Investors: 2008 Press Releases
HSE Integrated Ltd. Announces First Quarter 2008 Results
NEWS RELEASE - May 14, 2008
HSE Integrated Ltd. (“HSE”, “Our”, “We”, or the “Company”) announced its financial results for the first quarter ended March 31, 2008. Financial and operating highlights are summarized below:
- Revenue was $27.6 million for the quarter, a reduction of 1.4% compared to the prior year.
- Oilfield revenues declined 19% compared to the first quarter of 2007, and a 32% decline compared to the first quarter of 2006. This is primarily due to reduced overall activity levels within the conventional upstream, or “wellhead”, sector of the oil and gas industry: oil and natural gas well drilling, completion and work-over (repair and maintenance) operations. The decline in natural gas well drilling and recompletion activity over the past two years significantly impact the Company’s top and bottom line in the Oilfield sector.
- The Company continues its successful business diversification strategy, and reports a 42% ($3.5 million) increase in Industrial revenues in the first quarter when compared to the prior year, and almost 185% ($7.5 million) increase when compared to the similar period in 2006.
- A significant portion of the increase in Industrial revenues came from continued growth in demand for a growing range of HSE’s services to oilsands construction, extraction and processing operations in Northeast Alberta. This geographic area experienced growth rates of 42% over the prior year, and 600% when compared to same period in 2006. In the first quarter of 2008, revenue from this region represented almost 21% of total revenue.
- Equipment and services contracted by clients in Central and Atlantic Canada, and the North Eastern United States, is classified as Industrial revenue. Revenue from these areas in the first quarter of 2008 was $3.7 million and increased by almost 83% compared to 2007, and by 544% compared to the same period in 2006. This is due both to the acquisitions completed in April 2006, and increased demand created by more aggressive marketing efforts in new and existing markets.
- EBITDA declined to $2.6 million for the quarter (2007 - $4.8 million). The reduction in margins is mainly due to lower utilization of the Company’s higher margin large equipment fleet (fire trucks and mobile decontamination units), that are primarily deployed in the completion and stimulation of newly drilled natural gas wells, or major work-over and/or recompletion of existing natural gas wells. Industry sources have indicated that natural gas directed drilling activity in the first quarter of 2008 was lower than the previous two years. In the first quarter, rental revenue of fire trucks and mobile
decontamination units to customers in the Oilfield sector declined by 44% and 66% as compared to the same periods in 2007 and 2006, respectively. The large equipment fleet also employs a sizable fixed overhead support structure that did not realize its required economies of scale due to lower utilization levels. - Partially offsetting the reduced margins from lower equipment utilization was approximately $0.6 million of realized overhead cost reduction in the first quarter (as compared to the same quarter in the prior year) as a result of the initiatives announced in the fourth quarter of last year.
- Announced subsequent to the end of the first quarter, is a commercial arrangement with Boots & Coots International Well Control, Inc. (“Boots & Coots”) to serve as the basis for HSE’s US Expansion strategy. Initially, the new venture will provide fire protection and worker decontamination services during well stimulation operations. This will involve the relocation of existing specialized and proprietary capital assets, designed and manufactured by HSE in Canada, to selected US markets. The new venture is expected to be operating in one or more markets in the central and western producing regions of the US by mid-2008.
- At the end of the current quarter, the draw against the revolving facility was $13.8 million, and against the operating facility was $3.7 million. At March 31, 2008, the Company was in compliance with its financial covenants.
David Yager, Chairman and CEO, offered the following comments for HSE’s first quarter 2008 results:
“The main challenge for HSE to be able to generate a higher operating margin and improved return on investment will be to secure higher utilization rates on the larger pieces of safety equipment that are dedicated almost exclusively to natural gas well drilling, completion and workover activities, discussed in greater detail above. Our partnership with Boots & Coots in the U.S. and redeployment of otherwise underutilized assets will be a key component of that strategy, and exploiting what most observers believe will be improved activity in all aspects of natural gas development created by higher natural gas prices. The continued growth in the Industrial component of our business continues to be very satisfying and is a part of our business where we can maintain growth for the foreseeable future. Customer response to the HSE’s integrated services model is very encouraging. Improving margins in this growing Industrial safety services business sector remains a priority, and several initiatives are underway internally to expedite this process”.
For further information and analysis please see the attached Management’s Discussion and Analysis and Financial Statements.
Annual General Meeting Reminder
The Company extends an invitation to shareholders and members of the investment community to attend HSE Integrated Ltd.’s upcoming Annual General Meeting that will take place at the Viking Room, Calgary Petroleum Club, 319 – 5 Avenue SW, Calgary, Alberta, on Friday, May 16, 2008 at 10:00 a.m.,
CONFERENCE CALL
HSE will be hosting a conference to discuss their results at 10 AM (Eastern Daylight Time), 8 AM (Mountain Daylight Time) on Thursday May 15th, 2008.
Dial-In Number: 1-800-589-8577 or 1- 416-644-3428
Conference Replay to May 29, 2008: 1-416-640-1917 or 1-877-289-8525 (Passcode: 21271527 followed by the pound sign)
Webcast: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID= 2279420
HSE is an integrated, national supplier of industrial Health, Safety and Environmental services. From its head office in Calgary, Alberta, it serves its clients from field service locations in Alberta, British Columbia, Saskatchewan, Ontario, Nova Scotia, New Brunswick and Michigan. HSE trades on the TSX under the symbol “HSL”.
Forward Looking Statements
This news release may contain forward-looking statements concerning, among other things, the Company’s prospects, expected revenues, expenses, profits, financial position, strategic direction, and growth initiatives, all of which are subject to risks, uncertainties and assumptions. These forward-looking statements are identified by their use of terms and phrases such as expect, anticipate, estimate, believe, may, will, intend, plan, continue, project, objective and other similar terms and phrases. These statements are based on certain assumptions and analyses made by the Company based on its experience and assessment of current conditions, known trends, expected future developments and other factors it believes are appropriate under the circumstances. Such statements are subject to numerous external variables, both known and unknown, such as changes in commodity prices for natural gas and oil, changes in drilling activity, weather conditions, industry-specific and general economic conditions and exchange rate fluctuations. If any of these risks and uncertainties materializes or if assumptions are incorrect, actual results may differ materially from those expressed or implied in the forward-looking statements. The forward-looking statements included in this news release are not guarantees of future performance and should not be unduly relied upon.
Non GAAP Measures
This report makes reference to EBITDA, a measure that is not recognized under generally accepted accounting principles (GAAP). Management believes that, in addition to net earnings, EBITDA is a useful supplementary measure. EBITDA provides investors with an indication of earnings before provisions for interest, taxes, amortization, gains or losses on the disposal of property and equipment, foreign exchange gains or losses, and the non-cash effect of stock-based compensation expense. Investors should be cautioned that EBITDA should not be construed as an alternative to net earnings determined by GAAP as an indication of the Company’s performance. This method of calculating EBITDA may differ from that of other companies and accordingly may not be comparable to measures used by other companies.
For more information please contact:
HSE Integrated Ltd.
David Yager, Chairman & CEO
Telephone: (403) 266-1833
E-Mail:
Tony Hidalgo, Chief Financial Officer
Telephone: (403) 650-6481
E-Mail: