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SECURE Energy Services Announces Solid Fourth Quarter and 2017 Results Highlighted by a 59% Increase in Adjusted EBITDA Per Share

CALGARY, March 1, 2018 /CNW/ - Secure Energy Services Inc. ("Secure" or the "Corporation") (TSX – SES) today announced operational and financial results for the three and twelve months ended December 31, 2017. The following should be read in conjunction with the management's discussion and analysis ("MD&A") and the annual audited consolidated financial statements and notes thereto of Secure which are available on SEDAR at www.sedar.com.

FOURTH QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS

The Corporation's financial performance continues to improve year over year as the oil and gas sector rebounds on the back of rising, more stable crude oil prices, which closed out the year at the highest levels seen since mid-2015. Along with these higher activity levels, contributions from capital projects and acquisitions over the last several years, new service offerings, and geographic expansion contributed to Secure generating $51.2 million in Adjusted EBITDA1 in the fourth quarter of 2017, a 55% increase over the same period in 2016. Highlights from the fourth quarter include:

  • Within the PRD division, disposal and processing volumes increased by 48% and 19%, respectively, over the fourth quarter of 2016, contributing to a 30% increase in PRD services revenue. The increase in volumes can be attributed to the continued trend of higher fluid volumes pumped per well while fracing in the Corporation's key service areas, higher oil and gas activity levels, the acquisition of new facilities, and increases in disposal capacity at existing facilities;
  • Revenues generated from facilities in the U.S. nearly doubled in the fourth quarter of 2017 over 2016 because of increased volumes due to improved drilling and completion activity levels, new sales initiatives and higher average crude oil prices impacting recovered oil revenues;
  • Pipeline capacity constraints have resulted in a higher demand for the Corporation's full service rail terminals, which offer customers treating and storage solutions with rail access;
  • The DPS division approximately doubled its contribution to the Corporation's total Adjusted EBITDA in the fourth quarter of 2017 over the same period in 2016 as a result of higher industry drilling activity levels, increased average revenue per operating day generated from more complex wells, the continued effects of cost control measures previously implemented, and incremental Adjusted EBITDA generated from the production chemicals service line;
  • The Corporation's OS division had its most profitable quarter of 2017, driven primarily by positive industry activity levels and from integrated service offerings resulting in incremental Project work. Higher activity levels in the oil and gas sector also increased demand for the Corporation's water pumping services. Favorable weather conditions drove project execution and new customer additions also contributed to the OS division's success in the quarter.


2017 CAPITAL PROGRAM

During the fourth quarter, Secure incurred growth and expansion capital of $45.3 million, advancing construction on several projects. The expenditures in the quarter related primarily to:

  • Ongoing construction of a light oil feeder pipeline system and receipt terminal in the Kindersley-Kerrobert region of Saskatchewan. The system includes gathering pipelines for customer production, as well as a larger pipeline commencing at the Corporation's existing Kindersley FST, which will transport processed oil from the gathering pipelines and Secure's facility to a Secure owned and operated receipt terminal, and ultimately to the Enbridge Inc. mainline in Kerrobert. Key Viking light oil producers have contracted volume on both an annual and cumulative term basis over 10 years, supporting both FST and pipeline economics. The pipeline system is expected to be completed and operational in the fourth quarter of 2018 and cost approximately $75 million in total;
  • Construction of the Gold Creek SWD facility in the Montney region of Alberta, with commissioning expected by mid-2018;
  • Engineering, site work and long lead costs for the addition of a third well at the Big Mountain SWD located south of Grande Prairie to increase disposal capacity in order to meet customer demands in the region. Facility upgrades and the third well are expected to be completed in the first quarter of 2018;
  • Completing construction of additional landfill cells at the South Grande Prairie, Pembina and Fox Creek landfills to increase capacity;
  • Improvements to increase disposal capacity at various existing facilities, including the recently acquired facilities from Ceiba Energy Services Inc. Improvements included the deepening of a disposal well, pump replacements and well workovers;
  • Long lead items and upfront engineering costs on various other PRD division projects; and
  • Addition of rental equipment for the IFS service line, including two water injection skids and several frac ponds and pumps.


INCREASED DIVIDEND BY 6%

On November 9, 2017, Secure's Board of Directors approved a 6% increase to the monthly dividend rate from $0.02125 to $0.0225 per common share of the Corporation ("Common Share") commencing with the January 15, 2018 dividend payment date for shareholders of record on January 1, 2018. The dividend was previously increased in the second quarter of 2017 from $0.02 per Common Share.

Additional operating and financial highlights for the three months ended December 31, 2017 and 2016 can be summarized as follows:


Three months ended Dec 31,

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

2017

2016

% change

Revenue (excludes oil purchase and resale) 

184,740

124,584

48

Oil purchase and resale 

494,816

405,939

22

Total revenue

679,556

530,523

28

Adjusted EBITDA (1)

51,177

33,046

55


Per share ($), basic

0.31

0.21

48

Net loss

(23,934)

(10,075)

138


Per share ($), basic and diluted

(0.15)

(0.06)

150

Adjusted net loss (1)

(2,057)

(11,430)

(82)


Per share ($), basic

(0.01)

(0.07)

(86)

Cash flows from operating activities                      

22,925

15,361

49


Per share ($), basic

0.14

0.10

40

Funds flow (1)

45,075

33,978

33


Per share ($), basic

0.28

0.21

33

Dividends per common share

0.06

0.06

6

Capital expenditures (1)

51,815

15,408

236

Total assets

1,562,746

1,425,250

10

Net debt (1)

166,647

73,176

128

Common shares - end of period 

163,352,572

160,652,221

2

Weighted average common shares - basic and diluted

163,325,590

160,314,786

2

(1) Refer to "Non-GAAP measures and operational definitions" for further information.

 

  • REVENUE OF $679.6 MILLION FOR THE THREE MONTHS ENDED DECEMBER 31, 2017

  • ADJUSTED EBITDA OF $51.2 MILLION FOR THE THREE MONTHS ENDED DECEMBER 31, 2017

  • NET LOSS OF $23.9 MILLION FOR THE THREE MONTHS ENDED DECEMBER 31, 2017

  • ADJUSTED NET LOSS OF $2.1 MILLION FOR THE THREE MONTHS ENDED DECEMBER 31, 2017

  • FINANCIAL FLEXIBILITY

  • CAPITAL EXPENDITURES OF $51.8 MILLION FOR THE THREE MONTHS ENDED DECEMBER 31, 2017


ANNUAL OPERATIONAL AND FINANCIAL HIGHLIGHTS


Twelve months ended Dec 31,

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

2017

2016

2015

Revenue (excludes oil purchase and resale) 

603,421

393,159

560,898

Oil purchase and resale 

1,724,787

1,016,904

785,527

Total revenue

2,328,208

1,410,063

1,346,425

Adjusted EBITDA (1)

157,211

94,100

126,652


Per share ($), basic

0.97

0.61

0.95

Net loss

(34,202)

(48,943)

(159,870)


Per share ($), basic and diluted

(0.21)

(0.32)

(1.20)

Adjusted net loss(1)

(13,088)

(48,111)

(30,166)


Per share ($), basic

(0.08)

(0.31)

(0.23)

Cash flows from operating activities

108,872

96,682

131,018


Per share ($), basic

0.67

0.63

0.98

Funds flow (1)

157,186

97,291

89,905


Per share ($), basic

0.97

0.63

0.67

Dividends per common share

0.25

0.24

0.24

Capital expenditures (1)

191,837

150,877

117,518

Total assets

1,562,746

1,425,250

1,315,420

Long-term liabilities

422,251

336,830

393,774

Net debt (1)

166,647

73,176

153,263

Common Shares - end of period 

163,352,572

160,652,221

137,708,127

Weighted average common shares - basic and diluted

162,827,541

154,625,869

133,380,634

(1)Refer to "Non-GAAP measures and operational definitions" for further information.

 

  • REVENUE OF $2.3 BILLION FOR THE YEAR ENDED DECEMBER 31, 2017

  • ADJUSTED EBITDA OF $157.2 MILLION FOR THE YEAR ENDED DECEMBER 31, 2017

  • NET LOSS OF $34.2 MILLION FOR THE YEAR ENDED DECEMBER 31, 2017

  • ADJUSTED NET LOSS OF $13.1 MILLION FOR THE YEAR ENDED DECEMBER 31, 2017

  • CAPITAL EXPENDITURES OF $191.8 MILLION FOR THE YEAR ENDED DECEMBER 31, 2017

  • PRODUCTION CHEMICALS ACQUISITION

  • CEIBA ACQUISITION

  • STRONG BALANCE SHEET LEVERAGED THROUGH NEW CREDIT FACILITIES


PRD DIVISION OPERATING HIGHLIGHTS


Three months ended Dec 31,

Twelve months ended Dec 31,

($000's)

2017

2016

% Change

2017

2016

% Change

Revenue 








PRD services (a)

80,611

61,988

30

274,372

198,813

38


Oil purchase and resale service

494,816

405,939

22

1,724,787

1,016,904

70

Total PRD division revenue

575,427

467,927

23

1,999,159

1,215,717

64








Direct expenses 








PRD services (b)

33,877

25,805

31

117,655

91,620

28


Oil purchase and resale service

494,816

405,939

22

1,724,787

1,016,904

70

Total PRD division direct expenses

528,693

431,744

22

1,842,442

1,108,524

66








Operating Margin (1) (a-b)

46,734

36,183

29

156,717

107,193

46








Operating Margin (1) as a % of revenue (a)

58%

58%


57%

54%


(1)Refer to "Non-GAAP measures" for further information.

 

Highlights for the PRD division for the three and twelve months ended December 31, 2017 included:

  • Processing, recovery and disposal services revenue of $80.6 million and $274.4 million for the three and twelve months ended December 31, 2017 increased by 30% and 38% from the 2016 comparative periods, driven by higher existing facility throughput due to higher produced water volumes and higher drilling and completion related volumes, as well as new facilities added and expansions at certain of the Corporation's existing facilities in 2016 and 2017;
  • 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;
  • Processing volumes increased 19% and 24% in the three and twelve months ended December 31, 2017 from the comparative periods due to higher waste processing, emulsion and completions processing volumes;
  • Recovery revenues increased 73% and 65% in the three and twelve months ended December 31, 2017 from the comparative periods which was driven by a 72% and 46% increase in volumes and the positive impact of oil price increases. Recovery revenues at the Corporation's facilities in North Dakota were a strong contributor to this increase due to higher volumes resulting from improved activity levels, including new drilling and frac completions. Improved activity levels were driven by higher average crude oil prices over the prior periods, and the commissioning of the Dakota Access Pipeline in June 2017 which has improved economics for delivering producers' product to market;
  • Disposal volumes increased by 48% and 34% in the three and twelve months ended December 31, 2017 from the comparative periods. Increased disposal of waste at Secure's landfills resulting from higher drilling activity levels and remediation work resulted in a 43% and 59% increase in landfill revenues in the three and twelve months ended December 31, 2017 over 2016. Further driving the increase in disposal volumes is increased produced, flowback, and waste water volumes across Secure's facilities from the comparative periods resulting from expansions at existing facilities to increase disposal capacity, increasing water production as wells mature and improved industry activity; 
  • The addition of new facilities, both organically and through acquisitions, accounted for $2.2 million and $18.9 million of the PRD services revenue in the three and twelve months ended December 31, 2017, an impact of 4% and 9% when comparing to the same periods of 2016;
  • Oil purchase and resale revenue in the PRD division for the three months ended December 31, 2017 increased 22% from the 2016 comparative period to $494.8 million due to higher average crude oil prices and increased oil purchase and resale volumes from heightened industry activity at various pipeline connected facilities. Oil purchase and resale revenue increased to $1.7 billion in the year ended December 31, 2017, up 70% from the year ended December 31, 2016, due to the factors described above, as well as additional oil purchase and resale volumes from new facilities added in 2016, which included the Alida crude oil terminalling facility, the increased ownership in the La Glace and Judy Creek FSTs from 50% to 100%, and the Kakwa FST. Excluding the impact of these new facilities, the year over year variance would have been 30%;
  • Operating margin as a percentage of PRD services revenue for the three months ended December 31, 2017 remained consistent at 58% compared to the three months ended December 31, 2016. Operating margin as a percentage of PRD services revenue for the twelve months ended December 31, 2017 increased to 57% from 54% in the comparative period of 2016. The increase in operating margin as a percentage of revenue over 2016 is due to increased revenues while minimizing fixed and related costs. The Corporation's revised cost management structure has resulted in improved operating margins realized across various facilities including FSTs, SWDs and landfills;
  • General and administrative ("G&A") expenses of $4.7 million and $17.4 million for the three and twelve months ended December 31, 2017 increased by 64% and 35% from the comparative periods. Although the Corporation continues to minimize G&A costs by streamlining operations where possible, PRD G&A expenses have increased primarily due to the acquisitions completed in 2016 and 2017 and the overhead requirements to support new facilities and expansions. As a percentage of PRD revenue, G&A costs are 6% for the three and twelve months ended December 31, 2017 compared to 5% and 6% in the three and twelve months ended December 31, 2016.


DPS DIVISION OPERATING HIGHLIGHTS


Three months ended Dec 31,

Twelve months ended Dec 31,

($000's)

2017

2016

% Change

2017

2016

% Change

Revenue 








Drilling and production services (a)

61,403

38,063

61

205,833

111,329

85








Direct expenses








Drilling and production services (b)

48,928

31,776

54

166,568

95,516

74

Operating Margin (1) (a-b)

12,475

6,287

98

39,265

15,813

148








Operating Margin (1) as a % of revenue (a)

20%

17%


19%

14%


(1) Refer to "Non-GAAP measures" for further information.


Highlights for the DPS division for the three and twelve months ended December 31, 2017 included:

  • Revenue in the DPS division correlates with oil and gas drilling activity in the WCSB, most notably active rig counts and metres drilled. Commodity pricing, weather conditions and activity levels from oil and gas producers have a significant impact on the DPS division. For the three and twelve months ended December 31, 2017, industry rig counts in the WCSB increased 9% and 60%, and metres drilled increased 19% and 84% from the 2016 comparative periods. Revenue from the DPS division for the three and twelve months ended December 31, 2017 increased 61% and 85% to $61.4 million and $205.8 million from the comparative periods of 2016. The increased drilling activity and traction in the division's production chemicals service line through the Production Chemicals Acquisition has strengthened the DPS division's revenue in 2017;
  • Revenue per operating day increased 23% from the prior year comparative quarter from $6,873 to $8,487 during the three months ended December 31, 2017. The variance is a result of the proportion of type of rigs serviced, which typically fluctuates quarter over quarter, and location of wells which impacts the type of fluid used and depth of well. Revenue per operating day for the 2017 year was relatively consistent with 2016; 
  • Secure continues diversification efforts in the DPS division to become less dependent on drilling activity through expansion of the production chemicals and chemical EOR service lines which will benefit the Corporation in the medium to long-term. Strategic relationships with key suppliers and ongoing product development has resulted in a significant expansion to Secure's product offering resulting in multiple commercial projects in 2017. The Production Chemicals Acquisition 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 DPS division's operating margin for the three and twelve months ended December 31, 2017 improved by 98% and 148% from the 2016 comparative periods to $12.5 million and $39.3 million. Operating margin as a percentage of revenue increased to 20% and 19% in the three and twelve months ended December 31, 2017 from 17% and 14% in the comparative periods, respectively. Operating margins as a percentage of revenue were positively impacted by the increased revenues while minimizing fixed costs resulting in improved drilling fluids product margins and achieving economies of scale as activity increases, partially offset by higher production services operating costs for chemicals sourced from the U.S.;
  • G&A expense for the three and twelve months ended December 31, 2017 increased by 88% and 59% from the comparative periods of 2016. Although the Corporation continues to manage costs efficiently and proactively while still responding to customer demands and activity levels, G&A expenses have increased as a result of expanding the production chemicals and chemical EOR service lines, including the Production Chemicals Acquisition in the second quarter of 2017. As a percentage of DPS revenue, G&A expenses have increased to 8% from 7% in the three months ended December 31, 2017 and decreased to 8% from 10% in the twelve months ended December 31, 2017 from the prior year comparative periods.


OS DIVISION OPERATING HIGHLIGHTS


Three months ended Dec 31,

Twelve months ended Dec 31,

($000's)

2017

2016

% Change

2017

2016

% Change

Revenue 








OnSite services (a)

42,726

24,533

74

123,216

83,017

48








Direct expenses








OnSite services (b)

33,192

19,535

70

95,482

63,180

51

Operating Margin (1)  (a-b)

9,534

4,998

91

27,734

19,837

40








Operating Margin (1)  as a % of revenue (a)

22%

20%


23%

24%


(1)Refer to "Non-GAAP measures" for further information.

 

Highlights for the OS division for the three and twelve months ended December 31, 2017 included:

  • OS division revenue increased 74% and 48% to $42.7 million and $123.2 million for the three and twelve months ended December 31, 2017 due to increased producer activity which led to more Projects work and higher pumping and fluid storage rental activity. Geographic expansion into Manitoba and Ontario also contributed to increased revenue;
  • Projects revenue during the three and twelve months ended December 31, 2017 increased 65% and 61% from the 2016 comparative periods. Projects revenue is dependent on the type and size of jobs as well as weather conditions which can vary quarter to quarter. For the three and twelve months ended December 31, 2017, Projects revenue increased primarily because of new jobs awarded due to the division's expertise in managing remediation, demolition and spill response jobs and from overall higher industry activity levels. Revenue also increased due to new customer additions, geographic expansion and from the development of new service offerings. In the fourth quarter, the group entered into a long-term service agreement to manage a scrap metal recycling program for a major oil sands producer. Projects continues to seek opportunities like this contract as they provide a steady stream of revenue over the life of the agreement;
  • Integrated Fluids Solutions revenue for the three and twelve months ended December 31, 2017 increased 275% and 80% from the 2016 comparative periods. Revenue increased with overall industry activity as existing customers ramped up activity and through the addition of new customers. Pumping services and fluid storage rentals had increased job volumes and higher equipment utilization over the 2016 comparative periods;
  • Environmental Services revenue for the three and twelve months ended December 31, 2017 increased 39% and 13% from the 2016 comparative periods due to higher drilling waste and bin revenue resulting from improved levels of industry activity. These increases were partially offset by decreased reclamation and remediation revenue as many customers deferred this type of spending throughout most of the year;
  • Operating margins for the three and twelve months ended December 31, 2017 improved by 91% and 40% to $9.5 million and $27.7 million over the prior year comparative periods due primarily to increased revenue. The OS division operating margin as a percentage of revenue for the three months ended December 31, 2017 was 22% which increased from 20% for the prior year three month comparative period. Operating margin as a percentage of revenue for the twelve months ended December 31, 2017 decreased to 23% from 24% as compared to the prior year twelve month period. The OS division's operating margin as a percentage of revenue can fluctuate depending on the volume and type of projects undertaken and from the blend of business between remediation and reclamation projects, demolition projects, pipeline integrity projects, site clean-up, and other services provided in any given period;
  • G&A expenses for the three and twelve months ended December 31, 2017 increased by $0.2 million and $1.8 million from the 2016 comparative periods to $2.1 million and $8.3 million due primarily to increased costs to support additional Projects office locations resulting from growth initiatives. As a percentage of OS revenue, G&A expenses have decreased to 5% and 7% in the three and twelve months ended December 31, 2017 from 8% in the three and twelve months ended December 31, 2016.


OUTLOOK

Moderate oil, condensate and natural gas liquids ("NGL") price increases along with favourable weather conditions throughout the year drove increased drilling and completion activity in 2017 compared to 2016. Secure anticipates that there will be consistent producer activity levels and demand for the Corporation's services during 2018. In addition, there are also key fundamental drivers of Secure's business that are expected to provide meaningful avenues of growth for 2018 and beyond:

  • Produced water volumes continue to increase based on maturing basins and new shale completion techniques that result in increased water volumes per well. Disposal volumes for Secure are up over 30% in 2017 and Secure expects the trend for more produced water volumes and disposal capacity to continue;
  • Completion 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 to drive more volumes to Secure's PRD facilities;
  • Oil and condensate treatment volumes are increasing as producers bring on new production and are looking for incremental treating capacity while minimizing transportation costs. Secure's construction of the Kindersley-Kerrobert light oil feeder pipeline system to the Corporation's existing Kindersley FST, and further on to Kerrobert, is a growing trend where producers seek to reduce truck traffic and lower transport costs;
  • Moving oil volumes on rail cars also continues to gain momentum. Secure could see activity materially increase as supply growth driven by large oil sands expansions are anticipated to tighten pipeline takeaway capacity in 2018. Moreover, wide WTI – Brent oil differentials influence certain U.S. refiners to look for feedstock accessible by rail that is otherwise delivered by oil tanker;
  • Deep shale reservoirs and the increased need for new innovative drilling fluid programs are reducing the number of days to drill a well. This trend will continue in 2018 as Secure brings new products to market from the Corporation's research lab;
  • Demand for production chemicals is also increasing as producers bring on new oil, condensate and NGLs. Production chemicals optimize production, provide flow assurance and maintain the integrity of their production assets. The Production Chemicals Acquisition completed in 2017 provides a meaningful opportunity to grow market share in western Canada leveraging off Secure's infrastructure, key relationships and proprietary patents;
  • As described above, completions in the oil and gas industry are growing more geographically concentrated and even more penetrating given the length of wells and amount of proppants used. As part of this growing trend, 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 business model provides the complete offering and is assisting customers with large completion programs where significant amounts of water are required to be managed at various stages; and
  • Increased environmental regulations in all of our market areas have created opportunities to help our customers operate in a sustainable way with a focus on protecting the environment. Secure's OS division has seen increased proactive environmental projects that strive to prevent spills and reduce their future environmental liabilities. A long-term contract signed in the fourth quarter of 2017 to manage oil sands metal recycling is another example of environmental sustainability and reducing our customers' operating costs.


All of these growth trends provide Secure a significant opportunity to grow and expand its business into 2018 and beyond. Secure has made significant capital investments over the past few years to ensure the business is well positioned to capture new customer demand, and based on customer feedback there are more opportunities to continue to deploy capital in western Canada. As a result, Secure is expecting to allocate a minimum of $100 million in growth capital to the areas described above in 2018, including completion of the Kerrobert-Kindersley pipeline system and receipt terminal and Gold Creek SWD, expansions at various existing facilities to increase disposal capacity (additional wells, landfill cells), pre-design and engineering for two potential SWD locations in the Montney region, and equipment to support existing services.

The Corporation could increase organic spending within the PRD division up to $150 million depending on the outcome of various opportunities in development, such as timing of obtaining regulatory approvals, development permits and other operating agreements. Secure expects cash flow to climb as a result of improving activity levels as well as contributions from capital investments made by Secure in key areas over the past several years. Given annual sustaining capital of approximately $20 million, cash interest expense of approximately $15 million and minimal cash taxes, the amount of free cash flow generated by the Corporation's assets can adequately fund annual dividends while still providing cash to fund growth capital, pay down debt, buy back shares and/or increase the dividend.

Secure's strong balance sheet provides the Corporation the flexibility to grow organically and execute on strategic acquisition opportunities that align with the profitable growth strategy of Secure. Helping Secure's customers grow and being their trusted energy solutions partner will ensure that the Corporation continues to create long-term shareholder value.

FINANCIAL STATEMENTS AND MD&A
The Corporation's annual audited consolidated financial statements and notes thereto for the years ended December 31, 2017 and 2016 and MD&A for the three and twelve months ended December 31, 2017 and 2016 are available immediately on Secure's website at www.secure-energy.com. The audited 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 2018 activity levels; the Corporation's proposed 2018 capital expenditure program including expansion, growth and sustaining capital expenditures, and the timing of completion for projects, in particular the Kindersley-Kerrobert light oil feeder pipeline system, Gold Creek SWD and Big Mountain facility upgrades and third well; debt service; acquisition strategy and timing of potential acquisitions; the impact of new facilities, potential acquisitions, and the Production Chemicals Acquisition and Ceiba Acquisition on the Corporation's financial and operational performance and growth opportunities; future capital needs and how the Corporation intends to fund its operations, working capital requirements, dividends and capital program; access to capital; 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, including the Production Chemicals Acquisition and Ceiba Acquisition, 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 the Production Chemicals Acquisition and Ceiba Acquisition 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 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 non-GAAP measures and operational definitions used by the Corporation may not be comparable to similar measures presented by other reporting issuers. These non-GAAP financial measures and operational definitions are included because management uses the information to analyze operating performance, leverage and liquidity. Therefore, these non-GAAP financial measures and operational definitions should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. See the management's discussion and analysis available at www.sedar.com for a reconciliation of the Non-GAAP financial measures and operational definitions.

ABOUT SECURE ENERGY SERVICES INC.
Secure is a TSX publicly traded energy services company that provides safe, innovative, efficient and environmentally responsible fluids and solids solutions to the oil and gas industry. The Corporation owns and operates midstream infrastructure and provides environmental solutions and innovative products to upstream oil and natural gas companies operating in western Canada and certain regions in the United States ("U.S.").

The Corporation operates three divisions:

Processing, Recovery and Disposal Division ("PRD"): The PRD division owns and operates midstream infrastructure that provides processing, storing, pipelines, shipping and marketing of crude oil, oilfield waste disposal and recycling. The PRD division services include clean oil terminalling, rail transloading, pipelines, crude oil marketing, custom treating of crude oil, produced and waste water disposal, oilfield waste processing, landfill disposal, and oil purchase/resale service. Secure currently operates a network of facilities throughout western Canada and in North Dakota, providing these services at its full service terminals ("FST"), landfills, stand-alone water disposal facilities ("SWD"), full service rail facilities ("FSR") and crude oil terminalling facilities.

Drilling and Production Services Division ("DPS"): The DPS division provides equipment, product solutions and chemicals for drilling, completion and production operations for oil and gas producers in western Canada. The drilling service line currently comprises the majority of the revenue for the division which includes the design and implementation of drilling fluid systems for producers drilling for oil, bitumen and natural gas. The drilling service line focuses on providing products and systems that are designed for more complex wells, such as medium to deep wells, horizontal wells and horizontal wells drilled into the oil sands. The production services line focuses on providing equipment and chemical solutions that optimize production, provide flow assurance and maintain the integrity of production assets.

Onsite Services Division ("OS"): The operations of the OS division include Projects which include pipeline integrity (inspection, excavation, repair, replacement and rehabilitation), demolition and decommissioning, and reclamation and remediation of former wellsites, facilities, commercial and industrial properties, and environmental construction projects (landfills, containment ponds, subsurface containment walls, etc.); Integrated Fluid Solutions ("IFS") which include water management, recycling, pumping and storage solutions; and Environmental services which provide pre-drilling assessment planning, drilling waste management, remediation and reclamation assessment services, Naturally Occurring Radioactive Material ("NORM") management, waste container services and emergency response services.

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

 

SOURCE SECURE Energy Services Inc.


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