, decommissioning, remediation and reclamation activity levels which may result in additional demand for OS division services.

These drivers are expected to provide Secure with significant potential to grow and expand the business into the future. The Corporation expects to incur approximately $150 million of growth and expansion capital in 2018, and allocate $100 million in 2019, depending on the outcome of various opportunities in development, such as timing of obtaining regulatory approvals, development permits and other operating agreements. During the remainder of 2018, capital will be incurred on advancing the construction of additional storage tanks at the receipt terminal in Kerrobert, completing the permanent water disposal facility at Tony Creek, completing the expansion at the Williston landfill, increasing processing and disposal capacity at various other facilities, and purchasing equipment to support existing services. Providing value-adding solutions to increase customer operating netbacks and improve capital efficiency remains Secure's primary objective.

FINANCIAL STATEMENTS AND MD&A

The Corporation's unaudited condensed consolidated financial statements and notes thereto for the three and nine months ended September 30, 2018 and 2017 and MD&A for the three and nine months ended September 30, 2018 and 2017 are available immediately on Secure's website at www.secure-energy.com. The unaudited condensed consolidated financial statements and MD&A will be available tomorrow on SEDAR at www.sedar.com.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this document constitute "forward-looking statements" and/or "forward-looking information" within the meaning of applicable securities laws (collectively referred to as forward-looking statements). When used in this document, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", and similar expressions, as they relate to Secure, or its management, are intended to identify forward-looking statements. Such statements reflect the current views of Secure with respect to future events and operating performance and speak only as of the date of this document. In particular, this document contains or implies forward-looking statements pertaining to: key priorities for the Corporation's success; the oil and natural gas industry, including drilling and production trends; activity levels in the oil and gas sector, drilling levels, commodity prices for oil, natural gas liquids and natural gas; industry fundamentals for 2018; capital forecasts and spending by producers; demand for the Corporation's services and products; expansion strategy; the impact of oil and gas activity on Secure's activity levels; the Corporation's proposed 2018 and 2019 capital expenditure program including expansion, growth and sustaining capital expenditures, and the timing of completion for projects, in particular the additional storage at the Kerrobert terminal; debt service; acquisition strategy and timing of potential acquisitions; the impact of new facilities, new service offerings, potential acquisitions, and prior year acquisitions on the Corporation's financial and operational performance and growth opportunities; growth opportunities; future capital needs and how the Corporation intends to fund its operations, working capital requirements, dividends and capital program; access to capital; the impact of the NCIB on shareholder value; and the Corporation's ability to meet obligations and commitments and operate within any credit facility restrictions.

Forward-looking statements concerning expected operating and economic conditions are based upon prior year results as well as the assumption that levels of market activity and growth will be consistent with industry activity in Canada and the U.S. and similar phases of previous economic cycles. Forward-looking statements concerning the availability of funding for future operations are based upon the assumption that the 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 statements concerning the relative future competitive position of the Corporation are based upon the assumption that economic and operating conditions, including commodity prices, crude oil and natural gas storage levels, interest and foreign exchange rates, the regulatory framework regarding oil and natural gas royalties, environmental regulatory matters, the ability of the Corporation and its subsidiaries to successfully market their services and drilling and production activity in North America will lead to sufficient demand for the Corporation's services and its subsidiaries' services including demand for oilfield services for drilling and completion of oil and natural gas wells, 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 industry may change the demand for the Corporation's services and its subsidiaries' services. Forward-looking statements concerning the nature and timing of growth are 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 statements 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 costs will not significantly increase from past acquisition and maintenance costs. 

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. Readers are cautioned not to place undue reliance on these statements as 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 referred to under the heading "Risk Factors" in the AIF for the year ended December 31, 2017 and also includes the risks associated with the possible failure to realize the anticipated synergies in integrating the assets acquired in prior year acquisitions with the operations of Secure. Although forward-looking statements contained in this document 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.

NON-GAAP MEASURES, ADDITIONAL GAAP MEASURES AND OPERATIONAL DEFINITIONS

The Corporation uses accounting principles that are generally accepted in Canada (the issuer's "GAAP"), which includes International Financial Reporting Standards ("IFRS"). Certain supplementary measures in this document do not have any standardized meaning as prescribed by IFRS. These measures are intended as a complement to results provided in accordance with IFRS. The Corporation believes these measures provide additional useful information to analysts, shareholders and other users to understand the Corporation's financial results, profitability, cost management, liquidity and ability to generate funds to finance its operations. However, they should not be used as an alternative to IFRS measures because they do not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. See the management's discussion and analysis available at www.sedar.com for further details, including reconciliations of the Non-GAAP measures and additional GAAP measures to the most directly comparable measures calculated in accordance with IFRS.

ABOUT SECURE ENERGY SERVICES INC.

Secure is a TSX publicly traded integrated energy business with midstream infrastructure, environmental and technical solutions divisions providing industry leading customer solutions to upstream oil and natural gas companies operating in western Canada and certain regions in the United States ("U.S.").

1 Refer to the "Non-GAAP Measures, Additional GAAP Measures and Operational Definitions" section herein.

 

SOURCE SECURE Energy Services Inc.


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